FINANCIAL INSTRUMENTS Fair Value of Financial Instruments

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					                                                           FINANCIAL INSTRUMENTS

                                                      Fair Value of Financial Instruments

The following table presents the fair value of the Corporation’s financial instruments. Fair value represents the amount that
would be exchanged in an arm’s-length transaction between willing parties and is best evidenced by a quoted market price, if
one exists. Fair values are management’s estimates and are generally calculated using market conditions at a specific point in
time and may not reflect future fair values. The calculations are subjective in nature, involve uncertainties and matters of
significant judgment (please refer to Note 24 to the Corporation’s Consolidated Financial Statements).

    AS AT DECEMBER 31                                                                           2008                    2007

                                                                                                                                 POWER FINANCIAL CORPORATION
                                                                                  CARRYING     FAIR      CARRYING       FAIR
                                                                                    VALUE     VALUE        VALUE     VALUE
    Cash and cash equivalents                                                         4,689      4,689       5,625     5,625
    Investments [excluding real estate]                                              97,816     97,487      94,736    95,077
    Other financial assets                                                           14,139     14,139       4,526     4,526
    Derivatives assets                                                                 847        847         940       940
    Total financial assets                                                          117,491    117,162     105,827   106,168
    Deposits and certificates                                                          959        964         857       857
    Debentures and other borrowings                                                   5,658      5,059       6,791     7,088
    Preferred shares of the Corporation                                                300        302         300       313
    Preferred shares of subsidiaries                                                  1,269      1,275       1,303     1,335
    Other financial liabilities                                                       5,340      5,340       5,819     5,819
    Derivative liabilities                                                            1,261      1,261        136       136
    Total financial liabilities                                                      14,787     14,201      15,206    15,548

                                                         Derivative Financial Instruments

In the course of their activities, the Corporation and its subsidiaries use derivative financial instruments. When using such
derivatives, they only act as limited end-users and not as market-makers in such derivatives.

The use of derivatives is monitored and reviewed on a regular basis by senior management of the companies. The Corporation
and its subsidiaries have each established operating policies and processes relating to the use of derivative financial
instruments, which in particular aim at:

›     prohibiting the use of derivative instruments for speculative purposes;

›     documenting transactions and ensuring their consistency with risk management policies;

›     demonstrating the effectiveness of the hedging relationships; and

›     monitoring the hedging relationship.

There were no major changes to the Corporation’s and its subsidiaries’ policies and procedures with respect to the use of
derivative instruments in 2008. In addition, there has not been a significant change in either the notional amount outstanding
(increase from $14,793 million to $15,957 million) or in the exposure to credit risk that represents the market value of those
instruments, which are in a gain position (decrease from $990 million to $845 million). See Note 26 of the Corporation’s 2008
Consolidated Financial Statements for more information on the type of derivative financial instruments used by the
Corporation and its subsidiaries. Please also refer to Parts C and D of this MD&A relating to Lifeco and IGM.

                                  P O W E R C O R P O R AT I O N O F C A N A DA                                      B 23