financial group inc

financial group inc.

2008 ANNUAL REPORT

PRESIDENT’S REPORT 4

MANAGEMENT’S DISCUSSION AND ANALYSIS 8

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS 31

AUDITORS’ REPORT 32

FINANCIAL STATEMENTS 33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37

CORPORATE INFORMATION 55

Table of contents

financial highlightS

• Total revenue (operational and interest revenue) increased 17% to $29.4 million from $25.1 million for the year ending December 31, 2008.

• Revenue from operations increased 31% to $24.0 million from $18.4 million compared to the previous year.

financial group inc.

2002 2003 2004 2005 2006 2007 20080

Earnings before Income Taxes(millions of dollars)

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4 | OLYMPIA FINANCIAL GROUP INC. | 2008 ANNUAL REPORT

president’s report

Olympia Financial Group Inc. increased its dividend by 50%, eff ective January 31, 2009. This was the eighth consecutive dividend increase over the last eight years. According to the Financial Post, the Company has, at time of writing, the fourth best dividend growth history over the past fi ve years of all Canadian companies surveyed. We are proud of this accomplishment.

The Company’s share price reached a high of $43 for a short period last year. The year began with shares trading at $33 and ended at $37. According to Donville Kent Asset Management Inc., a private mutual fund, we were one of only two companies in the fi nancial business to end the year with a higher stock price than we began. Our current price is $32.

Based on our current quarterly dividend of $0.45, the dividend yield for the investor who purchased the last shares on the market at $32 is 5.5%. Prior to the meltdown in the stock markets, our shares traded at a market price that gave the investor a 3% yield. It will be interesting to see what happens as things begin to return to normal over the next year or two. My guess is that solid dividend paying stocks will be in high demand.

The Company and its staff were also delighted to qualify for Profi t magazine’s Profi t 100, a list of the 100 fastest growing companies over the last fi ve years. We were ranked number 64. We have submitted our 2008 results and are looking forward to seeing how we rank this year.

The Company had an explosive 31% growth in revenue (excluding interest) over the prior year. This increase in revenue came from all divisions. Foreign Exchange revenues grew by 106%, Registered Plans by 67%, Shareholder Services by 14% and Health Services by 13%. These increases in revenues were also accompanied by higher costs for staffi ng and infrastructure. The benefi ts of these additional staffi ng and infrastructure costs should be more noticeable to profi tability in 2009 than they were in 2008. There is a timing diff erence between the addition of staff and the time it takes to train them to be more effi cient and valuable to the company.

In 2009, the Company added additional management capability in its technology department and its human resources department. We are well positioned for future growth.

Two major events beyond the control of the Company had a negative aff ect on last year’s profi tability. You may recall that in 2007, the Company acted as depository for a $2.2 billion dollar takeover bid. We did not act on a deal of this size in 2008 and as such the Shareholder Services division did a great job of growing its revenues by 14%, even though the prior year’s numbers were signifi cantly aff ected by the impact of the large takeover bid.

RICK SKAUGE Chief Executive Offi cer & President

5OLYMPIA FINANCIAL GROUP INC. | 2008 ANNUAL REPORT |

The decrease in interest rates also had a negative aff ect on our profi tability. The Company earns interest on money it holds in trust in its various divisions. This interest amounted to $6.6 million in 2007 and was reduced to $5.4 million for 2008. These lower interest earnings were in spite of the Company holding considerably more money in trust in 2008 than in 2007. Because the Company held more money in trust in 2008 than 2007, the full impact of lower interest rates on operating revenues has been masked. There is no doubt that the lowering of interest rates to near zero will have a major impact on interest earnings for 2009. Our earnings will recover when interest rates increase. The only good news about lower interest earnings is that they are subject to management bonus contracts that on average reduce the amount of interest earnings available to the Company for profi ts by about 35%.

Shareholders and management are accustomed to the Company earning signifi cantly more money one year over next. In 2008, our corporate pre-tax profi ts were $7.1 million, only 6% higher than the previous year. This small increase can be attributed to lower interest earnings and the hiring of an additional 40 employees who did not contribute materially to the Company’s profi tability but did add to its costs.

The Company is continuing in its eff orts to obtain a federal charter so that it may operate Olympia Trust Company in Ontario. Regulators were having diffi culty determining whether the Olympia Trust Company’s health plan would be in confl ict with the Trust and Loans Companies Act. To resolve the issue from our perspective, and hopefully theirs, we have created a wholly owned subsidiary called Olympia Benefi ts Inc. and will move the Health Services Plan division out of the

CRAIG SKAUGE, RACHEL GREGORY, LORI MARTAI, HEATHER GENI, RANDY GREGORY Presenting a cheque to the Children’s Wish Foundation


Trust Company. There are some operational advantages for us in doing so as Olympia Benefi ts Inc. is in the life and disability business and there was some awkwardness to operating the health plan from the Trust Company and the insurance benefi ts from another company. There will be no eff ect on the profi tability of the Company as a result of these changes. These changes will take place in 2009.

Our Company and its employees have a tradition of supporting the community through contributions to the United Way. Showing its true spirit, the Company repeated its 2007 performance of 100% employee participation. For 2008, Olympia raised a total of $95,000, beating the previous year’s record by 44%. Olympia matches employee contributions.

The Company also held its 5th Annual Charity Golf Tournament and raised a whopping $50,000 in support of the Children’s Wish Foundation. The 2008 contribution exceeded that of 2007 by 56%.

Olympia Financial Group Inc. had impressive internal growth in 2008 and is more than prepared for continued growth in 2009. We do not expect to participate in the current economic slowdown other than by earning less interest. To combat this loss of interest, the company has taken the unprecedented step of investing $2 million of its free cash into two trust companies whose shares plummeted during the downturn. Both of these companies have recovered from their lows and as a result of these investments the company will be posting an unrealized gain of $610,000 for the fi rst quarter of 2009. The Company is confi dent that our basic businesses will continue to grow. First quarter results will

ANNE-LOUISE BARTLETT AND BRIAN NEWMAN Audit Committee members


LORI MARTAI AND HER DAUGHTER MACKENZIEHalloween celebration

show that the Registered Plans division opened approximately the same number of new accounts in the fi rst 90 days of the year as it did last year. Health Services was just 1% short of a January record for claims, and did set February and March records. Foreign Exchange has been profi table every month of this new year as opposed to losing money every month for the fi rst three months of last year. Shareholder Services has been aff ected, but is still growing, having added 20 new customers in the fi rst quarter of 2009.

The Company has no debt, large cash reserves and solid cash fl ows. We believe there are opportunities to be seized and are keeping our eyes open for those opportunities that fi t with our long-term business strategies, 2009 should be a very interesting year.

At Olympia Trust, we like what we do and do it well. Our business is about customers… satisfying needs…. meeting or exceeding expectations…executing on time. Our biggest asset is the commitment of our employees to deliver these expectations with enthusiasm and pride. Our commitment to our employees is to treat them well…pay them well…encourage them to grow… and to enjoy our time together.

Our executives provide the leadership, the vision and the professional atmosphere to help them meet their goals.

Our expectations are that the future holds much opportunity to continue on the same successful journey we have enjoyed in the past.

DERICK KACHUIK Olympia Golf Tournament

management’s discussion and analysis


Information contained in the Management Discussion and Analysis (MD&A) is presented on the same basis as the consolidated fi nancial statements and reported in Canadian dollars.

The document presents the views of management as at March 06, 2009. The MD&A has been prepared with reference to National Instrument 51-102, Continuous Disclosure Obligations of the Canadian Securities Administrators, and should be read in conjunction with the Group’s audited consolidated fi nancial statements and accompanying notes for the year ending December 31, 2008. The tables and charts in this document form an integral part of this MD&A. Additional information on Olympia Financial Group Inc. can be found on the Group’s website at www.olympiatrust.com and on SEDAR at www.sedar.com.

Methodology for the analysis of results

Management evaluates the Group’s performance on a reported basis, as presented in the consolidated fi nancial statements.

Cautionary note regarding forward-looking statements

The Management Discussion and Analysis contains forward-looking statements. A statement we make is forward-looking when it uses what we know today to make a statement about the future.

Forward-looking statements may include words such as anticipate, believe, could, expect, intend, may, objective, plan and will. The forward looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve

certain risks and uncertainties that are diffi cult to predict. Olympia Financial Group cautions readers against placing reliance on forward-looking statements when making decisions, as the actual results could diff er appreciably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements, due to various material factors. These factors include, among other things, capital market activity, changes in government monetary, fi scal and economic policies, changes in interest rates, infl ation levels and general economic conditions, legislative and regulatory developments, competition, credit ratings, scarcity of human resources and technological environment. The foregoing list of factors is not exhaustive. The reader is cautioned that the historical results are not necessarily indicative of future performance.

Olympia Financial Group Inc. (Olympia) was incorporated on July 12, 1994 under the Alberta Business Corporation Act and is headquartered in Calgary, Alberta. Olympia is listed on the Toronto Stock Exchange (TSX) Venture. The majority of Olympia’s business is conducted through its wholly owned subsidiary Olympia Trust Company (Olympia Trust), a non-deposit taking institution.

Olympia Trust received its letters patent on September 6, 1995 authorizing the formation of a trust company to be registered under the Trust and Loan Corporations Act of the Province of Alberta. Olympia Trust acts as a trustee for self-insured private health plans, manages self-administered registered plans, acts as a registrar and transfer agent for public companies, administers employee stock purchase plans for corporations, provides foreign currency exchange services and other trustee services. Olympia is licensed to conduct trust activities in Canada’s four western provinces.


Summary of Financial ResultsOverview of 2008

Olympia Financial Group Inc. is reporting an increase of 18% in diluted earnings per share for the year ending December 31, 2008 to $2.03 from $1.72 when compared to the same period last year. Net earnings from operations increased 20% to $5.03 million from $4.21 million when compared to the same period last year.

After-tax earnings increased by 20% to $1.05 million in the fourth quarter of 2008 compared to $0.88 million in the previous year’s fourth quarter.

Quarterly dividends per share increased 50% to $0.45 per share from $0.30 per share, eff ective January 31, 2009.

Olympia has a strong balance sheet with revenue growth in all divisions. Olympia is well positioned to manage the current economic conditions through well diversifi ed business divisions and a growing client base.

The fi nancial highlights for 2008

• Total revenue (operational and interest revenue) increased 17% to $29.4 million from $25.1 million for the year ending December 31, 2008.

CONSOLIDATED RESULTS FOR THE YEARS ENDING DECEMBER 31

($ thousands) 2008 2007 2006 Variation '07 -'08

Revenue 24,049 18,422 13,820 31%Interest revenue 5,379 6,647 2,475 -19%

Total revenue 29,428 25,069 16,295 17%Direct expenses (3,718 ) (3,556 ) (3,151 ) 5%Operating expenses (17,823 ) (14,241 ) (8,842 ) 25%Amortization (761 ) (527 ) (362 ) 44%

Earnings before income taxes 7,126 6,745 3,940 6%Income taxes (2,100 ) (2,540 ) (1,373 ) -17%

Net earnings 5,026 4,205 2,567 20%

Average number of common shares (thousands)

Basic 2,460 2,433 2,241 Diluted 2,474 2,450 2,439

Net earnings per common share (dollars)

Basic 2.04 1.73 1.15 Diluted 2.03 1.72 1.05

Eff ective tax rate 29.47% 37.65% 34.85%


• Revenue from operations increased 31% to $24.0 million from $18.4 million when compared to the previous year.

• Monies held in trust generated interest revenue of $5.4 million a 19% decrease from $6.6 million, when compared to the year ending December 31, 2007. The decrease in trust earnings was primarily due to the prime interest rate decreasing 42% to 3.50% from 6.00% during the reported twelve months ending December 31, 2008. Olympia’s interest earnings are subject to fl uctuation depending on account balances and changes in the prime interest rate. The prime interest rate was 2.50% on March 06, 2009.

Also the Corporate and Shareholder Services (CSS) division secured two very large buy-out transactions during the third quarter of 2007 that accounted for the increased interest revenue of approximately $1.5 million during the 2007 comparative year.

• Direct and operating expenses increased 21% to $21.5 million from $17.8 million when compared to the previous year.

• Earnings before income taxes increased 6% to $7.1 million from $6.7 million for the year ending December 31, 2008.

• Income tax expense estimate relating to operations is $2.1 million, an eff ective tax rate of 29.47% for 2008, compared to $2.5 million for the corresponding prior year, with an eff ective tax rate of 37.65%.

• Olympia has no sub-prime market investments and has therefore not experienced any asset deterioration due to sub-prime market exposure.

Olympia experienced growth in all business divisions, as evidenced by the continued increase in revenues as well as the continued improvement in income available to common shareholders.

Revenue(millions of dollars)

2002 2003 2004 2005 2006 2007 2008

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Objectives for 2009

Management is comfortable that it made signifi cant progress in achieving its objectives for 2008 and will further build towards these long-term objectives during 2009.

Management has set the following three objectives for 2009:

• Continue to expand the foreign exchange business

• Continue to invest in in-house software development programs

• Expansion into markets in Eastern Canada

Continue to expand the foreign exchange business

The Foreign Exchange division will continue to increase its sales force in 2009.

Continue to invest in in-house software development program

Management appreciates that Olympia’s client service is enhanced through the software supporting our various divisions. The software systems continue to mature and improve. Management has a policy of capitalizing certain salary costs associated with the development of in-house software.

Expansion into markets in Eastern Canada

Olympia’s traditional markets have been in Western Canada. Olympia requires a Federal Charter in order to off er its services to Ontario and Eastern Canada. Olympia fi led its Federal Charter application in November 2006 and appointed a Toronto-based law fi rm in October 2008 to expedite the Federal Charter.

Outlook for 2009

• The outlook for 2009 is exciting. We expect all divisions to continue to grow at acceptable rates. However, one factor that will aff ect the profi tability of Olympia is a decrease in interest earnings caused by the lower interest rates. Whereas Olympia Trust is not a deposit taking institution, it earns interest on funds held in trust. In 2008, Olympia earned $5.4 million in interest. Lowering of interest rates would reduce the amount of interest Olympia will earn.

• Olympia expects to continue to grow in the next year.

• If the Federal Charter is obtained during the year, it will have a minimal eff ect on Olympia’s 2009 earnings.

• Olympia has no sub-prime market investments and will therefore not experience any asset deterioration due to sub-prime market exposure.

CRAIG, MARK AND RICK SKAUGE Halloween


Financial Analysis

CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31

($) 2008 2007 2006

ASSETS Cash and cash equivalents 10,812,335 9,621,554 6,493,672 Accounts receivable and other 1,348,798 1,434,840 1,192,172 Income taxes receivable 201,850 - - Prepaid expenses 292,879 303,172 182,575 Forward foreign exchange contracts 930,690 985,946 - Commission advances - 3,302 254,564 Current portion of future income taxes - 31,748 - Equipment and other 1,731,604 1,866,178 966,134

15,318,156 14,246,740 9,089,117

LIABILITIES Accounts payable and accrued liabilities 1,349,058 1,269,646 727,284 Income taxes payable - 1,169,707 690,613 Bonus payable 207,605 390,073 89,934 Deferred revenue 577,486 381,187 310,499 Forward foreign exchange contracts 764,610 1,002,084 - Future income taxes 68,188 44,789 20,779

2,966,947 4,257,486 1,839,109

SHAREHOLDERS’ EQUITY Share capital 7,384,225 7,072,616 6,793,268 Contributed surplus 233,389 259,346 62,514

Retained earnings 4,733,595 2,657,292 394,226

12,351,209 9,989,254 7,250,008

15,318,156 14,246,740 9,089,117


Cash

Olympia continues to generate and accumulate cash reserves from its core businesses. Cash reserves improved by 12% (2007 - 48%) year on year. Olympia places its surplus cash on fi xed deposit where it generates interest at favorable interest rates negotiated with a Canadian fi nancial institution. Cash resources comprise 80% (2007 - 78%) of the total current assets of Olympia. Olympia invested nearly $2 million during the fi rst quarter of 2009 in shares of two companies listed on the Toronto Stock Exchange, namely Home Capital Group Inc. (TSX:HCG) and Equitable Group Inc. (TSX:ETC). These investments are in response to unique market conditions and are speculative in nature. This is the fi rst time Olympia has invested some of its cash in something other than government-backed term-deposits.

Receivables

Receivables are comprised mainly of trade accounts receivable from Corporate Shareholder Services clients for services rendered and from securities cage certifi cate transfer fees. Management is committed to a policy of closely monitoring Olympia’s risk and exposure in this area.

Prepaid expenses

Major prepaid expenses consist of insurance premiums, license fees and software maintenance, postage and rent.

Forward exchange contracts

Olympia periodically purchases forward contracts when it enters into a transaction to buy or sell foreign currency in the future. These contracts are short term in nature, are in the regular course of business and are used to manage foreign exchange exposures. Foreign exchange contracts are not designated as hedges and they are recorded using the mark-to-market method of accounting.

Foreign exchange contracts are recorded on Olympia’s balance sheet as either an asset or liability with changes in fair value recorded to net earnings. This accounting treatment resulted in the disclosure of the forward foreign exchange contract asset of $930,690 and a forward foreign exchange contract liability of $764,610 on the balance sheet and the inclusion of unrealized income of $166,080 in the statement of operations and comprehensive income.

Current liabilities

The breakdown of Olympia’s current liabilities, consists of Olympia Trust trade accounts and commissions payable to Private Health Services Plan agents. These accounts represent 30% of current liabilities. Accrued liabilities accounts for 15% of current liabilities and consists of consulting and audit fees, vacation pay and directors remuneration. Deferred revenue accounts for 20% of current liabilities as a result of the growth in new accounts opened in the Registered Plan division. Foreign Exchange broker and trade settlements accounts for 16% of total current liabilities. Most of bonus payable is due to Corporate Shareholder Services management and staff .


Contingent liabilities

Olympia is not a money lender nor does it guarantee, or participate in loans or mortgages of any type. Management is not aware of any contingent liabilities.

Related parties

During the year, Olympia entered into transactions with the following related parties:

• Companies controlled by the president of Olympia Trust Company and Olympia Financial Group Inc.

• Companies controlled by management of Olympia Trust Company and Olympia Financial Group Inc.

• Companies controlled by directors of Olympia Trust Company and Olympia Financial Group Inc.

• Eyelogic Systems Inc., a company under common control.

These transactions are in the normal course of business operations and have been valued in the consolidated fi nancial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties:

Olympia earned revenue for transfer agent services provided to Target Capital Inc, a company controlled by the president.

Transfer agent services to the value of $8,291 were provided to Orbus Pharma Inc., Committee Bay Resources ($38,801), Cedar Mountain Exploration Inc. ($11,650), Nose Creek Land Banking Corporation ($8,591) and

Nose Creek Capital Corporation (12,344), companies controlled by directors.

Revenue controlled by management was earned under contract with the Vice President, Registered Plans. She holds a mutual fund license and as part of her employment agreement remits to Olympia Trust 80% of revenue generated.

($) Dec. 31, 2008 Dec. 31, 2007

Revenue - controlled by the president 5,990 18,282 - controlled by management 34,976 44,269 - controlled by directors 79,438 27,060 - Eyelogic Systems Inc. 20,880 22,423

141,284 112,034

($) Dec. 31, 2008 Dec. 31, 2007

Direct expenses - controlled by the president 131,909 155,984 - controlled by management 28,157 29,995 - controlled by directors 96,418 106,722

256,484 292,701


Direct expenses were paid to companies controlled by the president, management and directors for commissions relating to the sale of health plans off ered by Olympia Trust.

The company controlled by the president is Target Capital Inc. CC Management is controlled by a director and JR Financial is controlled by the controller of Olympia.

Operating expenses were paid to companies controlled by the president, management and directors for services described below:

Tarman Inc., a company controlled by the president, receives management fees based on a percentage of the pre-tax profi ts of Olympia’s divisions; except for the Private Health Services Plans division where the

management fee is based on a percentage of health claims administered.

The Shire Limited, is a company controlled by the Vice President, Private Health Services Plan’s. The operating expenses are related to salary payments for providing strategic planning services and advice in respect of the marketing of Olympia Trust’s Private Health Services Plans.

Bijan’s Western Flooring Alberta Inc., a company controlled by a director supplied fl ooring and carpeting to the various new offi ces occupied during the year. These

expenditures were capitalized to leasehold improvements.

Accounts receivable include amounts receivable from:

($) Dec. 31, 2008 Dec. 31, 2007

Operating expenses - controlled by the president 1,458,405 1,360,638 - controlled by management 243,239 211,397 - controlled by directors – 40,000

1,701,644 1,612,035

($) Dec. 31, 2008 Dec. 31, 2007

Companies controlled by the president 15,068 6,483Companies controlled by management 2,730 3,372Companies controlled by the directors 28,685 5,219Eyelogic Systems Inc. 8,379 11,392

54,862 26,466

($) Dec. 31, 2008 Dec. 31, 2007

Capital expenditures - controlled by directors 23,939 -

23,939 -


Companies that are controlled by the president is part of an arrangement whereby Tarman Inc. and Target Capital pays a portion of the remuneration to three of Olympia’s personnel delivering services to both Olympia and these companies mentioned.

The other receivables are for transfer services provided by Corporate Shareholder Services to Eyelogic Systems Inc., Committee Bay Resources and Cedar Mountain Exploration Inc. These accounts are all current.

Accounts payable and accrued liabilities include amounts payable to:

Payments to companies controlled by the president are to Tarman Inc. for monthly management fees and payments to management consist of bonus payments. Director’s remuneration for the fourth quarter is included in payments to directors and companies controlled by directors.

These payments are all current.

Shareholders equity

During the year the following share movements occurred:

Olympia has established a stock option plan for offi cers and employees to purchase Class A common shares. Stock options are issued with an exercise price equal to fair value of Olympia’s common shares on the date of grant. The fair value of Olympia’s shares is determined by considering the share trading activities, dividend multiples and earnings per share multiples.

Stock options have a maximum term of fi ve years and vest one-third on date of issue and one-third on each of the next two anniversary dates from issuance. At December 31, 2008 Olympia had 36,950 (2007 - 58,950) options outstanding at an average exercise price of $22.12.

Olympia did not grant any options during 2008.

Olympia has established an Employee Share Ownership Plan (ESOP).

Under this plan Olympia contributes $1 for each $1 contributed by an employee up to a maximum that is based on the employee’s

($) Dec. 31, 2008 Dec. 31, 2007

Payments to companies controlled by the president 108,740 154,978Payments to management 97,947 192,289Payments to directors and companies controlled by directors 62,262 8,545

268,949 355,812

Number of Shares $

Balance Dec. 31, 2007 2,447,602 7,072,616Stock options exercised 17,000 225,500

Transferred from - 89,109 contributed surplus on exercise of options

Balance Dec. 31, 2008 2,464,602 7,387,225


earnings and years of service. Employee and Olympia contributions are used to purchase common shares of Olympia in the open market. Olympia’s contribution is included as an expense in the statement of operations and amounted to $120,664 (2007 - $64,942).

Quarterly results

Olympia’s quarterly operational results, excluding the uncontrollable interest revenue portion, are relatively stable from one quarter to the next with no signifi cant period-to-period fl uctuations, due to the diversifi ed nature of operations and quarterly divisional growth. Olympia is not subject to signifi cant fl uctuations in the short term. Results were infl uenced by the growth in transaction volume, specifi c events, as well as by changes in economic conditions, competition and

regulatory developments, including monetary policy.

Interest revenue decreased for the sixth quarter in a row as the prime interest rate decreases 44% to 3.50% from 6.25%, cushioned by an increase in client-administered funds under management as Olympia’s off -balance sheet assets administration increased by 63% to $1,500 million from $920 million. Management maintains a focus on expenses as evident in the quarterly numbers whereby expenses remained stable for three quarters in a row. Net earnings is a refl ection of the relatively stable operational revenue and the decreases in interest revenue as a result of the lowering of the prime rate during the reported quarters.

The following table presents the quarterly results for fi scal 2008 and 2007:

QUARTERLY SUMMARY ENDING DECEMBER 31, 2008

($) 2008 2007

31-Dec 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-MarRevenue 6,019 5,863 6,284 5,882 4,946 4,304 4,778 4,393Interest Revenue 977 1,312 1,331 1,759 1,939 2,003 1,888 817 Expenses (5,618) (5,622 ) (5,694 ) (5,368 ) (5,166 ) (4,372 ) (4,949 ) (3,837 )

Earnings before income taxes 1,378 1,553 1,921 2,273 1,719 1,935 1,717 1,373

Net earnings 1,054 1,031 1,334 1,607 876 1,360 1,060 919

Per share - basic ($) 0.42 0.42 0.54 0.66 0.29 0.56 0.47 0.41Per share - diluted ($) 0.42 0.42 0.54 0.65 0.31 0.55 0.46 0.40Dividends per share ($) 0.45 0.30 0.30 0.30 0.30 0.20 0.20 0.20


Fourth Quarter

The fourth quarter’s revenue decreased 3% to $7.0 million from $7.2 million when compared to the third quarter of 2008. Operational revenue increased by 3% to $6.02 million from $5.86 million whereas interest revenue decreased 25% to $0.98 million from $1.31 million when compared to the third quarter of 2008. From a Private Health Services and Registered Plans divisional view, the fi rst and the fourth quarters remain seasonally strong with the Foreign Exchange division achieving signifi cant quarterly revenue growth.

The Corporate Shareholders Services division is more directly aff ected by both industry and economic cycles. Fourth quarter expenses remains neutral compared to the third quarter of 2008 as Olympia remains focused on the bottom line.

Analysis of results by divisionPrivate Health Services Plan Division

The Private Health Services Plan Division’s revenue increased 13% to $6.84 million from $6.06 million when compared to 2007 and is a result of the increase in the health claims administered, which reached nearly $53 million for the 2008 year. The division had more than 10,833 new members joining during the year and more than 2,500 new groups signed on during this twelve month period. Terminations remained stable during the year when compared to 2007.

Interest revenue decreased to $0.23 million from $0.27 million, a 14% decrease refl ecting the lower interest rates available during this year as the prime interest rate continued to decrease. Total expenses increased by 9% due to increased rent and the appointment of fi ve

additional staff members to strengthen the team’s marketing, administrative functions and call centre capacity.

The Affi nity marketing program developed in conjunction with professional associations

continues to be successful in growing our new members. The Affi nity program is further strengthened by the development of an automated customer follow-up system to enhance client satisfaction and maintain

SUMMARY OF DIVISIONAL RESULTS AS AT DECEMBER 31

($ thousands) 2008 2007 Variation

Revenue 6,840 6,063 13%Interest revenue 231 269 -14%Direct expenses (2,541 ) (2,632 ) -3%

Gross margin 4,530 3,700 22%

General & administrative expenses (3,182 ) (2,612 ) 22%Amortization (166 ) (134 ) 24%

Earnings before income tax 1,182 954 24%

Income taxes (348 ) (359 ) -3%

Net earnings 834 595 40%


service excellence. The Olympia Trust PayDirect health care card has shown positive growth over the past year and Olympia started the process to upgrade the health care card to enhance its acceptance by the non-pharmaceutical health care providers.

Earnings before income taxes increased 24% to $1.18 million from $0.95 million, compared to the year ending December 31, 2007.

The division is responsible for 24% of Olympia’s total revenue, which decreased from 26% in 2007.

The Corporate and Shareholder Services Division deals primarily with public companies and provides services including: acting as transfer agent and registrar, disbursing agent, dividend reinvestment services, employee share purchase plans, assisting companies

as depository with respect to corporate reorganizations and shareholder solicitations, scrutineering shareholder meetings and acting as trustee in a variety of roles with income trusts, debt issues, warrants and escrows.



Revenue 8,491 7,465 14%Interest revenue 1,623 3,238 -50%Direct expenses (659 ) (684 ) -4%

Gross margin 9,455 10,019 -6%

General & administrative expenses (6,626 ) (6,665 ) -1%Amortization (223 ) (177 ) 26%

Earnings before income tax 2,606 3,177 -18%

Income taxes (768 ) (1,196 ) -36%

Net earnings 1,838 1,981 -7%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Private Health Plan Services Claims(millions of dollars)

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Corporate and Shareholder Services Division


The Corporate Shareholder Services Division’s revenue increased 14% to $8.49 million from $7.47 million when compared to 2007 as a result of growth in the transfer agency and certifi cate service off erings, which contributed nearly 85% of the revenue generated in this division.

Olympia carries out its operations in Toronto through Olympia Transfer Services Inc., an Ontario registered company. The consolidated fi nancial results include the results of this wholly owned subsidiary.

Offi ce renovations in the Vancouver offi ces and new staff training were completed during the third quarter of 2008 and Vancouver is now a full service transfer agent with a securities cage in place. Staff doubled to accommodate the 64% increase in the client base to 70 clients.

Interest revenue decreased 50% to $1.62 million from $3.24 million, refl ecting the lower interest rates available during this year as the prime interest rate continued to decrease. The division’s funds in trust decreased due to the market slowdown and less merger and acquisition activity during the second half of the year. Total expenses remained consistent compared to the previous year. Lower interest earnings translated into lower bonus payments. The division made some strategic hiring decisions and strengthened its core management group. Earnings before income taxes of $2.61 million is a decrease of 18% from $3.18 million, compared to the year ending December 31, 2007.

The Calgary head offi ce increased its client base during the year. The Corporate Shareholders Services division was successful in securing 20% of the new issues during the year, an increase from the previous year’s 13%.

Readers are reminded that the Corporate and Shareholder Services division secured two very large transactions during the second quarter of 2007, accounting for the increased interest revenue during the previous year.

The division is responsible for 34% of Olympia’s total revenue which decreased from 42% in 2007.

Corporate and Shareholder Services Revenue(millions of dollars)

2001 2002 2003 2004 2005 2006 2007 20080

1

2

3

4

5

6

7

8

9


This division specializes in dealing with niche account administration needs that are not provided by most of our competitors. Many of our clients use their registered funds to invest in Mortgage Investment Corporations, Private Mutual Fund Trusts and Canadian Controlled Private Corporations. In 2009 our clients can open self-directed Tax Free Savings Accounts. One of our specialties is the administration of accounts that invest in mortgages. These investors deal primarily with mortgage brokers and may have several mortgage investments in one account.

The Registered Plans Division’s revenue increased 67% to $5.70 million from $3.41 million when compared to 2007 as a result of the growth in the self administered plans under administration, which increased 63% to 34,059 accounts from 20,863 one year ago. Interest revenue increased 13% to $3.22 million from $2.85 million, refl ecting the growth of more than 13,000 new accounts opened during the year, cushioning the eff ect of lower prime interest rates during the year.

Total expenses increased 62% to $5.32 million from $3.28 million when compared to the previous year, refl ecting new hires in the division’s staff to accommodate the



Revenue 5,702 3,412 67%Interest revenue 3,220 2,847 13%Direct expenses - -

Gross margin 8,922 6,259 43%


Earnings before income tax 3,404 2,860 19%

Income taxes (1,003 ) (1,077 ) -7%

Net earnings 2,401 1,783 35%

Registered Plans Division

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Self-Administered Plans(thousands)

0

5

10

15

20

25

30

35

40


Accounting Group Team Building

63% growth in new accounts. The division’s rental expense increased to accommodate the increase in personnel. The division has a total of 33 staff members and has appointed a training and development specialist to ensure proper knowledge transfer and training to new and existing staff members. The division has suffi cient offi ce space to allow for growth in the future.

Earnings before income tax of $3.4 million are an increase of 19% from $2.86 million, compared to the year ending December 31, 2007. The Registered Plans Division contributed $2.4 million to the bottom line, making it the highest contributor to Olympia’s net earnings after income taxes, a contribution of 48%.

The division is responsible for 30% of Olympia’s total revenue which increased from 25% in 2007.

2002 2003 2004 2005 2006 2007 2008

Mortgages under administration

0

500

1,000

1,500

2,000

2,500

3,000

3,500


The Foreign Exchange Division provides corporations and private clients a personalized service of buying and selling foreign currencies at competitive rates while providing 100% security throughout the entire process of the transaction. This division has offi ces in Vancouver, Kelowna, Surrey, Calgary and Edmonton. This division is the newest and fastest growing division in Olympia. Olympia Foreign Exchange off ers its clients same-day transactions as well as long-term forward contracts. Forward contracts are a risk management tool for our business clients to help them reduce risk exposure on future currency needs.

The Foreign Exchange Division’s revenue increased 106% to $2.96 million from $1.43 million when compared to 2007. The division hired eight new traders during the year and has a total of 19 traders in its various offi ces.

Total expenses increased 80% to $3.14 million from $1.74 million when compared to the previous year, refl ecting the increase in the

division’s staff and additional offi ce space to accommodate the new business and growth strategy.

Loss before income taxes of $0.23 million is a decrease of 30% from $0.33 million, compared to the year ending December 31, 2007.

The division is responsible for 11% of Olympia’s total revenue which increased from 6% in 2007.

Off -balance sheet arrangements

During the normal course of operations Olympia administers client assets that are not reported on the balance sheet, through its wholly owned subsidiary Olympia Trust Company. The cash component of the off -balance sheet arrangements represents the cash and cash equivalents held in trust with a Canadian fi nancial institution.



Revenue 2,961 1,434 106%Interest revenue 121 74 63%Direct expenses (518 ) (240 ) 116%

Gross margin 2,564 1,268 102%


Earnings/(loss) before income tax (232 ) (334 ) -30%

Income tax recovery 68 126 -46%

Net earnings/(loss) (164 ) (208 ) -21%

Foreign Exchange Division


Management of capital resources

Olympia’s capital structure is comprised of Shareholders’ Equity.

Olympia maintains a strong capital base to maintain investor and creditor confi dence and to sustain future development of the business. Cash and cash equivalents increased 12% to $10.81 million from $9.62 million, when compared to the previous year.

Olympia has committed capital resources to the Objectives of 2009 and has suffi cient capital through internally generated cashfl ows to meet these spending commitments. The Objectives of 2009 requires minimal capital expenditure, save for the investment in in-house software to enhance Olympia’s Private Health Services Plan Divisions system during the year. Capital commitments to the Objectives of 2009 are not excessive.

Completing and fulfi lling the Objectives of 2009 will help Olympia meet its growth and development activities. No other signifi cant expenditures are required to maintain growth and development activities.

Olympia does not use fi nancial ratios to manage its capital structure. Olympia’s objective when managing capital is to maintain adequate fi nancial fl exibility to preserve its ability to meet fi nancial obligations. The capital structure of Olympia is managed and adjusted to refl ect changes in economic conditions. In order to maintain or adjust the capital structure, adjustments may be made to the amount of dividends (if any) to shareholders, in addition to the amount of new common shares issued. Financing decisions are set based on the timing and extent of expected operating and capital cash outlays.

Factors considered when determining whether to issue equity include the amount of cash

OFF-BALANCE SHEET ARRANGEMENTS UNDER ADMINISTRATION AS AT DECEMBER 31, 2008

Securities and mutual funds at ($ thousands) Cash market value

Private Health Services Plan Division 5,213 -Corporate and Shareholders Services Division 54,947 -Registered Retirement Savings Plan Division 93,239 1,340,954Foreign Exchange Division 439 -

153,838 1,340,954

($) Dec. 31, 2008 Dec. 31, 2007

Cash on hand and balances with banks 9,912,335 6,621,554Investments in term deposits 900,000 3,000,000

10,812,335 9,621,554


sought, the availability of these sources and their terms and overall balance in creation of value for the shareholders. Cash remains Olympia’s principal capital resource. Management does not expect this to change in the near future.

Olympia’s Foreign Exchange Division maintains various foreign currency bank accounts of which Canadian dollar and United States dollar bank accounts are the most signifi cant. It is Olympia’s policy to limit the amount of United States dollars on hand to US$ 500,000 to reduce exposure to foreign currency risk.

Olympia’s capital management objectives have not changed over the periods presented.

Liquidity

It is management’s policy to maintain a healthy current ratio. The ratio is 4.69:1 (2007 – 2.94:1) and indicates that Olympia will not have diffi culty in meeting working capital requirements. The exclusion of the forward foreign exchange contracts as a current asset and liability would create a ratio of 5.93:1 compared to the previous year. The decrease in the corporate tax rate to 29.5% from 32.5% created an income tax receivable of an estimated $201,850 rather than a payable of $1,169,707 in 2007, which explains the increase in the current ratio.

The following table shows the timing of cash outfl ows relating to trade accounts payable as at:

There are no legal or practical restrictions on the ability of subsidiaries to transfer cash within Olympia.

Cash and cash equivalents increased 12% to $10.81 million from $9.62 million when compared to 2007. Olympia is well diversifi ed; healthcare operations with close to 70,000 members under administration, foreign exchange services with offi ces in three major cities across Canada, registered plans catering for 35,000 clients and a corporate and shareholder services division acting as transfer agent and registrar with offi ces in eastern and western Canada. Olympia’s

eff ective diversifi cation, prudent fi nancial management and a focus on maintaining excellent customer service will help its ability to generate suffi cient amounts of cash and cash equivalents in the short term and in the long term, to maintain Olympia’s capacity and meet planned growth and development activities.

One factor that aff ected the profi tability of Olympia was the decrease in interest rates. Whereas Olympia Trust is not a deposit taking institution, it earns interest on funds held in trust. In 2008, Olympia earned a total of $5.38 million in interest revenue compared to the

($) Dec. 31, 2008 Dec. 31, 2007

Current 306,370 554,61931 to 60 days 4,327 114,30361 to 90 days 2,527 -Over 91 days 1,867 -

315,091 668,922


$6.65 million when compared to the previous year. Lowering of interest rates reduces the amount of interest revenue Olympia earns unless off set by Olympia holding more funds in trust. Olympia has been successful in holding more funds in trust this year than in the previous year, so the overall impact of lower interest rates has been substantially off set. Olympia’s earnings before taxes increased by 6% whereas the dependency on interest revenue as a percentage of total revenue decreased from 26.5% to 18.3%, indicating that to sustain earnings growth, Olympia is less dependent on uncontrollable interest revenue than in previous years.

Olympia has suffi cient operational cash fl ow to fund the Objectives for 2009. There is no signifi cant risk of default on dividend payments due to Olympia’s internally generated cash fl ows and available cash and cash equivalent balances.

Liquidity risks associated with fi nancial instruments are addressed in the note on foreign currency exchange risk. Management understands that the currency markets are volatile and therefore subject to higher risk. Olympia has policies in place to mitigate the currency risk.

Lease operating agreements are listed in the table below and Olympia has no long-term debt, other than the operating agreements.

Risk framework

Olympia is exposed to various types of risks owing to the nature of the commercial activities it pursues. Management has identifi ed the following risks:

Credit risk

Credit risk is the risk that a customer or counterparty will fail to perform an obligation or fail to pay amounts due, resulting in

a fi nancial loss. Olympia ensures there is a credit practice in place to measure and monitor credit risk. This documented practice outlines delegation of authority and the due diligence process required to approve a new customer or counterparty. The creditworthiness of a new customer or counterparty is assessed before transactions begin. The assessment practice considers both quantitative and qualitative factors.

($) Dec. 31, 2008

2009 758,1252010 653,3022011 516,9452012 290,8652013 70,324Subsequent 54,192

2,343,753


Olympia constantly monitors the exposure to any single customer or counterparty along with the fi nancial position of the customer or counterparty. If it is deemed that a customer or counterparty has become materially

weaker, Olympia will work to reduce the credit exposure and lower the credit limit allocated.

The table below shows no signifi cant credit risk exposure in the trade accounts receivable as at:

The allowance for doubtful accounts is based on an account by account analysis and prior credit history.

Liquidity risk

Liquidity risk is the risk that an entity will encounter diffi culty in meeting obligations associated with fi nancial liabilities. Olympia believes that it has access to suffi cient capital through internally generated cashfl ows to meet current spending forecasts. Surplus cash is invested into interest bearing bank accounts and fi xed day term deposits. Olympia seeks to ensure the security and liquidity of those investments

Interest rate risk

Olympia is exposed to interest rate risk as changes in interest rates may aff ect future cash fl ows and the fair values of Olympia’s fi nancial instruments. Primary exposure is related to cash balances and fi xed day term deposits.

If the interest rates were to have increased by 1%, it is estimated that Olympia’s after-tax earnings for the year ended December 31, 2008 would have increased by approximately $108,123 on account of its own assets. When interest earned on funds held in trust is taken into account the after-tax eff ect of a 1% increase in interest rates would have been $712,945. A 1% decrease in interest rates would have had an equal but opposite eff ect. This sensitivity analysis assumes that all other variables, in particular foreign exchange rates, remain constant.

Foreign currency exchange risk

Olympia is exposed to changes in foreign exchange rates because revenues or fi nancial instruments may fl uctuate as a result of changing rates. Transactions in the applicable fi nancial market are executed consistent with established risk management policies.

Olympia purchases forward contracts whenever it enters into a transaction with a value greater than US$100,000, to buy or sell

($) Dec. 31, 2008 Dec. 31, 2007

Current 654,097 832,77531 to 60 days 473,520 353,44861 to 90 days 91,217 73,506Over 91 days 96,757 105,747Allowance for doubtful accounts (25,529 ) (28,553 )

1,290,062 1,336,923


foreign currency in the future. These contracts are short term in nature and in the regular course of business. Management understands that the currency markets are volatile and therefore subject to higher risk.

Olympia applies the following policies to mitigate the currency risk:

• For contracts greater than US$100,000, a margin of 5% is payable on signature of the contract. Olympia sets up a corresponding position with its currency supplier. If market rates vary by 4% or more, the client is required to adjust their margin to match the variance by the end of the trading day.

• For contracts less than US$100,000, a margin of 5% is payable on signature of the contract. If market rates vary by 4% or more, the client is required to adjust their margin to match the variance by the end of the trading day.

If the United States dollar to Canadian dollar exchange rate at December 31, 2008 were to have increased by $0.01, it is estimated that Olympia’s after-tax earnings for the year ended December 31, 2008 would have decreased by approximately $1,661. A $0.01 decrease in the United States dollar to Canadian Dollar exchange rate would have had an equal but opposite eff ect. This sensitivity analysis assumes that all other variables, in particular interest rates, remain constant.

Operational risks

Management has identifi ed the following operational risks which could negatively aff ect Olympia’s future strategies and objectives:

• The risk that internal control systems implemented by management will fail to detect errors, omissions or fraud,

• The risk that the regulatory environment in which Olympia carries out commercial activities may change.

• The risk that new markets may fail to produce estimated revenues.

Accounting policies

The fi nancial information contained in the consolidated fi nancial statements and the Management Discussion and Analysis is prepared using a framework of accounting policies developed from the nature of the commercial activities that Olympia pursues. Some accounting policies due to their nature, require further explanation.

Capitalization policies

Olympia capitalizes certain identifi ed salary expenses in the development of in-house computer software. Olympia makes use of a formula to determine the salary portion to be capitalized. The method and process applied is consistent with previous years.

Foreign exchange contracts

Olympia purchases forward contracts whenever it enters into a forward exchange transaction of greater than US$100,000 to buy or sell foreign currency in the future. These contracts are short term in nature, in the regular course of business and are recorded for a short period of time only as discussed in detail in the risk framework, forward currency exchange risk note.


Dividends

Olympia has paid dividends to its shareholders and the last eight quarters’ dividends are listed in the Quarterly Summary ending December 31, 2008 under Quarterly Results in this MD&A.

Critical accounting estimates

The preparation of fi nancial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that aff ect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the fi nancial statements and reported amounts of revenues and expenses during the reporting period. Critical accounting estimates include stock-based compensation, contributed surplus and commission advances. Actual results could diff er from those estimates.

Dividend policy and pay outs

Olympia pays quarterly dividends. In November of each year the board meets to establish the dividend for the next year. In November 2008 the board of directors approved a 50% increase in the quarterly dividend to 45 cents from 30 cents, eff ective January 31, 2009.

Income tax

Future income tax liabilities refl ects management’s estimate of the value of loss carry-forwards, minimum tax carry-overs and other temporary diff erences. The determination of the values of liabilities is based on assumptions related to results

of operations of future fi scal years, timing of reversal of temporary diff erences and tax rates on the date of reversals, which may well change depending on governments’ fi scal policies.

Changes in accounting policies and practices

New standards

On January 1, 2008, Olympia adopted the following Canadian Institute of Chartered Accountants (CICA) Handbook Sections:

Section 1535 - Capital Disclosures

The new standard requires Olympia to disclose its objectives, policies and processes for managing its capital structure.

Section 3862 - Financial Instruments – Disclosures and Section 3863 – Financial Instruments – Presentation

These sections revise and enhance fi nancial instruments disclosure requirements and leave its presentation requirements unchanged. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from fi nancial instruments and how Olympia manages those risks.

Future accounting changes

In February 2008, the CICA’s Accounting Standards Board confi rmed that International Financial Reporting Standards (IFRS) will replace Canadian GAAP in 2011 for profi t oriented Canadian publicly accountable enterprises. Olympia will be required to report its results in accordance with IFRS beginning in 2011.


Olympia has developed a changeover plan to complete the transition to IFRS by January 1, 2011, including the preparation of required comparative information.

The key elements of Olympia’s changeover plan include:

• determine appropriate changes to accounting policies and required amendments to fi nancial disclosures;

• identify and implement changes in associated processes and information systems;

• comply with internal control requirements;

• communicate collateral impacts to internal business groups; and

• educate and train internal and external stakeholders.

Olympia is currently analyzing accounting policy alternatives and identifying implementation options for the corresponding process changes. Olympia will update its IFRS changeover plan to refl ect new and amended accounting standards issued by the International Accounting Standards Board.

As IFRS is expected to change prior to 2011, the impact of IFRS on Olympia’s Consolidated Financial Statements is not reasonably determinable at this time.

Impact of adoption

Implementation of the new accounting standards did not require the restatement of the comparative consolidated fi nancial statements.

Stampede 2008


Management’s responsibility for financial statements

Fiscal years ended December 31, 2008 and 2007

The accompanying fi nancial statements and all of the data included in this annual report have been prepared by and are the responsibility of the board of directors and management of the Company. The fi nancial statements have been prepared in accordance with accounting principles generally accepted in Canada and refl ect management’s best estimates and judgments based on currently available information.

The fi nancial statements for the fi scal year ended December 31, 2008 have been audited by PricewaterhouseCoopers LLP, Chartered Accountants. Their report outlines the scope of their examination and opinion on the fi nancial statements.

Rick Skauge Gerhard BarnardPRESIDENT & CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER

Calgary, Canada, March 06, 2009


Auditors’ Report

To the Shareholders of Olympia Financial Group Inc.

We have audited the consolidated balance sheets of Olympia Financial Group Inc. (“Olympia”) as at December 31, 2008 and 2007 and the consolidated statements of operations and comprehensive income, retained earnings and cash fl ows for the years then ended. These consolidated fi nancial statements are the responsibility of Olympia’s management. Our responsibility is to express an opinion on these fi nancial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation.

In our opinion, these consolidated fi nancial statements present fairly, in all material respects, the fi nancial position of Olympia as at December 31, 2008 and 2007 and the results of its operations and its cash fl ows for the years then ended in accordance with Canadian generally accepted accounting principles.

Chartered AccountantsCalgary, Alberta

March 6, 2009

“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member fi rms of the network, each of which is a separate and independent legal entity


DECEMBER 31 2008 2007

ASSETSCURRENT Cash and cash equivalents (note 4) $ 10,812,335 $ 9,621,554 Accounts receivable and other 1,348,798 1,434,840 Income taxes receivable 201,850 - Prepaid expenses 292,879 303,172 Forward foreign exchange contracts (note 13) 930,690 985,946 Commission advances (note 5) - 3,302 Current portion of future income taxes (note 7) - 31,748

13,586,552 12,380,562EQUIPMENT AND OTHER (note 6) 1,731,604 1,866,178

$ 15,318,156 $ 14,246,740

LIABILITIESCURRENT Accounts payable and accrued liabilities $ 1,349,058 $ 1,269,646 Income taxes payable - 1,169,707 Bonuses payable 207,605 390,073 Deferred revenue 577,486 381,187 Forward foreign exchange contracts (note 13) 764,610 1,002,084

2,898,759 4,212,697FUTURE INCOME TAXES (note 7) 68,188 44,789

2,966,947 4,257,486

SHAREHOLDERS’ EQUITYSHARE CAPITAL (note 9) 7,384,225 7,072,616CONTRIBUTED SURPLUS (note 10) 233,389 259,346RETAINED EARNINGS 4,733,595 2,657,292

12,351,209 9,989,254

$ 15,318,156 $ 14,246,740

COMMITMENTS (note 12)Approved on behalf of the Board of Directors

Rick Skauge Randy GregoryDIRECTOR DIRECTOR

March 6, 2009

See accompanying notes to the consolidated fi nancial statements

CONSOLIDATED BALANCE SHEET


YEAR ENDED DECEMBER 31 2008 2007

REVENUE $ 29,427,387 $ 25,068,828DIRECT EXPENSES 3,717,728 3,555,742

GROSS MARGIN 25,709,659 21,513,086

EXPENSES Salaries, management fees and bonuses 12,967,034 10,936,404 General and administration 3,705,886 2,503,540 Rent 1,149,834 801,228 Amortization 761,279 527,242

18,584,033 14,768,414

EARNINGS BEFORE INCOME TAXES 7,125,626 6,744,672

INCOME TAXES Current (note 7) 2,044,153 2,547,262

Future (note 7) 55,148 (7,738 )

2,099,301 2,539,524

NET EARNINGS AND COMPREHENSIVE INCOME $ 5,026,325 $ 4,205,148

BASIC EARNINGS PER SHARE (note 11) $ 2.04 $ 1.73

DILUTED EARNINGS PER SHARE (note 11) $ 2.03 $ 1.72


CONSOLIDATED STATEMENT OF OPERATIONS & COMPREHENSIVE INCOME



BALANCE, beginning of period $ 2,657,292 $ 394,226 Net earnings and comprehensive income 5,026,325 4,205,148 Dividends paid (2,950,022 ) (1,942,082 )

BALANCE, end of period $ 4,733,595 $ 2,657,292


CONSOLIDATED STATEMENT OF RETAINED EARNINGS



CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Net earnings $ 5,026,325 $ 4,205,148 Items not aff ecting cash Amortization 761,279 527,242 Future income taxes 55,148 (7,738 ) Stock-based compensation 63,152 241,180 Unrealized forward foreign exchange expense (revenue) (182,218 ) 16,138

5,723,686 4,981,970Changes in non-cash working capital items Accounts receivable and other 86,042 (242,668 ) Prepaid expenses 10,293 (120,597 ) Commission advances 3,302 251,262 Accounts payable and accrued liabilities 79,415 542,362 Bonuses payable (182,468 ) 300,139 Income taxes payable (1,371,557 ) 479,094 Deferred revenue 196,299 70,688

4,545,012 6,262,250

INVESTING ACTIVITIESPurchase of equipment and other (626,709 ) (1,427,286 )

FINANCING ACTIVITIESIssuance of capital stock 222,500 235,000Dividends (2,950,022 ) (1,942,082 )

(2,727,522 ) (1,707,082 )

CHANGE IN CASH POSITION 1,190,781 3,127,882CASH AND CASH EQUIVALENTS, beginning of period 9,621,554 6,493,672

CASH AND CASH EQUIVALENTS, end of period $ 10,812,335 $ 9,621,554

OTHER INFORMATIONInterest received $ 5,736,635 $ 6,136,785Income taxes paid $ 3,213,860 $ 1,869,180


CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1. NATURE OF OPERATIONS Olympia Financial Group Inc. (Olympia) was incorporated on July 12, 1994 under the Alberta Business

Corporation Act. Olympia is listed on the TSX Venture Exchange.

The majority of Olympia’s business is conducted through its wholly owned subsidiary Olympia Trust Company (Olympia Trust), a non-deposit taking institution.

Olympia Trust received its letters patent on September 6, 1995 authorizing the formation of a trust company to be registered under the Trust and Loan Corporations Act of the Province of Alberta. Olympia Trust acts as a trustee for self-insured private health plans, manages self-administered registered plans, acts as a registrar and transfer agent for public companies, administers employee stock purchase plans for corporations and provides foreign currency exchange services and other trustee services.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Consolidation The consolidated fi nancial statements include the accounts of Olympia and its subsidiary

corporations, all of which are wholly owned. All inter-corporate balances and transactions have been eliminated.

(b) Use of estimates The preparation of consolidated fi nancial statements in conformity with Canadian generally

accepted accounting principles requires management to make estimates and assumptions that aff ect the reported amounts of assets and liabilities at the date of the consolidated fi nancial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, these estimates are subject to measurement uncertainty. The eff ect of changes in such estimates on the consolidated fi nancial statements in future periods could be signifi cant. In particular, assessing the allowance for doubtful accounts, the amortization of equipment and assumptions used to calculate stock-based compensation require the use of estimates.

(c) New standards On January 1, 2008, Olympia adopted the following Canadian Institute of Chartered Accountants

(CICA) Handbook Sections:

(i) Section 1535 - Capital Disclosures The new standard requires Olympia to disclose its objectives, policies and processes for

managing its capital structure. (note 15)

(ii) Section 3862 - Financial Instruments – Disclosures Section 3863 - Financial Instruments – Presentation These sections revise and enhance fi nancial instruments disclosure requirements and leave

unchanged its measurement requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from fi nancial instruments and how Olympia manages those risks.



(d) Equipment and other Equipment and other is recorded at cost less accumulated amortization. Olympia provides for

amortization using the following methods at rates designed to amortize the cost of the equipment and other over its estimated useful life.

On January 1, 2008 Olympia changed its amortization method for furniture and fi xtures and computer hardware from declining balance to straight-line, to more reasonably estimate the useful lives of these items. The eff ect of this change is not material to the fi nancial statements.

The annual amortization rates and methods are as follows:

Furniture and fi xtures Straight-line 5 years Leasehold improvements Straight-line Over the lease term Computer equipment Straight-line 3 years Computer software Straight-line 3 years Customer list Straight-line 2 years

Olympia capitalizes certain salary expenses incurred in the development of in-house computer software.

(e) Revenue recognition Revenue includes administration fees and client set up fees from the self-administered

registered plans and self-insured private health plans. Olympia earns transfer agent and registrar administration fees from the corporate and shareholder services off ered to clients. Expense recoveries are charged for specifi c costs incurred for corporate and shareholder services. Foreign exchange transaction fee revenue is earned from the foreign currency exchange services off ered. Olympia earns interest income from funds held with fi nancial institutions, term deposits and balances held in trust, as stipulated in its service contracts with its clients.

• Administration fees charged annually by the Registered Plans Division are recognized on a monthly basis because the timing of the services to be provided is of an uncertain nature. The unearned balances of transfer agent, registrar fees and registered plan fees are included in deferred revenue.

• Client set up fees are recognized upon set up of the client in the records of Olympia if Olympia holds no further service obligation upon the completion of that set up. Client set up fees are recognized over the contract term in instances where Olympia has future service obligations.

• Administration fees that the Corporate and Shareholder Services Division and the Private Health Plan Division charge are recognized when the services are provided and where there is reasonable certainty of collection.

• Expense recoveries are recognized when the costs are incurred and where there is reasonable certainty of collection.

• Transaction fees for foreign currency exchange services are recognized at the time the transaction occurs.



• Foreign exchange profi ts and losses from future contracts are recognized on a net basis at each period end using a mark-to-market method.

• Olympia earns interest on clients’ funds held in trust. Interest is recognized over the period earned.

(f) Impairment of long-lived assets Olympia tests for impairment whenever events or changes in circumstances indicate that the

carrying amount of the assets may not be recoverable. Recoverability is assessed by comparing the carrying amount to the projected future net cash fl ows the long-lived assets are expected to generate through their direct use and eventual disposition. When a test for impairment indicates that the carrying amount of an asset is not recoverable, an impairment loss is recognized to the extent carrying value exceeds its fair value determined using discounted cash fl ow techniques.

(g) Foreign currency exchange contracts Olympia periodically purchases forward contracts when it enters into a transaction to buy or sell

foreign currency in the future. These contracts are short term in nature, are in the regular course of business and are used to manage foreign exchange exposures.

Foreign exchange contracts are not designated as hedges. They are recorded using the mark-to-market method of accounting whereby foreign exchange contracts are recorded on Olympia’s balance sheet as either an asset or liability with changes in fair value recorded to net earnings. The estimated fair value of all derivative instruments is based on quoted market prices, or, in their absence, third-party market indications and forecasts. Foreign exchange translation gains and losses on these instruments are recognized as an adjustment of revenues when the sale is recorded.

(h) Foreign exchange translation Monetary assets and liabilities denominated in foreign currencies are translated into Canadian

dollars at the rates in eff ect at the consolidated balance sheet dates. Revenues and expenses are translated at the rates prevailing at the respective transaction dates. Exchange gains or losses are included in revenue.

(i) Stock-based compensation Olympia has a stock-based compensation plan, which is described in note 9. Awards of stock

options under this plan are expensed based on the fair value of the options at the grant date. If the options are subject to a vesting period, the expense is recognized over this period. The amount is credited to contributed surplus. Fair values are determined using the Black-Scholes option-pricing model. Any consideration paid by employees on exercise of stock options or purchase of stock is credited to share capital plus the amounts originally recorded to contributed surplus.



(j) Earnings per share The calculation of basic earnings per share is based on net earnings divided by the weighted

average number of common shares outstanding during the period.

The treasury stock method of calculating diluted per share amounts is used whereby any proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to purchase common shares at the average market price during the period. In addition, diluted common shares also include the eff ect of the potential exercise of any outstanding options.

(k) Cash equivalents Cash and cash equivalents consist principally of balances with fi nancial institutions and term

deposits with maturities at purchase of less than three months.

(l) Future income taxes Future income taxes are calculated using the liability method of tax allocation accounting.Temporary

diff erences arising from the diff erence between the tax basis of an asset or liability and its carrying value on the consolidated balance sheet are used to calculate future income tax liabilities or assets. Future income tax liabilities or assets are calculated using tax rates anticipated to apply in the periods that the temporary diff erences are expected to reverse. The eff ect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs. To the extent that Olympia does not consider it to be more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.

(m) Commission advances Agents of Olympia’s private health plan are paid the entire commission amount that is charged to

clients when they sign on to the health plan. Olympia also pays agents a commission advance.

(n) Financial instruments A fi nancial asset is cash or a contractual right to receive cash or another fi nancial asset, including

equity, from another party. A fi nancial liability is the contractual obligation to deliver cash or another fi nancial asset to another party.

A derivative is a fi nancial instrument whose value changes in response to a specifi ed variable, requires little or no net investment and is settled at a future date. An embedded derivative is a derivative that is a part of a non-derivative contract and not directly related to that contract. Under this standard, embedded derivatives must be accounted for as a separate fi nancial instrument. A non-fi nancial derivative is a contract that can be settled net in cash or another fi nancial instrument.

All fi nancial instruments are initially recorded at fair value and are subsequently accounted for based on one of fi ve classifi cations: held for trading, held-to-maturity, other fi nancial liabilities, loans and receivables or available-for-sale. The classifi cation of a fi nancial instrument depends on its characteristics and the purpose for which it was acquired.



i) Held for trading Held for trading fi nancial instruments are fi nancial assets or fi nancial liabilities that are

purchased with the intention of selling or repurchasing in the near term. Any fi nancial instrument can be designated as held for trading as long as its fair value can be reliably measured. A derivative is classifi ed as held for trading unless designated as and considered an eff ective hedge. Held for trading instruments are recorded at fair value with any subsequent gains or losses from changes in the fair value included in earnings.

Currently, Olympia’s forward foreign exchange contracts are derivatives and accounted for as held for trading fi nancial instruments and are recorded at fair value.

ii) Held-to-maturity Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable

payments and a fi xed maturity that Olympia has the intent and ability to hold to maturity. These fi nancial assets are measured at amortized cost using the eff ective interest method. Any gains or losses arising from the sale of a held-to-maturity investment are included in earnings. All of Olympia’s cash equivalents are designated as held-to-maturity investments.

The fair values of cash equivalents approximate their carrying value due to their short-term nature.

iii) Other fi nancial liabilities Items classifi ed as other fi nancial liabilities on Olympia’s consolidated fi nancial statements

are accounted for at amortized cost using the eff ective interest method. Any gains or losses in the realization of other fi nancial liabilities are included in earnings.

The fair value of accounts payable and accrued liabilities and bonuses payable approximate their carrying values due to the short-term nature of these instruments.

iv) Loans and receivables Items classifi ed as loans and receivables in Olympia’s consolidated fi nancial statements are

accounted for at amortized cost using the eff ective interest method. Any gains or losses on the realization of loans and receivables are included in earnings.

The fair value of accounts receivable approximate their carrying values due to the short-term nature of these instruments.

v) Available-for-sale Available-for-sale assets are those fi nancial assets that are not classifi ed as held for trading,

held-to-maturity or loans and receivables. Available-for-sale instruments are recorded at fair value. Any gains or losses arising from the change in fair value is recorded in other comprehensive income and upon the sale of the instrument or other-than-temporary impairment, the cumulative gain or loss is included in earnings.

Olympia has not designated any fi nancial instruments as available-for-sale assets.

Fair values are based upon quoted market prices available from active markets or are otherwise determined using a variety of valuation techniques and models using quoted market prices.



(o) Hedges Hedge accounting is optional and Olympia may designate any qualifying hedging instrument as

a hedge for accounting purposes. When hedge accounting is not applied, the derivative fi nancial instrument is recorded on the balance sheet at fair value and changes in fair value of the derivative instrument are included in earnings. Olympia has chosen not to designate any of its current hedging instruments as hedges for accounting purposes and has classifi ed them as held for trading assets and recorded the fair value of these instruments on the balance sheet.

(p) Future accounting pronouncements In February 2008, the CICA’s Accounting Standards Board confi rmed that International Financial

Reporting Standards (IFRS) will replace Canadian GAAP in 2011 for profi t oriented Canadian publicly accountable enterprises. Olympia will be required to report its results in accordance with IFRS beginning in 2011. Olympia has developed a changeover plan to complete the transition to IFRS by January 1, 2011, including the preparation of required comparative information.

The key elements of Olympia’s changeover plan include:

• determine appropriate changes to accounting policies and required amendments to fi nancial disclosures;

• identify and implement changes in associated processes and information systems; • comply with internal control requirements; • communicate collateral impacts to internal business groups; and • educate and train internal and external stakeholders.

Olympia is currently analyzing accounting policy alternatives and identifying implementation options for the corresponding process changes. Olympia will update its IFRS changeover plan to refl ect new and amended accounting standards issued by the International Accounting Standards Board. As IFRS is expected to change prior to 2011, the impact of IFRS on Olympia’s Consolidated Financial Statements is not reasonably determinable at this time.

3. FUNDS HELD IN TRUST

(a) Self-insured health plans Olympia holds cash of $5.2 million (2007 - $4.4 million) on behalf of its self-insured private

health clients. These assets are the property of the plan holders and Olympia does not maintain eff ective control over the assets. Therefore, the assets are not refl ected in these consolidated fi nancial statements.



(b) Self-administered registered plans Self-administered registered plans consist of securities and mutual funds with an approximate

market value of $1,341 million (2007 - $808 million) plus cash and term deposits of approximately $93 million (2007 - $70 million). These assets are the property of the plan holders and Olympia does not maintain eff ective control over the assets. Therefore, the assets are not refl ected in these consolidated fi nancial statements.

(c) Trustee services Olympia holds funds in trust of approximately $55 million (2007 - $38 million) for clients who

have hired Olympia Trust to provide trustee services. These assets are the property of the plan holders and Olympia does not maintain eff ective control over the assets. Therefore, the assets are not refl ected in these consolidated fi nancial statements.

(d) Foreign exchange Olympia holds funds in trust of approximately $438,703 (2007 - $985,649) for clients who have

paid margins on forward foreign exchange contracts. These assets are the property of the contract holders and Olympia does not maintain eff ective control over the assets. Therefore, the assets are not refl ected in these consolidated fi nancial statements.

4. CASH AND CASH EQUIVALENTS

2008 2007

Cash on hand and balances with banks $ 9,912,335 $ 6,621,554 Investments in term deposits 900,000 3,000,000

$ 10,812,335 $ 9,621,554

5. COMMISSION ADVANCES

2008 2007

Balance, beginning of year $ 3,302 $ 254,564 Commissions advanced to agents - 155,600 Commissions expensed (3,302 ) (406,862 )

- 3,302 Less current portion - 3,302

Long-term portion $ – $ -



6. EQUIPMENT AND OTHER

2008 2007

2008 Accumulated 2008 2007 Accumulated 2007 Cost amortization Net Cost amortization Net

Furniture and fi xtures $ 511,912 $ 197,620 $ 314,292 $ 327,581 $ 118,656 $ 208,925 Leasehold 407,902 139,159 268,743 260,828 88,628 172,200 improvements Computer and 1,838,194 1,079,981 758,213 1,546,518 705,095 841,423 equipment Computer software 1,273,140 882,784 390,356 1,325,144 681,985 643,159 Customer list 1,886 1,886 - 1,886 1,415 471

4,033,034 2,301,430 1,731,604 $ 3,461,957 $ 1,595,779 $ 1,866,178

During the period $183,948 (2007 - $118,239) in salary expense for the development of in-house software was capitalized.

7. INCOME TAXES a) The components of future income tax balances are as follows:

2008 2007

Future income tax asset Non-capital losses carried forward $ - $ 31,748

Future income tax liability Carrying amount of equipment in excess of tax basis $ 99,325 $ 77,632 Cumulative eligible capital available for tax purposes (13,070 ) (14,053 ) Non-capital losses carried forward (18,067 ) (18,790 )

68,188 44,789

b) The provision for income taxes recorded in the fi nancial statements diff ers from the amount which would be obtained by applying the statutory rate of 29.50% (2007 - 32.12%) to the earnings for the period as follows:

2008 2007

Earnings for the year before income tax $ 7,125,626 $ 6,744,672 Anticipated income tax expense 2,102,060 2,166,388 Subsidiary losses incurred (used) (32,743 ) 50,538 Non-deductible expenses 69,576 126,843 Other (39,592 ) 195,755

$ 2,099,301 $ 2,539,524



For income tax purposes, Olympia has losses which can be applied to reduce future years’ taxable income. These losses expire as follows:

2026 $ 31,257 2027 101,610

$ 132,867

8. RELATED PARTY TRANSACTIONS

(a) During the period, Olympia entered into transactions with the following related parties: Companies controlled by the president of Olympia Trust and Olympia Financial Group Inc.; Companies controlled by directors of Olympia Trust and Olympia Financial Group Inc.; Companies controlled by management of Olympia Trust and Olympia Financial Group Inc.; and Eyelogic Systems Inc., a company under common control.

(b) Transactions These transactions are in the normal course of operations and have been valued in these fi nancial

statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

2008 2007

Revenue

- controlled by the president $ 5,990 $ 18,282 - controlled by management 34,976 44,269 - controlled by directors 79,438 27,060 - Eyelogic Systems Inc. 20,880 22,423

$ 141,284 $ 112,034

Direct Expenses - controlled by the president $ 131,909 $ 155,984 - controlled by management 28,157 29,995 - controlled by directors 96,418 106,722

$ 256,484 $ 292,701

Operating expenses - controlled by the president $ 1,458,405 $ 1,360,638 - controlled by management 243,239 211,397 - controlled by directors - 40,000

1,701,644 1,612,035

Equipment purchases - controlled by directors $ 23,939 $ -

$ 23,939 $ -



Olympia earned revenues from related parties for transfer agent services provided.

Direct expenses were paid to companies controlled by management and directors for commissions relating to the self-insured private health plans.

Operating expenses were paid to companies controlled by the president, management and director for services described below:

Tarman Inc., a company controlled by the president, receives management fees based on a percentage of the pre-tax profi ts of Olympia’s divisions; except for the Private Health Services Plans Division’s where the management fee is based on percentage of health claims administered.

The Shire Limited, a company controlled by the Vice President, Private Health Services Plan’s operating expenses is related to salary payments for providing strategic planning services and advice in respect of the marketing of Olympia’s Private Health Services Plans.

(c) Accounts receivable include amounts receivable from:

2008 2007

Companies controlled by the president $ 15,068 $ 6,483 Companies controlled by management 2,730 3,372 Companies controlled by directors 28,685 5,219 Eyelogic Systems Inc. 8,379 11,392

$ 54,862 $ 26,466

(d) Accounts payable and accrued liabilities include amounts payable to:

2008 2007

Companies controlled by the president $ 108,740 $ 154,978 Companies controlled by management 97,947 192,289 Companies controlled by directors 62,262 8,545

$ 268,949 $ 355,812

9. SHARE CAPITAL

a) Authorized Unlimited number of Class A common voting shares Unlimited number of Class B common voting shares Unlimited number of Class C common non-voting shares Unlimited number of Class D common non-voting shares



b) Class A common shares issued

Number Amount

Balance December 31, 2006 2,413,102 $ 6,793,268 Stock options exercised 34,500 235,000 Transferred from contributed surplus on exercise of options – 44,348

Balance December 31, 2007 2,447,602 7,072,616 Stock options exercised 17,000 222,500 Transferred from contributed surplus on exercise of options – 89,109

Balance September 30, 2008 2,464,602 $ 7,384,225

c) Employee share ownership plan Under this plan Olympia contributes $1 for each $1 contributed by an employee up to a

maximum that is based on the employee’s earnings and years of service. Employee and Olympia contributions are used to purchase common shares of Olympia in the open market. Olympia’s contribution is included as an expense in the statement of operations and amounted to $120,664 (2007 - $64,942).

d) Stock options Olympia has established a stock option plan for directors, offi cers, and employees to purchase

Class A common shares. Stock options are issued with an exercise price equal to the fair value of Olympia’s common shares on the date of grant. The fair value of Olympia’s shares is determined by considering the share trading activities, dividend multiples and earnings per share multiples. Stock options have a maximum term of fi ve years and vest one third on date of issuance and one third on each of the next two anniversary dates from issuance. Changes in the number of options, with their weighted average exercise prices are summarized below:

2008 2007

Average Average Number exercise Number exercise of options price of options price

Balance, opening 58,950 $ 22.74 91,450 $ 11.89 Granted - - 33,000 26.14 Exercised (17,000 ) 13.08 (34,500 ) 6.81 Expired (5,000 ) 20.00 (31,000 ) 18.55

Balance, closing 36,950 $ 22.12 58,950 $ 22.74



The following table summarizes the options outstanding and exercisable at December 31, 2008:

Expiry Date Options Options Exercise exercisable at outstanding price Dec. 31, 2008

April 1, 2009 3,950 $ 5.00 3,950 November 25, 2009 5,000 7.00 5,000 June 22, 2011 10,000 20.00 10,000 October 1, 2011 18,000 31.25 12,000

36,950 30,950

The weighted average remaining life of an option is 2.67 years.

e) Stock-based compensation During the year no options were granted. Assumptions for 2007 included a risk-free interest rate

of 4.125%, expected life of fi ve years and volatility of 43% were used to calculate stock-based compensation expense. For the year ended December 31, 2008, the amount of $63,152 (2007 - $241,180) has been charged to salary expense with an off setting credit to contributed surplus.

10. CONTRIBUTED SURPLUS

2008 2007

Beginning balance $ 259,346 $ 62,514 Stock-based compensation expense 63,152 241,180 Options exercised and expired (89,109 ) (44,348 )

Ending balance $ 233,389 $ 259,346

11. EARNINGS PER SHARE Basic earnings per share is calculated using the weighted average number of shares outstanding

during the period. Diluted earnings per share is calculated to refl ect the dilutive eff ect of stock options outstanding. Earnings per share is calculated as follows:

2008 2007

Weighted Weighted average average common Earnings common Earnings Net earnings shares per share Net earnings shares per share

Basic $ 5,026,325 2,460,490 $ 2.04 $ 4,205,148 2,433,032 $ 1.73 Eff ect of options - 13,930 (0.01 ) - 17,265 (0.01 )

Diluted $ 5,026,325 2,474,420 $ 2.03 $ 4,205,148 2,450,297 $ 1.72



12. COMMITMENTS

a) Operating leases Olympia entered into various operating agreements for the lease of offi ce premises until May 31,

2015. Future minimum lease payments, exclusive of operating costs, by year and in aggregate are as follows:

2009 $ 758,125 2010 653,302 2011 516,945 2012 290,865 2013 70,324 Subsequent 54,192

$ 2,343,753

b) Trailer commissions Olympia Trust pays trailer commissions ranging up to 3% to agents and other companies based on

health claims.

13. FORWARD FOREIGN EXCHANGE CONTRACTS The Company has entered into the following forward foreign exchange contracts with its customers and

bulk supplier. The expiry dates vary between January 2, 2009 and November 20, 2009:

Fair value Margins Fair value Margins (notional) held in (notional) held in as at Canadian as at Canadian Dec. 31, 2008 dollars Dec. 31, 2007 Dollars

Current asset Sell US dollars $ 930,690 $ 483,703 $ 985,946 $ 1,311,782 Current liability Buy US dollars $ 764,610 $ - $ 1,002,084 –

Unrealized income (loss) $ 166,080 $ (16,138 )

The fair values of at-risk forward exchange contracts have been determined based on market information. The unrealized income or loss is the diff erence between the nominal value of the contracts on their settlement dates and the fair market value of the contracts at December 31, 2008.

14. FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS Financial instruments consist of cash and cash equivalents, accounts receivable and other, forward

foreign exchange contracts, bonuses payable, accounts payable and accruals that will result in future cash outlays. The cash and cash equivalents are comprised of cash and short-term investments with Canadian and US banks.

The estimated fair values of recognized fi nancial instruments have been determined based on Olympia’s assessment of available market information and appropriate valuation methodologies based



on industry accepted third-party models; however, these estimates may not necessarily be indicative of the amounts that could be realized or settled in a current market transaction.

Olympia is exposed to a number of diff erent fi nancial risks arising from normal course business exposures, as well as Olympia’s use of fi nancial instruments. These risk factors include foreign currency exchange risk and interest rate risk, as well as liquidity risk and credit risk.

a) Interest rate risk Olympia is exposed to interest rate risk as changes in interest rates may aff ect future cash fl ows

and the fair values of its fi nancial instruments. The primary exposure is related to cash balances and fi xed day term deposits.

If the interest rates were to have increased by 1%, it is estimated that Olympia’s after-tax earnings for the year ended December 31, 2008 would have increased by approximately $108,123 on account of its own assets. When interest earned on funds held in trust is taken into account the after-tax eff ect of a 1% increase in interest rates would have been $712,945. A 1% decrease in interest rates would have had an equal but opposite eff ect. This sensitivity analysis assumes that all other variables, in particular foreign exchange rates, remain constant.

b) Credit risk Credit risk is the risk that a customer or counterparty will fail to perform an obligation or fail to pay

amounts due causing a fi nancial loss. Olympia ensures there is a credit practice to measure and monitor credit risk. This documented practice outlines delegation of authority and the due diligence process required to approve a new customer or counterparty. Before transactions begin with a new customer or counterparty, its creditworthiness is assessed. The assessment practice considers both quantitative and qualitative factors. Olympia constantly monitors the exposure to any single customer or counterparty along with the fi nancial position of the customer or counterparty. If it is deemed that a customer or counterparty has become materially weaker, Olympia will work to reduce the credit exposure and lower the credit limit allocated.

The table below shows no signifi cant credit risk exposure in the trade accounts receivable as at:

2008 2007

Current $ 654,097 $ 832,775 31 to 60 days 473,520 353,448 61 to 90 days 91,217 73,506 Over 90 days 96,757 105,747 Allowance for doubtful accounts (25,529 ) (28,553 )

$ 1,290,062 $ 1,336,923

The allowance for doubtful accounts is based on an account-by-account analysis and prior credit history.



(c) Foreign currency exchange risk Olympia is exposed to changes in foreign exchange rates because revenues or fi nancial instruments

may fl uctuate as a result of changing rates. Transactions in the applicable fi nancial market are executed consistent with established risk management policies. Olympia purchases forward contracts whenever it enters into a transaction with a value greater than US$100,000, to buy or sell foreign currency in the future. These contracts are short term in nature and in the regular course of business.

Management understands that the currency markets are volatile and therefore subject to higher risk. Olympia applies the following policies to mitigate the currency risk:

• For contracts greater than US$100,000, a margin of 5% is payable on signature of the contract. Olympia sets up a corresponding position with its currency supplier. If market rates vary by 4% or more, the client is required to adjust their margin to match the variance by the end of the trading day.

• For contracts less than US$100,000, a margin of 5% is payable on signature of the contract. If market rates vary by 4% or more, the client is required to adjust their margin to match the variance by the end of the trading day.

If the United States dollar to Canadian dollar exchange rate at December 31, 2008 were to have increased by $0.01, it is estimated that Olympia’s after-tax earnings for the year ended December 31, 2008 would have decreased by approximately $1,661. A $0.01 decrease in the United States dollar to Canadian dollar exchange rate would have had an equal but opposite eff ect. This sensitivity analysis assumes that all other variables, in particular interest rates, remain constant.

(d) Liquidity risk Liquidity risk is the risk that an entity will encounter diffi culty in meeting obligations associated

with fi nancial liabilities. Olympia believes that it has access to suffi cient capital through internally generated cash fl ows to meet current spending forecasts.

Surplus cash is invested into interest bearing bank accounts and fi xed day term deposits. Olympiaseeks to ensure the security and liquidity of those investments.

The following table shows the timing of cash outfl ows relating to trade accounts payable as at:

2008 2007

Current $ 306,370 $ 554,619 31 to 60 days 4,327 114,303 61 to 90 days 2,527 - Over 90 days 1,867 -

$ 315,091 $ 668,922

Olympia accrues for certain annual expenses on a monthly basis. At December 31, 2008 these accrued liabilities plus the trade payables above totaled $1,349,058 (2007 - $1,269,646).

As at December 31, 2008 Olympia has met all obligations associated with its fi nancial liabilities.



15. CAPITAL STRUCTURE Olympia’s capital structure is comprised of Shareholders’ Equity.

Olympia maintains a strong capital base to maintain investor and creditor confi dence and to sustain future development of the business. Olympia does not use fi nancial ratios to manage its capital structure. Olympia’s objective when managing capital is to maintain adequate fi nancial fl exibility to preserve its ability to meet fi nancial obligations. The capital structure of Olympia is managed and adjusted to refl ect changes in economic conditions. In order to maintain or adjust the capital structure, adjustments may be made to the amount of dividends (if any) to shareholders, in addition to the amount of new common shares issued. Financing decisions are set based on the timing and extent of expected operating and capital cash outlays. Factors considered when determining whether to issue equity include the amount of cash sought, the availability of these sources and their terms and to overall balance creation of value for the shareholders. Olympia’s capital management objectives have not changed over the periods presented.



16. SEGMENTED INFORMATION Olympia determines its reportable segments based on the structure of its operations as noted below.

Any transactions between segments are recorded at fair value and eliminated upon consolidation.

Net operations 2008

Health C&SS RRSP FX Corporate Total

Revenue $ 6,840,383 $ 8,491,179 $ 5,702,110 $ 2,960,958 $ 54,231 $ 24,048,861 Interest revenue 230,572 1,623,046 3,220,382 120,523 184,003 5,378,526 Direct expenses (2,541,265 ) (658,509 ) - (517,954 ) - (3,717,728 )

Gross margin 4,529,690 9,455,716 8,922,492 2,563,527 238,234 25,709,659

General & (3,181,945 ) (6,626,416 ) (5,323,885 ) (2,617,829 ) (72,679 ) (17,822,754 ) administrative expenses Amortization (165,716 ) (222,882 ) (194,586 ) (178,147 ) 52 (761,279 )

Earnings (loss) before 1,182,029 2,606,418 3,404,021 (232,449 ) 165,607 7,125,626 income taxes

Income taxes (348,241 ) (767,884 ) (1,002,868 ) 68,482 (48,790 ) (2,099,301 )

Net earnings (loss) $ 833,788 $ 1,838,534 $ 2,401,153 $ (163,967 ) $ 116,817 $ 5,026,325

Net operations 2007

Health C&SS RRSP FX Corporate Total

Revenue $ 6,062,896 $ 7,464,984 $ 3,411,516 $ 1,434,463 $ 47,869 $ 18,421,728 Interest revenue 269,123 3,238,142 2,847,411 73,868 218,556 6,647,100 Direct expenses (2,631,637 ) (684,280 ) - (239,825 ) - (3,555,742 )

Gross margin 3,700,382 10,018,846 6,258,927 1,268,506 266,425 21,513,086

General & (2,612,093 ) (6,665,389 ) (3,279,725 ) (1,500,091 ) (183,874 ) (14,241,172 ) administrative expenses Amortization (133,831 ) (177,379 ) (118,968 ) (102,171 ) 5,107 (527,242 )

Earnings (loss) before 954,458 3,176,078 2,860,234 (333,756 ) 87,658 6,744,672 income taxes

Income taxes (359,375 ) (1,195,866 ) (1,076,944 ) 125,666 (33,005 ) (2,539,524 )

Net earnings (loss) $ 595,083 $ 1,980,212 $ 1,783,290 $ (208,090 ) $ 54,653 $ 4,205,148



2008 2007

Total assets Health $ 1,283,671 $ 1,074,946 C&SS 1,837,467 2,218,312 RSP 789,939 898,918 FX 1,151,502 1,368,658 Corporate 10,255,577 8,685,906

$ 15,318,156 $ 14,246,740

2008 2007

Capital expenditures Health $ 140,815 $ 308,206 C&SS 130,882 343,126 RRSP 297,302 433,326 FX 57,710 342,628

$ 626,709 $ 1,427,286


Directors

Rick SkaugeGordon Angevine4

Frank Bailey2 3 5

Anne Louise Bartlett1 2 5

Charles Chebry1

Randy GregoryAnthony Lanzl3 4 5

Jim Maldaner1

Brian Newman1

Lyle Oberg2

Craig SkaugePatrick Windle2 3 4

Board Committees

1 Audit Committee2 Compliance Committee3 Corporate Governance Committee4 Executive Compensation Committee5 Investment Committee

Head Offi ce

2300, 125 - 9th Avenue SECalgary, AB T2G 0P6Tel: 403-261-0900Fax: [email protected]

Transfer Agent

Olympia Trust Company2300, 125 - 9th Avenue SECalgary, AB T2G 0P6Tel: 403-261-0900Fax: 403-265-1455

Auditors

PricewaterhouseCoopers LLPChartered AccountantsSuite 3100, 111 - 5th Avenue SWCalgary, AlbertaCanada T2P 5L3

corporate information


Officers

RICK SKAUGE President and Chief Executive Offi cer

ROBIN FRYVice President, Private Health Services

GERHARD BARNARD Chief Financial Offi cer and

Vice President, Finance

RANDY GREGORY Vice President,

Corporate and Shareholder Services

LORI MARTAI Vice President, Registered Plans

DERICK KACHUIKVice President, Foreign Exchange

2300, 125 - 9th Avenue SE Calgary, Alberta T2G 0P6Tel: 403-261-0900 • Fax: 403-265-1455

www.olympiatrust.com [email protected]

financial group inc

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