Investors Group Inc.
Outlook

THE FINANCIAL SERVICES ENVIRONMENT

The financial services industry continues to experience considerable growth and substantial change. Some of the factors contributing to industry growth are:

• Changes in investment habits.
• Increasing ease of investment in capital markets.
• Greater knowledge and understanding of investment products among the general public.
• Shifting demographics – the move of the baby boom generation into peak saving and investing years.

Increased Competition and Deregulation

A changing and expanding marketplace has brought a substantial increase in competition within the industry. Domestic and foreign service providers, including banks, financial planners, investment dealers, insurance companies and others, are providing a comprehensive range of services.

In response to the broadening of clients’ needs and their increasing sophistication, products and services are more integrated and are designed to meet clients’ overall financial objectives. Deregulation has also enabled companies to broaden their delivery channels to attract clients.

Growth of Mutual Funds

The mutual fund market continues to play a prominent role in the financial services industry. At December 31, 2003, mutual fund industry assets in Canada totaled $438.9 billion, an increase of 12.1% from $391.3 billion at December 31, 2002.

The $47.6 billion increase in industry assets from December 31, 2002 reflected an estimated $44.4 billion increase from market action, which represented 11.3% of year-end 2002 industry assets, the inclusion of approximately $3.8 billion of new assets that were not previously categorized as mutual fund assets, offset by net redemptions of $607 million.

The long-term outlook for growth in mutual fund assets continues to be positive. Factors that should contribute to this growth include:

• A continuing environment of low interest rates.
• Demographic changes resulting in more individuals focusing on saving and investing.
• Increased concern over the adequacy of government-sponsored pension plans.
• A growing number of financial services companies offering mutual funds.
• The globalization of capital markets.