IGM Financial Inc.

Murray J. Taylor - Co-President and Chief Executive Officer, IGM Financial Inc.

Jeffrey R. Carney - Co-President and Chief Executive Officer, IGM Financial Inc.

Kevin E. Regan - Executive Vice-President and Chief Financial Officer, IGM Financial Inc.

Gary Ho - Desjardins Capital Markets Geoffrey Kwan - RBC Capital Markets Paul Holden - CIBC World Markets Scott Chan - Canaccord Genuity Graham Ryding - TD Securities Inc. Tom MAcKinnon - BMO Capital Markets

Great, it’s Jeff Carney, President and CEO of McKenzie and Co-President and CEO of IGM Financial. And I’m joined today by Murray Taylor, President and CEO of Investors Group and Co-President and CEO of IGM Financial.

We’re also joined by Kevin Regan, who is Executive Vice President and CFO of IGM Financial. Before we get started, I would like to draw your attention to our cautions related to forward-looking statements on Page 3 of our presentation.

And the non-IFRS financial measures that we have used in this material are summarized for your reference on Page 4 and then finally on Page 5, we provide a list of document that are available on our public website related to the Q1 2015 results for IGM. Turning to Page 7 of the presentation, I will jump in here.

So starting with the operating earnings, we earned $200.3 million during the quarter, which is an increase of 3% relative to the same quarter last year. Our operating earnings per share were $0.80 that is up 3.9% from last year.

And yesterday the Board declared a dividend of $0.5625 maintaining the level of dividend. This implies the yield of 5% based on yesterday’s close of $44.89 also we’ve increased share buybacks in the first quarter and we view this as a good opportunity at this time having regard to our valuation and the strength of our balance sheet.

Turning to Page 8, IGM mutual fund growth sales during Q1 2015 were $4.5 billion and net sales were $537 million. Turning to Page 9, our mutual fund assets ended the quarter at $131.5 billion that is an increase of 7.4% relative to last year and up 4.3% from last quarter.

This reflects the company’s highest quarter end balance of mutual fund assets and total assets. Turning to Page 10, industry long-term mutual fund assets increased by 7.2% in the first quarter and Canadians tended to experience favorable returns in the quarter driven by strengthening U.S.

dollar, interest rate declines and equity market improvements. On Page 11, the advice channel gross sales increased 6.5% during Q1 2015 relative to the same period last year.

Turning to Page 12, the advice channel continued to experience positive net sales into both the balanced and foreign equity fund category. Turning to Page 13, IGM Financial’s average mutual fund AUM during the quarter was $129.9 billion that is up 8.5% relative to Q1 2014 and 4.3% from last quarter.

On Page 14, our assets under management, the average mutual fund, institutional and total AUM all reached record highs during the first quarter of 2015 at $146.5 billion. Slide 15 and 16 provide a summary of our operating earnings and earnings per share over the last five quarters.

Please turn to Slide 18, we all review McKenzie’s results for the quarter. So for the quarter we had mutual fund growth sales that were $2 billion in Q1, we had combined mutual fund and institutional net sales of $569 million during the quarter and we had mutual fund net redemptions of $106 million during the quarter.

On the gross sales the decline was largely due to continued challenges with our Cundill Value Fund, and it continues to have the same challenging momentum it came out of last quarter, the category itself was down 7% for the industry and we experienced further decline in the industry itself and are doing everything we can to rectify that decline. When you look at mutual fund net redemptions of $106 million that is reflecting lot of things that are going on inside of our company.

We’re increasing the investment we’ve made in our wholesalers and support of wholesalers increasing our efforts across the company and new products and capabilities and continuing to add to our value proposition the marketplace to make sure that we are in positive flows. Turning to Page 19, we continue to experience sales momentum in our balance funds which includes our symmetry managed asset program, which has been a big recipient of growth over the last periods.

Going to Page 20, McKenzie just continues to see improvements in its redemption rate, our long-term mutual funds declined to 13.8% at March 31, 2015 relative to 14% last quarter. On Page 21 you’ll see our McKenzie’s mutual fund growth sales stabilized during the March 2015 stemming from the original reason for that was really the global equity challenges we mentioned last quarter but we’ve been able to offset that with newer solutions like our global dividend and income fund as well as recent launch of our Global Tactical Capability with our fixed income team that both had significant net flows.

Turning to Page 22, you will see our Morningstar or sorry our performance numbers, McKenzie’s risk adjusted performance as measured by Morningstar has 62% of our funds and 66% of our assets rated three stars or better. Turning to Slide 23, McKenzie continues to have solid 5 and 10 year investment performance with 50% of our assets rated in the top tier performance quartile.

During the period, the three year numbers changed for a number of McKenzie’s value-styled funds where growth in the industry was really the champion in the recent performance numbers and across the industry and obviously our value funds do not perform at the same rate. It’s also challenged in the way that the category works because it blends value and growth in the same categories which makes it challenging at times through differentiation in that space.

Turning to Page 24, McKenzie’s average mutual fund AUM increased by 7.5% relative to the same quarter last year. Our average total assets under management represent 0.3% higher than last year at this time and both were record highs during the fourth quarter.

Turning to our earnings, operating earnings before interest and taxes were $56.9 million during the quarter and if you go to Page 26 you can see on Slide 28 that all sorry on the slide you can see that McKenzie management fees increased by 3.7% which is lower than the increased AUM and that’s really due to the compensation of our assets and the clients that are buying our products and that’s reflected in those numbers. We also had the impact of the October 2014 resale price changes on our management fees that was $2 million and the impact of the administration fees was $1.2 million.

Net investment income and other reflects investment returns on key capital which were $4.2 million during the quarter that’s up from $1.3 million during the same quarter last year. Finally, non-commission expenses increased by 7.6% relative to the first quarter as discussed in prior quarters, we have invested in our investment managements, our distribution and marketing capabilities also drive growth while embarking on initiatives to reduce cost wherever possible which we’ve done along the way and we’ll be experiencing year-over-year non-commission expenses during the full year 2015 but I would expect them to be slightly lower than 6% increase that you saw this quarter and certain quarters like the first quarter historically are timing issues as well.

Turning to Slide 27 as far as development set McKenzie we had embarked on building a new website for our firm and that site has been in the market for now about eight months and it was recognized as the number one site in the market by Kasina. Kasina is a firm that ranks North American websites across our industry and our space and we’re very pleased to see us come out as number one in that space.

I can also tell you that the usage of our site has gone up significantly which is a good leading indicator of engagement of advisors in our offer and what we’re doing as well as the site itself, we launched our McKenzie CRM2 blog and we have had 3200 visits to that site from advisors and investors as well as over 7700 page views. So it’s been very actively received by the marketplace and is one of the sources now in the industry for information and evolution of the debate around CRM2 and where it is all headed.

And then finally on LIVE IT, something we talked about in the past as that continues to get traction, we had over 130,000 visits to our LIVE IT website and we had 8300 pieces of content downloaded with McKenzie insights and ideas in how to help investors solve for their needs. I'll stop my comments there and turn it over to Murray J.

Taylor.

Thank you, Jeff. If you can turn to Page 29, this shows the growth of our consultant network and in the last quarter we saw further growth.

So at the end of March, we are at 5156 which is the highest level in the history of the company. On Slide 30, you can see our gross sales were up 6.1% to approximately $2.4 billion for the first quarter, this is a record high in the history of our company for any quarter and further to this we recently announced our April sales results and we set another record for the month of April which was actually up 13% over the previous high and the previous high happen to be last year.

So we are seeing very, very strong momentum in terms of our growth sales. Net sales are observed on the right hand side and we’re 588 for the quarter.

Page 31 you can see that our redemption rate has been declining and we are currently at 8.5% as you can see that for the first quarter of 2015, the annualized rate was 8.8% compared to 9.9% for the previous first quarter of 2014. On Page 32, we get a sense of the momentum of our gross sales in the blue line and you can see how it continues upward into the right and a new record high as indicated earlier, you can see the green line which is moving down into the right which is our redemption rate on long-term funds, the trailing 12-month redemption rate.

And because of buoyant markets through this period of time our actual redemptions in red are fairly stable during this period where we have seen redemption rates go down but asset levels go up. On Page 33, you can see that our median client performance as we reported previously for 2014 was 7% and the median return for the first quarter of 2015 was 3%.

We would also highlight at this point that as we have indicated before we are going to be making available on most of our client statements as of June 30, a full picture of client rate of return fully compliant will CRM2, this requirement is being fulfilled two years ahead of our deadline and it will show for our clients one year, three year, and five year returns at a minimum for all applicable clients. We’re going to repeat this every quarter for our clients.

We feel it is extremely value added in terms of what we are providing. On Page 34, we continue to show you the record of our client experience survey, new clients on the left and existing clients on the right and again these measures are extremely strong.

On Page 35, you can see our insurance sales on the left, mortgage fundings on the right and you can see a growth of 20% in our mortgage acquisitions in funding through 2015 based on the previous year. On Page 36, we can see a tracking of our assets under management and our average assets in the quarter was $75.5 billion, a record high in the history of investor share.

On Page 37, you can see that our earnings before interest and taxes were $190.7 up from the previous Q1 of 2014 and on Page 38 we will take you through a delineation of some of the elements of that earnings comparison. For the first observation I will make is that as we look at the context of our assets under management rising about 8.9%, you can see that the combined effect of management fees, administration fees is rising slower than that and this is attributable to the item we spoke off at the last call where we had decided to accelerate the movement of eligible clients into our lower fee rates for those with households of 500,000 or more.

And this is quite in line with the guidance we had provided at the last quarter. The distribution fee line is down predominantly because of a drop in redemption fees and given the fact that our redemption rates have been falling, this is good news but in terms of the period and question this creates a slight decline in redemption fee revenue.

The net investment income and other as you know is predominantly our mortgage business and during the quarter, we had a higher level of gains on sale, this is we fund our mortgages in several ways through securitization but also in some cases through a sale, when there is a sale, we the gain is reflected at the time of the transaction and that has identified in our MD&A was worth above $4.2 million in Q1 2015 as an increase to that same level in 2014. We also had a positive fair market adjustments on our financial instruments that are in our relation to our mortgage business and that has accounted for about $3.6 million.

So a most of the difference between 2014 and 2015 will be made up of those two items. Then I would like to draw your attention to non-commission expenses and as identified on this sheet due to the level of interest rates and the wisdom of the actuaries and accounts.

We have an increased pension expense for the year, the first quarter expression of that is $2.4 million if you extracted that amount for competitive purposes you would find that our non-commission expenses were going up about 8.2% and this is quite inline with what we’ve been talking about the last few quarters as we introduced a number of items last year in terms of increased advertising spending. We’ve been ramping up some of our investment management capabilities, there is an annualization effect that is occurring as we move into 2015 and as we continue to see growth in our business and expanding consultant networks, acceleration of sales, this is very appropriate and I wanted to give you that perspective in terms of how the pension expense number is affecting that line.

I will then take you to Page 39 and as I mentioned as we went through very strong growth in our consultant network over the last two years and this is continuing and becoming very, very positive for us. Gross sales records being set third quarter last year, fourth quarter last year, first quarter this year, April this year and at significant levels over prior highs and so very strong commitment there.

CRM2 we talked about later returning reporting, I certainly believe that the rate of return reporting is the most under attention issue on CRM2, it is in fact the item that is going to be the most telling for clients, the most important in terms of the go to information that clients will have on their statements into the future and on that note, we are delivering the full pure rate of return information to our clients two years early. We feel that this is a very important competitive advantage, we feel very committed to the importance of that information and as the industry wrestles with CRM2 issues we know that other companies will be scrambling to try and get their information there given on the timeline.

So we feel a very positive about that and on that note we are going to ask Patrick, our operator to come on and take your questions.

Thank you. Good afternoon.

Wanted to go back to the beginning of your prepared remarks. Want to get your views on how you guys think about balancing between share buybacks and dividend increases.

Notice the pick-up - uptick in buyback this quarter. So wouldn't mind getting some color in how management thinks about, and/or the Board approach returning cash to shareholders?

It's Murray. I'll start that.

Obviously, our dividend pattern is one that we want to maintain into the future on a permanent basis. Our permanent basis obviously is a decision by our Board at each quarter.

But the pattern of our dividends have not been one of moving up and down from period to period. We’ve had a consistent history of paying out the same dividend or increasing the dividend in the quarters where that is appropriate.

And so I would suggest that the payment of value via dividend is one that is pass through on a very long-term and sustainable basis. The use of our available liquidity to buy back shares is a little more tactical in the sense of it is something that we will choose to do at periods of time and if you look back at our history, we have had periods of lower amounts and higher amounts and so forth and we felt that this period that we were in here was a time of increasing that capability as we balance our available cash resources and the needs that we have for those at this time along with the current valuations of our stock and so forth.

So that would be how I would frame the issues.

Okay. And then maybe just to follow onto that.

Is it still correct to assume that you look at the payout ratio, either on free cash flow or EPS, maybe somewhere in the 60%-ish before considering raising the dividends? And in the meantime, you use the excess cash for buybacks?

Yes it’s not as prescriptive as that obviously one has an eye on relationship between dividend payout and earnings in quarter and future quarters and so forth. And so we do not work on the basis of a formula or a fixed amounts or trigger points.

But those considerations are of course brought into play as the board makes that consideration.

Okay. And then just a numbers question for you.

The pension expense, the CAD2.4 million, that's an ongoing expense, that's the right way to think about that, right?

Think of it as a ongoing expense through 2015 and then of course it will be recalibrated in for future years.

Okay.

So all things being equal without getting ahead of myself interest rates raised, I mean you could see a reverse of that into 2016. So since it is a temporary change but it will endure the year.

Okay. And then just lastly for Jeff.

Want to dig deeper on the product side and wanted to get more color into which McKenzie funds are selling and which ones you're seeing more redemptions, and the key drivers behind that. And I think you mentioned the kind of funds in your prepared remarks, but if you wouldn't mind elaborating on that and what it takes to turn that around?

Yes when you look at year-over-year numbers we had a very strong first quarter in global equities last year and we have to repeat that this year for probably because the category came out of favour and probably because of our styles of our mandates and particularly a deep value a deep value fund like Cundill. And so - and Cundill also rolled off a very strong quarter and it is going to be difficult quarter.

So ratings are going down and that has impacted their sales, the good news on that is we do have new products that we've launched like our Global Tactical Bond Funds with Konstantin Boehmer on that. And then Darren McKiernan we heard probably year and half ago and he is getting great traction with his new global dividend and income fund.

And both of those are because they are new obviously install net flows come out of that pretty much. But we’re seeing significant traction and we’re very encouraged in for me putting more diversification into our large cap and global states was an important part of what we’re trying to get done because we’ve got big engine with Ivy and Cundill, which are great, but it's nice to get more diversification beyond just those two products and the way to think about those two are that because of their unique styles they tend to take longer market cycles to generate the returns.

So when you’re comparing Cundill and Ivy against the traditional global fund like Darren that market cycles that Darren needs is more like a five year or four year cycle versus what Ivy and Cundill which are more or like six or seven years cycles. So you’re going to see a little more volatility probably play out in those funds over time.

It is encouraging on Ivy that our balanced - global balanced fund from them is five star fund now and Ivy Global equity it returns to a four star fund this quarter. So there is some positive things going on there.

But the new products they are selling and being well received by the market.

Great. Thanks for the color.

And that's it for me. Thanks.

Hi. Just the first question, tagging on to Gary's question on McKenzie fund performance.

Just with respect to the Cundill, is it just kind of a matter - a little bit of a matter of time, and because of the view of those types of funds to see them, the performance improve, just as we were talking about is, the other funds have generally had pretty good performance and good flows. Just trying to wonder what more you might be able to do on that front?

Yes I mean I think the good news is that Cundill investors love Cundill. So there is a long history of confidence in their capabilities and their track records and I think the core investors that knows understand us like I what I talk about in the longer term in the seven years cycle.

The team is working very hard to do it in a hands perform but at the end of the day with the market valuations where they are and it is not their sweet spot necessary and where we are in the market cycle and so some ways you would expect this type of performance a little bit. So I still feel very confident about that product and the team and its abilities to do - delivery long term competitive results.

But this just isn't quite their market.

Okay. And then just staying on the McKenzie side.

The admin fee, kind of the OpEx adjustment, with the change that you did last fall, is the way to kind of think about now, is that line in the revenue on the income statement is for McKenzie's now going to kind of float more direction with where AUM changes whereas in the past number of years that revenue map kind of had been reasonably stable, whether or not AUM was up or down?

Yes, we would expect that to change. Yes.

Okay. And then, Murray, just on IG.

Do you guys still have that OpEx adjustment still in place? It seems like because that line has been growing, it actually isn't all that relevant anymore?

No we don’t, we haven’t had it for some time.

Is it - okay. Last question I had was on the ARB.

There was some reference to the change in the rate in the MD&A. How much was that?

It looks like it might have been about 2 basis points?

No there was I don’t have the actual number in front of me but there was some changes in our ARB as it related to our high net worth business and we would have to get back on what the actual quantum of that was.

Okay. All right, thank you.

Thank you. Murray, I want to ask you a couple questions on the gain from the mortgage sales to start with, just to make sure I fully understand.

So mortgage sales overall were up 6% year-over- year, but there was a big shift from securitization to the other category. So it sounds like that was kind of - it was the shift in mix that really drove the incremental gains year-over-year, is that correct?

Yes I don’t know if I described it as significant shift but the opportunity for us to fund to gains on sale was somewhat higher and of course on securitization we can write a lot of business but you’re not, it doesn’t contribute to earnings a whole lot in the year of acquisition. You encourage some sales cost, issue cost and so forth and then you get a partial year of your margin and then it is the following year when you get the full margins.

So in contrast when we find gain on sale, it is and of course the whole mortgage business used to work that way prior to interest. The profitability is all front end and so it’s a timing issue in the sense of the level of that business.

But the amount of business that we do in gains on sale would vary from quarter-to-quarter and year-to-year and so it’s always an element there, it’s not like a turn-off, turn-off on element, it is as the opportunity arises for us to use that a funding source we do and you will find from quarter-to-quarter, it is either up or down and sometimes it is explaining why our earnings are down a little bit because we do less of this and sometimes it's more, but this happens to be a quarter where it’s a bit higher.

Got it. So basically you've effectively pulled forward all of the net interest margin you would have earned over time otherwise?

Right.

Yes okay. Okay, understood.

I have a couple questions for Jeff, I guess, on the gross sales at McKenzie. So we've kind of talked a lot about the net sales and the impact of Cundill, which I'm assuming is probably coming more on the gross redemption front.

But obviously there's been a change in the actual gross sales year-over-year. Is that also McKenzie, or is there another factor at play there?

I say the biggest factor was the 7% decline in the industry on the global equity, that would be one, two would be on the fixed income side, we had a really strong run in our floating rate capabilities and that just slowed down probably to market and probably we had some currency issues in we have to decide which side we hedge on these things but our currency hurt us in the floating rates, so they have not hurt our gross sales momentum coming out of that product. So I would say if you added up the gross sales of Ivy, Cundill and the floating rate that would be a lot of our decline in gross sales.

But we also saw pick up in other products that offset some of that which is way I see encouraging.

Understood. And then when I look at the performance numbers in terms of I mean what you report, the percentage of funds, first and second quartile, that's obviously slipped over the last two or three quarters.

That's largely Cundill and Ivy, then?

Yes. It’s mostly Cundill and then Symmetry which is our asset allocation gets a little bit impact because it owns Cundill inside of Symmetry and so you get kind of double whammy there but like I said we saw improvements in performance in other areas as well.

So it is always moving around that little bit.

Okay. And then in terms of the rebalances that have been impacting your redemptions, it seems to pop up more frequently than not these days.

So I mean should we be looking at these as one-offs, or is there some kind of - it seems like there's kind of repetition to them. So what's really kind of driving those third-party program rebalances?

Yes it’s a great question. Lot of these that have happened since I have been here long 10 years things that have people change their mind or they are looking for something different or it just happens.

I look forward to future meetings where I'm announcing big amounts of assets coming in and big chunks too and we’re working on that as we speak. So I wouldn’t read into it, the trend I wouldn’t think there is no I’m optimistic it will be reporting some new assets coming in surely that will help us and we’re continuing to find new opportunities to uncover as we go forward and with these new products that we have and the new talents whether it’s [indiscernible] run on our asset allocation side or Darren McKiernan whose new, or Todd Mattina who is really starting to drive brand awareness for us on the economic side and Ashley Misquitta, who is now taking over our U.S.

growth is off to a huge start and has a great long-term track record from his past. And so we’ve got - I feel like we have got with our 10 boutiques and our team, I see and you only see some of the products here, but we have over almost 70 products that are in the market and there is always going to be a shift of little bit on the mix there.

But we have some very exciting stories that our wholesalers are very excited about and sales teams are very confident that we can sell in the market and that was competitive anybody else’s out there.

Okay. And then in terms of the rebalancings that have happened since you joined, is it again going back to the same sort of -- those two sub-brands that have struggled a little bit more recently with performance?

No it’s just been - some of it’s been traditional pension money a little bit, some of it’s just a rebalancing that happens because people are always looking at their allocations and their platforms and they have other third-party providers and they are structured and how they’re managing that money will dictate that they have to shift out of one entity to other because there is an over concentration or change in their philosophy of what they’re going to do. So some of this is just everybody goes through, it is always going to be some churn.

I don’t see anything here that is saying that we are going to continue to see these types of redemptions going forward.

Okay, good. One final question for either or both of you.

Seems like - well, CRA is cracking down on various tax schemes. We saw it earlier this week with the disclosure from CI.

Than with the federal budget in terms of total returns swaps. So you do have a loss consolidation structure, as you call it, with Power Financial.

Wondering if you can provide any thoughts and commentary around that structure and if CRA has approached you at all recently to talk about it? And then second, you do use some total return swaps to hedge your deferred compensation.

Wondering if that's impacted at all by the federal budget?

Yes Paul its Kevin. With respect to the first part of your question, we made inquiries.

The Department of Finances' intention is not to capture conventional loss, or tax loss consolidation transaction, that you’re familiar with for us. So that is from our research is not on the table.

However to your second point that is something be affected albeit it’s extremely immaterial with respect to the organization.

Okay, that's great. That's all for me.

Thank you.

Good afternoon. Jeff, just on the third-party distribution assets.

If you compare to your retail split, is it similar in terms of asset class and the higher proportion of Cundill and Ivy in those platforms?

No I mean Cundill would be a much bigger piece of the retail than it would have pure institutional. As far as its impact on assets, I would put that more on a retail side.

So I wouldn’t that is why I am saying I am not worried about their some bucket of money that is going to leave tomorrow, or one particular client that's going to hurt us it is not going to be there, it is not going to play out like that.

Maybe I missed it, actually crystal, for Q1, McKenzie's institutional did $675 million of net sales?

That is correct.

Was that driven by pure institutional or was it the sub-advisory stuff?

We said mix, like it was very large relationships that we have as well as sort of traditional strategic alliances clients that we've long. But also sub-advisory within there as well.

So it was a good mix.

Okay. And Murray, just on the Series J and U product, it was good that you kind of transferred over and showed us the updated AUM.

If I were to strip out the clients that were eligible to switch internally, what's the growth rate, or how can you compare the growth rate of the J and U product versus your other offerings? Has it been a lot higher, similar to other independent companies out there?

Yes there is no question that we have seen above average growth in our high net worth areas in total. So J, U I talk about the sales insurance into that space et cetera and so it has been very robust for us and it has been an expanding area for us from a place that we feel we are well suited for and that we could increased market share in.

So yes we have seen growth above the average growth of our company statistics in that area.

Okay. Thank you, guys.

Hi Graham.

Jeffrey, maybe I can start with you. It was highlighting recently that you're looking at launching a line-up of different products, including active ETFs, Just wondering if you could provide some color around maybe what sort of products, or what stage you're at with that initiative?

And how do you plan to position those alongside your mutual fund products?

Yes we hired a gentleman named Michael Cooke to join us who's got some pretty broad experience and bring to different perspectives. So I have got Michael is really looking at alternative investments and he is part of that certainly looking at active ETFs as well to better understand that market.

And I think I have been asked to you on the past publicly about my thoughts on this and I should be neutral to the structure and really find the best ways to get our investments skillset out into the market in a way that advisors and clients want to use us. And if we can add value and add to ETF space which is really the way we’ve undertaken is to see that a component of what we want to do but we are also looking at other alternative products as well.

That if we can feel like we can add value to that space and we have skillsets here that we can utilize our skillsets so we can find elsewhere, utilizing active ETF space then something we’re certainly going to pursue but we are early days in that strategic work and I would certainly update you all as we move through it.

Great, thanks. And what sort of alternative products are you considering?

It is around multi-asset kind of strategies and we’ve been doing starting to look at those in broader ways than we have in the past and wherever we can find ways to bring some of those institutional capabilities into retail is certainly take advantage of that skill set as well.

Great. And would you, on the ETF side, is this something that you would think to focus towards the advisor channel, or is this - would you be looking at also do to yourself or you got global advisor channels that are gaining in momentum?

No we are looking at active retail versus active advisors. So we are committed to that space and that is exactly where is the target for and as more and more advisors go fee based and they are looking for components of a solution, you can get tactical in an active ETF potentially to hit some sweet spots for them that you can’t get through traditional mutual funds potentially and we think that is helpful and then the flexibility of the product and how you can trade it can sometimes be a competitive advantage as well.

So we want to make sure that is ultimately we are adding value in the space. We are not going to copy what somebody else is doing, it would be because we have an active capability that we think unique and differentiated and would add value in the space.

But we are not planning on doing having this sold in the self-directed. This is to help advisors solve client problems.

Got it. Okay, that makes sense.

And then the other theme I wanted to jump to is just there's been some speculation in the media around seg funds, that they're seeing -- well I guess firstly, just renewed interest lately overall. And also some speculation that some advisors are looking at that product, given it doesn't fall under the CRM2 disclosure requirements.

Just wondering if you're seeing anything like that within your channels or what not?

We have for some time had segregated fund product in cooperation with Great West Life, which uses Investors Group funds. And we continue to see interest in the product, I have not seen or heard of any sort of mass fleeing to the product for the reasons you stated.

I do however believe very strongly in the merits of the products and the guarantees that are provided and quite frankly it’s probably under sold in Canada today given the needs of the retail segment and particularly in a period where you are moving through where markets have advanced on the equity side and interest rates are extremely low. The opportunity to take part of your variable or market based investment and put it into a safe fund product with longer term and that guarantees to me makes a whole ton more sense than plowing it into GICs as 40% of Canadian seem to do.

So from a is it worthwhile point of view absolutely should it increase in terms of size, absolutely but not for the reasons of going CRM2.

Perfect, appreciate the color.

Yes, thanks very much. Good afternoon.

Question for Murray with respect to the mortgage banking income and the fair value adjustments. The number looks to be up substantially year-over-year, and I was wondering what's driving that?

Maybe just describe a little bit what these fair value adjustments are, and how should we be looking at that going forward? Thanks.

So it’s a very much an accounting issue, so I’m going to ask Kevin to give you some insights.

Sure. It starts with the variability in the interest rates are the key driver of that.

I know Murray has described in the past and we went through a couple of quarters ago, we are trying to describe some mechanics behind this. At any moment in time, we move monies into our warehouse which is essentially pending our permanent funding and we place - and place hedges essentially to protect ourselves of the interest rate movements and so when movement is down, it is to our advantage when money sits in the warehouse.

The opposite is true with interest rates going up. When we move them into permanent funding sources, securitize them as an example you get the mix between your fixed and variable interest rate products we offer our clients primarily expects there is some degree of that is variable.

We also seek to insulate ourselves from interest rate movements with respect to that, you think of the CMB program is post securitization. So it is really the variability is directly related to interest rate movements but also the mix if you will of our assets or our mortgage is placing through different funding sources so the quantum of that.

So it is the interplay between those that will give you the variability from quarter-to-quarter. Arguably, I wish there would be a better way to set it out, so you could anticipate and monitor for it in your models.

There really isn’t a easy way to do that unless you can guess interest rate movement. So but the short and long is, our mortgage business is building as was talked about earlier there are alternative sources that advance if you will the income to us like we have talked earlier on but really it is down to our hedging activities seeking to insulate ourselves from interest rate movements and the fact that that mark occurs from quarter-to-quarter and point-to-point.

Does it reflect a gain on your hedging activities, or…

Go ahead and finish your question.

Yes. Is that what it is?

Does it reflect really a gain on your hedging activities?

Yes in the sense of think about it this way, economically we are hedged, we end up with an accounting mismatch that is what you’re seeing flowing through and hence it is - it is not even the short term, so the economics of the mortgage business over the length of you will of any particular mortgage pool, we would work itself out. So it’s a short term by virtue of the movement in the marking a gain or loss from period to period.

But the underlying economics of the mortgage business were insulated from that mortgage rate change or the interest rate change.

I like it to. It is an accounting timing issue as opposed to an economic added value issue.

Right. So it looks like it is an advantage in the short term but it works itself out the gain today basically over for the mortgage is a drag if you will on the spread.

So we should just probably look at this thing as being generally 0, or not an impact going forward?

Yes I mean at the end of the day that is true. What I would pay attention to is the mortgage volume, I mean that is really the key that we look to are we placing mortgages with clients or we keeping the relationship with clients, we put in place strategies to hedge our interest rate risk as Murray suggested the economics are we try to lock it in through hedging but when you are looking at your models, you are looking at quarter-to-quarter there is a lot of moving parts and hence some of the variability you’re seeing.

And if we go back to how we have enhanced our MD&A, we’ve tried to give more clarity, more transparency on all these elements and not to be too predictive but if interest rates are going up, or interest rates are going down, there is going to be at least the tendency here in terms of the direction of this variance and the variance exist every quarter is the matter of how much it is in which direction. So hopefully that’s helpful.

Okay. Thank you very much.

Well thank you very much and thanks for all the questions and we would wish you all a great weekend on this Friday afternoon. And at this point, we will terminate the call.

Thank you, Patrick.