Equibles

6-K

CGI INC (GIB)

6-K 2020-12-18 For: 2020-12-18
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Added on April 10, 2026

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2020

Commission File Number 1-14858

CGI Inc.

(Translation ofRegistrant’s Name Into English)

1350 René-Lévesque Boulevard West

25th Floor

Montréal, Québec

Canada H3G 1T4

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F               Form 40-F     ✓

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Enclosures: 2020 Annual Report and Management Proxy Circular dated December 7, 2020.

This Form 6-K shall be deemed incorporated by reference in the Registrant’s Registration Statements on Form S-8, Reg. Nos. 333-13350, 333-66044, 333-74932, 333-112021, 333-146175, 333-177013, 333-197742 and 333-220741.

The following exhibits are filed herewith and incorporated herein:

Exhibit number    Description

99.1 2020 Annual Report
99.2 Management Proxy Circular dated December 7, 2020

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CGI INC.<br><br><br>(Registrant)
By: /s/ Benoit Dubé
Name: Benoit Dubé
Date:    December 18, 2020 Title: Executive Vice-President,<br><br><br>Legal and Economic Affairs, and<br><br><br>Corporate Secretary

EX-99.1

Exhibit 99.1

LOGO

LOGO

Management’s Discussion and Analysis

November 11, 2020

Basis of Presentation

This Management’s Discussion and Analysis of the Financial Position and Results of Operations (MD&A) is the responsibility of management and has been reviewed and approved by the Board of Directors. This MD&A has been prepared in accordance with the requirements of the Canadian Securities Administrators. The Board of Directors is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility mainly through its Audit and Risk Management Committee, which is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors.

Throughout this document, CGI Inc. is referred to as “CGI”, “we”, “our” or “Company”. This MD&A provides information management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company. This document should be read in conjunction with the audited consolidated financial statements and the notes thereto for the years ended September 30, 2020 and 2019. CGI’s accounting policies are in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). All dollar amounts are in Canadian dollars unless otherwise noted.

Materiality of Disclosures

This MD&A includes information we believe is material to investors. We consider something to be material if it results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares, or if it is likely that a reasonable investor would consider the information to be important in making an investment decision.

Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbours. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbour provisions of applicable Canadian and United States securities laws. Forward-looking information and statements include all information and statements regarding CGI’s intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as “believe”, “estimate”, “expect”, “intend”, “anticipate”, “foresee”, “plan”, “predict”, “project”, “aim”, “seek”, “strive”, “potential”, “continue”, “target”, “may”, “might”, “could”, “should”, and similar expressions and variations thereof. These information and statements are based on our perception of historic trends, current conditions and expected future developments, as well as other assumptions, both general and specific, that we believe are appropriate in the circumstances. Such information and statements are, however, by their very nature, subject to inherent risks and uncertainties, of which many are beyond the control of the Company, and which give rise to the possibility that actual results could differ materially from our expectations expressed in, or implied by, such forward-looking information or forward-looking statements. These risks and uncertainties include but are not restricted to: risks related to the market such as the level of business activity of our clients, which is affected by economic and political conditions, external risks (such as pandemics) and our ability to negotiate new contracts; risks related to our industry such as competition and our ability to attract and retain qualified employees, to develop and expand our services, to penetrate new markets, and to protect our intellectual property rights; risks related to our business such as risks associated with our growth strategy, including the integration of new operations, financial and operational risks inherent in worldwide operations, foreign exchange risks, income tax laws, our ability to negotiate favourable contractual terms, to deliver our services and to collect receivables, and the reputational and financial risks attendant to cybersecurity breaches and other incidents; as well as other risks identified or incorporated by reference in this MD&A and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR at www.sedar.com) and the U.S.

FISCAL 2020 RESULTS – 1

MANAGEMENT’S DISCUSSION AND ANALYSIS

Securities and Exchange Commission (on EDGAR at www.sec.gov). For a discussion of risks in response to the coronavirus (COVID-19) pandemic, see Pandemic Risks in section 10.1.1. of the present document. Unless otherwise stated, the forward-looking information and statements contained in this MD&A are made as of the date hereof and CGI disclaims any intention or obligation to publicly update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. While we believe that our assumptions on which these forward-looking information and forward-looking statements are based were reasonable as at the date of this MD&A, readers are cautioned not to place undue reliance on these forward-looking information or statements. Furthermore, readers are reminded that forward-looking information and statements are presented for the sole purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. Further information on the risks that could cause our actual results to differ significantly from our current expectations may be found in section 10 - Risk Environment, which is incorporated by reference in this cautionary statement. We also caution readers that the risks described in the previously mentioned section and in other sections of this MD&A are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation.

Non-GAAP and Key Performance Measures

The reader should note that the Company reports its financial results in accordance with IFRS. However, we use a combination of financial measures, ratios, and non-GAAP measures to assess the Company’s performance. The non-GAAP measures used in this MD&A do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with IFRS.

The table below summarizes our non-GAAP measures and most relevant key performance measures:

Profitability •  Adjusted EBIT (non-GAAP) – is a measure of earnings excluding acquisition-related and integration costs, restructuring costs, net finance costs and income tax expense. Management believes this measure is useful to investors<br>as it best reflects the performance of its activities and allows for better comparability from period to period as well as to trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in section 3.7. of the<br>present document.
•  Adjusted EBIT<br>margin (non-GAAP) – is obtained by dividing our adjusted EBIT by our revenues. Management believes this measure is useful to investors as it best reflects the performance of its activities and allows for<br>better comparability from period to period as well as to trend analysis. A reconciliation of the adjusted EBIT to its closest IFRS measure can be found in section 3.7. of the present document.
•  Net earnings<br>– is a measure of earnings generated for shareholders.
•  Net earnings<br>margin (non-GAAP) – is obtained by dividing our net earnings by our revenues. Management believes a percentage of revenue measure is meaningful for better comparability from period to<br>period.
•  Diluted<br>earnings per share (diluted EPS) – is a measure of earnings generated for shareholders on a per share basis, assuming all dilutive elements are exercised.
•  Net earnings<br>excluding specific items (non-GAAP) – is a measure of net earnings excluding acquisition-related and integration costs, restructuring costs and tax adjustments. Management believes this measure is useful<br>to investors as it best reflects the Company’s performance and allows for better comparability from period to period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in section 3.8.3. of<br>the present document.
•  Net earnings<br>margin excluding specific items (non-GAAP) – is obtained by dividing our net earnings excluding specific items by our revenues. Management believes this measure is useful to investors as it best reflects<br>the Company’s performance and allows for better comparability from period to period. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found in section 3.8.3. of the present document.
•  Diluted earnings per share excluding specific items<br>(non-GAAP) – is defined as the net earnings excluding specific items on a per share basis. Management believes that this measure is useful to investors as it best reflects the Company’s performance<br>on a per share basis and allows for better comparability from period to period. The diluted earnings per share reported in accordance with IFRS can be found in section 3.8. of the present document while the basic and diluted earnings per share<br>excluding specific items can be found in section 3.8.3. of the present document.
Liquidity •  Cash provided<br>by operating activities – is a measure of cash generated from managing our day-to-day business operations. Management believes strong operating cash flow is<br>indicative of financial flexibility, allowing us to execute the Company’s strategy.
•  Days sales outstanding (DSO) (non-GAAP) – is<br>the average number of days needed to convert our trade receivables and work in progress into cash. DSO is obtained by subtracting deferred revenue from trade accounts receivable and work in progress; the result is divided by our most recent<br>quarter’s revenue over 90 days. Management tracks this metric closely to ensure timely collection and healthy liquidity. Management believes this measure is useful to investors as it demonstrates the Company’s ability to timely convert its<br>trade receivables and work in progress into cash.

FISCAL 2020 RESULTS – 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

Growth •  Constant<br>currency growth (non-GAAP) – is a measure of revenue growth before foreign currency translation impacts. This growth is calculated by translating current period results in local currency using the<br>conversion rates in the equivalent period from the prior year. Management believes that it is helpful to adjust revenue to exclude the impact of currency fluctuations to facilitate<br>period-to-period comparisons of business performance and that this measure is useful to investors for the same reason.
•  Backlog (non-GAAP) – includes new contract wins, extensions and renewals (bookings (non-GAAP)), adjusted for the backlog consumed during the period as a result of client work<br>performed and adjustments related to the volume, cancellation and the impact of foreign currencies to our existing contracts. Backlog incorporates estimates from management that are subject to change. Management tracks this measure as it is a key<br>indicator of our best estimate of contracted revenue to be realized in the future and believes that this measure is useful to investors for the same reason.
•  Book-to-bill ratio (non-GAAP) – is a measure of the proportion of the value of our bookings to our revenue in<br>the period. This metric allows management to monitor the Company’s business development efforts to ensure we grow our backlog and our business over time and management believes that this measure is useful to investors for the same reason.<br>Management’s objective is to maintain a target ratio greater than 100% over a trailing twelve-month period. Management believes that monitoring the Company’s bookings over a longer period is a more representative measure as the services<br>and contract type, size and timing of bookings could cause this measurement to fluctuate significantly if taken for only a three- month period.
Capital Structure •  Net debt (non-GAAP) – is obtained by subtracting from our debt and lease liabilities, our cash and cash equivalents, short-term investments, long-term investments and adjusting for fair value of foreign currency<br>derivative financial instruments related to debt. Management uses the net debt metric to monitor the Company’s financial leverage and believes that this metric is useful to investors as it provides insight into its financial strength. A<br>reconciliation of net debt to its closest IFRS measure can be found in section 4.5. of the present document.
•  Net debt to<br>capitalization ratio (non-GAAP) – is a measure of our level of financial leverage and is obtained by dividing the net debt by the sum of shareholder’s equity and debt. Management uses the net debt to<br>capitalization ratio to monitor the proportion of debt versus capital used to finance the Company’s operations and to assess its financial strength. Management believes that this metric is useful to investors for the same reasons.
•  Return on<br>equity (ROE) (non-GAAP) – is a measure of the rate of return on the ownership interest of our shareholders and is calculated as the proportion of net earnings for the last 12 months over the last four<br>quarters’ average shareholder’s equity. Management looks at ROE to measure its efficiency at generating net earnings for the Company’s shareholders and how well the Company uses the invested funds to generate net earnings growth and<br>believes that this measure is useful to investors for the same reasons.
•  Return on invested capital (ROIC) (non-GAAP) –<br>is a measure of the Company’s efficiency at allocating the capital under its control to profitable investments and is calculated as the proportion of the net earnings excluding net finance costs after-tax<br>for the last 12 months, over the last four quarters’ average invested capital, which is defined as the sum of shareholder’s’ equity and net debt. Management examines this ratio to assess how well it is using its funds to generate<br>returns and believes that this measure is useful to investors for the same reason.

Change in Reporting Segments

Effective October 1, 2019, the Company realigned its management structure, resulting primarily in the creation of two new operating segments, namely Scandinavia (Sweden, Denmark and Norway) and Finland, Poland and Baltics, collectively known as Northern Europe in the prior fiscal year. As a result, the Company is now managed through nine operating segments, namely: Western and Southern Europe (primarily France, Portugal and Belgium); United States (U.S.) Commercial and State Government; Canada; U.S. Federal; United Kingdom (U.K.) and Australia; Central and Eastern Europe (primarily Germany and the Netherlands); Scandinavia; Finland, Poland and Baltics; and Asia Pacific Global Delivery Centers of Excellence (mainly India and Philippines) (Asia Pacific). This realignment of management structure also included, to a lesser extent, transfers of some lines of business between our operating segments. The Company has retrospectively revised the segmented information for the comparative period to conform to the new segmented information structure. Please refer to sections 3.4, 3.6, 5.4 and 5.5 of the present document and to note 29 of our audited consolidated financial statements for additional information on our segments.

FISCAL 2020 RESULTS – 5

MANAGEMENT’S DISCUSSION AND ANALYSIS

MD&A Objectives and Contents

In this document, we:

• Provide a narrative explanation of the audited consolidated financial statements through the eyes of management;<br>
• Provide the context within which the audited consolidated financial statements should be analyzed, by giving enhanced<br>disclosure about the dynamics and trends of the Company’s business; and
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• Provide information to assist the reader in ascertaining the likelihood that past performance may be indicative of future<br>performance.
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In order to achieve these objectives, this MD&A is presented in the following main sections:

Section Contents Pages
1. Corporate 1.1. About CGI 8
Overview 1.2. Vision and Strategy 9
1.3. Competitive Environment 10
2. Highlights and Key 2.1. Fiscal 2020 Year-Over-Year Highlights 12
Performance 2.2. Selected Yearly Information & Key Performance Measures 13
Measures 2.3. Stock Performance 14
2.4. Investments in Subsidiaries 15
2.5. Impact of the adoption of IFRS 16 16
2.6. COVID-19 16
3. Financial Review 3.1. Bookings and Book-to-Bill Ratio 17
3.2. Foreign Exchange 18
3.3. Revenue Distribution 19
3.4. Revenue by Segment 20
3.5. Operating Expenses 23
3.6. Adjusted EBIT by Segment 24
3.7. Earnings Before Income Taxes 26
3.8. Net Earnings and Earnings Per Share 27
4. Liquidity 4.1. Consolidated Statements of Cash Flows 29
4.2. Capital Resources 32
4.3. Contractual Obligations 33
4.4. Financial Instruments and Hedging Transactions 33
4.5. Selected Measures of Capital Resources and Liquidity 34
4.6. Guarantees 34
4.7. Capability to Deliver Results 35
5. Fourth Quarter 5.1. Bookings and Book-to-Bill Ratio 36
Results 5.2. Foreign Exchange 37
5.3. Revenue Distribution 38
5.4. Revenue by Segment 39
5.5. Adjusted EBIT by Segment 42
5.6. Net Earnings and Earnings Per Share 44
5.7. Consolidated Statements of Cash Flows 46
6. Eight Quarter Summary A summary of the past eight quarters’ key performance measures and a discussion of the factors that could impact our<br>quarterly results. 48
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7. Changes in Accounting Policies A summary of the accounting standard changes. 50
8. Critical Accounting Estimates A discussion of the critical accounting estimates made in the preparation of the audited consolidated financial<br>statements. 52
9. Integrity of Disclosure A discussion of the existence of appropriate information systems, procedures and controls to ensure that information used<br>internally and disclosed externally is complete and reliable. 55
10. Risk Environment 10.1. Risks and Uncertainties 57
10.2. Legal Proceedings 66

FISCAL 2020 RESULTS — 7

MANAGEMENT’S DISCUSSION AND ANALYSIS

1. Corporate Overview

1.1. ABOUT CGI

Founded in 1976 and headquartered in Montréal, Canada, CGI is among the largest information technology (IT) and business consulting services firms in the world. The Company delivers a full range of services, including strategic IT and business consulting, systems integration, intellectual property and managed IT and business process services to help clients accelerate digitization, achieve immediate cost savings, and drive revenue growth. CGI employs approximately 76,000 consultants and professionals worldwide, whom are called members as they are also owners.

End-to-end servicesand solutions

CGI delivers end-to-end services that cover the full spectrum of technology delivery; from digital strategy and architecture to solution design, development, integration, implementation, and operations. Our portfolio encompasses:

• Strategic IT and business consulting and systems integration: CGI helps clients define their digital strategy and<br>roadmap, and advance their IT modernization initiatives through an agile, iterative approach that facilitates innovation, connection and optimization of mission-critical systems to deliver enterprise-wide change.
• Managed IT and business process services: Our clients entrust us with full or partial responsibility for their IT<br>and business functions to help them become more agile and to build resilience into their technology supply chains. In return, we deliver innovation, significant efficiency gains, and cost savings. Typical services in an end-to-end engagement include: application development, integration and maintenance; technology infrastructure management; and business process services, such as in<br>collections and payroll management. Managed IT and business process services contracts are long-term in nature, with a typical duration greater than five years, allowing our clients to reinvest savings, alongside CGI, in their digital<br>transformation.
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• Intellectual property (IP): Our IP portfolio includes approximately 175 business solutions, some of which<br>are cross-industry solutions. Designed in collaboration with clients, our IP solutions act as business accelerators for the industries we serve. These include business solutions encompassing commercial software embedded within our end-to-end-services, and digital enablers such as methodologies and frameworks to drive change across business and IT processes.<br>
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Deep industry expertise

CGI has long standing and focused practices in all of its core industries, providing clients with a partner that is not only an expert in IT, but also expert in their industries. This combination of business knowledge and digital technology expertise allows us to help our clients navigate complex challenges and focus on how to create value. In the process, we evolve the services and solutions we deliver within our targeted industries.

Our targeted industries include communications and media, banking, insurance, government, health & life sciences, manufacturing, retail & consumer, transportation and logistics, energy and utilities and space. While these represent our go-to-market industry targets, we group these industries into the following for reporting purposes: government; manufacturing, retail & distribution (MRD); financial services; communications & utilities; and health.

As the move toward digitization continues across industries, CGI partners with clients to help guide them in becoming customer and citizen-centric digital organizations.

Applied innovation

At CGI, innovation happens across many interconnected fronts. It starts in our everyday work on client projects, where thousands of innovations are applied daily. Through benchmark in-person interviews we conduct each year, business and technology executives share their priorities with us, informing our own innovation investments and driving our client proximity teams’ focus on local client priorities.

Since 1976, CGI is a trusted partner in delivering innovative, client-inspired business services and solutions. We help develop, innovate and protect the technology that enables clients to achieve their digital transformation goals faster, with reduced risk and enduring results.

We partner with clients to enable their business agility through a range of business and digital initiatives focused on human capital and culture practices, process automation, and data analytics. Technology is a key element of the value chains of organizations today. We help clients adopt and harmonize a number of technologies and services, such as cloud, automation, and managed services, to build agility, elasticity, security and resiliency into their technology supply chains.

Digital engagement with customers and citizens has taken on new importance. We help clients evaluate their work culture, organizational models, and performance management, as well as adopt modern collaboration and resilient business continuity plans.

Technology will continue to be at the heart of the future value chains that serve our clients’ consumers and citizens.

Quality processes

CGI’s clients expect consistency of service wherever and whenever they engage us. We have an outstanding track record of on-time, within-budget delivery as a result of our commitment to excellence and our robust governance model - CGI’s Management Foundation. CGI’s Management Foundation provides a common business language, frameworks and practices for managing all operations consistently across the globe, driving a focus on continuous improvement. We also invest in rigorous quality and service delivery standards (including ISO and Capability Maturity Model Integration (CMMI) certification programs), as well as a comprehensive Client Satisfaction Assessment Program, with signed client assessments, to ensure high satisfaction on an ongoing basis.

1.2. VISION AND STRATEGY

CGI is unique compared to most companies, as our vision is based on a dream: “To create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.” This dream has motivated us since our founding in 1976 and drives our vision: “To be a global, world-class end-to-end IT and business consulting services leader helping our clients succeed.” In pursuing our dream and vision, CGI has been highly disciplined throughout its history in executing a Build and Buy profitable growth strategy comprised of four pillars that combine profitable organic growth (Build) and accretive acquisitions (Buy):

Pillar 1: Win, renew and extend contracts

Pillar 2: New large managed IT and business process services contracts

These first two pillars relate to driving profitable organic growth through the pursuit of contracts with new and existing clients in our targeted industries. Successes in these pillars reflect the strength of our end-to-end portfolio of capabilities, the depth of expertise of our consultants in business and IT, and the appreciation of the proximity model by our clients, both existing and potential.

Pillar 3: Metro market acquisitions

The third pillar focuses on growth through metro market acquisitions, complementing the proximity model, helping provide a fuller range of end-to-end services. We identify metro market acquisitions through a strategic qualification process that systematically searches for targets to strengthen our proximity model, leveraging strong local relationships with customers, and enhancing our industry expertise, services and solutions.

Pillar4: Large, transformational acquisitions

We also pursue large acquisitions to further expand our geographic presence and critical mass, which enables us to compete for large managed IT and business process services contracts and broaden our client relationships. CGI will continue to be a consolidator in the IT services industry by being active on both of these last pillars.

FISCAL 2020 RESULTS – 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

Executing our strategy

CGI’s strategy is executed through a unique business model that combines client proximity with an extensive global delivery network to deliver the following benefits:

• Local relationships and accountability: We live and work near our clients to provide a high level of responsiveness, partnership, and innovation. Our local CGI members speak our clients’ language, understand their business environment, and collaborate to meet their goals and advance their business.

• Global reach: Our local presence is complemented by an expansive global delivery network that ensures our clients have 24/7 access to best-fit digital capabilities and resources to meet their end-to-end needs. In addition, clients benefit from our unique combination of industry domain and technology expertise within our global delivery model.

• Committedexperts: One of our key strategic goals is to be our clients’ partner and expert of choice. To achieve this, we invest in developing and recruiting professionals with extensive industry, business and in-demand technology expertise. In addition, a majority of CGI consultants and professionals are also owners through our Share Purchase Plan, which, combined with the Profit Participation Plan, provide an added level of commitment to the success of our clients.

• Comprehensive quality processes: CGI’s investment in quality frameworks and rigorous client satisfaction assessments has resulted in a consistent track record of on-time and within-budget project delivery. With regular reviews of engagements and transparency at all levels, the company ensures that client objectives and its own targets are consistently followed at all times. This thorough process enables CGI to generate continuous improvements for all stakeholders by applying corrective measures as soon as they are required.

• Corporate social responsibility: Corporate social responsibility is one of CGI’s core values. Our business model is designed to ensure that we are close to our clients and communities. At CGI, our members embrace our responsibilities to contribute to the continuous improvement of the economic, social and environmental well-being of the communities in which we live and work.

1.3. COMPETITIVE ENVIRONMENT

In today’s digital era, there is a competitive urgency for organizations across industries to become digital in a sustainable way. The pressure is on to modernize legacy assets and connect them to digital business and operating models. Central to this massive transformation is the evolving role of technology. Traditionally viewed as an enabler, technology is now recognized also as a driver of business transformation. The promise of digital creates an enormous opportunity to transform organizations end-to-end, and CGI is well-positioned to serve as a digital partner and expert of choice. We are working with clients across the globe to implement digital strategies, roadmaps and solutions that revolutionize the customer/citizen experience, drive the launch of new products and services, and deliver efficiencies and cost savings.

As the demand for digitalization increases, competition within the global IT industry is intensifying. CGI’s competition comprises a variety of players, from metro market companies providing specialized services and software, to global, end-to-end IT service providers, to large consulting firms and government pure-plays. All of these players are competing to deliver some or all of the services we provide.

Many factors distinguish the industry leaders, including the following:

• Depth and breadth of industry and technology expertise;

• Local presence and strength of client relationships;

• Consistent, on-time, within-budget delivery everywhere the client operates;

• Breadth of digital IP solutions;

• Ability to deliver practical innovation for measurable results;

• Total cost of services and value delivered; and

• Unique global delivery network, including onshore, nearshore and offshore options.

CGI is one of the leaders in the industry with respect to all of these factors. We are not only delivering all of the capabilities clients need to compete in a digital world, but the immediate results and long-term value they expect. As the market dynamics and industry trends continue to increase demand for enterprise solutions from global, end-to-end IT and business consulting services firms, CGI is one of few firms with the scale, reach, and capabilities to meet clients’ enterprise needs.

FISCAL 2020 RESULTS – 11

MANAGEMENT’S DISCUSSION AND ANALYSIS

2. Highights and Key Performance Measures

2.1. FISCAL 2020 HIGHLIGHTS

• Revenue of $12.16 billion, up 0.4% and essentially stable in constant currency;
• Adjusted EBIT1 of $1,862.9 million, up 2.1% ;
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• Adjusted EBIT margin1 of 15.3%, up 20 basis points;
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• Net earnings of $1,117.9 million, down 11.5%;
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• Net earnings, excluding specific items2 of $1,300.1 million, down 0.4%;
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• Net earnings margin of 9.2%, down 120 basis points;
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• Net earnings margin, excluding specific items2 of 10.7%, down 10 basis points;
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• Diluted EPS of $4.20, down 7.7%;
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• Diluted EPS, excluding specific items2, of $4.89, up 4.0%;
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• Cash provided by operating activities1 of $1,938.6 million, up 18.6%, representing 15.9% of revenue;<br>
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• Bookings of $11.85 billion, or 97.4% of revenue; and,
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• Backlog of $22.67 billion.
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^1^ Includes the impact of the adoption of the IFRS 16 which is discussed in section 2.5. of the present document.<br>
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^2^ Specific items are comprised of acquisition-related, integration costs and restructuring costs net of tax, which are<br>discussed in sections 3.7.1. and 3.7.2. of the present document. Prior year also includes a tax adjustment, discussed in section 3.8.1.
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2.2. SELECTED YEARLY INFORMATION & KEY PERFORMANCE MEASURES^1^

As at and for the years ended September 30, 2020 2019 2018 Change    2020 / 2019 Change<br><br><br>2019 / 2018
In millions of CAD unless otherwise noted
Growth
Revenue 12,164.1 12,111.2 11,506.8 52.9 604.4
Year-over-year revenue growth 0.4% 5.3% 6.1% (4.9%) (0.8%)
Constant currency year-over-year revenue growth (0.1%) 5.9% 4.6% (6.0%) 1.3%
Backlog 22,673 22,611 22,577 62 34
Bookings 11,848 12,646 13,493 (798) (847)
Book-to-bill ratio 97.4% 104.4% 117.3% (7.0%) (12.9%)
Profitability^1^
Adjusted EBIT^2^ 1,862.9 1,825.0 1,701.7 37.9 123.3
Adjusted EBIT margin 15.3% 15.1% 14.8% 0.2% 0.3%
Net earnings 1,117.9 1,263.2 1,141.4 (145.3) 121.8
Net earnings margin 9.2% 10.4% 9.9% (1.2%) 0.5%
Diluted EPS (in dollars) 4.20 4.55 3.95 (0.35) 0.60
Net earnings excluding specific items^2^ 1,300.1 1,305.9 1,210.7 (5.8) 95.2
Net earnings margin excluding specificitems 10.7% 10.8% 10.5% (0.1%) 0.3%
Diluted EPS excluding specific items (in dollars)^2^ 4.89 4.70 4.19 0.19 0.51
Liquidity^1^
Cash provided by operating activities 1,938.6 1,633.9 1,493.4 304.7 140.5
As a % of revenue 15.9% 13.5% 13.0% 2.4% 0.5%
Days sales outstanding 47 50 52 (3) (2)
Capital structure^1^
Net debt 2,777.9 2,117.2 1,640.8 660.7 476.4
Net debt to capitalization ratio 23.6% 22.9% 19.2% 0.7% 3.7%
Return on equity 16.0% 18.5% 17.3% (2.5%) 1.2%
Return on invested capital 12.1% 15.1% 14.5% (3.0%) 0.6%
Balance sheet^1^
Cash and cash equivalents, and short-term investments 1,709.5 223.7 184.1 1,485.8 39.6
Total assets 15,550.4 12,621.7 11,919.1 2,928.7 702.6
Long-term financial liabilities^3^ 4,030.6 2,236.0 1,530.1 1,794.6 705.9
^1^ As of the periods ending December 31, 2019, figures include the impact of the adoption of IFRS 16, while previous<br>years are not restated as indicated in section 7.
--- ---
^2^ Please refer to sections 3.7. and 3.8.3. of each year’s respective MD&A for the reconciliation of non-GAAP financial measures for fiscal 2018 and 2019.
--- ---
^3^ Long-term financial liabilities include the long-term portion of the debt, long-term lease liabilities and the long-term<br>derivative financial instruments.
--- ---

FISCAL 2020 RESULTS – 13

MANAGEMENT’S DISCUSSION AND ANALYSIS

2.3. STOCK PERFORMANCE

LOGO

2.3.1. Fiscal 2020 Trading Summary

CGI’s shares are listed on the Toronto Stock Exchange (TSX) (stock quote – GIB.A) and the New York Stock Exchange (NYSE) (stock quote – GIB) and are included in key indices such as the S&P/TSX 60 Index.

TSX (CAD) NYSE (USD)
Open: 105.01 Open: 79.00
High: 114.49 High: 87.13
Low: 67.23 Low: 46.32
Close: 90.38 Close: 67.77
CDN average daily trading volumes^1^: 986,534 NYSE average daily trading volumes: 240,724
^1^ Includes the average daily volumes of both the TSX and alternative trading systems.
--- ---

2.3.2. Normal Course Issuer Bid (NCIB)

On January 29, 2020, the Company’s Board of Directors authorized and subsequently received regulatory approval from the TSX for the renewal of CGI’s NCIB which allows for the purchase for cancellation of up to 20,149,100 Class A subordinate voting shares (Class A Shares) representing 10% of the Company’s public float as of the close of business on January 22, 2020. Class A Shares may be purchased for cancellation under the NCIB commencing on February 6, 2020 until no later than February 5, 2021, or on such earlier date when the Company has either acquired the maximum number of Class A Shares allowable under the NCIB or elects to terminate the bid.

During the year ended September 30, 2020, the Company purchased for cancellation 10,605,464 Class A Shares for $1,043.5 million at a weighted average price of $98.39 under the previous and current NCIB. The purchased shares included 6,008,905 Class A Shares purchased for cancellation from Caisse de dépôt et de placement du Québec for cash consideration of $600.0 million. The purchase was made pursuant to an exemption order issued by the Autorité des marchés financiers and is considered within the annual aggregate limit that the Company is entitled to purchase under its current NCIB.

As at September 30, 2020, the Company can purchase up to 10,037,936 Class A Shares for cancellation under the current NCIB.

2.3.3. Capital Stock and Options Outstanding

The following table provides a summary of the Capital Stock and Options Outstanding as at November 6, 2020:

Capital Stock and Options Outstanding As at November 6, 2020
Class A subordinate voting shares 229,981,039
Class B multiple voting shares 28,945,706
Options to purchase Class A subordinate voting shares 8,849,802

2.4. INVESTMENTS IN SUBSIDIARIES

On December 18, 2019, the Company acquired all of the outstanding shares of SCISYS Group Plc (SCISYS). SCISYS operates in several sectors, with deep expertise and industry leading solutions in the space and defense sectors, as well as in the media and broadcast news industries and is headquartered in Dublin, Ireland. This acquisition added approximately 670 professionals to the Company, predominantly based in the U.K. and Germany.

On January 20, 2020, the Company acquired all of the outstanding shares of Meti Logiciels et Services SAS (Meti). Based in France, Meti is specialized in the development of software solutions for the retail sector across Europe and works with some of Europe’s largest retailers. This acquisition added approximately 300 professionals to the Company.

On March 31, 2020, the Company acquired all of the outstanding shares of TeraThink Corporation (TeraThink). Headquartered in Reston, Virginia, TeraThink is an information technology and management consulting firm providing digitization, enterprise finance, risk management, and data analytics services to the U.S. federal government. The acquisition added approximately 250 professionals to the Company.

The Company completed these acquisitions for a total purchase price of approximately $273 million.

With significant strategic consulting, system integration and customer-centric digital innovation capabilities, these acquisitions were made to complement CGI’s proximity model and expertise across key sectors, including communications, retail, space and defense and government.

FISCAL 2020 RESULTS – 15

MANAGEMENT’S DISCUSSION AND ANALYSIS

2.5. IMPACT OF THE ADOPTION OF IFRS 16

On October 1st, 2019, the Company adopted IFRS 16, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties in a lease agreement in replacement of International Accounting Standard (IAS) 17, Leases (please refer to section 7 of the present document).

The impacts on the adoption date on the consolidated balance sheet are presented in note 3 of our audited consolidated financial statements and consists primarily in the on-balance sheet recognition of our lease agreements of Right-of-use assets and Lease liabilities.

For the year ended September 30, 2020, IFRS 16 adoption had an impact on our audited consolidated statements of earnings, presenting a decrease in cost of services, selling and administrative of $195.8 million, an increase in depreciation of $158.0 million for a net impact on adjusted EBIT of $37.9 million (discussed in section 3.6.) which is partially offset by an increase in finance costs of $32.0 million (discussed in section 3.7.3. of the present document).

In addition, section 4.1. of the present document presents the impact on the consolidated statement of cash flows which increased our cash provided by operating activities by $165.3 million for the year ended September 30, 2020, with the offset presented in cash used in financing activities. Section 4.5. of the present document presents the impacts to some of our capital structure ratios.

Finally, the adoption of IFRS 16 doesn’t have an impact on the Company’s external covenants and conditions related to its debts.

2.6. COVID-19

While we are unable to predict the extent to which the COVID-19 pandemic may adversely impact our operations and financial performance in future quarters, our executive crisis management team and our network of local crisis management teams continue to closely monitor the evolving COVID-19 pandemic, executing on our business continuity plan and working collaboratively with our clients. We have established key guidelines and procedures related to security and access controls, member health screening, member isolation and quarantine, and facility infrastructure, maintenance and cleaning, to ensure that our workplace practices are in line with local government recommendations and requirements, as well as compliant with the appropriate standards of safety, health, wellness and required workplace readiness certifications. As of today, most of our members continue working remotely.

During the last two quarters of fiscal 2020, our revenues generally declined across our segments when compared to the same period last year. We experienced reduced demand for our services during the COVID-19 pandemic due to the slowdown of activities in some of our markets, particularly in the manufacturing, retail & distribution vertical market.

To mitigate the impacts of COVID-19 on our business, we have proactively implemented various cost reduction efforts to adjust our costs based on our revenue level, such as implementing our restructuring plan and reducing travel related expenses following government restrictions. Please refer to sections 3.4., 3.5.1., 3.6. and 3.7.2. for additional information.

The Company maintains a strong balance sheet and liquidity position. On April 2, 2020 the Company amended and restated its two-year unsecured committed term loan credit facility (the 2020 Term Loan) for a total principal amount of US$1,250.0 million.

Our highest priority remains the health and safety of our members and providing service continuity for our clients. CGI’s proximity-based business model and robust internal infrastructure limited the impact of confinement measures imposed in several countries and allowed the majority of our members to work remotely, ensuring service continuity to our clients.

3. Financial Review

3.1. BOOKINGS AND BOOK-TO-BILL RATIO

Bookings for the year were $11.8 billion representing a book-to-bill ratio of 97.4%. The breakdown of the new bookings signed during the year is as follows:

Contract Type Service Type Segment Vertical Market
A. Extensions, renewals and add-ons 75% A. System integration and consulting 51 % A. U.S. Commercial and State Government 17% A. Government 36%
B. New business 25% B. Managed IT and Business Process Services 49 % B. Western and Southern Europe 16% B. MRD 23%
C. U.S. Federal 15% C. Financial services 21%
D. Canada 12% D. Communications & utilities 13%
E. Central and Eastern Europe 11% E. Health 7%
F. U.K. and Australia 11%
G. Scandinavia 11%
H. Finland, Poland and Baltics 7%

Information regarding our bookings is a key indicator of the volume of our business over time. However, due to the timing and transition period associated with managed IT and business process services contracts, the realization of revenue related to these bookings may fluctuate from period to period. The values initially booked may change over time due to their variable attributes, including demand-driven usage, modifications in the scope of work to be performed caused by changes in client requirements as well as termination clauses at the option of the client. As such, information regarding our bookings is not comparable to, nor should it be substituted for, an analysis of our revenue. Management however believes that it is a key indicator of potential future revenue.

The following table provides a summary of the bookings and book-to-bill ratio by segment:

**** In thousands of CAD except forpercentages Bookings for the year ended<br><br><br>September 30, 2020 Book-to-bill ratio for the year<br> <br>ended September 30, 2020
Total CGI 11,847,704 **** 97.4%
Western and Southern Europe 1,860,234 **** 97.2%
U.S. Commercial and State Government 2,027,383 **** 106.3%
Canada 1,443,508 **** 78.9%
U.S. Federal 1,747,090 **** 100.7%
U.K. and Australia 1,308,393 **** 83.4%
Central and Eastern Europe 1,341,408 **** 107.5%
Scandinavia 1,290,579 **** 111.5%
Finland, Poland and Baltics 829,109 **** 103.1%

FISCAL 2020 RESULTS – 17

MANAGEMENT’S DISCUSSION AND ANALYSIS

3.2. FOREIGN EXCHANGE

The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS, we value assets, liabilities and transactions that are measured in foreign currencies using various exchange rates. We report all dollar amounts in Canadian dollars.

Closing foreign exchange rates

As at September 30, 2020 2019 Change
U.S. dollar 1.3325 1.3246 0.6%
Euro 1.5622 1.4446 8.1%
Indian rupee 0.0181 0.0188 (3.7%)
British pound 1.7216 1.6302 5.6%
Swedish krona 0.1487 0.1347 10.4%
Average foreign exchangerates
For the year endedSeptember 30, 2020 2019 Change
U.S. dollar 1.3457 1.3270 1.4%
Euro 1.5075 1.4970 0.7%
Indian rupee 0.0183 0.0188 (2.7%)
British pound 1.7152 1.6943 1.2%
Swedish krona 0.1425 0.1426 (0.1%)

3.3. REVENUE DISTRIBUTION

The following charts provide additional information regarding our revenue mix for the year:

Service Type Client Geography Vertical Market
A. Managed IT and Business Process Services 54% A. U.S. 30% A. Government 34%
B. System integration and consulting 46% B. Canada 15% B. MRD 24%
C. France 14% C. Financial services 22%
D. U.K. 12% D. Communications & utilities 13%
E. Sweden 7% E. Health 7%
F. Finland 6%
G. Germany 6%
H. Rest of the world 10%

3.3.1. Client Concentration

IFRS guidance on segment disclosures defines a single customer as a group of entities that are known to the reporting entity to be under common control. As a consequence, our work for the U.S. federal government including its various agencies represented 13.8% of our revenue for Fiscal 2020 as compared to 12.8% for Fiscal 2019.

FISCAL 2020 RESULTS – 19

MANAGEMENT’S DISCUSSION AND ANALYSIS

3.4. REVENUE BY SEGMENT

Our segments are reported based on where the client’s work is delivered from within our geographic delivery model.

The table below provides a summary of the year-over-year changes in our revenue, in total and by segment before eliminations, separately showing the impacts of foreign currency exchange rate variations between Fiscal 2020 and Fiscal 2019. The Fiscal 2019 revenue by segment was recorded reflecting the actual foreign exchange rates for that period. The foreign exchange impact is the difference between the current period’s actual results and the same period’s results converted with the prior year’s foreign exchange rates.

For the years ended September 30, Change
2020 2019 %
In thousands of CAD except forpercentages
Total CGI revenue **** 12,164,115 **** 12,111,236 **** 0.4% ****
Variation prior to foreign currency impact **** (0.1% )
Foreign currency impact **** 0.5% ****
Variation over previous period **** 0.4% ****
Western and Southern Europe
Revenue prior to foreign currency impact **** 1,904,508 **** 2,022,677 ) **** (5.8% )
Foreign currency impact **** 6,969 ****
Western and Southern Europe revenue **** 1,911,477 **** 2,022,677 ) **** (5.5% )
U.S. Commercial and State Government
Revenue prior foreign currency impact **** 1,836,637 **** 1,834,917 **** 0.1% ****
Foreign currency impact **** 26,830 ****
U.S. Commercial and State Governmentrevenue **** 1,863,467 **** 1,834,917 **** 1.6% ****
Canada
Revenue prior to foreign currency impact **** 1,685,511 **** 1,768,924 ) **** (4.7% )
Foreign currency impact **** 758 ****
Canada revenue **** 1,686,269 **** 1,768,924 ) **** (4.7% )
U.S. Federal
Revenue prior to foreign currency impact **** 1,687,792 **** 1,597,922 **** 5.6% ****
Foreign currency impact **** 24,452 ****
U.S. Federal revenue **** 1,712,244 **** 1,597,922 **** 7.2% ****
U.K. and Australia
Revenue prior to foreign currency impact **** 1,342,848 **** 1,356,858 ) **** (1.0% )
Foreign currency impact **** 15,621 ****
U.K. and Australia revenue **** 1,358,469 **** 1,356,858 **** 0.1% ****
Central and Eastern Europe
Revenue prior to foreign currency impact **** 1,205,805 **** 1,166,486 **** 3.4% ****
Foreign currency impact **** 6,391 ****
Central and Eastern Europe revenue **** 1,212,196 **** 1,166,486 **** 3.9% ****
Scandinavia
Revenue prior to foreign currency impact **** 1,125,868 **** 1,095,330 **** 2.8% ****
Foreign currency impact **** (21,747 )
Scandinavia revenue **** 1,104,121 **** 1,095,330 **** 0.8% ****
Finland, Poland and Baltics
Revenue prior to foreign currency impact **** 774,211 **** 787,640 ) **** (1.7% )
Foreign currency impact **** 2,941 ****
Finland,<br>Poland & Baltics revenue **** 777,152 **** 787,640 ) **** (1.3% )

All values are in US Dollars.

For the years ended September 30, Change
2020 2019 %
In thousands of CAD except forpercentages
Asia Pacific
Revenue prior to foreign currency impact **** 688,211 **** 606,252 **** 13.5%
Foreign currency impact **** (13,265 )
Asia Pacific revenue **** 674,946 **** 606,252 **** 11.3%
Eliminations **** (136,226 ) (125,770 ) ) **** 8.3%

All values are in US Dollars.

For the year ended September 30, 2020, revenue was $12,164.1 million, an increase of $52.9 million, or 0.4% over the same period last year. On a constant currency basis, revenue was essentially stable. Recent business acquisitions were offset by the slowdown of activities, primarily in the MRD, financial services and communications & utilities vertical markets, mostly as a result of COVID-19.

3.4.1. Western and Southern Europe

For the year ended September 30, 2020, revenue in our Western and Southern Europe segment was $1,911.5 million, a decrease of $111.2 million or 5.5% over the same period last year. On a constant currency basis, revenue decreased by $118.2 million or 5.8%. The change in revenue was due to the slowdown of activities mainly within the financial services, communications and utilities and MRD vertical markets, primarily as a result of COVID-19. This was partially offset by the Meti acquisition and growth within the government vertical market.

On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $1,186 million for the year ended September 30, 2020.

3.4.2. U.S. Commercial and State Government

For the year ended September 30, 2020, revenue in our U.S. Commercial and State Government segment was $1,863.5 million, an increase of $28.6 million or 1.6% over the same period last year. On a constant currency basis, revenue increased by $1.7 million or 0.1%. The increase was mainly due to growth within the financial services vertical market and the state and local government market. This was in part offset by an adjustment due to a reevaluation of cost to complete on a project and lower work volume within the communications & utilities vertical market.

On a client geographic basis, the top two U.S. Commercial and State Government vertical markets were financial services and government, generating combined revenues of approximately $1,156 million for the year ended September 30, 2020.

3.4.3. Canada

For the year ended September 30, 2020, revenue in our Canada segment was $1,686.3 million, a decrease of $82.7 million or 4.7% compared to the same period last year. On a constant currency basis, revenue decreased by $83.4 million or 4.7%. The change was mainly due to the impact of COVID-19, lower work volumes and license sales within the financial services vertical market and a higher proportion of client projects transferred to our global delivery centers of excellence in Asia-Pacific.

On a client geographic basis, the top two Canada vertical markets were financial services and communications & utilities, generating combined revenues of approximately $1,138 million for the year ended September 30, 2020.

3.4.4. U.S. Federal

For the year ended September 30, 2020, revenue in our U.S. Federal segment was $1,712.2 million, an increase of $114.3 million or 7.2% over the same period last year. On a constant currency basis, revenue increased by $89.9 million or 5.6%. The increase was driven by IP solutions, application support and cybersecurity services and recent business acquisitions. This was partly offset by lower transaction volumes related to our IP business process services, mainly due to the impact of the COVID-19 and adjustments on certain client contracts in the defense sector.

FISCAL 2020 RESULTS – 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the year ended September 30, 2020, 82% of revenues within the U.S. Federal segment were federal civilian based.

3.4.5. U.K. and Australia

For the year ended September 30, 2020, revenue in our U.K. and Australia segment was $1,358.5 million, an increase of $1.6 million or 0.1% over the same period last year. On a constant currency basis, revenue decreased by $14.0 million or 1.0%. The change was mainly due to the non-renewal of certain infrastructure contracts and the successful completion of the build phase of a large project within the communications and utilities vertical market. This was mostly offset by growth within the space, defense and intelligence sector, in part driven by the SCISYS acquisition.

On a client geographic basis, the top two U.K. and Australia vertical markets were government and communications & utilities, generating combined revenues of approximately $1,108 million for the year ended September 30, 2020.

3.4.6. Central and Eastern Europe

For the year ended September 30, 2020, revenue in our Central and Eastern Europe segment was $1,212.2 million, an increase of $45.7 million or 3.9% over the same period last year. On a constant currency basis, revenue increased by $39.3 million or 3.4%. The increase in revenue was primarily due to the Acando AB (Acando) and SCISYS acquisitions. This was partially offset by the impact of COVID-19, mainly within the MRD and financial services vertical markets, and a higher proportion of client projects transferred to our global delivery centers of excellence in Asia-Pacific.

On a client geographic basis, the top two Central and Eastern Europe vertical markets were MRD and communications & utilities, generating combined revenues of approximately $800 million for the year ended September 30, 2020.

3.4.7. Scandinavia

For the year ended September 30, 2020, revenue in our Scandinavia segment was $1,104.1 million, an increase of $8.8 million or 0.8% over the same period last year. On a constant currency basis, revenue increased by $30.5 million or 2.8%.The increase was mainly driven by the Acando acquisition. This was in part offset by a slowdown of activities primarily within the MRD vertical market, related to the impact of COVID-19, as well as the non-renewal of infrastructure contracts.

On a client geographic basis, the top two Scandinavia vertical markets were MRD and government, generating combined revenues of approximately $870 million for the year ended September 30, 2020.

3.4.8. Finland,Poland and Baltics

For the year ended September 30, 2020, revenue in our Finland, Poland and Baltics segment was $777.2 million, a decrease of $10.5 million or 1.3% over the same period last year. On a constant currency basis, revenue decreased by $13.4 million or 1.7% due to the non-renewal of infrastructure contracts and the impact of COVID-19, in part offset by the Acando Acquisition.

On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were government and financial services, generating combined revenues of approximately $473 million for the year ended September 30, 2020.

3.4.9. Asia Pacific

For the year ended September 30, 2020, revenue in our Asia Pacific segment was $674.9 million, an increase of $68.7 million or 11.3% over the same period last year. On a constant currency basis, revenue increased by $82.0 million or 13.5%. The increase was mainly driven by the continued demand for our offshore delivery centers, predominantly within the financial services and communications & utilities vertical markets.

3.5. OPERATING EXPENSES

For the years endedSeptember 30, 2020 %of        Revenue 2019 %of        Revenue %
In thousands of CAD except for percentages
Costs of services, selling and administrative **** 10,302,068 **** **** 84.7% 10,284,007 84.9% **** **** 0.2%
Foreign exchange (gain) loss **** (899 ) **** 0.0% 2,234 0.0% ) **** (140.2%)

All values are in US Dollars.

3.5.1. Costs of Services, Selling and Administrative

For the year ended September 30, 2020, costs of services, selling and administrative expenses amounted to $10,302.1 million, an increase of $18.1 million over the same period last year. As a percentage of revenue, costs of services, selling and administrative expenses decreased to 84.7% from 84.9%. As a percentage of revenue, costs of services increased compared to the same period last year due to the impact of a lower proportion of IP license sales revenue and adjustments on client contracts. This was partly offset by lower performance based compensation and planned synergies achieved through the optimization and automation in our infrastructure business, as discussed in section 3.6. of the present document. As a percentage of revenue, selling and administrative expenses improved compared to the same period last year mainly due to actions taken to lower expenses in response to COVID-19 and lower performance based compensation.

During the year ended September 30, 2020, the translation of the results of our foreign operations from their local currencies to the Canadian dollar unfavourably impacted costs by $50.3 million, partially offsetting the favourable translation impact of $61.0 million on our revenue.

3.5.2. Foreign Exchange (Gain) Loss

During the year ended September 30, 2020, CGI incurred $0.9 million of foreign exchange gains, mainly driven by the timing of payments combined with the volatility of foreign exchange rates. The Company, in addition to its natural hedges, uses derivatives as a strategy to manage its exposure, to the extent possible.

FISCAL 2020 RESULTS – 23

MANAGEMENT’S DISCUSSION AND ANALYSIS

3.6. ADJUSTED EBIT BY SEGMENT

Change ****
For the years endedSeptember 30, 2020 2019 % ****
In thousands of CAD except for percentages
Western and Southern Europe 264,009 275,535 (11,526 (4.2% )
As a percentage of segment revenue 13.8% 13.6%
U.S. Commercial and State Government 295,795 333,210 (37,415 (11.2% )
As a percentage of segment revenue 15.9% 18.2%
Canada 364,424 359,089 5,335 1.5% ****
As a percentage of segment revenue 21.6% 20.3%
U.S. Federal 221,793 230,054 (8,261 (3.6% )
As a percentage of segment revenue 13.0% 14.4%
U.K. and Australia 215,924 185,290 30,634 16.5% ****
As a percentage of segment revenue 15.9% 13.7%
Central and Eastern Europe 122,548 100,244 22,304 22.2% ****
As a percentage of segment revenue 10.1% 8.6%
Scandinavia 57,231 76,648 (19,417 (25.3% )
As a percentage of segment revenue 5.2% 7.0%
Finland, Poland and Baltics 120,959 118,771 2,188 1.8% ****
As a percentage of segment revenue 15.6% 15.1%
Asia Pacific 200,263 146,154 54,109 37.0% ****
As a percentage of segment revenue 29.7% 24.1%
Adjusted EBIT 1,862,946 1,824,995 37,951 2.1% ****
Adjusted EBIT margin 15.3% 15.1%

All values are in US Dollars.

For the year ended September 30, 2020, adjusted EBIT margin increased to 15.3% from 15.1% for the same period last year. The increase was mainly due to lower performance based compensation, the $37.9 million impact of adoption of IFRS 16, as well as synergies achieved through the optimization and modernization of our infrastructure business. This was partly offset by adjustments on client contracts.

3.6.1. Western and Southern Europe

For the year ended September 30, 2020, adjusted EBIT in the Western and Southern Europe segment was $264.0 million, a decrease of $11.5 million when compared to the same period last year. Adjusted EBIT margin increased to 13.8% from 13.6%, primarily due to lower performance based compensation, a decrease in amortization of client relationships, and to a lesser extent, the impact of the adoption of IFRS 16. This was partly offset by the slowdown of activities identified in the revenue section, primarily as a result of COVID-19.

3.6.2. U.S. Commercial and State Government

For the year ended September 30, 2020, adjusted EBIT in the U.S. Commercial and State Government segment was $295.8 million, a decrease of $37.4 million when compared to the same period last year. Adjusted EBIT margin decreased to 15.9% from 18.2%. The change in adjusted EBIT margin was mainly due to the impact of lower IP sales and solution revenue and an adjustment due to a reevaluation of cost to complete on a project. This was in part offset by lower discretionary expenses and fringe benefits due to COVID-19.

3.6.3. Canada

For the year ended September 30, 2020, adjusted EBIT in the Canada segment was $364.4 million, an increase of $5.3 million when compared to the same period last year. Adjusted EBIT margin increased to 21.6% from 20.3%. The increase was mainly due to synergies achieved through the optimization and modernization of our infrastructure business and the impact of the adoption of IFRS 16. This was partly offset by the impact of lower IP license sales and service revenue.

3.6.4. U.S. Federal

For the year ended September 30, 2020, adjusted EBIT in the U.S. Federal segment was $221.8 million, a decrease of $8.3 million when compared to the same period last year. Adjusted EBIT margin decreased to 13.0% from 14.4%. Adjusted EBIT margin changed primarily due to lower business process services volumes, mostly related to COVID-19, lower profitability on defense client contracts and a litigation provision. This was partly offset by the favourable impacts of both a contract settlement and the adoption of IFRS 16.

3.6.5. U.K. and Australia

For the year ended September 30, 2020, adjusted EBIT in the U.K. and Australia segment was $215.9 million, an increase of $30.6 million when compared to the same period last year. Adjusted EBIT margin increased to 15.9% from 13.7%, mainly due to adjustments on client contracts and the impact of the U.K. court ruling on pensionable services, both in the prior year.

3.6.6. Central and Eastern Europe

For the year ended September 30, 2020, adjusted EBIT in the Central and Eastern Europe segment was $122.5 million, an increase of $22.3 million when compared to the same period last year. Adjusted EBIT margin increased to 10.1% from 8.6%. The increase in adjusted EBIT was driven by the benefits of synergies achieved through the integration of the prior year’s business acquisitions and lower performance based compensation. This was in part offset by the slowdown of activities in the MRD vertical market, mostly related to COVID-19.

3.6.7. Scandinavia

For the year ended September 30, 2020, adjusted EBIT in the Scandinavia segment was $57.2 million, a decrease of $19.4 million when compared to the same period last year. Adjusted EBIT margin decreased to 5.2% from 7.0%. The change in adjusted EBIT margin was mainly driven by a slowdown of activities, mostly related to COVID-19, the impact of excess capacity in our Swedish infrastructure business and additional costs related to the ramp up of new contracts. This was in part offset by the savings generated from the Restructuring Plan (see section 3.7.2. of the present document).

3.6.8. Finland, Poland and Baltics

For the year ended September 30, 2020 adjusted EBIT in our Finland, Poland and Baltics segment was $121.0 million, an increase of $2.2 million, when compared to the same period last year. Adjusted EBIT margin increased to 15.6% from 15.1% mainly due to lower discretionary expenses and the temporary payroll tax relief, both due to COVID-19, and lower performance based compensation. This was in part offset by the impact of lower work volumes, also in part due to COVID-19.

3.6.9. Asia Pacific

For the year ended September 30, 2020, adjusted EBIT in the Asia Pacific segment was $200.3 million, an increase of $54.1 million when compared to the same period last year. Adjusted EBIT margin increased to 29.7% from 24.1%. The increase in adjusted EBIT margin was mostly due to automation and other productivity improvements, cost reduction in transportation and facilities due to the COVID-19 shutdown, the impact of the adoption of IFRS 16 and the favourable impact of our currency forward contracts.

FISCAL 2020 RESULTS — 25

MANAGEMENT’S DISCUSSION AND ANALYSIS

3.7. EARNINGS BEFORE INCOME TAXES

The following table provides a reconciliation between our adjusted EBIT and earnings before income taxes, which is reported in accordance with IFRS:

Change ****
For the years ended September 30, 2020 % of    Revenue 2019 % of    Revenue % ****
In thousands of CAD except for percentage
Adjusted EBIT 1,862,946 15.3% 1,824,995 15.1% 37,951 2.1% ****
Minus the following items:
Acquisition-related and integration costs 76,794 0.6% 77,417 0.6% (623 (0.8% )
Restructuring costs 155,411 1.3% — — 155,411 — ****
Net finance costs 114,474 0.9% 70,630 0.6% 43,844 62.1% ****
Earnings before income taxes 1,516,267 12.5% 1,676,948 13.8% (160,681 (9.6% )

All values are in US Dollars.

3.7.1. Acquisition-Related and Integration Costs

For the year ended September 30, 2020, the Company incurred $76.8 million, for acquisition-related and integration costs, acquisitions’ integration towards the CGI operating model. These costs were mainly related to terminations of employment and professional fees.

3.7.2. Restructuring Costs

During the year ended September 30, 2020, the Company incurred, as part of its cost reduction efforts in response to COVID-19, restructuring costs related to terminations of employment, primarily in France, Canada and Germany. The initiative is expected to help mitigate the adverse impacts of COVID-19.

During the year ended September 30, 2020, the Company also announced a restructuring plan (the Restructuring Plan), mainly for the closure of our Brazil operations, the refocusing of the Portugal infrastructure business towards nearshore delivery and the optimization of the Sweden infrastructure business. These actions generated benefits throughout Fiscal 2020, as discussed in section 3.6. of the present document.

As a result, a total of $155.4 million was expensed during the year ended September 30, 2020.

3.7.3. Net Finance Costs

Net finance costs mainly include interest on our long-term debt. For the year ended September 30, 2020, the increase in net finance costs of $43.8 million was mainly due to the recognition of $32.0 million of interest expense on leases liabilities upon adoption of IFRS 16 and our 2020 Term Loan.

3.8. NET EARNINGS AND EARNINGS PER SHARE

The following table sets out the information supporting the earnings per share calculations:

Change
For the years endedSeptember 30, 2020 2019 % ****
In thousands of CAD except for percentage and shares data
Earnings before income taxes 1,516,267 1,676,948 (160,681 (9.6% )
Income tax expense 398,405 413,741 (15,336 (3.7% )
Effective tax rate 26.3% 24.7%
Net earnings 1,117,862 1,263,207 (145,345 (11.5% )
Net earnings margin 9.2% 10.4%
Weighted average number of shares outstanding
Class A subordinate voting shares and Class B multiple voting shares (basic) 262,005,521 272,719,309 (10,713,788) (3.9% )
Class A subordinate voting shares and Class B multiple voting shares (diluted) 266,104,062 277,785,725 (11,681,663) (4.2% )
Earnings per share (in dollars)
Basic 4.27 4.63 (0.36 (7.8% )
Diluted 4.20 4.55 (0.35 (7.7% )

All values are in US Dollars.

3.8.1. Income Tax Expense

For the year ended September 30, 2020, income tax expense was $398.4 million compared to $413.7 million over the same period last year, while our effective tax rate increased to 26.3% from 24.7%. The prior year effective tax rate was impacted by a tax adjustment from a settlement with the German tax authorities where the Company booked $115.5 million of additional corporate tax losses, and recorded a $18.5 million income tax recovery.

When excluding that tax adjustment and the tax effects from acquisition-related and integration costs and restructuring costs, the effective tax rate would have been 25.6% for both financial years. The effective tax rate excluding specific items is a non-GAAP measure that management believes is useful when comparing our performance to the prior year.

The table in section 3.8.3. shows the year-over-year comparison of the tax rate with the impact of specific items removed.

Based on the enacted rates at the end of Fiscal 2020 and our current business mix, we expect our effective tax rate before any significant adjustments to be in the range of 25.0% to 27.0% in subsequent periods.

3.8.2. Weighted Average Number of Shares

For Fiscal 2020, CGI’s basic and diluted weighted average number of shares decreased compared to Fiscal 2019 due to the impact of purchase for cancellation of Class A Shares, partly offset by the grant and the exercise of stock options. Please refer to notes 19, 20 and 21 of our audited consolidated financial statements for additional information.

FISCAL 2020 RESULTS — 27

MANAGEMENT’S DISCUSSION AND ANALYSIS

3.8.3. Net Earnings and Earnings per Share Excluding Specific Items

Below is a table showing the year-over-year comparison excluding specific items namely, acquisition-related and integration costs and restructuring costs.

Change
For the years endedSeptember 30, 2020 **** 2019 **** % ****
In thousands of CAD except for percentages and shares data
Earnings before income taxes 1,516,267 **** 1,676,948 (160,681 (9.6% )
Add back:
Acquisition-related and integration costs 76,794 **** 77,417 (623 (0.8% )
Restructuring costs 155,411 **** — 155,411 — ****
Earnings before income taxes excluding specific items 1,748,472 **** 1,754,365 (5,893 (0.3% )
Margin 14.4% **** 14.5%
Income tax expense 398,405 **** 413,741 (15,336 (3.7% )
Effective tax rate 26.3% **** 24.7%
Add back:
Tax deduction on acquisition-related and integration costs 14,717 **** 16,307 (1,590 (9.8% )
Impact on effective tax rate (0.3% ) (0.2% )
Tax deduction on restructuring costs 35,278 **** — 35,278 — ****
Impact on effective tax rate (0.4% ) —
Tax adjustment — **** 18,451 (18,451 (100.0% )
Impact on effective tax rate — 1.1%
Income tax expense excluding specific items 448,400 **** 448,499 (99 —% ****
Effective tax rate excluding specific items 25.6% **** 25.6%
Net earnings excluding specific items 1,300,072 **** 1,305,866 (5,794 (0.4% )
Net earnings margin excluding specific items 10.7% **** 10.8%
Weighted average number of shares outstanding
Class A subordinate voting shares and Class B multiple voting shares (basic) 262,005,521 **** 272,719,309 (3.9% )
Class A subordinate voting shares and Class B multiple voting shares (diluted) 266,104,062 **** 277,785,725 (4.2% )
Earnings per share excluding specific items (in dollars)
Basic 4.96 **** 4.79 0.17 3.5% ****
Diluted 4.89 **** 4.70 0.19 4.0% ****

All values are in US Dollars.

4. Liquidity

4.1. CONSOLIDATED STATEMENTS OF CASH FLOWS

CGI’s growth is financed through a combination of cash flow from operations, drawing on our unsecured committed revolving credit facility, the issuance of long-term debt, and the issuance of equity. One of our financial priorities is to maintain an optimal level of liquidity through the active management of our assets and liabilities as well as our cash flows.

As at September 30, 2020, cash and cash equivalents were $1,708.0 million. The following table provides a summary of the generation and use of cash for the years ended September 30, 2020 and 2019.

For the yearsended September 30, 2020 **** 2019 **** Change
In thousands of CAD
Cash provided by operating activities 1,938,556 **** 1,633,919 304,637
Cash used in investing activities (572,453 ) (950,809 ) 378,356
Cash provided by (used in) financing activities 94,172 **** (629,109 ) 723,281
Effect of foreign exchange rate changes on cash and cash equivalents 33,879 **** (24,261 ) 58,140
Net increase in cash and cash equivalents 1,494,154 **** 29,740 1,464,414

4.1.1. Cash Provided by Operating Activities

For the year ended September 30, 2020, cash provided by operating activities was $1,938.6 million or 15.9% of revenue compared to $1,633.9 million or 13.5% for the same period last year.

The following table provides a summary of the generation and use of cash from operating activities:

For the yearsended September 30, 2020 **** 2019 **** Change ****
In thousands of CAD
Net earnings 1,117,862 **** 1,263,207 (145,345 )
Amortization, depreciation and impairment 565,692 **** 392,301 173,391 ****
Other adjustments^1^ 36,838 **** 34,662 2,176 ****
Cash flow from operating activities before net change innon-cash working capital items 1,720,392 **** 1,690,170 30,222 ****
Net change in non-cash working capital items:
Accounts receivable, work in progress and deferred revenue 256,986 **** 21,859 235,127 ****
Accounts payable and accrued liabilities, accrued compensation, provisions and long-term liabilities 12,193 **** (21,620 ) 33,813 ****
Other^2^ (51,015 ) (56,490 ) 5,475 ****
Net change in non-cash working capital items 218,164 **** (56,251 ) 274,415 ****
Cash provided by operating activities 1,938,556 **** 1,633,919 304,637 ****
^1^ Comprised of deferred income taxes, foreign exchange (gain) loss, loss on sale of business and share-based payment costs.<br>
--- ---
^2^ Comprised of prepaid expenses and other assets, long-term financial assets, retirement benefits obligations, derivative<br>financial instruments and income taxes.
--- ---

For the year ended September 30, 2020, the increase in our cash provided by operating activities was mostly due to higher collection of receivables and the impact of $165.3 million coming from the change in presentation of the payment of leases resulting from the adoption of IFRS 16. This was partially offset by the timing of payables.

The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.

FISCAL 2020 RESULTS — 29

MANAGEMENT’S DISCUSSION AND ANALYSIS

4.1.2. Cash Used in Investing Activities

For the year ended September 30, 2020, $572.5 million was used in investing activities while $950.8 million was used over the same periods last year.

The following table provides a summary of the use of cash from investing activities:

For the years ended September 30, 2020 **** 2019 **** Change ****
In thousands of CAD
Business acquisitions and Investment in Acando AB (266,938 ) (620,014 ) 353,076 ****
Purchase of property, plant and equipment (128,478 ) (162,061 ) 33,583 ****
Additions to contract costs (72,845 ) (60,191 ) (12,654 )
Additions to intangible assets (114,112 ) (105,976 ) (8,136 )
Net change in short-term investments and purchase of long-term investments 9,920 **** (2,567 ) 12,487 ****
Cash used in investing activities (572,453 ) (950,809 ) 378,356 ****

The decrease of $378.4 million in cash used in investing activities during the year ended September 30, 2020 was mainly due to the decrease in cash used in the prior year for the acquisition of Acando, as well as a decrease of investments in computer equipment and leasehold improvements. This was partially offset by an increase of investment in business acquisitions.

4.1.3. Cash Provided by (Used in) Financing Activities

For the year ended September 30, 2020, $94.2 million was generated from financing activities while $629.1 million was used over the same period last year.

The following table provides a summary of the generation and use of cash from financing activities:

For the years ended September 30, 2020 **** 2019 **** Change ****
In thousands of CAD
Net change in unsecured committed revolving credit facility (334,370 ) 139,575 (473,945 )
Payment of lease liabilities (175,320 ) — (175,320 )
Net change in long-term debt 1,700,671 **** 331,404 1,369,267 ****
1,190,981 **** 470,979 720,002 ****
Repayment of debt assumed from business acquisitions (28,281 ) (2,141 ) (26,140 )
Payment for remaining shares of Acando (23,123 ) — (23,123 )
Purchase of Class A subordinate voting shares held in trusts (55,287 ) (30,740 ) (24,547 )
Settlement of derivative financial instruments (3,903 ) (554 ) (3,349 )
Purchase and cancellation of Class A subordinate voting shares (1,043,517 ) (1,130,255 ) 86,738 ****
Issuance of Class A subordinate voting shares 57,302 **** 63,602 (6,300 )
Cash provided by (used in) financing activities 94,172 **** (629,109 ) 723,281 ****

For the year ended September 30, 2020, the Company received through the 2020 Term Loan an amount of $1,764.7 million (US$1,250.0 million), had a net repayment of $334.4 million under our unsecured committed revolving credit facility, made scheduled repayments of senior unsecured notes in the amount of $65.9 million. In addition, we paid $175.3 million of lease liabilities, of which $165.3 million is related to the adoption of IFRS 16, and used $28.3 million to repay debt assumed from business acquisitions.

For the year ended September 30, 2019, the Company drew $139.6 million under the unsecured committed revolving credit facility and entered into a five-year unsecured committed term loan credit facility of $670.0 million (swapped into euro currency) which was in part used for the scheduled repayments of the Senior unsecured notes in the amount of $306.8 million, used to invest in business acquisitions and in the purchase for cancellation of Class A Shares.

For the year ended September 30, 2020, the Company paid $23.1 million to acquire the remaining 3.9% of outstanding shares of Acando.

For the year ended September 30, 2020, $55.3 million was used to purchase Class A Shares in connection with the Company’s Performance Share Unit Plans (PSU Plans) compared to $30.7 million during the year ended September 30, 2019. More information concerning the PSU Plans can be found in note 20 of the audited consolidated financial statements.

For the year ended September 30, 2020, $1,043.5 million was used to pay for the purchase for cancellation of 10,605,464 Class A Shares. During the year ended September 30, 2019, $1,130.3 million was used to purchase 12,510,232 Class A Shares for cancellation.

Finally, for the year ended September 30, 2020, we received $57.3 million in proceeds from the exercise of stock options, compared to $63.6 million during the year ended September 30, 2019.

4.1.4. Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents

For the year ended September 30, 2020, the effect of foreign exchange rate changes on cash and cash equivalents had a favourable impact of $33.9 million. This amount had no effect on net earnings as it was recorded in other comprehensive income.

FISCAL 2020 RESULTS — 31

MANAGEMENT’S DISCUSSION AND ANALYSIS

4.2. CAPITAL RESOURCES

As at September 30, 2020 Available
In thousands of CAD
Cash and cash equivalents 1,707,985
Short-term investments 1,473
Long-term investments 22,612
Unsecured committed revolving credit facility^1^ 1,490,301
Total **** 3,222,371
^1^ As at September 30, 2020, letters of credit in the amount of $9.7 million were outstanding against the<br>$1.5 billion unsecured committed revolving credit facility.
--- ---

As at September 30, 2020, cash and cash equivalents and investments represented $1,732.1 million.

Cash equivalents include term deposits, all with maturities of 90 days or less. Short-term investments include money market securities, with initial maturities ranging from 91 days to one year. Long-term investments include corporate and government bonds with maturities ranging from one to five years, with a credit rating of A- or higher.

As at September 30, 2020, the aggregate amount of the capital resources available to the Company was $3,222.4 million. The long-term debt agreements contain covenants, which require us to maintain certain financial ratios. As at September 30, 2020, CGI was in compliance with these covenants.

Total debt increased by $1,255.9 million to $3,587.1 million as at September 30, 2020 compared to $2,331.2 million as at September 30, 2019. The variance was mainly due to the additional $1,764.7 million (US$1,250.0 million) received through the 2020 Term Loan, partially offset by the change in the unsecured committed revolving credit facility of $334.4 million, by a foreign exchange translation impact of $77.1 million and by scheduled repayments of the Senior unsecured notes in the amount of $65.9 million.

As at September 30, 2020, CGI was showing a positive working capital^2^ of $1,280.2 million. The Company also had $1,490.3 million available under its unsecured committed revolving credit facility and is generating a significant level of cash, which CGI’s management currently considers will allow the Company to fund its operations while maintaining adequate levels of liquidity.

The tax implications and impact related to the repatriation of cash will not materially affect the Company’s liquidity.

^2^ Working capital is defined as total current assets minus total current liabilities.

4.3. CONTRACTUAL OBLIGATIONS

We are committed under the terms of contractual obligations which have various expiration dates, primarily for the rental of premises, computer equipment used in outsourcing contracts and long-term service agreements. For the year ended September 30, 2020, the Company increased its commitments by $1,319.5 million mainly due to the increase of long-term debt.

Commitment type Total Less than 1 1 -3                years 3 -5                years More than 5
year years
In thousands of CAD
Long-term debt 3,582,216 310,726 2,137,273 1,134,210 7
Estimated interest on long-term debt 189,723 84,472 84,659 20,592
Lease liabilities 876,370 178,720 280,259 202,565 214,826
Estimated interest on lease liabilities 126,123 28,897 45,705 27,306 24,215
Long-term service agreements and other 235,781 124,776 110,790 215
Total 5,010,213 727,591 2,658,686 1,384,888 239,048

4.4. FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS

We use various financial instruments to help us manage our exposure to fluctuations of foreign currency exchange rates and interest rates. Please refer to note 3 and 32 of our audited consolidated financial statements for additional information on our financial instruments and hedging transactions.

FISCAL 2020 RESULTS — 33

MANAGEMENT’S DISCUSSION AND ANALYSIS

4.5. SELECTED MEASURES OF CAPITAL RESOURCES AND LIQUIDITY

As at September 30, 2020 **** 2019 ****
In thousands of CAD except for percentages
Reconciliation between net debt and long-term debt including the current portion:
Net debt 2,777,928 **** 2,117,229
Add back:
Cash and cash equivalents 1,707,985 **** 213,831
Short-term investments 1,473 **** 9,889
Long-term investments 22,612 **** 24,596
Fair value of foreign currency derivative financial instruments related to debt (46,533 ) (34,338 )
Long-term debt (including the current portion) and lease liabilities^1^ 4,463,465 **** 2,331,207
Net debt to capitalization ratio 23.6 % 22.9 %
Return on equity 16.0 % 18.5 %
Return on invested capital 12.1 % 15.1 %
Days sales outstanding 47 **** 50
^1^ As at September 30, 2020, long-term debt including the current portion was $3,587.1 million and lease<br>liabilities were $876.4 million.
--- ---

We use the net debt to capitalization ratio as an indication of our financial leverage in order to realize our Build and Buy strategy (please refer to section 1.2 of the present document for additional information on our Build and Buy strategy). The net debt to capitalization ratio increased to 23.6% in Fiscal 2020. When excluding the impact of the adoption of IFRS 16, the net debt to capitalization ratio would have been 17.6% in Fiscal 2020 down from 22.9% in Fiscal 2019, mostly due to higher capitalization mainly as a result of the 2020 Term Loan and a higher cash generation.

ROE is a measure of the return we are generating for our shareholders. ROE decreased to 16.0% in Fiscal 2020 from 18.5% in Fiscal 2019. When excluding the impact of IFRS 16, our ROE would have been 15.9% in Fiscal 2020. The decrease was mainly due to lower net earnings over the last four quarters.

ROIC is a measure of the Company’s efficiency in allocating the capital under our control to profitable investments. The return on invested capital ratio decreased to 12.1% in Fiscal 2020 from 15.1% in Fiscal 2019. When excluding the impact of IFRS 16, the ROIC ratio would have been 12.7%. The decrease in ROIC was mainly the result of lower net earnings excluding net finance costs after-tax over the last four quarters.

DSO decreased to 47 days at the end of Fiscal 2020 when compared to 50 days in Fiscal 2019. In calculating the DSO, we subtract the deferred revenue balance from trade accounts receivable and work in progress; for that reason, the timing of payments received from managed IT and business process services clients in advance of the work to be performed and the timing of payments related to project milestones can affect the DSO. The Company maintains a target DSO of 45 days.

4.6. GUARANTEES

In the normal course of operations, we may enter into agreements to provide financial or performance assurances to third parties on the sale of assets, business divestitures and guarantees on government and commercial contracts.

In connection with sales of assets and business divestitures, the Company may be required to pay counterparties for costs and losses incurred as a result of breaches in our contractual obligations, representations and warranties, intellectual property right infringement and litigation against counterparties, among others. While some of the agreements specify a maximum potential exposure, others do not specify a maximum amount or limited period. It is not possible to reasonably estimate the maximum amount that may have to be paid under such guarantees. The amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. The Company does not expect to incur any potential payment in connection with these guarantees that could have a materially adverse effect on its audited consolidated financial statements.

In the normal course of business, we may provide certain clients, principally governmental entities, with bid and performance bonds. In general, we would only be liable for the amount of the bid bonds if we refuse to perform the project once we are

awarded the bid. We would also be liable for the performance bonds in the event of a default in the performance of our obligations. As at September 30, 2020, we had committed a total of $32.1 million for these bonds. To the best of our knowledge, we complied with our performance obligations under all service contracts for which there was a performance or bid bond, and the ultimate liability, if any, incurred in connection with these guarantees would not have a material adverse effect on our consolidated results of operations or financial condition.

4.7. CAPABILITY TO DELIVER RESULTS

Despite the impact of COVID-19, as outlined in section 2.6 of the present document, CGI’s management believes that the Company has sufficient capital resources to support ongoing business operations and execute the Build and Buy growth strategy. Our principal and most accretive uses of cash are: to invest in our business (procuring new large managed IT and business process services contracts and developing business and IP solutions); to pursue accretive acquisitions; and to purchase for cancellation Class A Shares and pay down debt. In terms of financing, we are well positioned to continue executing our four-pillar growth strategy in Fiscal 2021.

To successfully implement the Company’s strategy, CGI relies on a strong leadership team, supported by highly knowledgeable members with relevant relationships and significant experience in both IT and our targeted industries. CGI fosters leadership development through the CGI Leadership Institute ensuring continuity and knowledge transfer across the organization. For key positions, a detailed succession plan is established and revised frequently.

As a Company built on human capital, our professionals and their knowledge are critical to delivering quality service to our clients. Our human resources program allows us to attract and retain the best talent as it provides competitive compensation and benefits, a favourable working environment, training programs and career development opportunities. Employee satisfaction is monitored annually through a Company-wide survey. Also, a majority of our professionals are owners of CGI through our Share Purchase Plan which, along with the Profit Participation Plan, allow them to share Company successes, further aligning stakeholders interests.

In addition to capital resources and talent, CGI has established the Management Foundation encompassing governance policies, organizational model and sophisticated management frameworks for its business units and corporate processes. This robust governance model provides a common business language for managing all operations consistently across the globe, driving a focus on continuous improvement. CGI’s operations maintain appropriate certifications in accordance with service requirements such as the ISO and the Capability Maturity Model Integration (CMMI) certification programs.

FISCAL 2020 RESULTS — 35

MANAGEMENT’S DISCUSSION AND ANALYSIS

5. Fourth Quarter Result (Unaudited)

5.1. BOOKINGS AND BOOK-TO-BILL RATIO

Bookings for the quarter ended September 30, 2020 were $3.5 billion representing a book-to-bill ratio of 118.8%. The breakdown of the new bookings signed during the quarter is as follows:

Contract Type Service Type Segment Vertical Market
A. Extensions, renewals and add-ons 78 % A. Managed IT and Business Process Services 57 % A. U.S. Federal 26 % A. Government 42 %
B. New business 22 % B. U.S. Commercial and State Government 14 % B. Financial Services 26 %
B. System integration and consulting 43 % C. U.K. and Australia 14 % C. MRD 16 %
D. Canada 13 % D. Health 8 %
E. Western and Southern Europe 11 % E. Communication & Utilities 8 %
F. Central and Eastern Europe 9 %
G. Scandinavia 7 %
H. Finland, Poland and Baltics 6 %

The following table provides a summary of the bookings and book-to-bill ratio by segment:

In thousands of CAD except for percentages Bookings for the threemonths ended<br><br><br>September 30, 2020 Bookings for the yearended September 30,<br><br><br>2020 Book-to-bill ratio for<br><br><br>the year endedSeptember 30, 2020
Total CGI **** 3,474,148 **** 11,847,704 **** 97.4%
Western and Southern Europe **** 391,598 **** 1,860,234 **** 97.2%
U.S. Commercial and State Government **** 495,585 **** 2,027,383 **** 106.3%
Canada **** 458,330 **** 1,443,508 **** 78.9%
U.S. Federal **** 879,881 **** 1,747,090 **** 100.7%
U.K. and Australia **** 491,920 **** 1,308,393 **** 83.4%
Central and Eastern Europe **** 321,158 **** 1,341,408 **** 107.5%
Scandinavia **** 224,027 **** 1,290,579 **** 111.5%
Finland, Poland and Baltics **** 211,649 **** 829,109 **** 103.1%

5.2. FOREIGN EXCHANGE

The Company operates globally and is exposed to changes in foreign currency rates. Accordingly, as prescribed by IFRS, we value assets, liabilities and transactions that are measured in foreign currencies using various exchange rates. We report all dollar amounts in Canadian dollars.

Closing foreign exchangerates

As at September 30, 2020 2019 Change ****
U.S. dollar 1.3325 1.3246 0.6% ****
Euro 1.5622 1.4446 8.1% ****
Indian rupee 0.0181 0.0188 (3.7% )
British pound 1.7216 1.6302 5.6% ****
Swedish krona 0.1487 0.1347 10.4% ****

Average foreign exchangerates

For the three months endedSeptember 30, 2020 2019 Change ****
U.S. dollar 1.3327 1.3205 0.9% ****
Euro 1.5579 1.4689 6.1% ****
Indian rupee 0.0179 0.0188 (4.8% )
British pound 1.7215 1.6285 5.7% ****
Swedish krona 0.1503 0.1378 9.1% ****

FISCAL 2020 RESULTS — 37

MANAGEMENT’S DISCUSSION AND ANALYSIS

5.3. REVENUE DISTRIBUTION

The following charts provide additional information regarding our revenue mix for the quarter ended September 30, 2020:

Service Type Client Geography Vertical Market
A. Managed IT and Business Process Services 56% A. U.S. 31% A. Government 35%
B. System integration and consulting 44% B. Canada 15% B. MRD 22%
C. U.K. 13% C. Financial services 22%
D. France 13% D. Communications & utilities 14%
E. Germany 6% E. Health 7%
E. Sweden 6%
G. Finland 6%
H. Rest of the world 10%

5.3.1. Client Concentration

IFRS guidance on segment disclosures defines a single customer as a group of entities that are known to the reporting entity to be under common control. As a consequence, our work for the U.S. federal government including its various agencies represented 14.5% of our revenue for Q4 2020 as compared to 13.7% for Q4 2019.

5.4. REVENUE BY SEGMENT

The following table provides a summary of the year-over-year changes in our revenue, in total and by segment, separately showing the impacts of foreign currency exchange rate variations between the Q4 2020 and Q4 2019 periods. The Q4 2019 revenue by segment was recorded reflecting the actual average foreign exchange rates for that period. The foreign exchange impact is the difference between the current period’s actual results and the current period’s results converted with the prior year’s average foreign exchange rates.

Change ****
For the three months endedSeptember 30, 2020 **** 2019 % ****
In thousands of CAD except for percentages
Total CGI revenue 2,925,560 **** 2,959,230 (33,670 (1.1% )
Variation prior to foreign currency impact (4.5% )
Foreign currency impact 3.4% ****
Variation over previous period (1.1% )
Western and Southern Europe
Revenue prior to foreign currency impact 407,659 **** 475,297 (67,638 (14.2% )
Foreign currency impact 25,405 ****
Western and Southern Europe revenue 433,064 **** 475,297 (42,233 (8.9% )
U.S. Commercial and State Government
Revenue prior to foreign currency impact 456,549 **** 447,527 9,022 2.0% ****
Foreign currency impact 4,822 ****
U.S. Commercial and State Government revenue 461,371 **** 447,527 13,844 3.1% ****
Canada
Revenue prior to foreign currency impact 396,243 **** 430,572 (34,329 (8.0% )
Foreign currency impact 512 ****
Canada revenue 396,755 **** 430,572 (33,817 (7.9% )
U.S. Federal
Revenue prior to foreign currency impact 427,140 **** 416,713 10,427 2.5% ****
Foreign currency impact 4,236 ****
U.S. Federal revenue 431,376 **** 416,713 14,663 3.5% ****
U.K. and Australia
Revenue prior to foreign currency impact 328,405 **** 337,964 (9,559 (2.8% )
Foreign currency impact 19,068 ****
U.K. and Australia revenue 347,473 **** 337,964 9,509 2.8% ****
Central and Eastern Europe
Revenue prior to foreign currency impact 289,263 **** 293,196 (3,933 (1.3% )
Foreign currency impact 17,577 ****
Central and Eastern Europe revenue 306,840 **** 293,196 13,644 4.7% ****
Scandinavia
Revenue prior to foreign currency impact 218,593 **** 260,367 (41,774 (16.0% )
Foreign currency impact 15,597 ****
Scandinavia revenue 234,190 **** 260,367 (26,177 (10.1% )
Finland, Poland and Baltics
Revenue prior to foreign currency impact 167,945 **** 176,327 (8,382 (4.8% )
Foreign currency impact 10,467 ****
Finland, Poland & Baltics revenue 178,412 **** 176,327 2,085 1.2% ****

All values are in US Dollars.

FISCAL 2020 RESULTS — 39

MANAGEMENT’S DISCUSSION AND ANALYSIS

Change
For the three months endedSeptember 30, 2020 **** 2019 **** %
In thousands of CAD except for percentages
Asia Pacific
Revenue prior to foreign currency impact 177,440 **** 156,388 21,052 13.5%
Foreign currency impact (5,855 )
Asia Pacific revenue 171,585 **** 156,388 15,197 9.7%
Eliminations (35,506 ) (35,121 ) (385 1.1%

All values are in US Dollars.

We ended the fourth quarter of Fiscal 2020 with revenue of $2,925.6 million, a decrease of $33.7 million, or 1.1% when compared to the same period of Fiscal 2019. On a constant currency basis, revenue decreased by $132.9 million or 4.5%. Foreign currency rate fluctuations favourably impacted our revenue by $99.2 million or 3.4%. The change in revenue was mainly due to the slowdown of activities, primarily in the MRD, financial services and communications & utilities vertical markets, mostly as a result of COVID-19. This was partly offset by recent business acquisitions.

5.4.1. Western and Southern Europe

Revenue in our Western and Southern Europe segment was $433.1 million in Q4 2020, a decrease of $42.2 million or 8.9% over the same period last year. On a constant currency basis, revenue decreased by $67.6 million or 14.2%. The change in revenue was due to the slowdown of activities mainly within the financial services and MRD vertical markets, primarily as a result of COVID-19. This was partially offset by the Meti acquisition.

On a client geographic basis, the top two Western and Southern Europe vertical markets were MRD and financial services, generating combined revenues of approximately $266 million for the three months ended September 30, 2020.

5.4.2. U.S. Commercial and State Government

Revenue from our U.S. Commercial and State Government segment was $461.4 million in Q4 2020, an increase of $13.8 million or 3.1% compared to the same period last year. On a constant currency basis, revenue increased by $9.0 million or 2.0%. The increase was mainly driven by growth within the financial services vertical market, including higher IP sales and service revenue. This was partly offset by an adjustment due to a reevaluation of cost to complete on a project and lower work volume within the communications & utilities vertical market.

On a client geographic basis, the top two U.S. Commercial and State Government vertical markets were financial services and government, generating combined revenues of approximately $279 million for the three months ended September 30, 2020.

5.4.3. Canada

Revenue in our Canada segment was $396.8 million in Q4 2020, a decrease of $33.8 million or 7.9% over the same period last year. On a constant currency basis, revenue decreased by $34.3 million or 8.0%. The change was mainly due to the impact of COVID-19, lower work volumes and license sales, all within the financial services vertical market, and a higher proportion of client projects transferred to our global delivery centers of excellence in Asia-Pacific.

On a client geographic basis, the top two Canada vertical markets were financial services and communications & utilities, generating combined revenues of approximately $281 million for the three months ended September 30, 2020.

5.4.4. U.S. Federal

Revenue in our U.S. Federal segment was $431.4 million in Q4 2020, an increase of $14.7 million or 3.5% over the same period last year. On a constant currency basis, revenue increased by $10.4 million or 2.5%. The increase was driven by IP solutions, application support and cybersecurity services as well as recent business acquisitions. This was partly offset by lower transaction volumes related to our IP business process services, mainly due to the impact of the COVID-19 and certain adjustments on client contracts.

For the three months ended September 30, 2020, 84% of revenues within the U.S. Federal segment were federal civilian based.

5.4.5. U.K. and Australia

Revenue in our U.K. and Australia segment was $347.5 million in Q4 2020, an increase of $9.5 million or 2.8% over the same period last year. On a constant currency basis, revenue decreased by $9.6 million or 2.8%. The change was mainly due to the non-renewal of certain infrastructure contracts and the successful completion of the build phase of a large project within the communications and utilities vertical market. This was partly offset by the SCISYS acquisition.

On a client geographic basis, the top two U.K. and Australia vertical markets were government and communications & utilities, generating combined revenues of approximately $285 million for the three months ended September 30, 2020.

5.4.6. Central and Eastern Europe

Revenue in our Central and Eastern Europe segment was $306.8 million in Q4 2020, an increase of $13.6 million or 4.7% over the same period last year. On a constant currency basis, revenue decreased by $3.9 million or 1.3%. The change in revenue was mainly due to the impact of COVID-19, mainly within the MRD vertical market, and a higher proportion of client projects transferred to our global delivery centers of excellence in Asia-Pacific. This was partially offset by the SCISYS acquisition.

On a client geographic basis, the top two Central and Eastern Europe vertical markets were MRD and government, generating combined revenues of approximately $202 million for the three months ended September 30, 2020.

5.4.7. Scandinavia

Revenue in our Scandinavia segment was $234.2 million, a decrease of $26.2 million or 10.1% over the same period last year. On a constant currency basis, revenue decreased by $41.8 million or 16.0%. The decrease was mainly the result of a slowdown of activities primarely within the MRD vertical market related to the impact of COVID-19, as well as the non-renewal of infrastructure contracts.

On a client geographic basis, the top two Scandinavia vertical markets were MRD and government, generating combined revenues of approximately $180 million for the three months ended September 30, 2020.

5.4.8. Finland, Poland and Baltics

Revenue in our Finland, Poland and Baltics segment was $178.4 million, an increase of $2.1 million or 1.2% over the same period last year. On a constant currency basis, revenue decreased by $8.4 million or 4.8% mainly due to lower work volumes in the government vertical market, projects completed in the financial services vertical market and the impact of COVID-19. On a client geographic basis, the top two Finland, Poland and Baltics vertical markets were government and financial services, generating combined revenues of approximately $109 million for the three months ended September 30, 2020.

5.4.9.Asia Pacific

Revenue in our Asia Pacific segment was $171.6 million, an increase of $15.2 million or 9.7% over the same period last year. On a constant currency basis, revenue increased by $21.1 million or 13.5%. The increase was mainly driven by the continued demand for our offshore delivery centers, predominantly within the financial services and communications & utilities vertical markets.

FISCAL 2020 RESULTS – 41

MANAGEMENT’S DISCUSSION AND ANALYSIS

5.5. ADJUSTED EBIT BY SEGMENT

Change
For the three months ended September 30, 2020 2019 %
In thousands of CAD except for percentages
Western and Southern Europe **** 59,742 74,832 ) **** (20.2% )
As a percentage of segment revenue **** 13.8% 15.7%
U.S. Commercial and State Government **** 66,474 68,161 ) **** (2.5% )
As a percentage of segment revenue **** 14.4% 15.2%
Canada **** 85,602 98,107 ) **** (12.7% )
As a percentage of segment revenue **** 21.6% 22.8%
U.S. Federal **** 58,073 59,490 ) **** (2.4% )
As a percentage of segment revenue **** 13.5% 14.3%
U.K. and Australia **** 55,749 44,230 **** **** 26.0% ****
As a percentage of segment revenue **** 16.0% 13.1%
Central and Eastern Europe **** 38,223 30,494 **** **** 25.3% ****
As a percentage of segment revenue **** 12.5% 10.4%
Scandinavia **** 7,805 11,835 ) **** (34.1% )
As a percentage of segment revenue **** 3.3% 4.5%
Finland, Poland and Baltics **** 32,931 32,072 **** **** 2.7% ****
As a percentage of segment revenue **** 18.5% 18.2%
Asia Pacific **** 52,964 38,236 **** **** 38.5% ****
As a percentage of segment revenue **** 30.9% 24.4%
Adjusted EBIT **** 457,563 457,457 **** **** —% ****
Adjusted EBITmargin **** 15.6% 15.5%

All values are in US Dollars.

Adjusted EBIT for the quarter was $457.6 million a decrease of $0.1 million from Q4 2019. The adjusted EBIT margin increased to 15.6% from 15.5% for the same period last year, mainly due to lower discretionary expenses due to COVID-19, synergies achieved through the optimization and modernization of our infrastructure business, savings generated from the Restructuring plan and the $8.5 million impact of adoption of IFRS 16. This was partly offset by adjustments on client contracts.

5.5.1. Western and Southern Europe

Adjusted EBIT in the Western and Southern Europe segment was $59.7 million in Q4 2020, a decrease of $15.1 million when compared to Q4 2019. Adjusted EBIT margin decreased to 13.8% from 15.7% in Q4 2019, primarily due to the slowdown of activities identified in the revenue section. This was partially offset by lower performance based compensation.

5.5.2. U.S. Commercial and State Government

Adjusted EBIT in the U.S. Commercial and State Government segment was $66.5 million in Q4 2020, a decrease of $1.7 million when compared to Q4 2019. Adjusted EBIT margin decreased to 14.4% from 15.2% in Q4 2019. The change in adjusted EBIT margin was mainly due to an adjustment due to a reevaluation of cost to complete on a project and a litigation provision. This was in part offset by the impact of higher IP sales and solution revenue and lower discretionary expenses and fringe benefits due to COVID-19.

5.5.3. Canada

Adjusted EBIT in the Canada segment was $85.6 million in Q4 2020, a decrease of $12.5 million when compared to Q4 2019. Adjusted EBIT margin decreased to 21.6% from 22.8% in Q4 2019. The change in adjusted EBIT margin was mainly due to the impact of lower IP license sales and service revenue within the financial services vertical market and the reevaluations of costs to complete on projects. This was partly offset by synergies achieved through the optimization and modernization of our infrastructure business and the impact of the adoption of IFRS 16.

5.5.4. U.S. Federal

Adjusted EBIT in the U.S. Federal segment was $58.1 million in Q4 2020, a decrease of $1.4 million when compared to Q4 2019. Adjusted EBIT margin decreased to 13.5% from 14.3% in Q4 2019. The change in adjusted EBIT margin was primarily due to lower profitability and adjustments on isolated client contracts in the defense sector and lower business process services volumes, mostly related to COVID-19.

5.5.5. U.K. and Australia

Adjusted EBIT in the U.K. and Australia segment was $55.7 million in Q4 2020, an increase of $11.5 million when compared to Q4 2019. Adjusted EBIT margin increased to 16.0% from 13.1% in Q4 2019. The increase in adjusted EBIT margin was mainly due to the favourable impact of a renegotiation on a client contract, lower discretionary expenses due to COVID-19 and the impact of the adoption of IFRS 16.

5.5.6. Central and Eastern Europe

Adjusted EBIT in the Central and Eastern Europe segment was $38.2 million in Q4 2020, an increase of $7.7 million when compared to Q4 2019. Adjusted EBIT margin increased to 12.5% from 10.4% in Q4 2019 due to the benefits of synergies achieved through the integration of the prior year’s business acquisitions and lower performance based compensation. This was in part offset by the slowdown of activities in the MRD vertical market, mostly related to COVID-19.

5.5.7. Scandinavia

Adjusted EBIT in the Scandinavia segment was $7.8 million in Q4 2020, a decrease of $4.0 million when compared to Q4 2019. Adjusted EBIT margin decreased to 3.3% from 4.5% in Q4 2019. The change in adjusted EBIT margin was mainly driven by a slowdown of activities, mostly related to COVID-19, in part offset by the savings generated from the Restructuring Plan (see section 3.7.2. of the present document).

5.5.8. Finland, Poland and Baltics

Adjusted EBIT in our Finland, Poland and Baltics segment was $32.9 million, an increase of $0.9 million, when compared to the same period last year. Adjusted EBIT margin increased to 18.5% from 18.2% mainly due to lower discretionary expenses and the temporary payroll tax relief, both due to COVID-19. This was mainly offset by the impact of lower work volumes in part due to COVID-19 and the prior year adjustments in performance based compensation accruals.

5.5.9.Asia Pacific

Adjusted EBIT in the Asia Pacific segment was $53.0 million in Q4 2020, an increase of $14.7 million when compared to Q4 2019, while the adjusted EBIT margin increased to 30.9% from 24.4% Q4 2019. The increase in adjusted EBIT margin was mostly due to automation and other productivity improvements, predominantly within the financial services and communications & utilities vertical markets, cost reduction in transportation and facilities due to the COVID-19 shutdown, the impact of the adoption of IFRS 16 and the favourable impact of our currency forward contracts.

FISCAL 2020 RESULTS – 43

MANAGEMENT’S DISCUSSION AND ANALYSIS

5.6. NET EARNINGS AND EARNINGS PER SHARE

The following table sets out the information supporting the earnings per share calculations:

Change
For the three months ended September 30, 2020 2019 %
In thousands of CAD except for percentage and shares data
Adjusted EBIT **** 457,563 457,457 **** **** 0.0% ****
Minus the following items:
Acquisition-related and integration costs **** 5,302 27,291 ) **** (80.6% )
Restructuring costs **** 84,255 — **** **** — ****
Net finance costs **** 30,424 17,824 **** **** 70.7% ****
Earnings before income taxes **** 337,582 412,342 ) **** (18.1% )
Income tax expense **** 85,668 88,253 ) **** (2.9% )
Effective tax rate **** 25.4% 21.4%
Net earnings **** 251,914 324,089 ) **** (22.3% )
Margin **** 8.6% 11.0%
Weighted average number of shares
Class A subordinate voting shares and Class B multiple voting shares (basic) **** 258,210,169 268,135,727 **** (3.7% )
Class A subordinate voting shares and Class B multiple voting shares (diluted) **** 261,790,231 273,090,564 **** (4.1% )
Earnings per share (in dollars)
Basic EPS **** 0.98 1.21 ) **** (19.0% )
Diluted EPS **** 0.96 1.19 ) **** (19.3% )

All values are in US Dollars.

For Q4 2020, the income tax expense was $85.7 million compared to $88.3 million for the same period last year, while our effective tax rate increased to 25.4% from 21.4%. During the quarter ended September 30, 2019, the Company settled with the German tax authorities and booked $115.5 million of additional corporate tax losses and recorded a $18.5 million income tax recovery. When excluding that tax adjustment and tax effects from acquisition-related and integration costs and restructuring costs, the effective tax rate would have been 25.5% in Q4 2020, compared to 25.1% in Q4 2019. The increase in the effective tax rate was mainly attributable to less non-taxable R&D tax credits in the U.S. partly offset by a different geographical profitability mix mainly within our France and U.K. operations.

During the quarter, the Company did not purchase any Class A subordinate voting Shares for cancellation while 359,588 stock options were exercised.

5.6.1. Net Earnings and Earnings per Share Excluding Specific Items

Below is a table showing the year-over-year comparison excluding specific items, namely acquisition-related and integration costs as well as restructuring costs :

Change
For the three months ended September 30, 2020 2019 %
In thousands of CAD except for percentage and shares data
Earnings before income taxes **** 337,582 412,342 ) **** (18.1% )
Add back:
Acquisition-related and integration costs **** 5,302 27,291 ) **** (80.6% )
Restructuring costs **** 84,255 — **** **** — ****
Earnings before income taxes excluding specific items **** 427,139 439,633 ) **** (2.8% )
Income tax expense **** 85,668 88,253 ) **** (2.9% )
Effective tax rate 25.4% 21.4%
Add back:
Tax deduction on acquisition-related and integration costs **** 1,210 3,467 ) **** (65.1% )
Impact on effective tax rate — (0.5% )
Tax deduction on restructuring costs **** 21,871 — **** **** — ****
Impact on effective tax rate 0.1% —
Tax adjustment **** — 18,451
Impact on effective tax rate — 4.2%
Income tax expense excluding specific items **** 108,749 110,171 ) **** (1.3% )
Effective tax rate excluding specificitems **** 25.5% 25.1%
Net earnings excluding specific items **** 318,390 329,462 ) **** (3.4% )
Net earnings excluding specific itemsmargin **** 10.9% 11.1%
Weighted average number of shares outstanding
Class A subordinate voting shares and Class B multiple voting shares (basic) **** 258,210,169 268,135,727 **** (3.7% )
Class A subordinate voting shares and Class B multiple voting shares (diluted) **** 261,790,231 273,090,564 **** (4.1% )
Earnings per share excluding specific items (in dollars)
Basic EPS **** 1.23 1.23 **** **** — ****
Diluted EPS **** 1.22 1.21 **** **** 0.8% ****

All values are in US Dollars.

FISCAL 2020 RESULTS – 45

MANAGEMENT’S DISCUSSION AND ANALYSIS

5.7. CONSOLIDATED STATEMENTS OF CASH FLOWS

As at September 30, 2020, cash and cash equivalents were $1,708.0 million. The following table provides a summary of the generation and use of cash and cash equivalents for the quarters ended September 30, 2020 and 2019.

For the three months ended September 30, 2020 2019 Change
In thousands of CAD
Cash provided by operating activities **** 492,000 **** 405,214 **** 86,786
Cash used in investing activities **** (67,996 ) (94,730 ) **** 26,734
Cash used in financing activities **** (90,724 ) (307,835 ) **** 217,111
Effect of foreign exchange rate changes on cash and cash equivalents **** 9,426 **** (13,969 ) **** 23,395
Net increase (decrease) incash and cash equivalents **** 342,706 **** (11,320 ) **** 354,026

5.7.1. Cash Provided by Operating Activities

For Q4 2020, cash provided by operating activities was $492.0 million compared to $405.2 million in Q4 2019, or 16.8% of revenue compared to 13.7% last year.

The following table provides a summary of the generation and use of cash from operating activities.

For the three months ended September 30, 2020 2019 Change
In thousands of CAD
Net earnings **** 251,914 **** 324,089 **** (72,175 )
Amortization, depreciation and impairment **** 152,459 **** 97,155 **** 55,304 ****
Other adjustments ^1^ **** 22,957 **** 6,971 **** 15,986 ****
Cash flow from operating activities before net change in non-cashworking capital items **** 427,330 **** 428,215 **** (885 )
Net change in non-cash working capital items:
Accounts receivable, work in progress and deferred revenue **** 151,583 **** 74,308 **** 77,275 ****
Accounts payable and accrued liabilities, accrued compensation, provisions and long-term liabilities **** (14,054 ) (63,567 ) **** 49,513 ****
Other ^2^ **** (72,859 ) (33,742 ) **** (39,117 )
Net change in non-cash working capital items **** 64,670 **** (23,001 ) **** 87,671 ****
Cash provided by operatingactivities **** 492,000 **** 405,214 **** 86,786 ****
^1^ Other adjustments are comprised of deferred income taxes, foreign exchange (gain) loss, loss on sale of business and<br>share-based payment costs.
--- ---
^2^ Comprised of prepaid expenses and other assets, long-term financial assets, retirement benefits obligations, derivative<br>financial instruments and income taxes.
--- ---

For the three months ended September 30, 2020, the increase in our cash provided by operating activities was mostly due to the timing of collection of receivables and the impact of $36.4 million coming from the change in presentation of the payment of leases resulting from the adoption of IFRS 16. This was partially offset by repayments of government deferral programs and the timing of income tax payments.

The timing of our working capital inflows and outflows will always have an impact on the cash flow from operations.

5.7.2. Cash Used in Investing Activities

For Q4 2020, $68.0 million was used in investing activities while $94.7 million was used in the prior year.

The following table provides a summary of the generation and use of cash from investing activities:

For the three months ended September 30, 2020 2019 Change
In thousands of CAD
Business acquisitions **** 7,083 **** (14,876 ) **** 21,959 ****
Purchase of property, plant and equipment **** (31,513 ) (41,592 ) **** 10,079 ****
Additions to contract costs **** (19,166 ) (12,679 ) **** (6,487 )
Additions to intangible assets **** (29,410 ) (26,421 ) **** (2,989 )
Net change in short-term investments and purchase of long-term<br>investments **** 5,010 **** 838 **** 4,172 ****
Cash used in investingactivities **** (67,996 ) (94,730 ) **** 26,734 ****

The decrease of $26.7 million in cash used in investing activities during the three months ended September 30, 2020 was mainly due to the decrease in cash used for business acquisitions, as well as a decrease of investments in computer equipment. This was partially offset by an increase in cash used in contract costs.

5.7.3. Cash Used in Financing Activities

For the three months ended September 30, 2020 2019 Change
In thousands of CAD
Net change in unsecured committed revolving credit facility **** 1 **** (95,119 ) **** 95,120 ****
Payment of lease liabilities **** (39,820 ) — **** (39,820 )
Net change in long-term debt **** (57,613 ) (123,446 ) **** 65,833 ****
**** (97,432 ) (218,565 ) **** 121,133 ****
Repayment of debt assumed in a business acquisition **** (38 ) (767 ) **** 729 ****
Settlement of derivative financial instruments **** (3,903 ) 1,380 **** (5,283 )
Purchase and cancellation of Class A subordinate voting shares held in trusts **** — **** (106,143 ) **** 106,143 ****
Issuance of Class A subordinate voting shares **** 10,649 **** 16,260 **** (5,611 )
Cash used in financingactivities **** (90,724 ) (307,835 ) **** 217,111 ****

During Q4 2020, we used $57.6 million to reduce our outstanding long-term debt mainly driven by scheduled repayments on Senior unsecured notes in the amount of $65.9 million, and we paid $39.8 million of lease liabilities, of which $36.4 million were related to the adoption of IFRS 16. During Q4 2019, we used $123.4 million to reduce our outstanding long-term debt mainly driven by scheduled repayments on Senior unsecured notes in the amount of $119.2 million and we repaid $95.1 million on the Company’s unsecured committed revolving credit facility.

During Q4 2020, we did not purchase Class A Shares for cancellation under the NCIB, while for the same period last year, we used $106.1 million to purchase Class A Shares for cancellation under the NCIB.

In Q4 2020, we received $10.6 million in proceeds from the exercise of stock options, compared to $16.3 million during the same period last year.

FISCAL 2020 RESULTS – 47

MANAGEMENT’S DISCUSSION AND ANALYSIS

6. Eight Quarter Summary (Unaudited)

As at and for the three months ended, Sep. 30,2020 Jun. 30,2020 Mar. 31,2020 Dec. 31,2019 Sep. 30,2019 Jun. 30,2019 Mar. 31,2019 Dec. 31,2018
In millions of CAD unless otherwise noted
Growth
Revenue **** 2,925.6 3,052.7 3,131.1 3,054.7 2,959.2 3,119.8 3,068.3 2,963.9
Year-over-year revenue growth **** (1.1%) (2.2% ) 2.0% 3.1% 5.7% 6.1% 4.0% 5.2%
Constant currency year-over-year revenue growth **** (4.5%) (3.5% ) 3.0% 4.8% 7.7% 6.6% 4.7% 4.5%
Backlog **** 22,673 22,295 22,994 22,292 22,611 22,418 22,947 23,338
Bookings **** 3,474 2,841 2,783 2,749 3,409 2,951 3,255 3,031
Book-to-bill ratio **** 118.8% 93.1% 88.9% 90.0% 115.2% 94.6% 106.1% 102.3%
Book-to-bill ratio trailing twelve<br>months **** 97.4% 96.6% 97.0% 101.3% 104.4% 106.9% 112.9% 116.3%
Profitability^1^
Adjusted EBIT^2^ **** 457.6 448.0 483.2 474.1 457.5 474.2 454.1 439.2
Adjusted EBIT margin **** 15.6% 14.7% 15.4% 15.5% 15.5% 15.2% 14.8% 14.8%
Net earnings **** 251.9 260.9 314.8 290.2 324.1 309.4 318.3 311.5
Net earnings margin **** 8.6% 8.5% 10.1% 9.5% 11.0% 9.9% 10.4% 10.5%
Diluted EPS (in dollars) **** 0.96 1.00 1.18 1.06 1.19 1.12 1.14 1.11
Net earnings excluding specific items^2^ **** 318.4 308.4 338.4 334.9 329.5 337.2 324.5 314.7
Net earnings margin excluding specific items **** 10.9% 10.1% 10.8% 11.0% 11.1% 10.8% 10.6% 10.6%
Diluted EPS excluding specific items (in dollars)^2^ **** 1.22 1.18 1.26 1.23 1.21 1.22 1.17 1.12
Liquidity^1^
Cash provided by operating activities **** 492.0 584.8 396.5 465.3 405.2 375.2 462.0 391.5
As a % of revenue **** 16.8% 19.2% 12.7% 15.2% 13.7% 12.0% 15.1% 13.2%
Days sales outstanding **** 47 48 51 49 50 52 49 54
Capital structure^1^
Net debt **** 2,777.9 3,243.5 3,792.3 2,810.6 2,117.2 2,336.1 1,597.3 1,738.7
Net debt to capitalization ratio **** 23.6% 28.0% 34.8% 27.7% 22.9% 25.2% 17.4% 19.1%
Return on equity **** 16.0% 17.3% 18.0% 18.0% 18.5% 18.1% 17.7% 17.3%
Return on invested capital **** 12.1% 13.0% 13.9% 14.4% 15.1% 15.0% 14.9% 14.5%
Balancesheet^1^
Cash and cash equivalents, and short-term investments **** 1,709.5 1,371.1 314.0 223.2 223.7 225.2 544.0 406.1
Total assets **** 15,550.4 15,343.3 14,597.2 13,863.6 12,621.7 12,813.9 12,709.4 12,872.5
Long-term financial liabilities^3^ **** 4,030.6 4,363.5 3,889.1 2,766.3 2,236.0 2,421.3 2,007.3 2,070.9
^1^ As of the periods ending December 31, 2019, figures include the impact of the adoption of IFRS 16, while previous<br>quarters are not restated as indicated in section 7.
--- ---
^2^ Please refer to sections 3.7. and 3.8.3. of each quarter’s respective MD&A for the reconciliation of non-GAAP financial measures for the quarterly periods of 2019. For Fiscal 2019, please refer to sections 5.6. and 5.6.1. of each fiscal year’s MD&A.
--- ---
^3^ Long-term financial liabilities include the long-term portion of the debt, long-term lease liabilities and the long-term<br>derivative financial instruments.
--- ---

There are factors causing quarterly variances which may not be reflective of the Company’s future performance. There is seasonality in system integration and consulting work, and the quarterly performance of these operations is impacted by occurrences such as vacations and the number of statutory holidays in any given quarter. Managed IT and business process services contracts are affected to a lesser extent by seasonality. Also, the workflow from some clients may fluctuate from quarter to quarter based on their business cycle and the seasonality of their own operations. Further, the savings that we generate for a client on a given managed IT and business process services contract may temporarily reduce our revenue stream from this client, as these savings may not be immediately offset by additional work performed for this client.

Cash flow from operating activities could vary significantly from quarter to quarter depending on the timing of monthly payments received from large clients, cash requirements associated with large acquisitions, managed IT and business process services

contracts and projects, the timing of the reimbursements for various tax credits as well as profit sharing payments to members and the timing of restructuring cost payments.

Foreign exchange fluctuations can also contribute to quarterly variances as our percentage of operations in foreign countries evolves. The effect from these variances is primarily on our revenue and to a much lesser extent, on our margin as we benefit, as much as possible, from natural hedges.

FISCAL 2020 RESULTS – 49

MANAGEMENT’S DISCUSSION AND ANALYSIS

7. Changes in Accounting Policies

The audited consolidated financial statements for the year ended September 30, 2020 include all adjustments that CGI’s management considers necessary for the fair presentation of its financial position, results of operations, and cash flows.

ADOPTIONOF ACCOUNTING STANDARDS

The following standards have been adopted by the Company on October 1, 2019:

IFRS 16 - Leases

In January 2016, the IASB issued IFRS 16,Leases, to set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a lease agreement. The standard supersedes IAS 17, Leases, and other leases related interpretations, eliminates the lessee’s classification of leases as either operating leases or finance leases and introduces a single lessee accounting model. Lessees recognize a right-of-use asset representing its control of, and right to use, the underlying asset and a lease liability representing its obligation to make future lease payments. The Company adopted IFRS 16 using the modified retrospective method, with no restatement of comparative figures. The Company applied the new standard to contracts that were classified as leases under IAS 17 at the date of initial application. The right-of-use assets were recognized as if IFRS 16 had been applied since the commencement date for real estate leases. For all other leases, the right-of-use assets were measured at an amount equal to the lease liability adjusted by the prepaid amount and the accrued lease payment related to the lease in the balance sheet as at September 30, 2019.

The Company made use of the following practical expedients available on transition date: the definition of a lease, the use of hindsight in determining the lease term, the exclusion of initial direct costs from the measurement of the right-of-use asset at the transition date, the usage of a single incremental borrowing rate for a portfolio of leases with reasonably similar characteristics and adjusting the right-of-use assets for any onerous lease provisions as an alternative to an impairment review.

The adoption of IFRS 16 resulted in a material increase to the Company’s assets and liabilities through the recognition of right-of-use assets and lease liabilities. Please refer to note 3 of our audited consolidated financial statements for additional information.

Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform

In September 2019, the IASB has amended some of its requirements to address the uncertainty arising from the planned phasing out of interest-rate benchmarks such as interbank offered rates (IBORs). The amendments provide temporary relief from applying specific hedge accounting requirements affected by the interest rate benchmark reform. The amendments impact IFRS 9 Financialinstruments, IAS 39 Financial instruments: Recognition and measurement and IFRS 7 Financial instruments: Disclosures. The amendments come into effect for annual periods beginning on or after January 1, 2020 but early adoption is permitted. The Company elected to early adopt the Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform as at October 1, 2019 and applied retrospectively the reform to hedging relationship that existed on the application date and to the amount accumulated in the cash flow hedge reserve at that date.

The Company has a debt expiring in December 2023 with a principal amount of US$500.0 million bearing interest based on the 1 month USD LIBOR rate. The debt has a carrying value of $666.3 million as at September 30, 2020. The Company has entered into cross-currency interest rate swaps with aggregate notional amounts of US$500.0 million maturing on the same date as the debt (the hedging instruments) on which it receives interest based on the same 1 month USD LIBOR rate. The cross-currency interest rate swaps were designated as cash flow hedge for the debt.

During the year ended September 30, 2020, the Company entered into the 2020 Term Loan for a total principal amount of US $1,250.0 million, please refer to note 32 of our audited consolidated financial statements for additional information. The 2020 Term Loan expires in March 2022, bears interest based on the 1 month USD LIBOR rate and has a carrying value of $1,665.6 million as at September 30, 2020.

For its hedges relationship, the Company assumes that the LIBOR interest rates used for the settlements on the debts and the swaps will continue to be available beyond the planned phase out date at the end of December 2021.

FUTURE ACCOUNTING STANDARD CHANGE

The following standards have been issued but are not yet effective as of September 30, 2020.

LIBOR reform with amendments to IFRS 9, IAS 29, IFRS 7 and IFRS 16

In August 2020, the IASB issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures and IFRS 16 Leases. The amendments complement those issued in 2019 and focus on the effects on financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate as a result of the reform. The standard will be effective on October 1, 2021 for the Company. The Company is currently evaluating the impact of this standard on its financial statements.

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8. Critical Accounting Estimates

The Company’s significant accounting policies are described in note 3 of the audited consolidated financial statements year ended September 30, 2020. Certain of these accounting policies, listed below, require management to make accounting estimates and judgements that affect the reported amounts of assets, liabilities and equity and the accompanying disclosures at the date of the audited consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. These accounting estimates are considered critical because they require management to make subjective and/or complex judgements that are inherently uncertain and because they could have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

The uncertainties around the COVID-19 pandemic required the use of judgements and estimates which resulted in no material impact, outside of restructuring costs, for the period ended September 30, 2020. The continued impact of COVID-19 could generate, in future reporting periods, a significant risk of material adjustments to the following items listed below.

Areas impacted by estimates Consolidatedbalance<br><br><br>sheets Consolidated statements of earnings
Revenue Cost ofservices,selling andadministrative Amortizationanddepreciation Net financeCosts Income<br><br><br>taxes
Revenue recognition^1^ ✓ ✓ ✓
Goodwill impairment ✓ ✓
Right-of-use assets ✓ ✓ ✓
Business combinations ✓ ✓ ✓ ✓
Income taxes ✓ ✓
Litigation and claims ✓ ✓ ✓
^1^ Affects the balance sheet through accounts receivable, work in progress and deferred revenue.
--- ---

Revenue recognition

Relative selling price

If an arrangement involves the provision of multiple performance obligations, the total arrangement value is allocated to each performance obligations based on its relative stand-alone selling price. At least on a yearly basis, the Company reviews its best estimate of the stand-alone selling price which is established by using a reasonable range of prices for the various services and solutions offered by the Company based on local market information available. Information used in determining the range is mainly based on recent contracts signed and the economic environment. A change in the range could have a material impact on the allocation of total arrangement value, and therefore on the amount and timing of revenue recognition.

System integration and consulting services under fixed-fee arrangements

Revenue from systems integration and consulting services under fixed-fee arrangements is recognized using the percentage-of-completion method over time, as the Company has no alternative use for the asset created and has an enforceable right to payment for performance completed to date. The Company primarily uses labour costs or labour hours to measure the progress towards completion. Project managers monitor and reevaluate project forecasts on a monthly basis. Forecasts are reviewed to consider factors such as: changes to the scope of the contracts, delays in reaching milestones and new complexities in the project delivery. Forecasts can also be affected by market risks such as the availability and retention of qualified IT professionals and/or the ability of the subcontractors to perform their obligation within agreed upon budget and timeframes. To the extent that actual labour hours or labour costs could vary from estimates, adjustments to revenue following the review of the costs to complete on projects are reflected in the period in which the facts that give rise to the revision occur. Whenever

the total costs are forecasted to be higher than the total revenue, a provision for an onerous revenue-generating contract is recorded.

Goodwill impairment

The carrying value of goodwill is tested for impairment annually or if events or changes in circumstances indicate that the carrying value may be impaired. In order to determine if a goodwill impairment test is required, management reviews different factors on a quarterly basis such as changes in technological or market environment, changes in assumptions used to derive the weighted average cost of capital and actual financial performance compared to planned performance.

The recoverable amount of each segment has been determined based on its value in use calculation, which includes estimates about their future financial performance based on cash flows approved by management. However, factors such as our ability to continue developing and expanding services offered to address emerging business demands and technology trends, a lengthened sales cycle and our ability to hire and retain qualified IT professionals affect future cash flows, and actual results might differ from future cash flows used in the goodwill impairment test. Key assumptions used in goodwill impairment testing are presented in note 12 of the audited consolidated financial statements for the fiscal year ended September 30, 2020. Historically, the Company has not recorded an impairment charge on goodwill.

Right-of-use assets

Estimates of the lease term

The Company estimates the lease term in order to calculate the value of the lease liability at the initial date of the lease. Management uses judgement to determine the appropriate lease term based on the conditions of each lease. To determine the term, the Company considers all factors that create economic incentives to exercise an extension or a termination option. The extension or termination options are only included in the lease term if it is reasonably certain of being exercised. Management considers all facts that create incentive to exercise an extension option or not to take a termination option including leasehold improvements, significant modification of the underlying asset or a business decision.

Discount Rate for leases

The discount rate is used to determine the initial carrying amount of the lease liabilities and the right-of-use assets. The Company estimates the incremental borrowing rate for each lease or portfolio of leased assets, as most of the implicit interest rates in the leases are not readily determinable. To calculate the incremental borrowing rate, the Company considers its credit worthiness, the term of the arrangement, any collateral received and the economic environment. The incremental borrowing rates are subject to change mainly due to changes in the economic environment.

A change in the assumptions used to determine the lease term could result in a significant impact on the right-of-use assets and the lease liabilities presented in the consolidated balance sheet as well as in the depreciation of the right-of-use assets and interest expense on lease liabilities.

Business combinations

Management makes assumptions when determining the acquisition-date fair values of the identifiable tangible and intangible assets acquired and liabilities assumed which involve estimates, such as the forecasting of future cash flows, discount rates, and the useful lives of the assets acquired.

Additionally, management’s judgement is required in determining whether an intangible asset is identifiable and should be recorded separately from goodwill.

Changes in the above assumptions, estimates and judgements could affect our acquisition-date fair values and therefore could have material impacts on our audited consolidated financial statements. These changes are recorded as part of the purchase price allocation and therefore result in corresponding goodwill adjustments if they occurred during the measurement period, which does not exceed one year. All other subsequent changes are recorded in our consolidated statement of earnings.

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Income taxes

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available for their utilization. The Company considers the analysis of forecast and future tax planning strategies. Estimates of taxable profit are made based on the forecast by jurisdiction which are aligned with goodwill impairment testing assumptions, on an undiscounted basis. In addition, management considers factors such as substantively enacted tax rates, the history of the taxable profits and availability of tax strategies. Due to the uncertainty and the variability of the factors mentioned above, deferred tax assets are subject to change. Management reviews its assumptions on a quarterly basis and adjusts the deferred tax assets when appropriate.

The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes as the determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations and requires estimates and assumptions considering the existing facts and circumstances. The Company provides for potential tax liabilities based on the most likely amount of the possible outcomes. Estimates are reviewed each reporting period and updated, based on new information available, and could result in changes to the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

Litigation and claims

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The accrued litigation and legal claim provisions are based on historical experience, current trends and other assumptions that are believed to be reasonable under the circumstances. Estimates include the period in which the underlying cause of the claim occurred and the degree of probability of an unfavourable outcome. Management reviews assumptions and facts surrounding outstanding litigation and claims on a quarterly basis, involves external counsel when necessary and adjusts the provision accordingly. The Company has to be compliant with applicable law in many jurisdictions which increases the complexity of determining the adequate provision following a litigation review. Since the outcome of such litigation and claims is not predictable with assurance, those provisions are subject to change. Adjustments to litigation and claims provisions are reflected in the period when the facts that give rise to an adjustment occur.

9. Integrity of Disclosure

The Board of Directors has the responsibility under its charter and under the securities laws that govern CGI’s continuous disclosure obligations to oversee CGI’s compliance with its continuous and timely disclosure obligations, as well as the integrity of the Company’s internal controls and management information systems. The Board of Directors carries out this responsibility mainly through its Audit and Risk Management Committee.

The Audit and Risk Management Committee of CGI is composed entirely of independent directors who meet the independence and experience requirements of National Instrument 52-110 adopted by the Canadian Securities Administrators as well as those of the New York Stock Exchange (NYSE) and the U.S. Securities and Exchange Commission. The role and responsibilities of the Audit and Risk Management Committee include: (i) reviewing public disclosure documents containing audited or unaudited financial information concerning CGI; (ii) identifying and examining material financial and operating risks to which the Company is exposed, reviewing the various policies and practices of the Company that are intended to manage those risks, and reporting on a regular basis to the Board of Directors concerning risk management; (iii) reviewing and assessing the effectiveness of CGI’s accounting policies and practices concerning financial reporting; (iv) reviewing and monitoring CGI’s internal control procedures, programs and policies and assessing their adequacy and effectiveness; (v) reviewing the adequacy of CGI’s internal audit resources including the mandate and objectives of the internal auditor; (vi) recommending to the Board of Directors the appointment of the external auditor, assessing the external auditor’s independence, reviewing the terms of their engagement, conducting an annual auditor’s performance assessment, and pursuing ongoing discussions with them; (vii) reviewing related party transactions in accordance with the rules of the NYSE and other applicable laws and regulations; (viii) reviewing the audit procedures including the proposed scope of the external auditor’s examinations; and (ix) performing such other functions as are usually attributed to audit committees or as directed by the Board of Directors. In making its recommendation to the Board of Directors in relation to the annual appointment of the external auditor, the Audit and Risk Management Committee conducts an annual assessment of the external auditor’s performance following the recommendations of the Chartered Professional Accountants of Canada. The formal assessment is concluded in advance of the Annual General Meeting of Shareholders and is conducted with the assistance of key CGI personnel.

The Company has established and maintains disclosure controls and procedures designed to provide reasonable assurance that material information relating to the Company is made known to the Chief Executive Officer and the Chief Financial Officer by others, particularly during the period in which annual and interim filings are prepared, and that information required to be disclosed by the Company in its annual fillings, interim filings or other reports filed or submitted by the Company under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and the related rules. As at September 30, 2020, management evaluated, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures as defined under National Instrument 52-109 adopted by the Canadian Securities Administrators and in Rule 13 (a)-15(e) under the U.S. Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as at September 30, 2020.

The Company has also established and maintains internal control over financial reporting, as defined under National Instrument 52-109 and in Rule 13(a)-15(f) under the U.S. Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer and the Chief Financial Officer, and effected by management and other key CGI personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. However, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Management evaluated, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company’s internal control over financial reporting as at September 30, 2020, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management, under the supervision of and

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with the participation of the Chief Executive Officer as well as the Chief Financial Officer concluded that the Company’s internal control over financial reporting was effective as at September 30, 2020.

10. Risk Environment

10.1. RISKS AND UNCERTAINTIES

While we are confident about our long-term prospects, a number of risks and uncertainties could affect our ability to achieve our strategic vision and objectives for growth. The following risks and uncertainties should be considered when evaluating our potential as an investment.

10.1.1. External Risks

Economic and political risk

Economic and political conditions in the markets in which we operate have a bearing upon the results of our operations, directly and through their effect on the level of business activity of our clients. We can neither predict the impact that current economic and political conditions will have on our future revenue, nor predict changes in economic conditions or future political uncertainty. The level of activity of our clients and potential clients may be affected by an economic downturn or political uncertainty. Clients may cancel, reduce or defer existing contracts and delay entering into new engagements and may decide to undertake fewer IT systems projects resulting in limited implementation of new technology and smaller engagements. Since there may be fewer engagements, competition may increase and pricing for services may decline as competitors may decrease rates to maintain or increase their market share in our industry and this may trigger pricing adjustments related to the benchmarking obligations within our contracts. Economic downturns and political uncertainty makes it more difficult to meet business objectives and may divert management’s attention and time from operating and growing our business. Our business, results of operations and financial condition **** could be negatively affected as a result of these factors.

Other external risks

Additional external risks that could adversely impact the markets in which we operate, our industry and our business include terrorism, armed conflict, labour or social unrest, criminal activity, regional and international hostilities and international responses to these hostilities, and disease, illness or health emergencies that affect local, national or international economies. Additionally, the potential impacts of climate change are unpredictable and natural disasters, sea-level rise, floods, droughts or other weather-related events present additional external risks. Climate change risks can arise from physical risks (risks related to the physical effects of climate change) and transition risks (risks related to regulatory, legal, technological and market changes from a transition to a low-carbon economy) which may affect us or affect the financial viability of our clients leading to a reduction of demand and loss of business from such clients. Each of these risks could negatively impact our business, results of operation and financial condition.

Pandemic risks

A pandemic, including the COVID-19 pandemic, can create significant volatility and uncertainty and economic disruption. A pandemic poses the risk that our members, clients, contractors and business partners may be prevented from conducting business activities for an indefinite period, including the transmission of the disease or due to emergency measures or restrictions that may be requested or mandated by governmental authorities. The COVID-19 pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including the implementation of travel bans, self-imposed quarantine periods and social distancing. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. These emergency measures and restrictions, and future measures and restrictions taken in response to the COVID-19 pandemic or other pandemics, have and may cause, material disruptions to businesses globally and are likely to have an adverse impact on global economic conditions and consumer confidence and spending, which could materially adversely affect our business. A pandemic, including the COVID-19 pandemic, may affect the financial viability of our clients, and could cause them to exit certain business lines, or change the terms on which they are willing to purchase services and solutions. Clients may also slow down decision-making, delay planned work, seek to terminate existing agreements, not renew existing agreements or be unable to pay us in accordance

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with the terms of existing agreements. As a result of increased remote working arrangements due to a pandemic, the exposure to, and reliance on, networked systems and the internet can increase. This can lead to increased risk and frequency of cybersecurity incidents. Cybersecurity incidents can result from unintentional events or deliberate attacks by insiders or third parties, including cybercriminals, competitors, nation-states, and hacktivists. Any of these events could cause or contribute to risk and uncertainty and could adversely affect our business, results of operations and financial condition.

As a result of the COVID-19 pandemic, global equity and capital markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 pandemic are unknown at this time, as is the efficacy of the government and central bank interventions. The extent to which the COVID-19 pandemic impacts our future business, including our operations and the market for our securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the COVID-19 pandemic. It is not possible to reliably estimate the length and severity of these developments or the negative impact on our financial results, share price and financial condition in future periods. Many of the risks, uncertainties and other risk factors identified are, and will be, amplified by the COVID-19 pandemic.

10.1.2. Risks Related to our Industry

The competition for contracts

CGI operates in a global marketplace in which competition among providers of IT services is vigorous. Some of our competitors possess greater financial, marketing and sales resources, and larger geographic scope in certain parts of the world than we do, which, in turn, provides them with additional leverage in the competition for contracts. In certain niche, regional or metropolitan markets, we face smaller competitors with specialized capabilities who may be able to provide competing services with greater economic efficiency. Some of our competitors have more significant operations than we do in lower cost countries that can serve as a platform from which to provide services worldwide on terms that may be more favourable. Increased competition among IT services firms often results in corresponding pressure on prices. There can be no assurance that we will succeed in providing competitively priced services at levels of service and quality that will enable us to maintain and grow our market share.

We derive significant revenue from contracts awarded through competitive bidding processes, which limit the Company’s ability to negotiate certain contractual terms and conditions. Risks related to competitive bidding processes also involve substantial cost and managerial time and effort spent by the Company to prepare bids and proposals for contracts that may or may not be awarded to the Company, as well as expenses and delays that may arise if the Company’s competitors protest or challenge awards made to the Company pursuant to competitive bidding processes.

The availability and retention of qualified IT professionals

There is strong demand for qualified individuals in the IT industry. Hiring and retaining a sufficient amount of individuals with the desired knowledge and skill set may be difficult. Therefore, it is important that we remain able to successfully attract and retain highly qualified professionals and establish an effective succession plan. If our comprehensive programs aimed at attracting and retaining qualified and dedicated professionals do not ensure that we have staff in sufficient numbers and with the appropriate training, expertise and suitable government security clearances required to serve the needs of our clients, we may have to rely on subcontractors or transfers of staff to fill resulting gaps. If our succession plan fails to identify those with potential or to develop these key individuals, we may be unable to replace key members who retire or leave the Company and may be required to recruit and/or train new employees. This might result in lost revenue or increased costs, thereby putting pressure on our net earnings.

Theability to continue developing and expanding service offerings to address emerging business demands and technology trends

The rapid pace of change in all aspects of IT and the continually declining costs of acquiring and maintaining IT infrastructure mean that we must anticipate changes in our clients’ needs. To do so, we must adapt our services and our solutions so that

we maintain and improve our competitive advantage and remain able to provide cost effective services and solutions. The markets in which we operate are extremely competitive and there can be no assurance that we will succeed in developing and adapting our business in a timely manner nor that we will be able to penetrate new markets successfully. If we do not keep pace, our ability to retain existing clients and gain new business may be adversely affected. This may result in pressure on our revenue, net earnings and resulting cash flow from operations.

Infringing on the intellectual propertyrights of others

Despite our efforts, the steps we take to ensure that our services and offerings do not infringe on the intellectual property rights of third parties may not be adequate to prevent infringement and, as a result, claims may be asserted against us or our clients. We enter into licensing agreements for the right to use intellectual property and may otherwise offer indemnities against liability and damages arising from third-party claims of patent, copyright, trademark or trade secret infringement in respect of our own intellectual property or software or other solutions developed for our clients. In some instances, the amount of these indemnity claims could be greater than the revenue we receive from the client (see guarantees risk). Intellectual property claims or litigation could be time-consuming and costly, harm our reputation, require us to enter into additional royalty or licensing arrangements, or prevent us from providing some solutions or services. Any limitation on our ability to sell or use solutions or services that incorporate software or technologies that are the subject of a claim could cause us to lose revenue-generating opportunities or require us to incur additional expenses to modify solutions for future projects.

Protectingour intellectual property rights

Our success depends, in part, on our ability to protect our proprietary methodologies, processes, know-how, tools, techniques and other intellectual property that we use to provide our services. Although CGI takes reasonable steps (e.g. available copyright protection and, in some cases, patent protection) to protect and enforce its intellectual property rights, there is no assurance that such measures will be enforceable or adequate. The cost of enforcing our rights can be substantial and, in certain cases, may prove to be uneconomic. In addition, the laws of some countries in which we conduct business may offer only limited intellectual property rights protection. Despite our efforts, the steps taken to protect our intellectual property may not be adequate to prevent or deter infringement or other misappropriation of intellectual property, and we may not be able to detect unauthorized use of our intellectual property, or take appropriate steps to enforce our intellectual property rights.

Benchmarking provisions within certain contracts

Some of our managed IT and business process services contracts contain clauses allowing our clients to externally benchmark the pricing of agreed upon services against those offered by other providers in a peer comparison group. The uniqueness of the client environment should be factored in and, if results indicate a difference outside the agreed upon tolerance, we may be required to work with clients to reset the pricing for their services. There can be no assurance that benchmarks will produce accurate or reliable data, including pricing data. This may result in pressure on our revenue, net earnings and resulting cash flow from operations.

10.1.3.Risks Related to our Business

Risks associated with our growth strategy

CGI’s Build and Buy strategy is founded on four pillars of growth: first, organic growth through smaller contract wins, renewals and extensions in the areas of managed IT and business process services and system integration; second, the pursuit of new large long-term managed IT and business process services contracts; third, acquisitions of smaller firms or niche players; and fourth, large transformational acquisitions.

Our ability to achieve organic growth is affected by a number of factors outside of our control, including a lengthening of our sales cycle for major managed IT and business process services contracts.

Our ability to grow through niche and transformational acquisitions requires that we identify suitable acquisition targets that we correctly evaluate their potential as transactions that will meet our financial and operational objectives, and that we successfully integrate them into our business. There can, however, be no assurance that we will be able to identify suitable

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acquisition targets and consummate additional acquisitions that meet our economic thresholds, or that future acquisitions will be successfully integrated into our operations and yield the tangible accretive value that had been expected.

If we are unable to implement our Build and Buy strategy, we will likely be unable to maintain our historic or expected growth rates.

The variability of financialresults

Our ability to maintain and increase our revenue is affected not only by our success in implementing our Build and Buy strategy, but also by a number of other factors, which could cause the Company’s financial results to fluctuate. These factors include: (i) our ability to introduce and deliver new services and business solutions; (ii) our potential exposure to a lengthened sales cycle; (iii) the cyclicality of the purchases of our technology services and solutions; (iv) the nature of our client’s business (for example, if a client encounters financial difficulty (including as a result of external risks such as climate change or a pandemic), it may be forced to cancel, reduce or defer existing contracts with us); and (v) the structure of our agreements with clients (for example, some of CGI’s agreements with clients contain clauses allowing the clients to benchmark the pricing of services provided by CGI against the prices offered by other providers). These, and other factors, make it difficult to predict financial results for any given period.

Business mix variations

The proportion of revenue that we generate from shorter-term system integration and consulting projects (SI&C), versus revenue from long-term managed IT and business process services contracts, will fluctuate at times, affected by acquisitions or other transactions. An increased exposure to revenue from SI&C projects may result in greater quarterly revenue variations, as the revenue from SI&C projects does not provide long-term consistency in revenue.

The financial and operational risks inherent in worldwide operations

We manage operations in numerous countries around the world including offshore delivery centers. The scope of our operations (including our offshore delivery centers) subjects us to issues that can negatively impact our operations, including: currency fluctuations (see foreign exchange risk); the burden of complying with a wide variety of national and local laws (see regulatory risk); the differences in and uncertainties arising from local business culture and practices; and political, social and economic instability. Any or all of these risks could impact our global business operations and cause our profitability to decline.

Organizational challenges associated with our size

Our culture, standards, core values, internal controls and our policies need to be instilled across newly acquired businesses as well as maintained within our existing operations. To effectively communicate and manage these standards throughout a large global organization is both challenging and time consuming. Newly acquired businesses may be resistant to change and may remain attached to past methods, standards and practices which may compromise our business agility in pursuing opportunities. Cultural differences in various countries may also present barriers to introducing new ideas or aligning our vision and strategy with the rest of the organization. If we cannot overcome these obstacles in maintaining a strategic bond throughout the Company worldwide, we may not be able to achieve our growth and profitability objectives.

Taxes and tax credit programs

In estimating our income tax payable, management uses accounting principles to determine income tax positions that are likely to be sustained by applicable tax authorities. However, there is no assurance that our tax benefits or tax liability will not materially differ from our estimates or expectations. The tax legislation, regulation and interpretation that apply to our operations are continually changing. In addition, future tax benefits and liabilities are dependent on factors that are inherently uncertain and subject to change, including future earnings, future tax rates, and anticipated business mix in the various jurisdictions in which we operate. Moreover, our tax returns are continually subject to review by applicable tax authorities and we are subject to ongoing audits, investigations and tax proceedings in various jurisdictions. These tax authorities determine the actual amounts of taxes payable or receivable, of any future tax benefits or liabilities and of income tax expense that we may ultimately recognize. Tax authorities have disagreed and may in the future disagree with our income tax positions and are taking increasingly aggressive positions in respect of income tax positions, including with respect to intercompany transactions.

Our effective tax rate in the future could be adversely affected by challenges to intercompany transactions, changes in the value of deferred tax assets and liabilities, changes in tax law or in their interpretation or enforcement, changes in the mix of earnings in countries with differing statutory tax rates, the expiration of tax benefits and changes in accounting principles. Tax rates in the jurisdictions in which we operate may change as a result of shifting economic conditions and tax policies.

A number of countries in which the Company does business have implemented, or are considering implementing, changes in relevant tax, accounting and other laws, regulations and interpretations and the overall tax environment has made it increasingly challenging for multinational corporations to operate with certainty about taxation in many jurisdictions.

Any of the above factors could have a material adverse effect on our net income or cash flow by affecting our operations and profitability, our effective tax rate, the availability of tax credits, the cost of the services we provide, and the availability of deductions for operating losses.

Benefits obtainedfrom government sponsored programs

We benefit from government sponsored programs designed to support research and development, labour and economic growth in jurisdictions where we operate. Government programs reflect government policy and depend on various political and economic factors. There can be no assurance that such government programs will continue to be available to the Company in the future, or will not be reduced, amended or eliminated. Any future government program reductions or eliminations or other amendments to the tax credit programs could increase operating or capital expenditures incurred by the Company and have a material adverse effect on its net earnings or cash flow.

Credit risk with respect to accounts receivable and work in progress

In order to sustain our cash flow from operations, we must invoice and collect the amounts owed to us in an efficient and timely manner. Although we maintain provisions to account for anticipated shortfalls in amounts collected from clients, the provisions we take are based on management estimates and on our assessment of our clients’ creditworthiness which may prove to be inadequate in the light of actual results. To the extent that we fail to perform our services in accordance with our contracts and our clients’ reasonable expectations, and to the extent that we fail to invoice clients and to collect the amounts owed to the Company for our services correctly in a timely manner, our collections could suffer, which could materially adversely affect our revenue, net earnings and cash flow. In addition, a prolonged economic downturn may cause clients to curtail or defer projects, impair their ability to pay for services already provided, and ultimately cause them to default on existing contracts, in each case, causing a shortfall in revenue and impairing our future prospects.

Material developments regarding major commercial clients resulting from such causes as changes in financial condition, mergers or business acquisitions

Consolidation among our clients resulting from mergers and acquisitions may result in loss or reduction of business when the successor business’ IT needs are served by another service provider or are provided by the successor company’s own personnel. Growth in a client’s IT needs resulting from acquisitions or operations may mean that we no longer have a sufficient geographic scope or the critical mass to serve the client’s needs efficiently, resulting in the loss of the client’s business and impairing our future prospects. There can be no assurance that we will be able to achieve the objectives of our growth strategy in order to maintain and increase our geographic scope and critical mass in our targeted markets.

Early termination risk

If we should fail to deliver our services according to contractual agreements, some of our clients could elect to terminate contracts before their agreed expiry date, which would result in a reduction of our earnings and cash flow and may impact the value of our backlog of orders. In addition, a number of our managed IT and business process services contractual agreements have termination for convenience and change of control clauses according to which a change in the client’s intentions or a change in control of CGI could lead to a termination of these agreements. Early contract termination can also result from the exercise of a legal right or when circumstances that are beyond our control or beyond the control of our client prevent the contract from continuing. In cases of early termination, we may not be able to recover capitalized contract costs and we may not be able to eliminate ongoing costs incurred to support the contract.

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Cost estimation risks

In order to generate acceptable margins, our pricing for services is dependent on our ability to accurately estimate the costs and timing for completing projects or long-term managed IT and business process services contracts, which can be based on a client’s bid specification, sometimes in advance of the final determination of the full scope and design of the contract. In addition, a significant portion of our project-oriented contracts are performed on a fixed-price basis. Billing for fixed-price engagements is carried out in accordance with the contract terms agreed upon with our client, and revenue is recognized based on the percentage of effort incurred to date in relation to the total estimated efforts to be incurred over the duration of the respective contract. These estimates reflect our best judgement regarding the efficiencies of our methodologies and professionals as we plan to apply them to the contracts in accordance with the CGI Client Partnership Management Framework (CPMF), a framework that contains high standards of contract management to be applied throughout the Company. If we fail to apply the CPMF correctly or if we are unsuccessful in accurately estimating the time or resources required to fulfill our obligations under a contract, or if unexpected factors, including those outside of our control, arise, there may be an impact on costs or the delivery schedule which could have a material adverse effect on our expected net earnings.

Risks related to teaming agreements andsubcontracts

We derive revenue from contracts where we enter into teaming agreements with other providers. In some teaming agreements we are the prime contractor whereas in others we act as a subcontractor. In both cases, we rely on our relationships with other providers to generate business and we expect to continue to do so in the foreseeable future. Where we act as prime contractor, if we fail to maintain our relationships with other providers, we may have difficulty attracting suitable participants in our teaming agreements. Similarly, where we act as subcontractor, if our relationships are impaired, other providers might reduce the work they award to us, award that work to our competitors, or choose to offer the services directly to the client in order to compete with our business. In either case, if we fail to maintain our relationship with these providers or if our relationship with these providers is otherwise impaired, our business, prospects, financial condition and operating results could be materially adversely affected.

Our partners’ ability to deliver on their commitments

Increasingly large and complex contracts may require that we rely on third party subcontractors including software and hardware vendors to help us fulfill our commitments. Under such circumstances, our success depends on the ability of the third parties to perform their obligations within agreed upon budgets and timeframes. If our partners fail to deliver, our ability to complete the contract may be adversely affected, which could have an unfavourable impact on our profitability.

Guarantees risk

In the normal course of business, we enter into agreements that may provide for indemnification and guarantees to counterparties in transactions such as consulting and managed IT and business process services, business divestitures, lease agreements and financial obligations. These indemnification undertakings and guarantees may require us to compensate counterparties for costs and losses incurred as a result of various events, including breaches of representations and warranties, intellectual property right infringement, claims that may arise while providing services or as a result of litigation that may be suffered by counterparties.

Risk related to human resources utilization rates

In order to maintain our net earnings, it is important that we maintain the appropriate availability of professional resources in each of our geographies by having a high utilization rate while still being able to assign additional resources to new work. Maintaining an efficient utilization rate requires us to forecast our need for professional resources accurately and to manage recruitment activities, professional training programs, attrition rates and restructuring programs appropriately. To the extent that we fail to do so, or to the extent that laws and regulations restrict our ability to do so, our utilization rates may be reduced; thereby having an impact on our revenue and profitability. Conversely, we may find that we do not have sufficient resources to deploy against new business opportunities in which case our ability to grow our revenue would suffer.

Client concentration risk

We derive a significant portion of our revenue from the services we provide to various U.S. federal government departments and agencies. We expect that this will continue for the foreseeable future. There can be, however, no assurance that each such U.S. federal government department and agency will continue to utilize our services to the same extent, or at all in the future. In the event that a major U.S. federal government department or agency were to limit, reduce, or eliminate the business it awards to us, we might be unable to recover the lost revenue with work from other U.S. federal government departments or agencies or other clients, and our business, prospects, financial condition and operating results could be materially and adversely affected. Although IFRS considers a national government and its departments and agencies as a single client, our client base in the U.S. government economic sector is in fact diversified with contracts from many different departments and agencies.

Government business risk

Changes in government spending policies or budget priorities could directly affect our financial performance. Among the factors that could harm our government contracting business are: the curtailment of governments’ use of consulting and IT services firms; a significant decline in spending by governments in general, or by specific departments or agencies in particular; the adoption of new legislation and/or actions affecting companies that provide services to governments; delays in the payment of our invoices by government; and general economic and political conditions. These or other factors could cause government agencies and departments to reduce their purchases under contracts, to exercise their right to terminate contracts, to issue temporary stop work orders, or not to exercise options to renew contracts, any of which would cause us to lose future revenue. Government spending reductions or budget cutbacks at these departments or agencies could materially harm our continued performance under these contracts, or limit the awarding of additional contracts from these agencies.

Regulatory risk

Our global operations require us to be compliant with laws and regulations in many jurisdictions on matters such as: anti-corruption, trade restrictions, immigration, taxation, securities, antitrust, data privacy, labour relations, and the environment, amongst others. Complying with these diverse requirements worldwide is a challenge and consumes significant resources. The laws and regulations frequently change and some may impose conflicting requirements which may expose us to penalties for non-compliance and harm our reputation. Furthermore, in some jurisdictions, we may face the absence of effective laws and regulations to protect our intellectual property rights and there may be restrictions on the movement of cash and other assets, on the import and export of certain technologies, and on the repatriation of earnings. Any or all of these risks could impact our global business operations and cause our profitability to decline.

Our business with the U.S. federal government departments and agencies also requires that we comply with complex laws and regulations relating to government contracts. These laws and regulations relate to the integrity of the procurement process, impose disclosure requirements, and address national security concerns, among other matters. For instance, we are routinely subject to audits by U.S. government departments and agencies with respect to compliance with these rules. If we fail to comply with these requirements we may incur penalties and sanctions, including contract termination, suspension of payments, suspension or debarment from doing business with the federal government, and fines.

Legal claims made against our work

We create, implement and maintain IT solutions that are often critical to the operations of our clients’ business. Our ability to complete large projects as expected could be adversely affected by unanticipated delays, renegotiations, and changing client requirements or project delays. Also, our solutions may suffer from defects that adversely affect their performance; they may not meet our clients’ requirements or may fail to perform in accordance with applicable service levels. Such problems could subject us to legal liability, which could materially adversely affect our business, operating results and financial condition, and may negatively affect our professional reputation. While we typically use reasonable efforts to include provisions in our contracts which are designed to limit our exposure to legal claims relating to our services and the applications we develop, we may not

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always be able to include such provisions and, where we are successful, such provisions may not protect us adequately or may not be enforceable under some circumstances or under the laws of some jurisdictions.

Data protection and infrastructure risks

Our business often requires that our clients’ applications and information, which may include their proprietary information and personal information they manage, be processed and stored on our networks and systems, and in data centers that we manage. We also process and store proprietary information relating to our business, and personal information relating to our members. The Company is subject to numerous laws and regulations designed to protect information, such as the European Union’s General Data Protection Regulation (GDPR), various laws and regulations in Canada, the U.S. and other countries in which the Company operates governing the protection of health or other personally identifiable information and data privacy. These laws and regulations are increasing in number and complexity and are being adopted and amended with greater frequency, which results in greater compliance risk and cost. The potential financial penalties for non-compliance with these laws and regulations have significantly increased with the adoption of the GDPR. The Company’s Chief Data Protection Officer oversees the Company’s compliance with the laws that protect the privacy of personal information. The Company faces risks inherent in protecting the security of such personal data which have grown in complexity, magnitude and frequency in recent years. Digital information and equipment are subject to loss, theft or destruction, and services that we provide may become temporarily unavailable as a result of those risks, or upon an equipment or system malfunction. The causes of such failures include human error in the course of normal operations (including from advertent or inadvertent actions or inactions by our members), maintenance and upgrading activities, as well as hacking, vandalism (including denial of service attacks and computer viruses), theft, and unauthorized access, as well as power outages or surges, floods, fires, natural disasters and many other causes. The measures that we take to protect against all information infrastructure risks, including both physical and logical controls on access to premises and information may prove in some circumstances to be inadequate to prevent the improper disclosure, loss, theft, misappropriation of, unauthorized access to, or destruction of client information, or service interruptions. Such events may expose the Company to financial loss arising from the costs of remediation and those arising from litigation from our clients and third parties (including under the laws that protect the privacy of personal information), claims and damages, as well as expose the Company to government sanctions and damage to our brand and reputation.

Security and cybersecurity risks

In the current environment, the volume, velocity and creativity of security threats and cyber attacks continue to grow, this includes criminal hackers, hacktivists, state sponsored organizations, industrial espionage, employee misconduct, and human or technological error. As a worldwide IT and business consulting firm providing services to both the private and public sectors, we process and store increasingly large amounts of data for our clients, including proprietary information and personal information. Consequently, our business could be negatively impacted by physical and cyber threats, which could affect our future sales and financial position or increase our costs and expenses.

An unauthorized disclosure of sensitive or confidential client or member information, including cyber-attacks or other security breaches, could cause a loss of data, give rise to remediation or other expenses, expose us to liability under federal and state laws, and subject us to litigation and investigations, which could have an adverse effect on our business, cash flows, financial condition and results of operations. These security risks to the Company include potential attacks not only of our own solutions, services and systems, but also those of our clients, contractors, business partners, vendors and other third parties. Any local issue in a Business Unit could have a global impact on the entire Company , thus visibility and timely escalation on potential issues are key.

The Company’s Chief Security Officer is responsible for overseeing the security of the Company. We seek to detect and investigate all security incidents and to prevent their occurrence or recurrence, by: (i) developing and regularly reviewing policies and standards related to information security, data privacy, physical security and business continuity; (ii) monitoring the Company’s performance against these policies and standards; (iii) developing strategies intended to seek to mitigate the Company’s risks, including through security trainings for all employees to increase awareness of potential cyber threats; (iv) implementing security measures to ensure an appropriate level of control based on the nature of the information and the inherent risks attached thereto, including through access management, security monitoring and testing to mitigate and help

detect and respond to attempts to gain unauthorized access to information systems and networks; and (v) working with the industry and governments against cyber threats. However, because of the evolving nature and sophistication of these security threats, there can be no assurance that our safeguards will detect or prevent the occurrence of material cyber breaches, intrusions or attacks.

We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. If security protection does not evolve at the same pace as threats, a growing gap on our level of protection will be created. Technology evolution and global trends like digital transformation, cloud and mobile computing amongst others are disrupting the security operating model, thus security should evolve to address new relevant security requirements and build new capabilities to address the changes. Increasing detection and automated response capabilities are key to improve visibility and contain any negative potential impact. Automating security processes and integrating with IT, business and security solutions could address shortage of technical security staff and avoid introducing human intervention and errors.

Insider or employee cyber and security threats are increasingly a concern for all large companies, including ours. CGI is continuously working to install new, and upgrade its existing, information technology systems and provide member awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches. While CGI selects third-party vendors carefully, it does not control their actions. Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor could adversely affect the our ability to deliver solutions and services to our customers and otherwise conduct business. Furthermore, while our liability insurance policy covers cyber risks, there is no assurance that such insurance coverage will be sufficient in type or amount to cover the costs, damages, liabilities or losses that could result from security breaches, cyber-attacks and other related breaches. As the cyber threat landscape evolves, the Company may find it necessary to make further significant investments to protect data and infrastructure. Occurrence of any of the aforementioned security threats could expose the Company, our clients or other third parties to potential liability, litigation, and regulatory action, as well as the loss of client confidence, loss of existing or potential clients, loss of sensitive government contracts, damage to brand and reputation, and other financial loss.

Risk of harm to our reputation

CGI’s reputation as a capable and trustworthy service provider and long-term business partner is key to our ability to compete effectively in the market for IT services. The nature of our operations exposes us to the potential loss, unauthorized access to, or destruction of our clients’ information, as well as temporary service interruptions. Depending on the nature of the information or services, such events may have a negative impact on how the Company is perceived in the marketplace. Under such circumstances, our ability to obtain new clients and retain existing clients could suffer with a resulting impact on our revenue and net earnings.

Risks associated with the integration of new operations

The successful integration of new operations arising from our acquisition strategy or from large managed IT and business process services contracts requires that a substantial amount of management time and attention be focused on integration tasks. Management time that is devoted to integration activities may detract from management’s normal operations focus with resulting pressure on the revenues and earnings from our existing operations. In addition, we may face complex and potentially time-consuming challenges in implementing uniform standards, controls, procedures and policies across new operations when harmonizing their activities with those of our existing business units. Integration activities can result in unanticipated operational problems, expenses and liabilities. If we are not successful in executing our integration strategies in a timely and cost-effective manner, we will have difficulty achieving our growth and profitability objectives.

Internal controls risks

Due to the inherent limitations of internal controls including the circumvention or overriding of controls, or fraud, there can only be reasonable assurance that the Company’s internal controls will detect and prevent a misstatement. If the Company is

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unable to design, implement, monitor and maintain effective internal controls throughout its different business environments, the efficiency of our operations might suffer, resulting in a decline in revenue and profitability, and the accuracy of our financial reporting could be impaired.

Liquidity and funding risks

The Company’s future growth is contingent on the execution of its business strategy, which, in turn, is dependent on its ability to grow the business organically as well as through business acquisitions. In the event we would need to raise additional funds through equity or debt financing to fund any currently unidentified or unplanned future acquisitions and other growth opportunities, there can be no assurance that such financing will be available in amounts and on terms acceptable to us. Our ability to raise the required funding depends on the capacity of the capital markets to meet our equity and/or debt financing needs in a timely fashion and on the basis of interest rates and/or share prices that are reasonable in the context of our commercial objectives. Increasing interest rates, volatility in our share price, and the capacity of our current lenders to meet our additional liquidity requirements are all factors that may have a material adverse effect on any acquisitions or growth activities that we may, in the future, identify or plan. If we are unable to obtain the necessary funding, we may be unable to achieve our growth objectives.

Foreign exchange risk

The majority of our revenue and costs are denominated in currencies other than the Canadian dollar. Foreign exchange fluctuations impact the results of our operations as they are reported in Canadian dollars. This risk is partially mitigated by a natural hedge in matching our costs with revenue denominated in the same currency and through the use of derivatives in our global hedging strategy. However, as we continue our global expansion, natural hedges may begin to diminish and the use of hedging contracts exposes us to the risk that financial institutions could fail to perform their obligations under our hedging instruments. Furthermore, there can be no assurance that our hedging strategy and arrangements will offset the impact of fluctuations in currency exchange rates, which could materially adversely affect our business revenues, results of operations, financial condition or prospects. Other than the use of financial products to deliver on our hedging strategy, we do not trade derivative financial instruments.

Our functional and reporting currency is the Canadian dollar. As such, our U.S., European and Asian investments, operations and assets are exposed to net change in currency exchange rates. Volatility in exchange rates could have an adverse effect on our business, financial condition and results of operations.

10.2. LEGAL PROCEEDINGS

The Company is involved in legal proceedings, audits, claims and litigation arising in the ordinary course of its business. Certain of these matters seek damages in significant amounts. Although the outcome of such matters is not predictable with assurance, the Company has no reason to believe that the disposition of any such current matter could reasonably be expected to have a material adverse effect on the Company’s financial position, results of operations or the ability to carry on any of its business activities.

Transfer Agent

Computershare Investor Services Inc.

(800) 564-6253

Investor Relations

Maher Yaghi

Vice-President, Investor Relations

Telephone: (514) 415-3651

maher.yaghi@cgi.com

1350 René-Lévesque Boulevard West

25^th^ Floor

Montréal, Quebec

H3G 1T4

Canada

Management’s and Auditors’ Reports

MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING

The management of CGI Inc. (the Company) is responsible for the preparation and integrity of the consolidated financial statements and the Management’s Discussion and Analysis (MD&A). The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and necessarily include some amounts that are based on management’s best estimates and judgement. Financial and operating data elsewhere in the MD&A are consistent with that contained in the accompanying consolidated financial statements.

To fulfill its responsibility, management has developed, and continues to maintain, systems of internal controls reinforced by the Company’s standards of conduct and ethics, as set out in written policies to ensure the reliability of the financial information and to safeguard its assets. The Company’s internal control over financial reporting and consolidated financial statements are subject to audit by an Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP, whose report follows. PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm appointed by our shareholders upon the recommendation of the Audit and Risk Management Committee of the Board of Directors, has performed an independent audit of the consolidated balance sheets as at September 30, 2020 and 2019 and the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years ended September 30, 2020 and 2019 and the effectiveness of our internal control over financial reporting as at September 30, 2020.

Members of the Audit and Risk Management Committee of the Board of Directors, all of whom are independent of the Company, meet regularly with PricewaterhouseCoopers LLP and with management to discuss internal controls in the financial reporting process, auditing matters and financial reporting issues and formulate the appropriate recommendations to the Board of Directors. PricewaterhouseCoopers LLP has full and unrestricted access to the Audit and Risk Management Committee. The consolidated financial statements and MD&A have been reviewed and approved by the Board of Directors.

George D. Schindler François Boulanger
President and Chief Executive Officer Executive Vice-President and Chief Financial Officer
November 10, 2020

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CONSOLIDATED FINANCIAL STATEMENTS

Management’s and Auditors’ Reports

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed, under the supervision of and with the participation of the President and Chief Executive Officer as well as the Executive Vice-President and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The Company’s internal control over financial reporting includes policies and procedures that:

  • Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company;

  • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and,

  • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

All internal control systems have inherent limitations; therefore, even where internal control over financial reporting is determined to be effective, it can provide only reasonable assurance. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision of and with the participation of the President and Chief Executive Officer as well as the Executive Vice-President and Chief Financial Officer, conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined the Company’s internal control over financial reporting as at September 30, 2020 was effective.

The effectiveness of the Company’s internal control over financial reporting as of September 30, 2020 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which appears herein.

George D. Schindler François Boulanger
President and Chief Executive Officer Executive Vice-President and Chief Financial Officer
November 10, 2020

Management’s and Auditors’ Reports

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of CGI Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CGI Inc. and its subsidiaries (together, the Company) as of September 30, 2020 and 2019, and the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years then ended, including the related notes (collectively referred to as the ‘‘consolidated financial statements’’). We also have audited the Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases on October 1, 2019.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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CONSOLIDATED FINANCIAL STATEMENTS

Management’s and Auditors’ Reports

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

Definition and Limitations of Internal Control over Financial Reporting (continued)

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit and Risk Management Committee of the Board of Directors and that (i) relates to accounts or disclosures that are material to the consolidated financial statements; and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimates of total expected labour costs or total expected labour hours for systems integration and consulting services under fixed-fee arrangements

As described in Notes 3 and 29 to the consolidated financial statements, the Company recognizes revenue for systems integration and consulting services under fixed-fee arrangements using the percentage-of-completion method over time. For the year ended on September 30, 2020, revenue from systems integration and consulting services under fixed-fee arrangements makes up a portion of the revenue from systems integration and consulting services. The selection of the measure of progress towards completion requires management judgment and is based on the nature of the services to be provided. As disclosed by management, the Company relies on estimates of total expected labour costs or total expected labour hours to complete the service, which are compared to labour costs or labour hours incurred to date, to arrive at an estimate of the percentage of revenue earned to date. Management regularly reviews underlying estimates of total expected labour costs or total expected hours. Management has disclosed that there are many factors that can affect the estimates of total expected labour costs or total expected labour hours, including, but not limited to, changes to the scope of the contracts, delays in reaching milestones and new complexities in the project delivery.

The principal considerations for our determination that performing procedures relating to Revenue Recognition - Estimates of total expected labourcosts or total expected labour hours for systems integration and consulting services under fixed-fee arrangements is a critical audit matter are (i) there was significant judgment by management when developing the estimates of total expected labour costs or total expected labour hours; and (ii) there were significant auditor judgment and effort in performing procedures to evaluate the estimates of total expected labour costs or total expected labour hours, including the assessment of management’s judgment about the Company’s ability to properly assess the factors that can affect the significant assumptions related to the estimates of total expected labour costs or total expected labour hours to complete.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimates of total expected labour costs or total expected labour hours. The procedures also included, among others, evaluating and testing management’s process, on a sample basis, for determining the estimates of total expected labour costs or total expected labour hours which included evaluating the reasonableness of significant assumptions, including the total expected labour costs or total expected labour hours to complete, used by management by (i) testing total labour costs or total labour hours incurred to supporting evidence; (ii) performing a comparison of the sum of total labour costs or labour hours incurred and the total expected labour costs or total expected labour hours to complete to the originally estimated costs or hours; and; (iii) evaluating the process of the timely identification of factors that can affect the total expected labour costs or total expected hours, including but not limited to, changes to the scope of the contracts, delays in reaching milestones and new complexities in the project delivery.

/s/ PricewaterhouseCoopers LLP^1^

Montréal, Québec, Canada

November 10, 2020

We have served as the Company’s auditor since 2019.

  1. FCPA auditor, FCA, public accountancy permit No. A115888

Consolidated Statements of Earnings

For the years ended September 30

(in thousands of Canadian dollars, except per share data)

Notes 2020 2019
**** $
Revenue 29 **** 12,164,115 12,111,236
Operating expenses
Costs of services, selling and administrative 23 **** 10,302,068 10,284,007
Acquisition-related and integration costs 27c **** 76,794 77,417
Restructuring costs 25 **** 155,411 —
Net finance costs 26 **** 114,474 70,630
Foreign exchange (gain) loss **** (899 2,234
**** 10,647,848 10,434,288
Earnings before income taxes **** 1,516,267 1,676,948
Income tax expense 16 **** 398,405 413,741
Net earnings **** 1,117,862 1,263,207
Earnings per share
Basic earnings per share 21 **** 4.27 4.63
Diluted earnings per share 21 **** 4.20 4.55

All values are in US Dollars.

See Notes to the Consolidated Financial Statements.

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CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Comprehensive Income

For the years ended September 30

(in thousands of Canadian dollars)

2020 2019
Net earnings ****
Items that will be reclassified subsequently to net earnings (net of income<br>taxes):
Net unrealized gains (losses) on translating financial statements of foreign<br>operations **** )
Net gains on cross-currency swaps and on translating long-term debt designated<br>as hedges of net investments in foreign operations ****
Deferred gains (costs) of hedging on cross-currency swaps **** )
Net unrealized (losses) gains on cash flow hedges )
Net unrealized gains on financial assets at fair value through other<br>comprehensive income ****
Items that will not be reclassified subsequently to net earnings (net of income<br>taxes):
Net remeasurement (losses) gains on defined<br>benefit plans )
Other comprehensive income (loss) **** )
Comprehensive income ****

All values are in US Dollars.

See Notes to the Consolidated Financial Statements.

Consolidated Balance Sheets

As at September 30

(in thousands of Canadian dollars)

Notes 2020
$
Assets
Current assets
Cash and cash equivalents 28e and 32 **** 1,707,985 213,831
Accounts receivable 4 and 32 **** 1,219,302 1,357,090
Work in progress **** 1,075,252 1,096,031
Current financial assets 32 **** 18,500 39,931
Prepaid expenses and other current assets **** 160,406 172,182
Income taxes **** 29,363 10,206
Total current assets before funds held for clients **** 4,210,808 2,889,271
Funds held for clients 5 **** 725,178 368,112
Total current assets **** 4,935,986 3,257,383
Property, plant and equipment 6 **** 372,946 397,661
Right-of-use assets 3 and 7 **** 666,865 —
Contract costs 8 **** 239,376 222,965
Intangible assets 9 **** 521,462 517,982
Other long-term assets 10 **** 163,739 180,480
Long-term financial assets 11 **** 156,569 176,899
Deferred tax assets 16 **** 113,484 100,539
Goodwill 12 **** 8,379,931 7,767,837
**** 15,550,358 12,621,746
Liabilities
Current liabilities
Accounts payable and accrued liabilities **** 1,025,963 1,108,895
Accrued compensation **** 672,775 642,897
Current derivative financial instruments 32 **** 8,328 4,902
Deferred revenue **** 426,393 397,370
Income taxes **** 136,928 176,243
Provisions 13 **** 175,632 73,509
Current portion of long-term debt 14 **** 310,764 113,511
Current portion of lease liabilities 3 **** 178,720 —
Total current liabilities before clients’ funds obligations **** 2,935,503 2,517,327
Clients’ funds obligations **** 720,322 366,796
Total current liabilities **** 3,655,825 2,884,123
Long-term income taxes **** 6,720 7,690
Long-term provisions 13 **** 23,888 24,946
Long-term debt 14 **** 3,276,331 2,217,696
Long-term lease liabilities 3 **** 697,650 —
Other long-term liabilities 15 **** 185,374 213,392
Long-term derivative financial instruments 32 **** 56,622 18,322
Deferred tax liabilities 16 **** 158,341 178,265
Retirement benefits obligations 17 **** 225,447 193,209
**** 8,286,198 5,737,643
Equity
Retained earnings **** 4,703,642 4,557,855
Accumulated other comprehensive income 18 **** 545,710 176,694
Capital stock 19 **** 1,761,873 1,903,977
Contributed surplus **** 252,935 245,577
**** 7,264,160 6,884,103
**** 15,550,358 12,621,746

All values are in US Dollars.

See Notes to the Consolidated Financial Statements.

Approved by the Board of Directors George D. Schindler<br><br><br><br> <br>Director Serge Godin <br><br> <br>Director

FISCAL 2020 RESULTS — 73

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Equity

For the years ended September 30

(in thousands of Canadian dollars)

Notes Retainedearnings Accumulatedothercomprehensiveincome Capitalstock Contributedsurplus Totalequity
**** **** **** **** ****
Balance as at September 30, 2019 4,557,855 176,694 1,903,977 245,577 6,884,103
Adoption of IFRS 16 3 (93,873 — — — (93,873
Balance as at October 1, 2019 4,463,982 176,694 1,903,977 245,577 6,790,230
Net earnings 1,117,862 — — — 1,117,862
Other comprehensive income — 369,016 — — 369,016
Comprehensive income 1,117,862 369,016 — — 1,486,878
Share-based payment costs — — — 37,358 37,358
Income tax impact associated with stock options — — — (8,653 (8,653
Exercise of stock options 19 — — 69,420 (12,269 57,151
Exercise of performance share units 19 — — 9,078 (9,078 —
Purchase for cancellation of Class A subordinate voting shares 19 (878,202 — (165,315 — (1,043,517
Purchase of Class A subordinate voting<br>shares held in trusts 19 — — (55,287 — (55,287
Balance as at September 30,2020 **** 4,703,642 **** 545,710 **** 1,761,873 **** 252,935 **** 7,264,160
Notes Retained<br>earnings Accumulated<br>other<br>comprehensive<br>income Capital<br>stock Contributed<br>surplus Total<br><br><br>equity
Balance as at September 30, 2018 4,251,424 201,596 2,018,592 213,195 6,684,807
Net earnings 1,263,207 — — — 1,263,207
Other comprehensive loss — (24,902 — — (24,902
Comprehensive income (loss) 1,263,207 (24,902 — — 1,238,305
Share-based payment costs — — — 39,440 39,440
Income tax impact associated with stock options — — — 14,663 14,663
Exercise of stock options 19 — — 77,773 (14,070 63,703
Exercise of performance share units 19 — — 7,651 (7,651 —
Purchase for cancellation of Class A subordinate voting shares 19 (956,776 — (169,299 — (1,126,075
Purchase of Class A subordinate voting<br>shares held in trusts 19 — — (30,740 — (30,740
Balance as at September 30, 2019 4,557,855 176,694 1,903,977 245,577 6,884,103

All values are in US Dollars.

See Notes to the Consolidated Financial Statements.

Consolidated Statements of Cash Flows

For the years ended September 30

(in thousands of Canadian dollars)

Notes 2020 2019
****
Operating activities
Net earnings **** 1,117,862 1,263,207
Adjustments for:
Amortization, depreciation and impairment 24 **** 565,692 392,301
Deferred income tax expense (recovery) 16 **** 6,170 (8,297
Foreign exchange (gain) loss **** (7,956 3,519
Share-based payment costs **** 37,358 39,440
Loss on sale of business **** 1,266 —
Net change in<br>non-cash working capital items 28a **** 218,164 (56,251
Cash provided by operating activities **** 1,938,556 1,633,919
Investing activities
Net change in short-term investments **** 8,414 (9,889
Business acquisitions (considering the bank overdraft assumed and cash<br>acquired) **** (269,585 (480,366
Investment in Acando AB **** — (140,248
Proceeds from sale of business **** 2,647 600
Purchase of property, plant and equipment **** (128,478 (162,061
Additions to contract costs **** (72,845 (60,191
Additions to intangible assets **** (114,112 (105,976
Purchase of long-term investments **** (10,594 (523
Proceeds from sale of long-term<br>investments **** 12,100 7,845
Cash used in investing activities **** (572,453 (950,809
Financing activities
Net change in unsecured committed revolving credit facility 14 and 28c **** (334,370 139,575
Increase of long-term debt 28c **** 1,807,167 686,810
Repayment of long-term debt 28c **** (106,496 (355,406
Payment of lease liabilities 28c **** (175,320 —
Repayment of debt assumed in business acquisitions 28c **** (28,281 (2,141
Payment for remaining shares of Acando 27b **** (23,123 —
Settlement of derivative financial instruments 28c and 32 **** (3,903 (554
Purchase of Class A subordinate voting shares held in trusts 19 **** (55,287 (30,740
Purchase and cancellation of Class A subordinate voting shares 19 **** (1,043,517 (1,130,255
Issuance of Class A subordinate voting<br>shares **** 57,302 63,602
Cash provided by (used in) financing<br>activities **** 94,172 (629,109
Effect of foreign exchange rate changes on cash<br>and cash equivalents **** 33,879 (24,261
Net increase in cash and cash equivalents **** 1,494,154 29,740
Cash and cash equivalents, beginning of<br>year **** 213,831 184,091
Cash and cash equivalents, end ofyear **** 1,707,985 213,831

All values are in US Dollars.

Supplementary cash flow information (Note 28).

See Notes to the Consolidated Financial Statements.

FISCAL 2020 RESULTS — 75

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

1. Description of business

CGI Inc. (the Company), directly or through its subsidiaries, provides managed information technology (IT) and business process services (BPS), systems integration and consulting, as well as the sale of software solutions to help clients effectively realize their strategies and create added value. The Company was incorporated under Part IA of the CompaniesAct (Québec), predecessor to the Business Corporations Act (Québec) which came into force on February 14, 2011 and its Class A subordinate voting shares are publicly traded. The executive and registered office of the Company is situated at 1350 René-Lévesque Blvd. West, Montréal, Québec, Canada, H3G 1T4.

2. Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The Company’s consolidated financial statements for the years ended September 30, 2020 and 2019 were authorized for issue by the Board of Directors on November 10, 2020.

3. Summary of significant accounting policies

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated on consolidation.

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed or has right to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the relevant activities of the entity. Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date control over the subsidiaries ceases.

BASIS OF MEASUREMENT

The consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities, which have been measured at fair value as described below.

USE OF JUDGEMENTS AND ESTIMATES

The preparation of the consolidated financial statements requires management to make judgements and estimates that affect the reported amounts of assets, liabilities, equity and the accompanying disclosures at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Because the use of judgements and estimates is inherent in the financial reporting process, actual results could differ.

Significant judgements and estimates about the future and other major sources of estimation uncertainty at the end of the reporting period could have a significant risk of causing a material adjustment to the carrying amounts of the following within the next financial year: revenue recognition, deferred tax assets, estimated losses on revenue-generating contracts, goodwill impairment, right-of-use assets, business combinations, provisions for uncertain tax treatments and litigation and claims.

The judgements, apart from those involving estimations, that have the most significant effect on the amounts recognized in the consolidated financial statements are:

Revenue recognition of multiple deliverable arrangements

Assessing whether the deliverables within an arrangement are separate performance obligations requires judgement by management. A deliverable is identified as a separate performance obligation if the customer benefits from it on its own or together with resources that are readily available to the customer and if it is separately identifiable from the other deliverables in the contract. The Company assesses if the deliverables are separately identifiable in the context of the contract by determining if it is highly interrelated with other deliverables in the contract. If these criteria are not met, the deliverables are accounted for as a combined performance obligation.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

USE OF JUDGEMENTS AND ESTIMATES (CONTINUED)

Deferred tax assets

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable income will be available against which the losses can be utilized. Management judgement is required concerning uncertainties that exist with respect to the timing of future taxable income required to recognize a deferred tax asset. The Company recognizes an income tax benefit only when it is probable that the tax benefit will be realized in the future. In making this judgement, the Company assesses forecasts and the availability of future tax planning strategies.

A description of estimates is included in the respective sections within the Notes to the Consolidated Financial Statements.

COVID-19 pandemic

For the year ended September 30, 2020, the Company assessed the impact of the uncertainties around the outbreak of the novel strain of the coronavirus, specifically identified as COVID-19 pandemic, on its balance sheet carrying amounts. This review required the use of judgements and estimates and resulted in no material impacts outside of the restructuring costs, refer to Note 25.

The future impact of COVID-19 uncertainties could generate, in future reporting periods, a significant risk of material adjustments to the following: revenue recognition, deferred tax assets, estimated losses on revenue-generating contracts, impairment of PP&E, right-of-use assets, intangible assets and goodwill and litigation and claims.

REVENUE RECOGNITION, WORK IN PROGRESS AND DEFERRED REVENUE

The Company generates revenue through the provision of managed IT and BPS, systems integration and consulting, as well as the sale of software solutions as described in Note 1, Description of business.

The Company provides services and products under arrangements that contain various pricing mechanisms. The Company accounts for a contract or a group of contracts when the following criteria are met: the parties to the contract have approved the contract in which their rights, their obligations and the payment terms have been identified, the contract has commercial substance, and the collectability of the consideration is probable.

A contract modification is a change in the scope or price of an existing revenue-generating customer contract. The Company accounts for a contract modification as a separate contract when the scope of the contract increases because of the addition of promised performance obligations and the price of the contract increases by an amount of consideration that reflects its stand-alone selling prices. When the contract is not accounted for as a separate contract, the Company recognizes an adjustment to revenue on the existing contract on a cumulative catch-up basis as at the date of the contract modification or, if the remaining goods and services are distinct, the Company recognizes the remaining consideration prospectively.

Revenue is recognized when or as the Company satisfies a performance obligation by transferring a promise of good or service to the customer and are measured at the amount of consideration the Company expects to be entitled to receive, including variable consideration, such as, discounts, volume rebates, service-level penalties, and incentives. Variable consideration is estimated using either the expected value method or most likely amount method and is included only to the extent it is highly probable that a significant reversal of cumulative revenue recognized will not occur. In making this judgement, management will mostly consider all information available at the time (historical, current and forecasted), the Company’s knowledge of the client or the industry, the type of services to be delivered and the specific contractual terms of each arrangement.

Revenue from sales of third party vendor’s products, such as software licenses, hardware or services is recorded on a gross basis when the Company is a principal to the transaction and is recorded net of costs when the Company is acting as an agent between the client and vendor. To determine whether the Company is a principal or an agent, it evaluates whether control is obtained of the goods or services before they are transferred to the client. Factors generally considered include whether the Company has the primary responsibility for providing the product or service, adds meaningful value to the vendor’s product or service and has discretion establishing the price.

FISCAL 2020 RESULTS — 77

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

REVENUE RECOGNITION, WORK IN PROGRESS AND DEFERRED REVENUE (CONTINUED)

Relative stand-alone selling price

The Company’s arrangements often include a mix of the services and products as described below. If an arrangement involves the provision of multiple performance obligations, the total arrangement value is allocated to each performance obligations based on its relative stand-alone selling price. When estimating the stand-alone selling price of each performance obligations, the Company maximizes the use of observable prices which are established using the Company’s prices for same or similar deliverables. When observable prices are not available, the Company estimates stand-alone selling prices based on its best estimate. The best estimate of the stand-alone selling price is the price at which the Company would normally expect to offer the services or products and is established by considering a number of internal and external factors including, but not limited to, geographies, the Company’s pricing policies, internal costs and margins. Additionally, in certain circumstances, the Company may apply the residual approach when estimating the stand-alone price of software license products, for which the Company has not yet established the price or has not previously sold on a stand-alone basis.

The appropriate revenue recognition method is applied for each performance obligation as described below.

Managed IT and business process services

Revenue from managed IT and business process services arrangements is generally recognized over time as the services are provided at the contractual billings, which corresponds with the value provided to the client, unless there is a better measure of performance or delivery.

Systems integration andconsulting services

Revenue from systems integration and consulting services under time and material arrangements is recognized over time as the services are rendered, and revenue under cost-based arrangements is recognized over time as reimbursable costs are incurred. Contractual billings of such arrangements correspond with the value provided to the client, and therefore revenues are generally recognized when amounts become billable.

Revenue from systems integration and consulting services under fixed-fee arrangements is recognized using the percentage-of-completion method over time, as the Company has no alternative use for the asset created and has an enforceable right to payment for performance completed to date. The Company primarily uses labour costs or labour hours to measure the progress towards completion. This method relies on estimates of total expected labour costs or total expected labour hours to complete the service, which are compared to labour costs or labour hours incurred to date, to arrive at an estimate of the percentage of revenue earned to date. Factors considered in the estimates include: changes in scope of the contracts, delays in reaching milestones, complexities in project delivery, availability and retention of qualified IT professionals and/or the ability of the subcontractors to perform their obligation within agreed upon budget and timeframes. Management regularly reviews underlying estimates of total expected labour costs or hours.

Software licenses

Most of the Company’s software license arrangements include other services such as implementation, customization and maintenance. For these types of arrangements, revenue from a software license, when identified as a performance obligation, is recognized at a point in time upon delivery. Otherwise when the software is significantly customized, integrated or modified, it is combined with the implementation and customization services and is accounted for as described in the systems integration and consulting services section above. Revenue from maintenance services for software licenses sold is recognized straight-line over the term of the maintenance period.

Work in progress and deferred revenue

Amounts recognized as revenue in excess of billings are classified as work in progress. Amounts received in advance of the performance of services or delivery of products are classified as deferred revenue. Work in progress and deferred revenue are presented net on a contract by-contract basis. During the year ended September, 30 2020, the revenues recognized from the short-term deferred revenue was not significantly different than what was presented as at September, 30 2019.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of unrestricted cash and short-term investments having a maturity of three months or less from the date of purchase.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

SHORT-TERM INVESTMENTS

Short-term investments, comprise generally of term deposits, have remaining maturities over three months, but not more than one year, at the date of purchase.

FUNDS HELD FOR CLIENTS AND CLIENTS’ FUNDS OBLIGATIONS

In connection with the Company’s payroll, tax filing and claims services, the Company collects funds for payment of payroll, taxes and claims, temporarily holds such funds until payment is due, remits the funds to the clients’ employees, appropriate tax authorities or claims holders, files tax returns and handles related regulatory correspondence and amendments. The funds held for clients include cash and long-term bonds. The Company presents the funds held for clients and related obligations separately. Funds held for clients are classified as current assets since, based upon management’s intentions, these funds are held solely for the purpose of satisfying the clients’ funds obligations, which will be repaid within one year of the consolidated balance sheet date. The market fluctuations affect the fair value of the long-term bonds. Due to those fluctuations, funds held for clients might not equal to the clients’ funds obligations.

Interest income earned and realized gains and losses on the disposal of bonds are recorded in revenue in the period that the income is earned, as the collecting, holding and remitting of these funds are critical components of providing these services.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment (PP&E), are recorded at cost and are depreciated over their estimated useful lives using the straight-line method.

Buildings 10 to 40 years
Leasehold improvements Lesser of the useful life or lease term
Furniture, fixtures and equipment 3 to 20 years
Computer equipment 3 to 5 years

LEASES

For the fiscal year ended September 30, 2020, under IFRS 16, Leases

When the Company enters into contractual agreements with suppliers or other parties, an assessment is performed to determine if the contract contains a lease. The Company identified lease agreements under the following categories: Properties, Motor vehicules and others as well as Computer equipment.

The Company identifies a lease if it conveys the right to control the use of an identified asset for a specific period in exchange for a determined consideration. At inception, a right-of-use asset for the underlying asset and corresponding lease liability are presented in the consolidated balance sheet measured on a present value basis except for short-term leases (expected term of 12 months or less) and leases with low value underlying asset for which payments are recorded as an expense on a straight-line basis over the lease term.

The right-of-use assets are measured at initial lease liabilities adjusted by lease payments made before the commencement date, indirect costs and cash incentives received. The right-of-use assets are depreciated on a straight-line basis over the expected lease term of the underlying asset.

Lease liabilities are measured at present value of non-cancellable payments of the expected lease term, which are mostly made of fixed payments of rent excluding maintenance fees; variable payments that are based on an index or a rate; amounts expected to be payable as residual value guaranties and extension or termination option if reasonably certain to be exercised.

The Company estimates the lease term in order to calculate the value of the lease liability at the initial date of the lease. Management uses judgement to determine the appropriate lease term based on the conditions of each lease. To determine the lease term, the Company considers all factors that create economic incentives to exercise an extension or a termination option. The extension or termination options are only included in the lease term if it is reasonably certain of being exercised. Management considers all facts that create incentive to exercise an extension option or not to take a termination option including leasehold improvements, significant modification of the underlying asset or a business decision.

FISCAL 2020 RESULTS — 79

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

LEASES (CONTINUED)

Discount rate used in the present value calculation is the incremental borrowing rate unless the implicit interest rate in the lease can be readily determined. The Company estimates the incremental borrowing rate for each lease or portfolio of leased assets, as most of the implicit interest rates in the leases are not readily determinable. To calculate the incremental borrowing rate, the Company considers its credit worthiness, the term of the arrangement, any collateral received and the economic environment. The incremental borrowing rates are subject to change mainly due to changes in the economic environment.

The lease liabilities are subsequently adjusted to reflect interest on the lease liabilities and lease payments made. Lease liabilities are remeasured (along with the corresponding adjustment to the right-of-use asset), whenever the following situations occur; a modification in the lease term, a change in the assessment of an option to purchase, a modification in the residual guarantees or in future lease payments due to a change of an index or rate tied to the payments.

CONTRACT COSTS

Contract costs are comprised primarily of transition costs incurred to implement long-term managed IT and business process services contracts and incentives.

Transition costs

Transition costs consist mostly of costs associated with the installation of systems and processes, as well as conversion of the client’s applications to the Company’s platforms incurred after the award of managed IT and business process services contracts. Transition costs are comprised essentially of labour costs, including compensation and related fringe benefits, as well as subcontractor costs.

Incentives

Occasionally, incentives are granted to clients upon the signing of managed IT and business process services contracts. These incentives are granted in the form of cash payments.

Amortization of contract costs

Contract costs are amortized using the straight-line method over the period services are provided. Amortization of transition costs is included in costs of services, selling and administrative and amortization of incentives is recorded as a reduction of revenue.

Impairment of contract costs

When a contract is not expected to be profitable, the estimated loss is first applied to impair the related capitalized contract costs. The excess of the expected loss over the capitalized contract costs is recorded as onerous revenue-generating contracts in provisions. If at a future date the contract returns to profitability, the previously recognized impairment loss must be reversed. First the estimated losses on revenue-generating contracts must be reversed, and if there is still additional projected profitability then any capitalized contract costs that were impaired must be reversed. The reversal of the impairment loss is limited so that the carrying amount does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the contract costs in prior years.

INTANGIBLE ASSETS

Intangible assets consist mainly of internal-use software, business solutions, software licenses and client relationships. Internal-use software, business solutions and software licenses are recorded at cost. Internal-use software developed internally is capitalized when it meets specific capitalization criteria related to technical and financial feasibility and when the Company demonstrates its ability and intention to use it. Business solutions developed internally and marketed are capitalized when they meet specific capitalization criteria related to technical, market and financial feasibility. Internal-use software, business solutions, software licenses and client relationships acquired through business combinations are initially recorded at their fair value based on the present value of expected future cash flows, which involves estimates, such as the forecasting of future cash flows and discount rates.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

INTANGIBLE ASSETS (CONTINUED)

Amortization of intangible assets

The Company amortizes its intangible assets using the straight-line method over their estimated useful lives.

Internal-use software 2 to 7 years
Business solutions 2 to 10 years
Software licenses 3 to 8 years
Client relationships 2 to 10 years

IMPAIRMENT OF PP&E, RIGHT-OF-USE ASSETS,INTANGIBLE ASSETS AND GOODWILL

Timing of impairment testing

The carrying values of PP&E, right-of-use assets, intangible assets and goodwill are reviewed for impairment when events or changes in circumstances indicate that the carrying value may be impaired. The Company assesses at each reporting date whether any such events or changes in circumstances exist. The carrying values of intangible assets not available for use are tested for impairment annually as at September 30. Goodwill is tested for impairment annually during the fourth quarter of each fiscal year.

Impairment testing

If any indication of impairment exists or when annual impairment testing for an asset is required, the Company estimates the recoverable amount of the asset or cash-generating unit (CGU) to which the asset relates to determine the extent of any impairment loss. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use (VIU) to the Company. The Company mainly uses the VIU. In assessing the VIU, estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If the recoverable amount of an asset or a CGU is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statements of earnings.

Goodwill acquired through business combinations is allocated to the CGU or group of CGUs that are expected to benefit from acquired work force and synergies of the related business combination. The group of CGUs that benefit from the acquired work force and synergies correspond to the Company’s operating segments. For goodwill impairment testing purposes, the group of CGUs that represents the lowest level within the Company at which management monitors goodwill is the operating segment level.

The recoverable amount of each operating segment has been determined based on the VIU calculation which includes estimates about their future financial performance based on cash flows approved by management covering a period of five years. Key assumptions used in the VIU calculations are the discount rate applied and the long-term growth rate of net operating cash flows. In determining these assumptions, management has taken into consideration the current economic environment and its resulting impact on expected growth and discount rates. The cash flow projections reflect management’s expectations of the operating segment’s operating performance and growth prospects in the operating segment’s market. The discount rate applied to an operating segment is the weighted average cost of capital (WACC). Management considers factors such as country risk premium, risk-free rate, size premium and cost of debt to derive the WACC. Impairment losses relating to goodwill cannot be reversed in future periods.

For impaired assets, other than goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the recoverable amount of the asset. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the recoverable amount of the asset since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated statements of earnings.

FISCAL 2020 RESULTS — 81

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

LONG-TERM FINANCIAL ASSETS

Long-term investments presented in long-term financial assets are comprised of bonds which are presented as long-term based on management’s intentions.

BUSINESS COMBINATIONS

The Company accounts for its business combinations using the acquisition method. Under this method, the consideration transferred is measured at fair value. Acquisition-related and integration costs associated with the business combination are expensed as incurred or when a present legal or constructive obligation exists. The Company recognizes goodwill as the excess of the cost of the acquisition over the net identifiable tangible and intangible assets acquired and liabilities assumed at their acquisition-date fair values. The goodwill recognized is composed of the future economic value associated to acquired work force and synergies with the Company’s operations which are primarily due to reduction of costs and new business opportunities. Management makes assumptions when determining the acquisition-date fair values of the identifiable tangible and intangible assets acquired and liabilities assumed which involve estimates, such as the forecasting of future cash flows, discount rates, and the useful lives of the assets acquired. Subsequent changes in fair values are recorded as part of the purchase price allocation and therefore result in corresponding goodwill adjustments if they qualify as measurement period adjustments. The measurement period is the period between the date of acquisition and the date where all significant information necessary to determine the fair values is available, not to exceed 12 months. All other subsequent changes in estimates and judgements are recognized in the consolidated statements of earnings.

EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of shares outstanding during the period. Diluted earnings per share is determined using the treasury stock method to evaluate the dilutive effect of stock options and performance share units (PSUs).

RESEARCH AND SOFTWARE DEVELOPMENT COSTS

Research costs are charged to earnings in the period in which they are incurred, net of related tax credits. Software development costs related to internal-use software and business solutions are charged to earnings in the year they are incurred, net of related tax credits, unless they meet specific capitalization criteria related to technical, market and financial feasibility as described in the Intangible assets section above.

TAX CREDITS

The Company follows the income approach to account for research and development (R&D) and other tax credits, whereby investment tax credits are recorded when there is a reasonable assurance that the assistance will be received and that the Company will comply with all relevant conditions. Under this method, tax credits related to operating expenditures are recorded as a reduction of the related expenses and recognized in the period in which the related expenditures are charged to earnings. Tax credits related to capital expenditures are recorded as a reduction of the cost of the related assets. The tax credits recorded are based on management’s best estimates of amounts expected to be received and are subject to audit by the taxation authorities.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

INCOME TAXES

Income taxes are accounted for using the liability method of accounting.

Current income taxes are recognized with respect to the amounts expected to be paid or recovered under the tax rates and laws that have been enacted or substantively enacted at the balance sheets date.

Deferred tax assets and liabilities are determined based on deductible or taxable temporary differences between the amounts reported for consolidated financial statement purposes and tax values of the assets and liabilities using enacted or substantively enacted tax rates that will be in effect for the year in which the differences are expected to be recovered or settled. Deferred tax assets and liabilities are recognized in earnings, in other comprehensive income or in equity based on the classification of the item to which they relate.

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Once this assessment is made, the Company considers the analysis of forecasts and future tax planning strategies. Estimates of taxable profit are made based on the forecast by jurisdiction on an undiscounted basis. In addition, management considers factors such as substantively enacted tax rates, the history of the taxable profits and availability of tax strategies.

The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes as the determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations and requires estimates and assumptions considering the existing facts and circumstances. The Company provides for potential tax liabilities based on the most likely amount of the possible outcomes. Estimates are reviewed each reporting period and updated, based on new information available, and could result in changes to the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

PROVISIONS

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The Company’s provisions consist of liabilities for litigation and claims provisions arising in the ordinary course of business, decommissioning liabilities for leases of office buildings, onerous supplier contracts and onerous revenue-generating contracts. The Company also records restructuring provisions for termination of employment costs related to specific initiatives and to the integration of its business acquisitions.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Provisions are discounted using a current pre-tax rate when the impact of the time value of money is material. The increase in the provisions due to the passage of time is recognized as finance costs.

The accrued litigation and legal claims provisions are based on historical experience, current trends and other assumptions that are believed to be reasonable under the circumstances. Estimates include the period in which the underlying cause of the claim occurred and the degree of probability of an unfavourable outcome.

Decommissioning liabilities pertain to leases of buildings where certain arrangements require premises to be returned to their original state at the end of the lease term. The provision is determined using the present value of the estimated future cash outflows.

Provisions for onerous supplier contracts are recorded when the unavoidable net cash flows from honoring the contract are negative. The provision represents the lowest of the costs to fulfill the contract and the penalties to exit the contract.

Provisions for onerous revenue-generating contracts are recorded when unavoidable costs of fulfilling the contract exceed the estimated total revenue from the contract. Management regularly reviews arrangement profitability and the underlying estimates.

Restructuring provisions are recognized when a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs, appropriate timelines and has been communicated to those affected by it.

FISCAL 2020 RESULTS — 83

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

TRANSLATION OF FOREIGN CURRENCIES

The Company’s consolidated financial statements are presented in Canadian dollars, which is also the parent company’s functional currency. Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Functional currency is the currency of the primary economic environment in which the entity operates.

Foreign currency transactions and balances

Revenue, expenses and non-monetary assets and liabilities denominated in foreign currencies are recorded at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates prevailing at the balance sheets date. Unrealized and realized translation gains and losses are reflected in the consolidated statements of earnings.

Foreign operations

For foreign operations that have functional currencies different from the Company, assets and liabilities denominated in a foreign currency are translated at exchange rates in effect at the balance sheets date. Revenue and expenses are translated at average exchange rates prevailing during the period. Resulting unrealized gains or losses on translating financial statements of foreign operations are reported in other comprehensive income.

For foreign operations with the same functional currency as the Company, monetary assets and liabilities are translated at the exchange rates in effect at the balance sheets date and non-monetary assets and liabilities are translated at historical exchange rates. Revenue and expenses are translated at average exchange rates during the period. Translation exchange gains or losses of such operations are reflected in the consolidated statements of earnings.

SHARE-BASED PAYMENTS

Equity-settled plans

The Company operates equity-settled stock option and PSU plans under which the Company receives services from employees, officers and directors as consideration for equity instruments.

The fair value of those share-based payments is established on the grant date using the Black-Scholes option pricing model for the stock options and the closing price of Class A subordinate voting shares of the Company on the Toronto Stock Exchange (TSX) for the PSUs. The number of stock options and PSUs expected to vest are estimated on the grant date and subsequently revised on each reporting date. For stock options, the estimation of fair value requires making assumptions for the most appropriate inputs to the valuation model including the expected life of the option and expected stock price volatility. The fair value of share-based payments, adjusted for expectations related to performance conditions and forfeitures, are recognized as share-based payment costs over the vesting period in earnings with a corresponding credit to contributed surplus on a graded-vesting basis if they vest annually or on a straight-line basis if they vest at the end of the vesting period.

When stock options are exercised, any consideration paid is credited to capital stock and the recorded fair value of the stock options is removed from contributed surplus and credited to capital stock. When PSUs are exercised, the recorded fair value of PSUs is removed from contributed surplus and credited to capital stock.

Share purchase plan

The Company operates a share purchase plan for eligible employees. Under this plan, the Company matches the contributions made by employees up to a maximum percentage of the employee’s salary. The Company’s contributions to the plan are recognized in salaries and other member costs within costs of services, selling and administrative.

Cash-settled deferred share units

The Company operates a deferred share unit (DSU) plan to compensate the external members of the Board of Directors. The expense is recognized within costs of services, selling and administrative for each DSU granted equal to the closing price of Class A subordinate voting shares of the Company on the TSX at the date on which DSUs are awarded and a corresponding liability is recorded in accrued compensation. After the grant date, the DSU liability is remeasured for subsequent changes in the fair value of the Company’s shares.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

FINANCIAL INSTRUMENTS

All financial instruments are initially measured at their fair value and are subsequently classified either at amortized cost, at fair value through earnings (FVTE) or at fair value through other comprehensive income (FVOCI). Financial assets are classified based on the Company’s management model of such instruments and their contractual cash flows they generate. Financial liabilities are classified and measured at amortized cost, unless they are held for trading and classified as FVTE.

The Company has made the following classifications:

FVTE

Cash and cash equivalents, derivative financial instruments and deferred compensation plan assets within long-term financial assets are measured at fair value at the end of each reporting period and the resulting gains or losses are recorded in the consolidated statements of earnings.

Amortized Cost

Trade accounts receivable, cash included in funds held for clients, long-term receivables within long-term financial assets, accounts payable and accrued liabilities, accrued compensation, long-term debt and clients’ funds obligations are measured at amortized cost using the effective interest method. Financial assets classified at amortized cost are subject to impairment. For trade accounts receivable and work in progress, the Company applies the simplified approach to measure expected credit losses, which requires lifetime expected loss allowance to be recorded upon initial recognition of the financial assets.

FVOCI

Long-term bonds included in funds held for clients and in long-term investments within long-term financial assets are measured at fair value through other comprehensive income and are subject to impairment for which the Company uses the low credit risk exemption.

The unrealized gains and losses, net of applicable income taxes, are recorded in other comprehensive income. Interest income measured using the effective interest method and realized gains and losses on derecognition are recorded in the consolidated statements of earnings.

Transaction costs are comprised primarily of legal, accounting and other costs directly attributable to the issuance of the respective financial assets. Transaction costs are capitalized to the cost of financial assets classified as other than FVTE.

Financial assets are derecognized if the contractual rights to the cash flows from the financial asset expire or the asset is transferred and the transfer qualifies for derecognition as substantially all the risks and rewards of ownership of the financial asset have been transferred.****

Fair value hierarchy

Fair value measurements recognized on the balance sheets are classified in accordance with the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included in Level 1, but that are observable for the asset or liability, either directly or indirectly; and

Level 3: inputs for the asset or liability that are not based on observable market data.

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS

The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency exchange risks.

Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting date. The resulting gain or loss is recognized in the consolidated statements of earnings, unless the derivative is designated and is effective as a hedging instrument, in which event the timing of the recognition in the consolidated statements of earnings depends on the nature of the hedge relationship. The cash flows of the hedging instruments are classified in the same manner as the cash flows of the item being hedged.

FISCAL 2020 RESULTS — 85

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS (CONTINUED)

At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management’s objective and strategy for undertaking the hedge. The documentation includes the identification of the nature of the risk being hedged, the economic relationship between the hedged item and the hedging instruments which should not be dominated by credit risk, the hedge ratio consistent with the risk management strategy pursued and how the Company will assess the effectiveness of the hedging relationship on an ongoing basis.

Management evaluates hedge effectiveness at inception of the hedge instrument and quarterly thereafter generally based on a managed hedge ratio of 1:1. Hedge effectiveness is measured prospectively as the extent to which changes in the fair value or cash flows of the derivative offsets the changes in the fair value or cash flows of the underlying hedged instrument or risk when there is a significant mismatch between the terms of the hedging instrument and the hedged item. Any meaningful imbalance is considered ineffectiveness in the hedge and accounted for accordingly in the consolidated statements of earnings.

Hedges of net investments in foreign operations

The Company uses cross-currency swaps and foreign currency denominated long-term debt to hedge portions of the Company’s net investments in its U.S. and European operations. Foreign exchange translation gains or losses on the net investments and the effective portions of gains or losses on instruments hedging the net investments are recorded in other comprehensive income. Gains or losses relating to the ineffective portion are recognized in consolidated statements of earnings. When the hedged net investment is disposed of, the relevant amount in other comprehensive income is transferred to earnings as part of the gain or loss on disposal.

Cash flowhedges of future revenue and long-term debt

The majority of the Company’s revenue and costs are denominated in a currency other than the Canadian dollar. The risk of foreign exchange fluctuations impacting the results is substantially mitigated by matching the Company’s costs with revenue denominated in the same currency. In certain cases where there is a substantial imbalance for a specific currency, the Company enters into foreign currency forward contracts to hedge the variability in the foreign currency exchange rates.

The Company also uses interest rate and cross-currency swaps to hedge either the cash flow exposure or the foreign exchange exposure of the long-term debt.

The effective portion of the change in fair value of the derivative financial instruments is recognized in other comprehensive income and the ineffective portion, if any, in the consolidated statements of earnings. The effective portion of the change in fair value of the derivatives is reclassified out of other comprehensive income into the consolidated statements of earnings when the hedged item is recognized in the consolidated statements of earnings.

Fair value hedges of Senior U.S. unsecured notes

The Company entered into interest rate swaps to hedge the fair value exposure of the issued fixed rate Senior U.S. unsecured notes. Under the interest rate swaps, the Company receives a fixed rate of interest and pays interest at a variable rate on the notional amount.

The changes in the fair value of the interest rate swaps are recognized in the consolidated statements of earnings as finance costs. The changes in the fair value of the hedged items attributable to the risk hedged is recorded as part of the carrying value of the Senior U.S. unsecured notes and are also recognized in the consolidated statements of earnings as finance costs. If the hedged items are derecognized, the unamortized fair value is recognized immediately in the consolidated statements of earnings.

Cost of hedging

The Company has elected to account for forward element of forward contracts or foreign currency basis spread as costs of hedging. In such cases, the deferred costs of hedging, net of applicable income taxes, are recognized as a separate component of the accumulated other comprehensive income and reclassified in the consolidated statements of earnings when the hedged item is recognized.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

EMPLOYEE BENEFITS

The Company operates both defined benefit and defined contribution post-employment benefit plans.

The cost of defined contribution plans is charged to the consolidated statements of earnings on the basis of contributions payable by the Company during the year.

For defined benefit plans, the defined benefit obligations are calculated by independent actuaries using the projected unit credit method. The retirement benefits obligations in the consolidated balance sheets represent the present value of the defined benefit obligations as reduced by the fair value of plan assets. The retirement benefits assets are recognized to the extent that the Company can benefit from refunds or a reduction in future contributions. Retirement benefits plans that are funded by the payment of insurance premiums are treated as defined contribution plans unless the Company has an obligation either to pay the benefits directly when they fall due or to pay further amounts if assets accumulated with the insurer do not cover all future employee benefits. In such circumstances, the plan is treated as a defined benefit plan.

Insurance policies are treated as plan assets of a defined benefit plan if the proceeds of the policy:

- Can only be used to fund employee benefits;
- Are not available to the Company’s creditors; and
--- ---
- Either cannot be paid to the Company unless the proceeds represent surplus assets not needed to meet all the benefit<br>obligations or are a reimbursement for benefits already paid by the Company.
--- ---

Insurance policies that do not meet the above criteria are treated as non-current investments and are held at fair value as long-term financial assets in the consolidated balance sheets.

The actuarial valuations used to determine the cost of defined benefit pension plans and their present value involve making assumptions about discount rates, future salary and pension increases, inflation rates and mortality. Any changes in these assumptions will impact the carrying amount of pension obligations. In determining the appropriate discount rate, management considers the interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability.

The current service cost is recognized in the consolidated statements of earnings under costs of services, selling and administrative. The net interest cost calculated by applying the discount rate to the net defined benefit liabilities or assets is recognized as net finance cost or income. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefits that relates to past services or the gains or losses on curtailment is recognized immediately in the consolidated statements of earnings. The gains or losses on the settlement of a defined benefit plan are recognized when the settlement occurs.

Remeasurements on defined benefit plans include actuarial gains and losses, changes in the effect of the asset ceiling and the return on plan assets, excluding the amount included in net interest on the net defined liabilities or assets. Remeasurements are charged or credited to other comprehensive income in the period in which they arise.

FISCAL 2020 RESULTS — 87

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

ADOPTION OF ACCOUNTING STANDARDS

The following standards have been adopted by the Company on October 1, 2019:

IFRS 16 - Leases

Adoption IFRS 16 - Leases

In January 2016, the IASB issued IFRS 16, Leases, to set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a lease agreement. The standard supersedes IAS 17, Leases, and other leases related interpretations, eliminates the lessee’s classification of leases as either operating leases or finance leases and introduces a single lessee accounting model. Lessees recognize a right-of-use asset representing its control of, and right to use, the underlying asset and a lease liability representing its obligation to make future lease payments. The Company adopted IFRS 16 using the modified retrospective method, with no restatement of comparative figures. The Company applied the new standard to contracts that were classified as leases under IAS 17 at the date of initial application. The right-of-use assets were recognized as if IFRS 16 had been applied since the commencement date for real estate leases. For all other leases, the right-of-use assets were measured at an amount equal to the lease liability adjusted by the prepaid amount and the accrued lease payment related to the lease in the balance sheet as at September 30, 2019.

The Company made use of the following practical expedients available on transition date: the definition of a lease, the use of hindsight in determining the lease term, the exclusion of initial direct costs from the measurement of the right-of-use asset at the transition date, the usage of a single incremental borrowing rate for a portfolio of leases with reasonably similar characteristics and adjusting the right-of-use assets for any onerous lease provisions as an alternative to an impairment review.

Impacts at adoption date

The following table shows the impacts of the adoption of IFRS 16 on the Company’s consolidated balance sheet as of October 1, 2019:

Balance sheet as atSeptember 30, 2019 Balance sheet      as at October 1, 2019
**** **** $
Assets
Accounts receivable 1,357,090 3,319 1,360,409
Prepaid expenses and other current assets 172,182 (6,365 165,817
Property, plant and equipment 397,661 (21,863 375,798
Right-of-use assets — 701,346 701,346
Other long-term assets 180,480 607 181,087
Deferred tax assets 100,539 14,778 115,317
Other assets 10,413,794 — 10,413,794
**** 12,621,746 691,822 **** 13,313,568
Liabilities
Accounts payable and accrued liabilities 1,108,895 (8,037 1,100,858
Current portion of provisions 73,509 (3,723 69,786
Current portion of long-term debt 113,511 (14,086 99,425
Current portion of lease liabilities — 172,402 172,402
Long-term provisions 24,946 (2,264 22,682
Long-term debt 2,217,696 (16,253 2,201,443
Long-term lease liabilities — 739,123 739,123
Other long-term liabilities 213,392 (64,655 148,737
Deferred tax liabilities 178,265 (16,812 161,453
Other liabilities 1,807,429 — 1,807,429
5,737,643 785,695 6,523,338
Equity
Retained earnings 4,557,855 (93,873 4,463,982
Other equity 2,326,248 — 2,326,248
6,884,103 (93,873 6,790,230
**** 12,621,746 691,822 **** 13,313,568

All values are in US Dollars.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

ADOPTION OF ACCOUNTING STANDARDS (CONTINUED)

IFRS 16 - Leases (continued)

Impacts at adoption date (continued)

Upon adoption of IFRS 16, all operating lease commitments that were presented in the Note 29 of the consolidated financial statements as at September 30, 2019 were recognized as lease liabilities and are now presented in the balance sheet. The Company used its incremental borrowing rates as at October 1, 2019 to measure lease liabilities. The weighted average incremental borrowing rate was 3.69% at the initial application.

The following table reconciles operating lease commitments presented in the consolidated financial statements as at September 30, 2019 and the lease liabilities recognized on October 1, 2019:

Operating lease commitments as at September 30,2019 847,502 ****
Discounted using the weighted average incremental borrowing rate as at October 1, 2019 (96,638 )
Finance lease obligations presented as at September 30, 2019 30,339
Termination options reasonably certain to be exercised (22,748 )
Extension options reasonably certain to be exercised 153,070
Lease liabilities recognized as atOctober 1, 2019 911,525 ****
Current portion of lease liabilities 172,402
Long-term lease liabilities 739,123
Total lease liabilitiesrecognized as at October 1, 2019 911,525 ****

For the year ended September 30, 2020, the impacts of the application of IFRS 16 are a decrease in property costs of $195,848,000 , an increase in amortization and depreciation of $157,974,000, as well as an increase in finance costs of $31,957,000. In addition, the cash provided by operating activities increased by $165,348,000, with the offset presented in the cash provided by (used in) financing activities.

Accounting policies for the fiscal year ended September 30, 2019, under IAS 17, Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognized in PP&E at an amount equal to the fair value of the leased assets or, if lower, the present value of minimum lease payments at the inception of the lease, and then depreciated over the economic useful life of the asset or lease term, whichever is shorter. The capital element of future lease payments is included in the consolidated balance sheets within long-term debt. Interest is charged to the consolidated statements of earnings so as to achieve a constant rate of interest on the remaining balance of the liability.

Lease payments under operating leases are charged to the consolidated statements of earnings on a straight-line basis over the lease term. Operating lease incentives, typically for premises, are recognized as a reduction in rental expense over the lease term.

The Company accrues provisions for onerous leases which consist of estimated costs associated with vacated premises. The provisions reflect the present value of lease payments in excess of the expected sublease proceeds on the remaining term of the lease.

FISCAL 2020 RESULTS — 89

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

3. Summary of significant accounting policies (continued)

ADOPTION OF ACCOUNTING STANDARDS (CONTINUED)

Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform

In September 2019, the IASB has amended some of its requirements to address the uncertainty arising from the planned phasing out of interest-rate benchmarks such as interbank offered rates (IBORs). The amendments provide temporary relief from applying specific hedge accounting requirements affected by the interest rate benchmark reform. The amendments impact IFRS 9 Financialinstruments, IAS 39 Financial instruments: Recognition and measurement and IFRS 7 Financial instruments: Disclosures. The amendments come into effect for annual periods beginning on or after January 1, 2020 but early adoption is permitted. The Company elected to early adopt the Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform as at October 1, 2019 and applied retrospectively the reform to hedging relationship that existed on the application date and to the amount accumulated in the cash flow hedge reserve at that date.

The Company has a debt expiring in December 2023 with a principal amount of U.S.$500,000,000 bearing interest based on the 1 month USD LIBOR rate. The debt has a carrying value of $666,250,000 as at September 30, 2020. The Company has entered into cross-currency interest rate swaps with aggregate notional amounts of U.S.$500,000,000 maturing on the same date as the debt (the hedging instruments) on which it receives interest based on the same 1 month USD LIBOR rate. The cross-currency interest rate swaps were designated as cash flow hedge for the debt.

During the year ended September 30, 2020, the Company entered into a two-year unsecured committed term loan credit facility (the 2020 Term Loan) for a total principal amount of U.S.$1,250,000,000, refer to Note 32. The 2020 Term Loan expires in March 2022, bears interest based on the 1 month USD LIBOR rate and has a carrying value of $1,665,625,000 as at September 30, 2020.

For its hedges relationship, the Company assumes that the LIBOR interest rates used for the settlements on the debts and the swaps will continue to be available beyond the planned phase out date at the end of December 2021.

FUTURE ACCOUNTING STANDARD CHANGES

The following standards have been issued but are not yet effective as of September 30, 2020.

LIBOR reform with amendments to IFRS 9, IAS 29, IFRS 7 and IFRS 16

In August 2020, the IASB issued Interest Rate Benchmark Reform-Phase 2, which amends IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures and IFRS 16 Leases. The amendments complement those issued in 2019 and focus on the effects on financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate as a result of the reform. The standard will be effective on October 1, 2021 for the Company. The Company is currently evaluating the impact of this standard on its financial statements.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

4. Accounts receivable
As atSeptember 30, 2020
--- --- --- ---
**** $
Trade (Note 32) **** 904,887 979,728
R&D and other tax credits^1^ **** 180,953 259,289
Other **** 133,462 118,073
**** 1,219,302 1,357,090

All values are in US Dollars.

^1^ R&D and other tax credits were related to government programs in Canada, the United States, France, the United Kingdom<br>and other countries.
5. Funds held for clients
--- ---
As atSeptember 30, 2020
--- --- --- ---
**** $
Cash **** 576,708 187,823
Long-term bonds (Note<br>32) **** 148,470 180,289
**** 725,178 368,112

All values are in US Dollars.

FISCAL 2020 RESULTS — 91

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

6. Property, plant and equipment
Land andbuildings Leaseholdimprovements Furniture,fixtures andequipment Computerequipment Total
--- --- --- --- --- --- --- --- --- --- ---
**** **** **** **** ****
Cost
As at September 30, 2019 58,614 224,559 180,638 714,629 1,178,440
Adoption of IFRS 16 (Note<br>3) — — (14,578 (40,357 (54,935
As at October 1, 2019 58,614 224,559 166,060 674,272 1,123,505
Additions 5,759 28,188 12,225 79,057 125,229
Additions - business acquisitions (Note 27a) 12,730 1,013 2,683 2,474 18,900
Disposals/retirements — (17,160 (19,405 (118,490 (155,055
Foreign currency translation adjustment 2,178 4,942 3,656 24,578 35,354
As at September 30,2020 **** 79,281 **** 241,542 **** 165,219 **** 661,891 **** 1,147,933
Accumulated depreciation
As at September 30, 2019 16,961 139,726 118,672 505,420 780,779
Adoption of IFRS 16 (Note<br>3) — — (8,285 (24,787 (33,072
As at October 1, 2019 16,961 139,726 110,387 480,633 747,707
Depreciation expense (Note 24) 1,895 24,965 14,240 115,490 156,590
Impairment (Note 24) — — — 1,035 1,035
Disposals/retirements — (17,160 (19,021 (117,681 (153,862
Foreign currency translation adjustment 1,268 3,041 2,454 16,754 23,517
As at September 30,2020 **** 20,124 **** 150,572 **** 108,060 **** 496,231 **** 774,987
Net carrying amount as at September 30,2020 **** 59,157 **** 90,970 **** 57,159 **** 165,660 **** 372,946
Land and<br>buildings Leasehold<br>improvements Furniture,<br>fixtures and<br>equipment Computer<br>equipment Total
Cost
As at September 30, 2018 58,455 204,888 164,634 686,499 1,114,476
Additions 619 40,915 19,568 104,887 165,989
Additions - business acquisitions (Note 27b) — 5,320 981 1,374 7,675
Disposals/retirements — (25,565 (4,146 (67,291 (97,002
Foreign currency translation adjustment (460 (999 (399 (10,840 (12,698
As at September 30,<br>2019 58,614 224,559 180,638 714,629 1,178,440
Accumulated depreciation
As at September 30, 2018 14,652 144,275 106,223 461,233 726,383
Depreciation expense (Note 24) 2,601 21,021 16,428 119,214 159,264
Disposals/retirements — (25,099 (3,836 (67,223 (96,158
Foreign currency translation adjustment (292 (471 (143 (7,804 (8,710
As at September 30,<br>2019 16,961 139,726 118,672 505,420 780,779
Net carrying amount as at September 30, 2019 41,653 84,833 61,966 209,209 397,661

All values are in US Dollars.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

7. Right-of-use assets
Properties Motor vehicles andothers Computerequipment Total
--- --- --- --- --- --- --- --- ---
**** **** **** ****
Cost
As at September 30, 2019 — — — —
Adoption of IFRS 16 (Note<br>3) 1,070,987 230,707 40,357 1,342,051
As at October 1, 2019 1,070,987 230,707 40,357 1,342,051
Additions 59,556 56,976 2,390 118,922
Additions - business acquisitions (Note 27a) 11,859 — — 11,859
Change in estimates and lease modifications (6,460 — — (6,460
Disposals/retirements (56,986 (61,941 (3,110 (122,037
Foreign currency translation adjustment 45,302 8,234 1,328 54,864
As at September 30,2020 **** 1,124,258 **** 233,976 **** 40,965 **** 1,399,199
Accumulated depreciation
As at September 30, 2019 — — — —
Adoption of IFRS 16 (Note<br>3) 546,537 69,381 24,787 640,705
As at October 1, 2019 546,537 69,381 24,787 640,705
Depreciation expense (Note 24) 127,931 33,140 7,168 168,239
Impairment (Note 24) 8,361 — — 8,361
Disposals/retirements (56,986 (52,467 (3,110 (112,563
Foreign currency translation adjustment 24,028 2,803 761 27,592
As at September 30,2020 **** 649,871 **** 52,857 **** 29,606 **** 732,334
Net carrying amount as at September 30,2020 **** 474,387 **** 181,119 **** 11,359 **** 666,865

All values are in US Dollars.

FISCAL 2020 RESULTS — 93

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

8. Contract costs
--- --- --- --- --- --- --- ---
Cost
**** $
Transition costs **** 477,174 246,468 230,706 476,075 258,283 217,792
Incentives **** 67,545 58,875 8,670 61,258 56,085 5,173
**** 544,719 305,343 239,376 537,333 314,368 222,965

All values are in US Dollars.

9. Intangible assets
Internal-usesoftwareacquired Internal-usesoftwareinternallydeveloped Businesssolutionsacquired Businesssolutionsinternallydeveloped Softwarelicenses Clientrelationships Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
**** **** **** **** **** **** ****
Cost
As at September 30, 2019 99,204 123,289 81,028 511,384 221,510 1,095,339 2,131,754
Additions 929 9,861 229 88,900 10,738 — 110,657
Additions - business acquisitions (Note 27a) — — — — 507 47,303 47,810
Disposals/retirements (4,652 (2,826 (7,506 (34,810 (47,888 (2,376 (100,058
Foreign currency translation adjustment 1,419 974 2,527 5,541 5,505 47,596 63,562
As at September 30,2020 **** 96,900 **** 131,298 **** 76,278 **** 571,015 **** 190,372 **** 1,187,862 **** 2,253,725
Accumulated amortization
As at September 30, 2019 80,467 69,095 79,907 317,846 159,591 906,866 1,613,772
Amortization expense (Note 24) 7,336 12,986 316 41,928 26,411 68,401 157,378
Impairment (Note 24) — — — 10,633 — — 10,633
Disposals/retirements (4,652 (2,826 (7,506 (34,810 (47,146 (453 (97,393
Foreign currency translation adjustment 1,280 490 2,453 2,525 3,600 37,525 47,873
As at September 30,2020 **** 84,431 **** 79,745 **** 75,170 **** 338,122 **** 142,456 **** 1,012,339 **** 1,732,263
Net carrying amount as at September 30,2020 **** 12,469 **** 51,553 **** 1,108 **** 232,893 **** 47,916 **** 175,523 **** 521,462
Internal-use<br>software<br>acquired Internal-use<br>software<br>internally<br>developed Business<br>solutions<br>acquired Business<br>solutions<br>internally<br>developed Software<br>licenses Client<br>relationships Total
Cost
As at September 30, 2018 95,707 114,701 82,256 444,593 216,490 1,025,083 1,978,830
Additions 4,321 9,433 911 61,693 20,196 — 96,554
Additions - business acquisitions (Note 27b) 77 — — — 201 113,786 114,064
Disposals/retirements (436 (326 (803 (46 (13,281 (24,321 (39,213
Foreign currency translation adjustment (465 (519 (1,336 5,144 (2,096 (19,209 (18,481
As at September 30,<br>2019 99,204 123,289 81,028 511,384 221,510 1,095,339 2,131,754
Accumulated amortization
As at September 30, 2018 72,177 58,212 80,586 277,092 145,078 866,359 1,499,504
Amortization expense (Note 24) 8,872 11,513 1,319 37,318 29,356 76,182 164,560
Disposals/retirements (436 (326 (803 (46 (13,247 (24,321 (39,179
Foreign currency translation adjustment (146 (304 (1,195 3,482 (1,596 (11,354 (11,113
As at September 30,<br>2019 80,467 69,095 79,907 317,846 159,591 906,866 1,613,772
Net carrying amount as at September 30, 2019 18,737 54,194 1,121 193,538 61,919 188,473 517,982

All values are in US Dollars.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

10. Other long-term assets
As atSeptember 30, 2020
--- --- --- ---
**** $
Prepaid long-term maintenance agreements **** 17,567 20,532
Insurance contracts held to fund defined benefit pension and life assurance arrangements -<br>reimbursement rights (Note 17) **** 24,033 23,879
Retirement benefits assets (Note 17) **** 86,127 96,620
Deposits **** 13,312 13,999
Deferred financing fees **** 3,408 3,798
Other **** 19,292 21,652
**** 163,739 180,480
11.  Long-term financial assets
As atSeptember 30, 2020
**** $
Deferred compensation plan assets (Notes 17 and 32) **** 73,156 62,627
Long-term investments (Note 32) **** 22,612 24,596
Long-term receivables **** 20,623 18,034
Long-term derivative financial instruments (Note 32) **** 40,178 71,642
**** 156,569 176,899

All values are in US Dollars.

FISCAL 2020 RESULTS — 95

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

12. Goodwill

Effective October 1, 2019, the Company realigned its management structure, resulting primarily in the creation of two new operating segments, namely Scandinavia (Sweden, Denmark and Norway) and Finland, Poland and Baltics, collectively formerly known as Northern Europe in the prior fiscal year. As a result, the Company is now managed through nine operating segments, namely: Western and Southern Europe (primarily France, Portugal and Belgium); United States (U.S.) Commercial and State Government; Canada; U.S. Federal; United Kingdom (U.K.) and Australia; Central and Eastern Europe (primarily Germany and Netherlands); Scandinavia; Finland, Poland and Baltics; and Asia Pacific Global Delivery Centers of Excellence (mainly India and Philippines) (Asia Pacific). This realignment of management structure also included, to a lesser extent, transfers of some lines of business between our operating segments.

Due to the changes in operating segments and that CGUs correspond to the operating segments, the Company reallocated goodwill to the revised CGUs using their relative fair value.

The operating segments reflect the fiscal year 2020 management structure and the way that the chief operating decision-maker, who is the President and Chief Executive Officer of the Company, evaluates the business.

The Company completed the annual impairment test during the fourth quarter of the fiscal year 2020 and did not identify any impairment.

The variations in goodwill were as follows:

Western<br><br><br>and<br> <br>SouthernEurope U.K. andAustralia Finland,Poland<br><br><br>and<br> <br>Baltics
**** **** ****
As at September 30, 2019 975,075 1,134,246 1,136,737 918,064 806,318 820,565 1,703,927 — 272,905 7,767,837
Business acquisitions (Note 27) 32,272 — 5,411 86,882 53,021 95,285 (6,604 — — 266,267
Goodwill reallocation — 6,324 — (6,324 — — (613,472 613,472 — —
Sale of business — — — — — — (3,411 — — (3,411
Foreign currency translation adjustment 81,752 6,737 — 540 45,633 69,999 89,433 46,406 8,738 349,238
As at September 30,2020 **** 1,089,099 1,147,307 1,142,148 999,162 **** 904,972 985,849 1,169,873 **** 659,878 281,643 8,379,931

All values are in US Dollars.

Key assumptions in goodwill impairment testing

The key assumptions for the CGUs are disclosed in the following tables for the years ended September 30:

2020 WesternandSouthernEurope U.S.Commercialand StateGovernment Canada U.S.Federal U.K. andAustralia Central andEasternEurope Scandinavia Finland,PolandandBaltics AsiaPacific
**** % **** % **** % **** % **** % **** % **** % **** % **** %
Pre-tax WACC **** 11.2 **** 9.3 **** 9.6 **** 8.5 **** 9.3 **** 10.2 **** 10.0 **** 10.8 **** 23.0
Long-term growth rate of net operating cash flows^1^ **** 1.7 **** 2.0 **** 2.0 **** 2.0 **** 2.0 **** 1.9 **** 1.9 **** 1.7 **** 2.0
2019 WesternandSouthernEurope U.S.Commercialand StateGovernment Canada U.S.Federal U.K. andAustralia Central andEasternEurope Northern<br><br><br>Europe AsiaPacific
% % % % % % % %
Pre-tax WACC 9.1 10.0 8.9 9.9 8.9 9.1 9.4 21.4
Long-term growth rate of net operating cash flows^1^ 1.8 2.0 2.0 2.0 1.9 1.5 1.8 2.0
^1^ The long-term growth rate is based on published industry research.
--- ---

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

13. Provisions
Restructuring^1^ Decommissioningliabilities^2^ Others^3^ Total
--- --- --- --- --- --- --- --- ---
**** **** **** ****
As at September 30, 2019 39,212 25,824 33,419 98,455
Adoption of IFRS 16 (Note<br>3) — — (5,987 (5,987
As at October 1, 2019 39,212 25,824 27,432 92,468
Additional provisions 193,592 5,328 34,842 233,762
Business acquisitions — 351 24,823 25,174
Utilized amounts (119,331 (3,667 (24,091 (147,089
Reversals of unused amounts — (3,006 (6,532 (9,538
Discount rate adjustment and imputed interest — 158 — 158
Foreign currency translation adjustment 1,799 1,573 1,213 4,585
As at September 30,2020 **** 115,272 **** 26,561 **** 57,687 **** 199,520
Current portion **** 112,731 **** 8,609 **** 54,292 **** 175,632
Non-current portion **** 2,541 **** 17,952 **** 3,395 **** 23,888

All values are in US Dollars.

^1^ See Note 25, Restructuring costs and Note 27c), Investments in subsidiaries.
^2^ As at September 30, 2020, the decommissioning liabilities were based on the expected cash flows of $27,390,000 and<br>were discounted at a weighted average rate of 0.59%. The timing of settlements of these obligations ranges between one and thirteen years as at September 30, 2020. The reversals of unused amounts are mostly due to favourable settlements.<br>
--- ---
^3^ As at September 30, 2020, others included onerous revenue-generating contracts, onerous supplier contracts and<br>litigation and claims.
--- ---

FISCAL 2020 RESULTS — 97

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

14. Long-term debt
--- --- ---
$
Senior U.S. unsecured note repayable of 333,125 (U.S.250,000) in December 20211 339,682 332,533
Senior unsecured notes repayable in September by tranches of 73,288 (U.S.55,000) in 2021, 399,750<br>(U.S.300,000) in 2024, 266,500 (U.S.200,000) in four yearly repayments of U.S.50,000 from 2021 to 2024 and 132,787 (85,000) in 20212 872,283 924,021
Unsecured committed revolving credit facility3 — 334,370
Unsecured committed term loan credit facilities4 2,330,288 661,939
Obligations under finance leases repayable in blended monthly installments (maturing at various dates<br>until 2024, bearing a weighted average interest rate of 2.44% in 2019) (Note 3) — 30,339
Other long-term debt 44,842 48,005
3,587,095 2,331,207
Current portion 310,764 113,511
3,276,331 2,217,696

All values are in US Dollars.

^1^ As at September 30, 2020, an amount of $333,125,000 was borrowed, plus fair value adjustments relating to interest<br>rate swaps designated as fair value hedges of $6,470,000 and less financing fees. The private placement financing with U.S. institutional investors is comprised of one tranche of Senior U.S. unsecured note, due in December 2021, with an interest<br>rate of 4.99% (interest rate of 4.99% in 2019). The Senior U.S. unsecured note contains covenants that require the Company to maintain certain financial ratios (Note 33). As at September 30, 2020, the Company was in compliance with these<br>covenants.
^2^ As at September 30, 2020, an amount of $872,325,000 was borrowed, less financing fees. The private placement is<br>comprised of three tranches of Senior U.S. unsecured notes and one tranche of Senior euro unsecured note, with a weighted average maturity of 2.8 years and a weighted average interest rate of 3.64% (3.66% in 2019). In September 2020, the Company<br>repaid the third of the seven yearly scheduled repayments of U.S.$50,000,000 on a tranche of the Senior U.S. unsecured notes for a total amount of $65,860,000 and settled the related cross-currency swaps (Note 32). The Senior unsecured notes contain<br>covenants that require the Company to maintain certain financial ratios (Note 33). As at September 30, 2020, the Company was in compliance with these covenants.
--- ---
^3^ The Company has an unsecured committed revolving credit facility available for an amount of $1,500,000,000 that expires in<br>December 2024. This facility bears interest at bankers’ acceptance, LIBOR or Canadian prime, plus a variable margin that is determined based on the Company’s leverage ratio. As at September 30, 2020, there was no amount drawn upon<br>this facility. An amount of $9,699,000 has been committed against this facility to cover various letters of credit issued for clients and other parties. The unsecured committed revolving credit facility contains covenants that require the Company to<br>maintain certain financial ratios (Note 33). As at September 30, 2020, the Company was in compliance with these covenants.
--- ---
^4^ During the year ended September 30, 2020, the Company entered into the 2020 Term Loan for a total principal amount of<br>U.S.$1,250,000,000 (Note 32). The 2020 Term Loan expires in March 2022, bears interest based on the 1 month USD LIBOR rate, plus a variable margin that is determined based on the Company’s leverage ratio. As at September 30, 2020, an<br>amount of $1,665,625,000 was borrowed less financing fees with a weighted average interest rate of 0.16% and a margin of 1.50%. In addition, the Company has an unsecured committed term loan credit facility for a notional amount of U.S.$500,000,000<br>expiring in December 2023. This facility bears interest based on the 1 month USD LIBOR rate, plus a variable margin that is determined based on the Company’s leverage ratio. As at September 30, 2020, an amount of $666,250,000 was borrowed<br>less financing fees with a weighted average interest rate ratio of 0.16% and a margin of 1.00%. The unsecured committed term loan credit facilities contains covenants that require the Company to maintain certain financial ratios (Note 33). As at<br>September 30, 2020, the Company was in compliance with these covenants.
--- ---

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

15. Other long-term liabilities
As atSeptember 30, 2020
--- --- --- ---
**** $
Deferred revenue **** 38,466 70,522
Deferred compensation plan liabilities (Note<br>17) **** 82,221 63,838
Deferred rent (Note 3) **** — 64,655
Other^1^ **** 64,687 14,377
**** 185,374 213,392

All values are in US Dollars.

1 As at September 30, 2020, other is mainly composed of $48,299,000 in relation with the deferral of the employer side<br>social security payments under the U.S. Government Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
16. Income taxes
--- ---
Year ended September 30
--- --- --- ---
**** 2020 2019
****
Current income tax expense
Current income tax expense in respect of the current year **** 416,563 439,972
Adjustments recognized in the current year in<br>relation to the income tax expense of prior years **** (24,328 (17,934
Total current income tax expense **** 392,235 422,038
Deferred income tax expense (recovery)
Deferred income tax recovery relating to the origination and reversal of<br>temporary differences **** (1,120 (959
Deferred income tax (recovery) expense relating to changes in tax rates **** (3,479 784
Adjustments recognized in the current year in relation to the deferred income<br>tax recovery of prior years **** 10,769 —
Recognition of previously unrecognized temporary<br>differences **** — (8,122
Total deferred income tax expense<br>(recovery) **** 6,170 (8,297
Total income tax expense **** 398,405 413,741

All values are in US Dollars.

The Company’s effective income tax rate differs from the combined Federal and Provincial Canadian statutory tax rate as follows:

Year ended September 30
**** 2020 **** 2019
**** % **** %
Company’s statutory tax rate **** 26.5 **** 26.6
Effect of foreign tax rate differences **** (0.9 ) (1.6 )
Final determination from agreements with tax authorities and expirations of<br>statutes of limitations **** (0.9 ) (1.4 )
Non-deductible and tax exempt<br>items **** 0.2 **** 0.2
Effect of integration-related costs **** 0.7 **** 0.1
Minimum income tax charge **** 0.9 **** 0.8
Changes in tax laws and rates **** (0.2 ) —
Effective income tax rate **** 26.3 **** 24.7

FISCAL 2020 RESULTS — 99

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

16. Income taxes (continued)

The continuity schedule of deferred tax balances is as follows:

As atSeptember30, 2019 Adoption<br>of IFRS 16 (Note 3) As atOctober1, 2020 Additionsfrombusiness<br>acquisitions Recognized<br>in earnings Recognized<br>in othercomprehensive income Recognized<br>in equity Foreign currencytranslationadjustment andother As atSeptember30, 2020
Accounts payable and accrued liabilities, provisions and other long-term liabilities ) ) ****
Tax benefits on losses carried forward ) ****
Accrued compensation ) ) ****
Retirement benefits obligations ) ****
Lease liabilities ) ****
PP&E, contract costs, intangible assets and other long-term assets ) ) ) ) ) )
Right-of-use<br>assets ) ) ) ) )
Work in progress ) ) ) )
Goodwill ) ) ) ) ) )
Refundable tax credits on salaries ) ) )
Cash flow hedges ) ) ) )
Other ) ) ) ****
Deferred taxes, net ) **** ) ) ) **** ) **** )

All values are in US Dollars.

As atSeptember30, 2018 Additions frombusiness<br>acquisitions Recognized inearnings Recognized<br>in othercomprehensive income Recognizedin equity Foreign currencytranslationadjustment andother As atSeptember30, 2019
Accounts payable and accrued liabilities, provisions and other long-term liabilities ) )
Tax benefits on losses carried forward ) )
Accrued compensation
Retirement benefits obligations ) ) )
Allowance for doubtful accounts )
PP&E, contract costs, intangible assets and other long-term assets ) ) ) )
Work in progress ) ) )
Goodwill ) ) ) )
Refundable tax credits on salaries ) )
Cash flow hedges ) ) )
Other ) ) ) )
Deferred taxes, net ) ) ) ) )

All values are in US Dollars.

The deferred tax balances are presented as follows in the consolidated balance sheets:

As atSeptember 30, 2020 As at<br>September 30, 2019
****
Deferred tax assets **** 113,484 100,539
Deferred tax liabilities **** (158,341 (178,265
**** (44,857 (77,726

All values are in US Dollars.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

16. Income taxes (continued)

As at September 30, 2020, the Company had $291,255,000 ($367,352,000 as at September 30, 2019) in operating tax losses carried forward, of which $59,390,000 ($37,480,000 as at September 30, 2019) expire at various dates from 2029 to 2040 and $231,865,000 ($329,872,000 as at September 30, 2019) have no expiry dates. As at September 30, 2020, a deferred income tax asset of $41,380,000 ($54,814,000 as at September 30, 2019) has been recognized on $217,563,000 ($289,976,000 as at September 30, 2019) of these losses. The deferred income tax assets are recognized only to the extent that it is probable that taxable income will be available against which the unused tax losses can be utilized. As at September 30, 2020, the Company had $31,639,000 ($29,287,000 as at September 30, 2019) of the unrecognized operating tax losses that will expire at various dates from 2029 to 2032 and 42,053,000 ($48,089,000 as at September 30, 2019) that have no expiry date.

As at September 30, 2020, the Company had $485,546,000 ($471,772,000 as at September 30, 2019) in non-operating tax losses carried forward that have no expiry dates. As at September 30, 2020, a deferred income tax asset of $4,848,000 ($4,349,000 as at September 30, 2019) has been recognized on $19,436,000 ($18,151,000 as at September 30, 2019) of these losses. As at September 30, 2020, the Company had $466,110,000 ($453,621,000 as at September 30, 2019) of unrecognized non-operating tax losses.

As at September 30, 2020, the Company had $836,101,000 ($149,121,000 as at September 30, 2019) of cash and cash equivalents held by foreign subsidiaries. The tax implications of the repatriation of cash and cash equivalents not considered indefinitely reinvested have been accounted for and will not materially affect the Company’s liquidity. In addition, the Company has not recorded deferred tax liabilities on undistributed earnings of $5,565,437,000 ($4,457,906,000 as at September 30, 2019) coming from its foreign subsidiaries as they are considered indefinitely reinvested. Upon distribution of these earnings in the form of dividends or otherwise, the Company may be subject to taxation.

On September 30, 2019, the Company recorded a deferred tax asset of $18,500,000 attributable to the recognition of additional operating tax losses following a settlement with the German tax authority.

FISCAL 2020 RESULTS — 101

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits

The Company operates various post-employment plans, including defined benefit and defined contribution pension plans as well as other benefit plans for its employees.

DEFINED BENEFIT PLANS

The Company operates defined benefit pension plans primarily for the benefit of employees in the U.K., Germany and France, with smaller plans in other countries. The benefits are based on pensionable salary and years of service and are funded with assets held in separate funds.

The defined benefit plans expose the Company to interest risk, inflation risk, longevity risk, currency risk and market investment risk.

The following description focuses mainly on plans registered in the U.K., Germany and France:

U.K.

In the U.K., the Company has three defined benefit pension plans, the CMG U.K. Pension Scheme, the Logica U.K. Pension & Life Assurance Scheme and the Logica Defined Benefit Pension Plan.

The CMG U.K. Pension Scheme is closed to new members and is closed to further accrual of rights for existing members. The Logica U.K. Pension & Life Assurance Scheme is still open but only for employees who come from the civil service with protected pensions. The Logica Defined Benefit Pension Plan was created to mirror the Electricity Supply Pension Scheme and was created for employees that worked for National Grid and Welsh Water with protected benefits.

Both the Logica U.K. Pension & Life Assurance Scheme and the Logica Defined Benefit Pension Plan are employer and employee based contribution plans.

The trustees are the custodians of the defined benefit pension plans and are responsible for the plan administration, including investment strategies. The trustees review periodically the investment and the asset allocation policies. As such, the CMG U.K. Pension Scheme policy is to target an allocation up to a maximum of 70% to return-seeking assets such as equities; the Logica U.K. Pension & Life Assurance Scheme policy is to invest 15% of the scheme assets in equities and 85% in bonds; and the Logica Defined Benefit Pension Plan policy is to invest 30% of the plan assets in equities and 70% in bonds.

The U.K. Pensions Act 2004 requires that full formal actuarial valuations are carried out at least every three years to determine the contributions that the Company should pay in order for the plan to meet its statutory objective, taking into account the assets already held. In the interim years, the trustees need to obtain estimated funding updates unless the scheme has less than 100 members in total.

The latest funding actuarial valuations of the three defined benefit pension plans described above were performed as at September 30, 2018 and the results were finalized during the year ended September 30, 2020 with the following recommendations:

– The actuarial valuation of the CMG U.K. Pension Scheme reported a deficit of $26,546,000. A new recovery plan was<br>proposed, and during fiscal 2020, the Company contributed a total amount of $12,432,000 to ensure that the funding objectives of the scheme were met, and stopped the contributions on June 30, 2020 accordingly to the plan. The Company also<br>contributed an amount of $1,279,000 to cover administration expenses; and
– The actuarial valuation of the Logica Defined Benefit Pension Plan specified that no supplementary contributions were<br>required after November 30, 2019 in order to reach the plan funding objectives. During fiscal 2020, the Company contributed a total amount of $344,200 and then stopped the contributions.
--- ---

Germany

In Germany, the Company has numerous defined benefit pension plans which are all closed to new members. In the majority of the plans, upon retirement of employees, the benefits are in the form of a monthly pension and in a few plans, the employees receive an indemnity in the form of a lump-sum payment. About one third of the plans are bound by the former Works Council agreements. There are no mandatory funding requirements. The plans are funded by the contributions made by the Company. In some plans, insurance policies are taken out to fund retirement benefit plans. These do not qualify as plan assets and are presented as reimbursement rights, unless they are part of a reinsured support fund or are pledged to the employees.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

France

In France, the retirement indemnities are provided in accordance with the Labour Code. Upon retirement, employees receive an indemnity, depending on the salary and seniority in the Company, in the form of a lump-sum payment.

The following tables present amounts for post-employment benefits plans included in the consolidated balance sheets:

As at September 30, 2020 U.K. Germany France Other Total
Defined benefit obligations (891,628 (104,090 (84,442 (83,584 (1,163,744
Fair value of plan assets 977,137 12,766 692 33,829 1,024,424
85,509 (91,324 (83,750 (49,755 (139,320
Fair value of reimbursement rights — 22,505 — 1,528 24,033
Net asset (liability) recognized in the balance sheet 85,509 (68,819 (83,750 (48,227 (115,287
Presented as:
Other long-term assets (Note 10)
Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement<br>rights — 22,505 — 1,528 24,033
Retirement benefits assets 85,509 — — 618 86,127
Retirement benefits obligations — (91,324 (83,750 (50,373 (225,447
85,509 (68,819 (83,750 (48,227 (115,287
As at September 30, 2019 U.K. Germany France Other Total
Defined benefit obligations (812,179 (101,298 (58,048 (73,059 (1,044,584
Fair value of plan assets 908,406 12,803 — 26,786 947,995
96,227 (88,495 (58,048 (46,273 (96,589
Fair value of reimbursement rights — 22,360 — 1,519 23,879
Net asset (liability) recognized in the balance sheet 96,227 (66,135 (58,048 (44,754 (72,710
Presented as:
Other long-term assets (Note 10)
Insurance contracts held to fund defined benefit pension and life assurance arrangements - reimbursement<br>rights — 22,360 — 1,519 23,879
Retirement benefits assets 96,227 — — 393 96,620
Retirement benefits obligations — (88,495 (58,048 (46,666 (193,209
96,227 (66,135 (58,048 (44,754 (72,710

All values are in US Dollars.

FISCAL 2020 RESULTS — 103

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

Defined benefit obligations U.K. Germany France Other Total
As at September 30, 2019 812,179 101,298 58,048 73,059 1,044,584
Current service cost 1,060 776 4,665 7,974 14,475
Interest cost 15,253 576 347 2,878 19,054
Business acquisitions (Note 27a) — — 1,732 — 1,732
Actuarial losses (gains) due to change in financial<br>assumptions^1^ 36,135 (1,258 4,279 1,138 40,294
Actuarial losses due to change in demographic assumptions^1^ 17,671 — 6,401 — 24,072
Actuarial (gains) losses due to experience^1^ (8,033 (530 4,054 (1,374 (5,883
Plan participant contributions 91 — — — 91
Benefits paid from the plan (28,793 (1,645 — (2,426 (32,864
Benefits paid directly by employer — (2,787 (454 (1,832 (5,073
Foreign currency translation adjustment^1^ 46,065 7,660 5,370 4,167 63,262
As at September 30,2020 891,628 104,090 84,442 83,584 1,163,744
Defined benefit obligations of unfunded plans — — 84,442 35,070 119,512
Defined benefit obligations of funded plans 891,628 104,090 — 48,514 1,044,232
As at September 30,2020 891,628 104,090 84,442 83,584 1,163,744
Defined benefit obligations U.K. Germany France Other Total
As at September 30, 2018 760,244 89,959 55,276 58,594 964,073
Current service cost 889 689 4,251 6,547 12,376
Interest cost 21,261 1,512 950 3,558 27,281
Past service cost 8,239 — — — 8,239
Business acquisitions (Note 27b) — 1,444 — 6,550 7,994
Actuarial losses due to change in financial assumptions^1^ 99,257 15,253 7,806 7,072 129,388
Actuarial gains due to change in demographic assumptions^1^ (6,947 (292 (6,667 (1,802 (15,708
Actuarial (gains) losses due to experience^1^ (16,773 1,065 (11 (1,389 (17,108
Plan participant contributions 102 — — — 102
Benefits paid from the plan (25,395 (263 — (3,228 (28,886
Benefits paid directly by employer — (4,020 (1,248 (1,831 (7,099
Foreign currency translation adjustment^1^ (28,698 (4,049 (2,309 (1,012 (36,068
As at September 30, 2019 812,179 101,298 58,048 73,059 1,044,584
Defined benefit obligations of unfunded plans — — 58,048 34,690 92,738
Defined benefit obligations of funded plans 812,179 101,298 — 38,369 951,846
As at September 30, 2019 812,179 101,298 58,048 73,059 1,044,584

All values are in US Dollars.

^1^ Amounts recognized in other comprehensive income.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

Plan assets and reimbursement rights U.K. Germany France Other Total
As at September 30, 2019 908,406 35,163 — 28,305 971,874
Interest income on plan assets 17,255 204 3 964 18,426
Business acquisitions (Note 27a) — — 664 — 664
Employer contributions 14,398 2,430 454 6,874 24,156
Return on assets excluding interest income^1^ 15,976 46 — (396 15,626
Plan participants contributions 91 — — — 91
Benefits paid from the plan (28,793 (1,645 — (2,426 (32,864
Benefits paid directly by employer — (2,787 (454 (1,831 (5,072
Administration expenses paid from the plan (1,189 — — (58 (1,247
Foreign currency translation adjustment^1^ 50,993 1,860 25 3,925 56,803
As at September 30, 2020 977,137 35,271 692 35,357 1,048,457
Plan assets 977,137 12,766 692 33,829 1,024,424
Reimbursement rights — 22,505 — 1,528 24,033
As at September 30, 2020 977,137 35,271 692 35,357 1,048,457
Plan assets and reimbursement rights U.K. Germany France Other Total
As at September 30, 2018 787,550 36,420 — 22,903 846,873
Interest income on plan assets 22,271 620 — 2,425 25,316
Employer contributions 24,430 2,765 1,248 7,025 35,468
Return on assets excluding interest income^1^ 133,821 (784 — 669 133,706
Plan participants contributions 102 — — — 102
Benefits paid from the plan (25,395 (263 — (3,228 (28,886
Benefits paid directly by employer — (2,576 (1,248 (1,831 (5,655
Administration expenses paid from the plan (1,696 — — (152 (1,848
Foreign currency translation adjustment^1^ (32,677 (1,019 — 494 (33,202
As at September 30, 2019 908,406 35,163 — 28,305 971,874
Plan assets 908,406 12,803 — 26,786 947,995
Reimbursement rights — 22,360 — 1,519 23,879
As at September 30, 2019 908,406 35,163 — 28,305 971,874

All values are in US Dollars.

^1^ Amounts recognized in other comprehensive income.

FISCAL 2020 RESULTS — 105

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

The plan assets at the end of the years consist of:

As at September 30, 2020 U.K. Germany France Other Total
$ $ $ $ $
Quoted equities 472,318 — — — 472,318
Quoted bonds 93,003 — — — 93,003
Cash 52,230 — — 88 52,318
Other^1^ 359,586 12,766 692 33,741 406,785
977,137 12,766 692 33,829 1,024,424
As at September 30, 2019 U.K. Germany France Other Total
$ $ $ $ $
Quoted equities 366,203 — — — 366,203
Quoted bonds 200,599 — — — 200,599
Cash 111,454 — — 91 111,545
Other^1^ 230,150 12,803 — 26,695 269,648
908,406 12,803 — 26,786 947,995
^1^ Other is mainly composed of various insurance policies and quoted investment funds to cover some of the defined benefit<br>obligations.
--- ---

Plan assets do not include any shares of the Company, property occupied by the Company or any other assets used by the Company.

The following table summarizes the expense^1^ recognized in the consolidated statements of earnings:

Year ended September 30
2020 2019
$ $
Current service cost 14,475 12,376
Past service cost — 8,239
Net interest on net defined benefit obligations or assets 629 1,965
Administration expenses 1,247 1,848
16,351 24,428
^1^ The expense was presented as costs of services, selling and administrative for an amount of $14,475,000 and as net<br>finance costs for an amount of $1,876,000 (Note 26) ($20,615,000 and $3,813,000, respectively for the year ended September 30, 2019).
--- ---

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

Actuarial assumptions

The following are the principal actuarial assumptions (expressed as weighted averages). The assumed discount rates, future salary and pension increases, inflation rates and mortality all have a significant effect on the accounting valuation.

As at September 30, 2020 U.K Germany France Other
% % % %
Discount rate 1.53 0.65 0.65 3.11
Future salary increases 2.84 2.50 3.79 1.51
Future pension increases 2.82 1.50 — 2.51
Inflation rate 2.84 2.00 2.00 0.08
As at September 30, 2019 U.K. Germany France Other
% % % %
Discount rate 1.82 0.56 0.56 3.05
Future salary increases 3.03 2.50 3.29 1.07
Future pension increases 3.00 1.50 — 0.06
Inflation rate 3.03 2.00 2.00 2.40

The average longevity over 65 of a member presently at age 45 and 65 are as follows:

As at September 30, 2020 U.K. Germany
(in years )
Longevity at age 65 for current members
Males 21.8 20.0
Females 23.7 23.0
Longevity at age 45 for current members
Males 23.2 24.0
Females 25.3 26.0
As at September 30, 2019 U.K. Germany
(in years ) ****
Longevity at age 65 for current members
Males 21.8 20.0
Females 23.1 23.0
Longevity at age 45 for current members
Males 23.6 24.0
Females 25.2 26.0

FISCAL 2020 RESULTS — 107

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

Actuarial assumptions (continued)

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each country. Mortality assumptions for the most significant countries are based on the following post-retirement mortality tables for the year ended September 30, 2020: (1) U.K.: 100% S2PxA (year of birth) plus CMI_2018 projections with 1.25% p.a. minimum long term improvement rate, (2) Germany: Heubeck RT2018G and (3) France: INSEE TVTD 2014-2016.

The following tables show the sensitivity of the defined benefit obligations to changes in the principal actuarial assumptions:

As at September 30, 2020 U.K. Germany France
Increase of 0.25% in the discount rate (36,622 (3,445 (2,936
Decrease of 0.25% in the discount rate 38,192 3,632 3,079
Salary increase of 0.25% 441 36 3,091
Salary decrease of 0.25% (437 (36 (2,962
Pension increase of 0.25% 18,528 1,598 —
Pension decrease of 0.25% (18,132 (1,531 —
Increase of 0.25% in inflation rate 29,148 1,598 3,091
Decrease of 0.25% in inflation rate (28,207 (1,531 (2,962
Increase of one year in life expectancy 27,126 3,615 558
Decrease of one year in life expectancy (26,843 (3,040 (592
As at September 30, 2019 U.K. Germany France
Increase of 0.25% in the discount rate (33,082 (3,440 (2,027
Decrease of 0.25% in the discount rate 34,484 3,632 2,126
Salary increase of 0.25% 408 56 2,132
Salary decrease of 0.25% (404 (55 (2,044
Pension increase of 0.25% 16,758 1,601 —
Pension decrease of 0.25% (16,398 (1,531 —
Increase of 0.25% in inflation rate 26,342 1,601 2,132
Decrease of 0.25% in inflation rate (25,490 (1,531 (2,044
Increase of one year in life expectancy 20,884 3,325 384
Decrease of one year in life expectancy (20,824 (2,938 (406

All values are in US Dollars.

The sensitivity analysis above has been based on a method that extrapolates the impact on the defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the year.

The weighted average duration of the defined benefit obligations are as follows:

Year ended September 30
2020 2019
(in years)
U.K. 18 18
Germany 14 14
France 14 14
Other 12 13

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

17. Employee benefits (continued)

DEFINED BENEFIT PLANS (CONTINUED)

The Company expects to contribute $7,903,000 to defined benefit plans during the next year, of which $1,657,000 relates to the U.K. plans, and $6,246,000 relates to the other plans. The contributions will include funding payments and new benefit accruals.

DEFINED CONTRIBUTION PLANS

The Company also operates defined contribution pension plans. In some countries, contributions are made into the state pension plans. The pension cost for defined contribution plans amounted to $228,998,000 in 2020 ($221,063,000 in 2019).

In addition, in Sweden, the Company contributes to a multi-employer plan, Alecta SE (Alecta) pension plan, which is a defined benefit pension plan. This pension plan is classified as a defined contribution plan as sufficient information is not available to use defined benefit accounting. Alecta lacks the possibility of establishing an exact distribution of assets and provisions to the respective employers. The Company’s proportion of the total contributions to the plan is 0.40% and the Company’s proportion of the total number of active members in the plan is 0.50%.

Alecta uses a collective funding ratio to determine the surplus or deficit in the pension plan. Any surplus or deficit in the plan will affect the amount of future contributions payable. The collective funding is the difference between Alecta’s assets and the commitments to the policy holders and insured individuals. The collective solvency is normally allowed to vary between 125% and 175%. As at September 30, 2020, Alecta collective funding ratio was 144% (142% in 2019). The plan expense was $30,269,000 in 2020 ($32,512,000 in 2019). The Company expects to contribute $25,709,000 to the plan during the next year.

OTHER BENEFIT PLANS

As at September 30, 2020, the deferred compensation liability totaled $82,221,000 ($63,838,000 as at September 30, 2019) (Note 15) and the deferred compensation assets totaled $73,156,000 ($62,627,000 as at September 30, 2019) (Note 11). The deferred compensation liability is mainly related to plans covering some of its U.S. and German management. Some of the plans include assets that will be used to fund the liabilities.

For the deferred compensation plan in the U.S., a trust was established so that the plan assets could be segregated; however, the assets are subject to the Company’s general creditors in the case of bankruptcy. The assets composed of investments vary with employees’ contributions and changes in the value of the investments. The change in liabilities associated with the plan is equal to the change of the assets. The assets in the trust and the associated liabilities totaled $72,743,000 as at September 30, 2020 ($62,247,000 as at September 30, 2019).

FISCAL 2020 RESULTS — 109

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

18. Accumulated other comprehensive income

As at As at
September 30, 2020 September 30, 2019
Items that will be reclassified subsequently to net earnings:
Net unrealized gains on translating financial statements of foreign operations, net of accumulated income tax<br>expense of $56,239 ($63,579 as at September 30, 2019) 1,002,804 596,358
Net losses on cross-currency swaps and on translating long-term debt designated as hedges of net investments<br>in foreign operations, net of accumulated income tax recovery of $63,692 ($67,165 as at September 30, 2019) (417,462 (426,376
Deferred gains (costs) of hedging on cross-currency swaps, net of accumulated income tax expense of $4,049<br>(net of accumulated income tax recovery $1,113 as at September 30, 2019) 14,053 (4,091
Net unrealized (losses) gains on cash flow hedges, net of accumulated income tax recovery of $2,554 (net of<br>accumulated income tax expense of $13,003 as at September 30, 2019) (5,935 24,157
Net unrealized gains on financial assets at fair value through other comprehensive income, net of accumulated<br>income tax expense of $1,291 ($352 as at September 30, 2019) 4,340 1,486
Items that will not be reclassified subsequently to net earnings:
Net remeasurement losses on defined benefit plans, net of accumulated<br>income tax recovery of $18,920 ($8,698 as at September 30, 2019) (52,090 (14,840
545,710 176,694

All values are in US Dollars.

For the year ended September 30, 2020, $5,616,000 of the net unrealized gains on cash flow hedges, net of income tax expense of $1,648,000, previously recognized in other comprehensive income were reclassified in the consolidated statements of earnings

($8,306,000, net of income tax expense of $4,311,000, for the year ended September 30, 2019).

For the year ended September 30, 2020, $10,268,000 of the deferred gains of hedging on cross-currency swaps, net of income tax expense of $3,702,000, were also reclassified in the consolidated statements of earnings (deferred costs of $5,203,000, net of income tax recovery of $1,113,000, for the year ended September 30, 2019).

19. Capital stock

The Company’s authorized share capital is comprised of an unlimited number, all without par value, of:

– First preferred shares, issuable in series, carrying one vote per share, each series ranking equal with other series,<br>but prior to second preferred shares, Class A subordinate voting shares and Class B multiple voting shares with respect to the payment of dividends;
– Second preferred shares, issuable in series, non-voting, each series ranking<br>equal with other series, but prior to Class A subordinate voting shares and Class B multiple voting shares with respect to the payment of dividends;
--- ---
– Class A subordinate voting shares, carrying one vote per share, participating equally with Class B multiple<br>voting shares with respect to the payment of dividends and convertible into Class B multiple voting shares under certain conditions in the event of certain takeover bids on Class B multiple voting shares; and
--- ---
– Class B multiple voting shares, carrying ten votes per share, participating equally with Class A subordinate<br>voting shares with respect to the payment of dividends and convertible at any time at the option of the holder into Class A subordinate voting shares.
--- ---

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

19. Capital stock (continued)

For the fiscal years 2020 and 2019, the number of issued and outstanding Class A subordinate voting shares and Class B multiple voting shares varied as follows:

Class A subordinate voting shares Class B multiple voting shares Total
Number **** Carrying value Number Carrying value **** Carrying value
As at September 30, 2018 250,425,114 1,978,210 28,945,706 40,382 2,018,592
Issued upon exercise of stock options^1^ 1,942,580 77,773 — — 77,773
PSUs exercised^2^ — 7,651 — — 7,651
Purchased and cancelled^3^ (12,510,232 ) (169,299 — — ) (169,299
Purchased and held in trusts^4^ — (30,740 — — (30,740
As at September 30, 2019 239,857,462 1,863,595 28,945,706 40,382 1,903,977
Issued upon exercise of stock options^1^ 1,438,877 69,420 — — 69,420
PSUs exercised^2^ — 9,078 — — 9,078
Purchased and cancelled^3^ (10,605,464 ) (165,315 — — ) (165,315
Purchased and held in trusts^4^ — (55,287 — — (55,287
As at September 30, 2020 230,690,875 **** 1,721,491 28,945,706 40,382 **** 1,761,873

All values are in US Dollars.

^1^ The carrying value of Class A subordinate voting shares includes $12,269,000 ($14,070,000 for the year ended<br>September 30, 2019), which corresponds to a reduction in contributed surplus representing the value of accumulated compensation costs associated with the stock options exercised during the year.
^2^ During the year ended September 30, 2020, 157,788 PSUs were exercised (160,694 during the year ended<br>September 30, 2019) with a recorded value of $9,078,000 ($7,651,000 during the year ended September 30, 2019) that was removed from contributed surplus. As at September 30, 2020, 1,243,022 Class A subordinate voting shares were<br>held in trusts under the PSU plans (875,480 as at September 30, 2019).
--- ---
^3^ On January 29, 2020, the Company’s Board of Directors authorized and subsequently received the regulatory<br>approval from the Toronto Stock Exchange (TSX), for the renewal of the Normal Course Issuer Bid (NCIB) for the purchase for cancellation of up to 20,149,100 Class A subordinate voting shares on the open market through the TSX, the New York<br>Stock Exchange (NYSE) and/or alternative trading systems or otherwise pursuant to exemption orders issued by securities regulators. The Class A subordinate voting shares are available for purchase for cancellation commencing on February 6,<br>2020 until no later than February 5, 2021, or on such earlier date when the Company has either acquired the maximum number of Class A subordinate voting shares allowable under the NCIB or decided not to make any further purchases for<br>cancellation under it.
--- ---
During the year ended September 30, 2020, the Company purchased for cancellation 6,008,905 Class A<br>subordinate voting shares from the Caisse de dépôt et placement du Québec for a cash consideration of $600,000,000 (5,158,362 and $500,000,000, respectively during the year ended September 30, 2019). The excess of the<br>purchase price over the carrying value in the amount of $471,455,000 was charged to retained earnings ($389,651,000 during the year ended September 30, 2019). The purchase was made pursuant to an exemption order issued by the Autorité<br>des marchés financiers and is considered within the annual aggregate limit that the Company is entitled to purchase under its current NCIB.
---
In addition, during the year ended September 30, 2020, the Company purchased for cancellation 4,596,559<br>Class A subordinate voting shares (7,301,870 during the year ended September 30, 2019) under its previous and current NCIB for a cash consideration of $443,517,000 ($626,075,000 during the year ended September 30, 2019) and the excess<br>of the purchase price over the carrying value in the amount of $406,747,000 ($567,125,000 during the year ended September 30, 2019) was charged to retained earnings.
---
^4^ During the year ended September 30, 2020, the trustees, in accordance with the terms of the PSU plans and Trust<br>Agreements, purchased 525,331 Class A subordinate voting shares of the Company on the open market (374,995 during the year ended September 30, 2019) for a cash consideration of $55,287,000 ($30,740,000 during the year ended<br>September 30, 2019).
--- ---

FISCAL 2020 RESULTS — 111

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

20. Share-based payments
a) Stock options
--- ---

Under the Company’s stock option plan, the Board of Directors may grant, at its discretion, stock options to purchase Class A subordinate voting shares to certain employees, officers and directors of the Company and its subsidiaries. The exercise price is established by the Board of Directors and is equal to the closing price of the Class A subordinate voting shares on the TSX on the day preceding the date of the grant. Stock options generally vest over four years from the date of grant conditionally upon achievement of performance objectives and must be exercised within a ten-year period, except in the event of retirement, termination of employment or death. As at September 30, 2020, 24,442,509 Class A subordinate voting shares were reserved for issuance under the stock option plan.

The following table presents information concerning the outstanding stock options granted by the Company:

2020 2019
Number of options **** Weightedaverage exerciseprice per share Weighted<br>average exercise<br>price per share
$
Outstanding, beginning of year 9,891,592 **** 54.64 52.01
Granted 913,560 **** 110.65 82.59
Exercised (Note 19) (1,438,877 ) 39.72 ) 32.81
Forfeited (431,223 ) 84.50 ) 64.11
Expired (955 ) 74.55 ) 34.79
Outstanding, end of year 8,934,097 **** 61.33 54.64
Exercisable, end of year 5,748,402 **** 49.02 41.32

All values are in US Dollars.

The weighted average share price at the date of exercise for stock options exercised in 2020 was $99.79 ($93.68 in 2019).

The following table summarizes information about the outstanding stock options granted by the Company as at September 30, 2020:

Options outstanding
Range of exercise price Weightedaverageremainingcontractual life Weightedaverageexercise price Weightedaverageexercise price
(in years) $
14.48 to 38.79 2.70 29.83 29.83
39.47 to 50.94 4.68 45.21 45.21
52.63 to 63.72 6.43 63.00 62.87
67.04 to 87.65 7.92 84.05 82.94
102.79 to 110.73 9.17 110.70 102.79
5.87 61.33 49.02

All values are in US Dollars.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

20. Share-based payments (continued)
a) Stock options (continued)
--- ---

The weighted average fair value of stock options granted in the year and the weighted average assumptions used in the calculation of their fair value on the date of grant using the Black-Scholes option pricing model were as follows:

Year ended September 30
2020 2019
Grant date fair value ($) 17.71 16.24
Dividend yield (%) 0.00 0.00
Expected volatility (%)^1^ 16.60 19.79
Risk-free interest rate (%) 1.55 2.26
Expected life (years) 4.00 4.00
Exercise price ($) 110.65 82.59
Share price ($) 110.65 82.59
^1^ Expected volatility was determined using statistical formulas and based on the weekly historical average of closing<br>daily share prices over the period of the expected life of stock options.
--- ---
b) Performance share units
--- ---

The Company operates two PSU plans with similar terms and conditions. Under both plans, the Board of Directors may grant PSUs to certain employees and officers which entitle them to receive one Class A subordinate voting share for each PSU. The vesting performance conditions are determined by the Board of Directors at the time of each grant. PSUs expire on the business day preceding December 31 of the third calendar year following the end of the fiscal year during which the PSU award was made, except in the event of retirement, termination of employment or death. Conditionally upon achievement of performance objectives, granted PSUs under the first plan vest annually over a period of four years from the date of the grant and granted PSUs under the second plan vest at the end of the four-year period.

Class A subordinate voting shares purchased in connection with the PSU plans are held in trusts for the benefit of the participants. The trusts, considered as structured entities, are consolidated in the Company’s consolidated financial statements with the cost of the purchased shares recorded as a reduction of capital stock (Note 19).

The following table presents information concerning the number of outstanding PSUs granted by the Company:

Outstanding as at September 30, 2018 658,732
Granted^1^ 472,187
Exercised (Note 19) (160,694 )
Forfeited (108,740 )
Outstanding as at September 30, 2019 861,485
Granted^1^ 607,342
Exercised (Note 19) (157,788 )
Forfeited (79,569 )
Outstanding as at September 30, 2020 1,231,470 ****
^1^ The PSUs granted in 2020 had a grant date fair value of $107.39 per unit ($83.24 in 2019).
--- ---
c) Share purchase plan
--- ---

Under the share purchase plan, the Company contributes an amount equal to a percentage of the employee’s basic contribution, up to a maximum of 3.50%. An employee may make additional contributions in excess of the basic contribution. However, the Company does not match contributions in the case of such additional contributions. The employee and Company’s contributions are remitted to an independent plan administrator who purchases Class A subordinate voting shares on the open market on behalf of the employee through either the TSX or NYSE.

FISCAL 2020 RESULTS — 113

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

20. Share-based payments (continued)
d) Deferred share unit plan
--- ---

External members of the Board of Directors (participants) are entitled to receive part or their entire retainer fee in DSUs. DSUs are granted with immediate vesting and must be exercised no later than December 15 of the calendar year immediately following the calendar year during which the participant ceases to act as a director. Each DSU entitles the holder to receive a cash payment equal to the closing price of Class A subordinate voting shares on the TSX on the payment date. As at September 30, 2020, the number of outstanding DSUs was 152,743 (137,571 DSUs as at September 30, 2019).

e) Share-based payment costs

The share-based payment expense recorded in costs of services, selling and administrative is as follows:

Year ended September 30
2020 2019
$
Stock options 16,378 21,674
PSUs 20,979 17,766
Share purchase plan 127,983 115,287
DSUs (607 3,334
164,733 158,061

All values are in US Dollars.

21. Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the years ended September 30:

2020 2019
Net earnings Earnings pershare Net earnings Earnings per<br>share
$ $
Basic 1,117,862 4.27 1,263,207 4.63
Net effect of dilutive stock options and PSUs^2^
1,117,862 4.20 1,263,207 4.55

All values are in US Dollars.

^1^ During the year ended September 30, 2020, 10,605,464 Class A subordinate voting shares purchased for cancellation and<br>1,243,022 Class A subordinate voting shares held in trust were excluded from the calculation of weighted average number of shares outstanding as of the date of transaction (12,460,232 and 875,480, respectively during the year ended September 30,<br>2019).
^2^ The calculation of the diluted earnings per share excluded 876,213 stock options for the year ended September 30,<br>2020 (1,716,774 for the year ended September 30, 2019), as they were anti-dilutive.
--- ---
22. Remaining performance obligations
--- ---

Remaining performance obligations relates to Company’s performance obligations that are partially or fully unsatisfied under fixed-fee arrangements.

The amount of the selling price allocated to remaining performance obligations as at September 30, 2020 is $824,854,000

($964,052,000 as at September 30, 2019) and is expected to be recognized as revenue within a weighted average of 1.4 years (1.6 years as at September 30, 2019).

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

23. Costs of services, selling and administrative
Year ended September 30
--- --- ---
2020 2019
$ $
Salaries and other member costs^1^ 7,264,839 7,158,588
Professional fees and other contracted labour 1,355,065 1,439,915
Hardware, software and data center related costs 800,496 873,158
Property costs 259,306 363,812
Amortization, depreciation and impairment (Note 24) 556,061 388,087
Other operating expenses 66,301 60,447
10,302,068 10,284,007
^1^ Net of R&D and other tax credits of $160,335,000 in 2020 ($171,389,000 in 2019).
--- ---
24. Amortization, depreciation and impairment
--- ---
Year ended September 30
--- --- ---
2020 2019
$ $
Depreciation of PP&E (Note 6) 156,590 159,264
Depreciation of right-of-use<br>assets (Note 7) 168,239 —
Impairment of right-of-use<br>assets (Note 7) 3,269 —
Amortization of contract costs related to transition costs 55,905 64,263
Impairment of contract costs related to transition costs 4,047 —
Amortization of intangible assets (Note 9) 157,378 164,560
Impairment of intangible assets (Note<br>9) 10,633 —
Included in costs of services, selling and administrative (Note<br>23) 556,061 388,087
Amortization of contract costs related to incentives (presented as a reduction of revenue) 2,535 2,919
Amortization of deferred financing fees (presented in finance costs) 890 1,012
Amortization of premiums and discounts on investments related to funds held for clients (presented net as a<br>reduction of revenue) 79 283
Impairment of PP&E (presented in restructuring costs) (Note 6 and<br>25) 1,035 —
Impairment of right-of-use assets (presented in restructuring costs) (Note 7 and 25) 5,092 —
565,692 392,301
25. Restructuring costs
--- ---

During the year ended September 30, 2020, the Company incurred restructuring costs related to terminations of employment primarily in France, Canada and Germany, in relation with the COVID-19 impacts.

During the year ended September 30, 2020, the Company also announced a restructuring plan mainly for the closure of the Brazil operations, the refocusing of the Portugal infrastructure business towards nearshore delivery and the optimization of the Sweden infrastructure business.

The Company recorded $155,411,000 of restructuring costs during the year ended September 30, 2020 (nil during the year ended September 30, 2019).

This amount includes restructuring costs for terminations of employment of $144,202,000, accounted for in restructuring provisions, impairment of PP&E of $1,035,000 (Notes 6 and 24), impairment of right-of-use assets of $5,092,000 (Note 24), as well as other restructuring costs of $5,082,000.

FISCAL 2020 RESULTS — 115

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

26. Net finance costs
Year ended September 30
--- --- ---
2020 2019
Interest on long-term debt 75,667 63,312
Interest on lease liabilities (Note 3) 33,017 —
Net interest costs on net defined benefit obligations or assets (Note<br>17) 1,876 3,813
Other finance costs 9,029 15,071
Finance costs 119,589 82,196
Finance income (5,115 (11,566
114,474 70,630

All values are in US Dollars.

27. Investments in subsidiaries
a) Business acquisitions realized in current fiscal year
--- ---

The Company made the following significant acquisitions during the year ended September 30, 2020:

– On December 18, 2019, the Company acquired all of the outstanding shares of SCISYS Group Plc (SCISYS), for a<br>purchase price of $130,260,000. Predominantly based in United Kingdom and Germany, SCISYS operates in several sectors, with deep expertise and industry leading solutions in the space and defense sectors, as well as in the media and broadcast news<br>industries, headquartered in Dublin, Ireland.
– On January 20, 2020, the Company acquired all of the outstanding shares of Meti Logiciels et Services SAS (Meti),<br>for a purchase price of $43,404,000. Based in France, Meti is specialized in the development of software solutions for the retail sector across Europe and works with some of Europe’s largest retailers.
--- ---
– On March 31, 2020, the Company acquired all of the outstanding shares of TeraThink Corporation (TeraThink), for a<br>purchase price of $99,388,000. Based in the United States, TeraThink is an information technology and management consulting firm providing digitization, enterprise finance, risk management, and data analytics services to the U.S. federal government<br>and is headquartered in Reston, Virginia.
--- ---

The following table presents the fair value of assets acquired and liabilities assumed for all acquisitions based on the acquisition-date fair values of the identifiable tangible and intangible assets acquired and liabilities assumed:

SCISYS TeraThink Other Total
Current assets 28,461 14,227 12,995 55,683
PP&E (Note 6) 16,893 1,369 638 18,900
Right-of-use assets (Note 7) 3,362 4,228 4,269 11,859
Intangible assets (Note 9) 16,837 19,025 10,661 46,523
Goodwill^1^(Note<br>12) 144,712 86,642 37,683 269,037
Current liabilities (68,254 (13,910 (14,414 (96,578
Deferred tax liabilities (3,030 — (1,507 (4,537
Retirement benefits obligations (Note 17) — — (1,068 (1,068
Long-term debt (10,880 (9,732 (122 (20,734
Lease liabilities (4,336 (4,935 (4,321 (13,592
123,765 96,914 44,814 265,493
Cash acquired 6,495 2,474 7,035 16,004
Net assets acquired 130,260 99,388 51,849 281,497
Consideration paid 130,260 99,388 51,849 281,497

All values are in US Dollars.

^1^ The goodwill arising from the acquisitions mainly represents the future economic value associated to acquired work<br>force and synergies with the Company’s operations. As at September 30, 2020, $32,272,000 of the goodwill is included in the Western and Southern Europe operating segment, $5,411,000 in the Canada operating segment, $86,642,000 in the U.S.<br>Federal operating segment, $53,170,000 in the U.K and Australia operating segment and $91,542,000 in the Central and Eastern Europe operating segment. The goodwill is only deductible for tax purposes for TeraThink.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

27. Investments in subsidiaries (continued)
a) Business acquisitions realized in current fiscal year (continued)
--- ---

The fair value of assets acquired and liabilities assumed for SCISYS, TeraThink and Meti are preliminary and are expected to be completed as soon as management will have gathered all the information available and considered necessary in order to finalize this allocation.

For the year ended September 30, 2020, the above significant acquisitions would have contributed approximately $250,000,000 of revenues and individually between 6.0% and 10.5% of earnings before acquisition-related and integration costs, and income taxes to the financial results of the Company had the acquisition dates been October 1, 2019. These figures are indicative of the actual contribution when considering the specific dates of acquisition.

With significant strategic consulting, system integration and customer-centric digital innovation capabilities, these acquisitions were made to complement CGI’s proximity model and expertise across key sectors, including communications, retail, space and defense and government.

b) Business acquisitions realized in the prior fiscal year

The Company made the following acquisitions during the year ended September 30, 2019:

– On October 11, 2018, the Company acquired all outstanding shares of ckc AG (ckc), a specialized provider of agile<br>software development and management services, with a focus on the automotive sector, headquartered in Brunswick, Germany.
– During the year, the Company acquired the control of Acando AB (Acando), a consulting services firm headquartered in<br>Stockholm, Sweden, through a step acquisition. In March 2019, the Company acquired 22.6% of the outstanding shares of Acando which was accounted for as an investment in an associate using the equity method. On April 16, 2019, the Company<br>acquired control of Acando through the acquisition of an additional 71.1% of the outstanding shares under a tender offer and by May 14, 2019, an additional 2.4% was acquired. The remaining 3.9% of the outstanding shares, which are included in<br>accounts payable and accrued liabilities in the consolidated balance sheet, were acquired on October 11, 2019.
--- ---
– On August 30, 2019, the Company acquired all outstanding shares of Annams Systems Corporation d/b/a Sunflower<br>Systems (Sunflower), a specialized provider of asset management software, solutions and services, headquartered in San Ramon, California.
--- ---

With strategic consulting, system integration and customer-centric digital innovation capabilities, these acquisitions were made to complement CGI’s proximity model and expertise across key sectors, including manufacturing, retail and government.

FISCAL 2020 RESULTS — 117

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

27. Investments in subsidiaries (continued)
b) Business acquisitions realized in the prior fiscal year (continued)
--- ---

The following table presents the fair value of assets acquired and liabilities assumed for all the above acquisitions based on the acquisition-date fair values of the identifiable tangible and intangible assets acquired and liabilities assumed. During the year ended September 30, 2019, the Company finalized the fair value of assets acquired and liabilities assumed for ckc. The fair value of assets acquired and liabilities assumed for Acando and Sunflower were preliminary.

Acando Other Total
Current assets
PP&E (Note 6)
Intangible assets (Note 9)
Goodwill^1^
Current liabilities ) ) )
Deferred tax liabilities ) ) )
Retirement benefits obligations (Note 17) ) ) )
Long-term debt ) )
Cash acquired )
Net assets acquired
Consideration paid
Consideration payable

All values are in US Dollars.

^1^ The goodwill arising from the acquisitions mainly represents the future economic value associated to acquired work<br>force and synergies with the Company’s operations. As at September 30, 2019, $465,209,000 of the goodwill is included in the Scandinavia operating segment, $90,943,000 in the Central and Eastern Europe operating segment, $17,730,000 in the<br>Finland, Poland and Baltics operating segment and $13,955,000 in the U.S. Federal operating segment. The goodwill is only deductible for tax purposes for Sunflower.

During fiscal year 2019, the Company acquired 96.1% of the outstanding shares of Acando and the remaining 3.9% on October 11, 2019 for $23,123,000. During the year ended September 30, 2020, the Company finalized the fair value of assets acquired and liabilities assumed for Acando and Sunflower with no significant adjustments.

c) Acquisition-related and integration costs

During the year ended September 30, 2020, the Company expensed $76,794,000, for acquisition-related and integration costs. This amount includes acquisition-related costs of $6,545,000, and integration costs of $70,249,000. The acquisition-related costs consist mainly of professional fees incurred for the acquisitions. The integration costs mainly include terminations of employment of $49,390,000, accounted for in restructuring provisions, as well as other integration costs of $20,859,000.

During the year ended September 30, 2019, the Company expensed $77,417,000, for acquisition-related and integration costs. This amount included acquisition-related costs of $1,992,000, and integration costs of $75,425,000. The acquisition-related costs consist mainly of professional fees incurred for the acquisitions. The integration costs mainly include terminations of employment of $56,268,000, accounted for in restructuring provisions, as well as other integration costs of $19,157,000.

d) Disposal

There was no significant disposal during the years ended September 30, 2020 and 2019.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

28. Supplementary cash flow information

a) Net change in non-cash working capital items is as follows for the years ended September 30:

2020 2019
Accounts receivable ****
Work in progress **** )
Prepaid expenses and other assets **** )
Long-term financial assets ) )
Accounts payable and accrued liabilities ) )
Accrued compensation )
Deferred revenue ) )
Provisions ****
Long-term liabilities ****
Retirement benefits obligations ) )
Derivative financial instruments **** )
Income taxes ) )
**** )

All values are in US Dollars.

b) Non-cash operating and investing activities related to operations are as follows for the years ended September 30:

2020 2019
Operating activities
Accounts payable and accrued liabilities ****
Provisions ****
****
Investing activities
Purchase of PP&E ) )
Additions, disposals/retirements and change in estimates and lease modifications of right-of-use assets )
Additions to intangible assets ) )
) )

All values are in US Dollars.

FISCAL 2020 RESULTS — 119

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

28. Supplementary cash flow information (continued)

c) Changes arising from financing activities are as follows for the years ended September 30:

2020 2019
Long-termdebt Derivativefinancialinstruments tohedge long-termdebt Leaseliabilities Long-termdebt Derivativefinancialinstruments tohedge long-termdebt
Balance, beginning of year **** ) ****
Adoption of IFRS 16 (Note<br>3) ) **** ****
Balance as at October 1, 2019 **** ) ****
Cash used in financing activities excluding equity
Net change in unsecured committed revolving credit facility ) **** ****
Increase of long-term debt **** **** ****
Repayment of long-term debt and lease liabilities ) **** ) )
Repayment of debt assumed in business acquisitions ) **** **** )
Settlement of derivative financial instruments (Note<br>32) **** ) **** )
Non-cash financing activities
Additions, disposals/retirements and change in estimates and lease modifications of right-of-use assets (New obligations under finance leases for 2019) **** **** ****
Additions through business acquisitions (Note 27) **** **** ****
Changes in foreign currency exchange rates ) **** **** )
Other **** **** )
Balance, end of year **** **** **** )

All values are in US Dollars.

d) Interest paid and received and income taxes paid are classified within operating activities and are as follows for the years ended September 30:

2020 2019
Interest paid
Interest received
Income taxes paid

All values are in US Dollars.

e) Cash and cash equivalents consisted of unrestricted cash as at September 30, 2020 and 2019.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

29. Segmented information

The following tables present information on the Company’s operations based on its revised management structure. Segment results are based on the location from which the services are delivered - the geographic delivery model. The Company has retrospectively revised the segmented information for the comparative period to conform to the new segmented information structure (Note 12).

Year ended September 30, 2020
WesternandSouthernEurope U.S.Commercialand State<br>Government Canada U.S.Federal U.K. and<br>Australia CentralandEasternEurope Scandinavia Finland,PolandandBaltics Asia<br>Pacific Eliminations Total
Segment revenue ) ****
Segment earnings before acquisition-related and integration costs, restructuring costs, net finance costs and<br>income tax expense^1^ **** ****
Acquisition-related and integration costs (Note 27) )
Restructuring costs (Note 25) )
Net finance costs (Note<br>26) )
Earnings before income taxes ****

All values are in US Dollars.

^1^ Total amortization and depreciation of $558,675,000 included in the Western and Southern Europe, U.S. Commercial and<br>State Government, Canada, U.S. Federal, U.K. and Australia, Central and Eastern Europe, Scandinavia, Finland, Poland and Baltics and Asia Pacific segments is $64,084,000, $89,150,000, $69,921,000, $47,443,000, $68,346,000, $84,592,000, $71,590,000,<br>$39,055,000 and $24,494,000, respectively for the year ended September 30, 2020. Amortization includes impairments of $14,680,000 from business solutions and contract costs which are mainly included in U.S. Commercial and State Government for<br>$3,396,000 of business solutions, Canada for $3,589,000 of business solutions and Finland, Poland and Baltics for $4,065,000 of contract costs and a business solution. These assets were no longer expected to generate future economic benefits.<br>
Year ended September 30, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
WesternandSouthernEurope U.S.Commercialand State<br>Government Canada U.S.Federal U.K. and<br>Australia CentralandEasternEurope Scandinavia Finland,PolandandBaltics Asia<br>Pacific Eliminations Total
Segment revenue )
Segment earnings before acquisition-related and integration costs, net finance costs and income tax expense^1^
Acquisition-related and integration costs (Note 27) )
Net finance costs (Note<br>26) )
Earnings before income taxes

All values are in US Dollars.

^1^ Total amortization and depreciation of $391,289,000 included in the Western and Southern Europe, U.S. Commercial and<br>State Government, Canada, U.S. Federal, U.K. and Australia, Central and Eastern Europe, Scandinavia, Finland, Poland and Baltics and Asia Pacific segments is $42,558,000, $73,647,000, $62,486,000, $27,433,000, $67,110,000, $37,314,000, $26,534,000,<br>$38,968,000 and $15,239,000, respectively for the year ended September 30, 2019.

The accounting policies of each operating segment are the same as those described in Note 3, Summary of significant accounting policies. Intersegment revenue is priced as if the revenue was from third parties.

FISCAL 2020 RESULTS — 121

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

29. Segmented information (continued)

GEOGRAPHIC INFORMATION

The following table provides external revenue information based on the client’s location which is different from the revenue presented under operating segments, due to the intersegment revenue, for the years ended September 30:

2020 2019
Western and Southern Europe
France
Others
U.S.^1^
Canada
U.K. and Australia
U.K.
Australia
1,572,427 1,555,895
Central and Eastern Europe
Germany
Netherlands
Others
Scandinavia
Sweden
Others
1,158,393 1,151,666
Finland, Poland and Baltics
Finland
Others
804,001 822,464
Asia Pacific
Others

All values are in US Dollars.

^1^ External revenue included in the U.S Commercial and State Government and U.S. Federal operating segments was<br>$1,902,661,000 and $1,734,409,000, respectively in 2020 ($1,853,154,000 and $1,621,264,000, respectively in 2019).

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

29. Segmented information (continued)

GEOGRAPHIC INFORMATION (CONTINUED)

The following table provides information for PP&E, right-of-use assets (only as at September 30, 2020), contract costs and intangible assets based on their location:

As at<br>September 30, 2020 As atSeptember 30, 2019
U.S.
Canada
U.K.
France
Sweden
Finland
Germany
Netherlands
Rest of the world

All values are in US Dollars.

INFORMATION ABOUT SERVICES

The following table provides revenue information based on services provided by the Company for the year ended September 30:

2020 2019
Systems integration and consulting
Management of IT and business functions

All values are in US Dollars.

MAJOR CLIENT INFORMATION

Contracts with the U.S. federal government and its various agencies, included within the U.S. Federal operating segment, accounted for $1,675,326,000 and 13.8% of revenues for the year ended September 30, 2020 ($1,554,933,000 and 12.8% for the year ended September 30, 2019).

FISCAL 2020 RESULTS — 123

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

30. Related party transactions
a) Transactions with subsidiaries and other related parties
--- ---

Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation. The Company owns 100% of the equity interests of its principal subsidiaries.

The Company’s principal subsidiaries whose revenues, based on the geographic delivery model, represent more than 3% of the consolidated revenues are as follows:

Name of subsidiary Country of incorporation
CGI Technologies and Solutions Inc. United States
CGI France SAS France
CGI Federal Inc. United States
CGI IT UK Limited United Kingdom
CGI Information Systems and Management Consultants Inc. Canada
Conseillers en gestion et informatique CGI Inc. Canada
CGI Sverige AB Sweden
CGI Deutschland B.V. & Co KG Germany
CGI Suomi Oy Finland
CGI Information Systems and Management Consultants Private Limited India
CGI Nederland BV Netherlands
b) Compensation of key management personnel
--- ---

Compensation of key management personnel, currently defined as the executive officers and the Board of Directors of the Company, was as follows for the year ended September 30:

2020 2019
Short-term employee benefits
Share-based payments

All values are in US Dollars.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

31. Commitments, contingencies and guarantees
a) Commitments
--- ---

As at September 30, 2020, the Company entered into long-term service agreements representing a total commitment of $235,781,000. Minimum payments under these agreements are due as follows:
Less than one year
Between one and three years
Between three and five years

All values are in US Dollars.

b) Contingencies

From time to time, the Company is involved in legal proceedings, audits, litigation and claims which primarily relate to tax exposure, contractual disputes and employee claims arising in the ordinary course of its business. Certain of these matters seek damages in significant amounts and will ultimately be resolved when one or more future events occur or fail to occur. Although the outcome of such matters is not predictable with assurance, the Company has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Company’s financial position, results of operations or the ability to carry on any of its business activities. Claims for which there is a probable unfavourable outcome are recorded in provisions.

In addition, the Company is engaged to provide services under contracts with various government agencies. Some of these contracts are subject to extensive legal and regulatory requirements and, from time to time, government agencies investigate whether the Company’s operations are being conducted in accordance with these requirements. Generally, the governments agencies have the right to change the scope of, or terminate, these projects at its convenience. The termination or reduction in the scope of a major government contract or project could have a materially adverse effect on the results of operations and the financial condition of the Company.

c) Guarantees

Sale of assets and business divestitures

In connection with the sale of assets and business divestitures, the Company may be required to pay counterparties for costs and losses incurred as the result of breaches in contractual obligations, representations and warranties, intellectual property right infringement and litigation against counterparties, among others. While some of the agreements specify a maximum potential exposure, others do not specify a maximum amount or limited period. It is not possible to reasonably estimate the maximum amount that may have to be paid under such guarantees. The amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. No amount has been accrued in the consolidated balance sheets relating to this type of indemnification as at September 30, 2020. The Company does not expect to incur any potential payment in connection with these guarantees that could have a materially adverse effect on its consolidated financial statements.

Other transactions

In the normal course of business, the Company may provide certain clients, principally governmental entities, with bid and performance bonds. In general, the Company would only be liable for the amount of the bid bonds if the Company refuses to perform the project once the bid is awarded. The Company would also be liable for the performance bonds in the event of default in the performance of its obligations. As at September 30, 2020, the Company had committed a total of $32,130,000 of these bonds. To the best of its knowledge, the Company is in compliance with its performance obligations under all service contracts for which there is a bid or performance bond, and the ultimate liability, if any, incurred in connection with these guarantees, would not have a materially adverse effect on the Company’s consolidated results of operations or financial condition.

Moreover, the Company has letters of credit for a total of $76,795,000 in addition to the letters of credit covered by the unsecured committed revolving credit facility (Note 14). These guarantees are required in some of the Company’s contracts with customers.

FISCAL 2020 RESULTS — 125

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments

FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to value financial instruments are as follows:

- The fair value of Senior U.S. and euro unsecured notes, the unsecured committed revolving credit facility, the<br>unsecured committed term loan credit facilities and the other long-term debt is estimated by discounting expected cash flows at rates currently offered to the Company for debts of the same remaining maturities and conditions;
- The fair value of long-term bonds included in funds held for clients and in long-term investments is determined by<br>discounting the future cash flows using observable inputs, such as interest rate yield curves or credit spreads, or according to similar transactions on an arm’s-length basis;
--- ---
- The fair value of foreign currency forward contracts is determined using forward exchange rates at the end of the<br>reporting period;
--- ---
- The fair value of cross-currency swaps and interest rate swaps is determined based on market data (primarily yield<br>curves, exchange rates and interest rates) to calculate the present value of all estimated cash flows;
--- ---
- The fair value of cash and cash equivalents is determined using observable quotes; and
--- ---
- The fair value of deferred compensation plan assets within long-term financial assets is based on observable price<br>quotations and net assets values at the reporting date.
--- ---

As at September 30, 2020, there were no changes in valuation techniques.

The following table presents the financial liabilities included in the long-term debt (Note 14) measured at amortized cost categorized using the fair value hierarchy.

As at September 30, 20120 As at September 30, 2019
Level Carrying amount Fair value Carrying amount Fair value
Senior U.S. and euro unsecured notes Level 2
Obligations under finance leases Level 2
Other long-term debt Level 2

All values are in US Dollars.

For the remaining financial assets and liabilities measured at amortized cost, the carrying values approximate the fair values of the financial instruments given their short term maturity.

During the year ended September 30, 2020, the Company entered into the 2020 Term Loan for a total principal amount of U.S. $1,250,000,000. The 2020 Term Loan was designated as a hedge of a portion of the Company’s net investment in its U.S. operations.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments (continued)

FAIR VALUE MEASUREMENTS (CONTINUED)

The following table presents financial assets and liabilities measured at fair value categorized using the fair value hierarchy:

Level As at September 30, 2020 As at September 30, 2019
Financial assets
FVTE
Cash and cash equivalents Level 2
Deferred compensation plan assets (Note<br>11) Level 1
Derivative financial instruments designated as hedging instruments
Current derivative financial instruments included in current financial assets Level 2
Cross-currency swaps
Foreign currency forward contracts
Long-term derivative financial instruments (Note 11) Level 2
Cross-currency swaps
Foreign currency forward contracts
Interest rate swaps
FVOCI
Short-term investments included in current financial assets Level 2
Long-term bonds included in funds held for clients (Note 5) Level 2
Long-term investments (Note<br>11) Level 2
Financial liabilities
Derivative financial instruments designated as hedging instruments
Current derivative financial instruments Level 2
Cross-currency swaps
Foreign currency forward contracts
Long-term derivative financial instruments Level 2
Cross-currency swaps
Foreign currency forward contracts

All values are in US Dollars.

There have been no transfers between Level 1 and Level 2 for the years ended September 30, 2020 and 2019.

FISCAL 2020 RESULTS — 127

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments (continued)

MARKET RISK

Market risk incorporates a range of risks. Movements in risk factors, such as interest rate risk and currency risk, affect the fair values of financial assets and liabilities.

Interest rate risk

The Company has interest rate swaps whereby the Company receives a fixed rate of interest and pays interest at a variable rate of its Senior U.S. unsecured note. These swaps are being used to hedge the exposure to changes in the fair value of the debt. The following table summarizes the fair value of theses swaps:

As at<br>September 30, 2020 As at<br>September 30, 2019
Interest rate swaps Notional amount Receive Rate Pay Rate Maturity Fair value Fair value
Fair value hedges of Senior U.S. unsecured note U.S.$ 250,000 4.99% LIBOR 1 month +<br>3.26% December 2021

All values are in US Dollars.

Senior U.S. unsecured note with a carrying value of $339,682,000, includes an accumulated amount of fair value hedge adjustments of $6,470,000 as at September 30, 2020.

In addition, the Company designates cross-currency interest rate swaps as cash flow hedges for changes in both interest rates and foreign exchange rates of foreign currency denominated long-term debt as described below.

The Company is also exposed to interest rate risk on its unsecured committed revolving credit facility and on its 2020 Term Loan.

The Company analyzes its interest rate risk exposure on an ongoing basis using various scenarios to simulate refinancing or the renewal of existing positions. Based on these scenarios, a change in the interest rate of 1% would not have had a significant impact on net earnings.

Currency risk

The Company operates internationally and is exposed to risk from changes in foreign currency exchange rates. The Company mitigates this risk principally through foreign currency denominated debt and derivative financial instruments, which includes foreign currency forward contracts and cross-currency swaps.

The Company hedges a portion of the translation of the Company’s net investments in its U.S. and European operations into Canadian dollar, with Senior U.S. and euro unsecured notes and the 2020 Term Loan. As of September 30, 2020, the Senior U.S. and euro unsecured notes and the 2020 Term Loan of a carrying value of $2,316,639,000 and a nominal amount of $2,311,425,000 have been designated as hedging instruments to hedge portions of the Company’s net investments in its U.S. and European operations.

The Company also hedges a portion of the translation of the Company’s net investments in its European operations with cross-currency swaps.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments (continued)

MARKET RISK (CONTINUED)

Currency risk(continued)

The following tables summarize the cross-currency swap agreements that the Company had entered into in order to manage its currency:

As at<br>September 30, 2020 As at<br>September 30, 2019
Receive Notional Receive Rate Pay Notional Pay rate Maturity Fair value Fair value
**** Hedges of net investmentsin European operations ****
$374,200 From 3.40% to 3.81% €240,800 From 2.10% to 2.51% From September 2021 to 2024 ****
$136,274 From 3.57% to 3.63% £75,842 From 2.67% to 2.80% September 2024 ****
$58,419 From 3.57% to 3.68% Skr371,900 From 2.12% to 2.18% September 2024 ****
**** Hedges of net investmentsin European operations and cash flow hedges on unsecured committed term loan credit facility ****
U.S.$500,000 LIBOR 1 month + 1.00% €443,381 From 1.13% to 1.17% December 2023 ) )
**** Cash flow hedges of SeniorU.S. unsecured notes ****
U.S.$420,000 From 3.74% to 4.06% $568,893 From 3.40% to 3.81% From September 2021 to 2024 ) )
Total )

All values are in US Dollars.

During the year ended September 30, 2020, the Company settled cross-currency swaps with a notional amount of $69,300,000 for a net amount of $3,903,000. The related amounts recognized in accumulated other comprehensive income will be transferred to earnings when the net investment is disposed of.

The Company enters into foreign currency forward contracts to hedge the variability in various foreign currency exchange rates on future revenues. Hedging relationships are designated and documented at inception and quarterly effectiveness assessments are performed during the year.

As at September 30, 2020, the Company held foreign currency forward contracts to hedge exposures to changes in foreign currency, which have the following notional, average contract rates and maturities:

As at<br>September 30, 2020 As at<br>September 30, 2019
Foreign currency forward contracts More than one year Fair value Fair value
/ U.S.146,778 75.30 80.89 ****
CAD/ 288,942 57.94 61.59 ****
/ 107,190 91.92 95.77 ****
/ 86,833 100.26 105.18 ****
SEK/ Skr248,637 8.61 8.79 ****
/ 39,291 0.90 0.90 ) )
/MAD 47,010 11.60 11.46 ****
/CZK 27,456 26.09 26.69 )
/SEK 30,773 10.45 10.70 **** )
Others 74,054 )
Total ****

All values are in US Dollars.

FISCAL 2020 RESULTS — 129

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments (continued)

MARKET RISK (CONTINUED)

Currency risk (continued)

The following table details the Company’s sensitivity to a 10% strengthening of the Swedish krona, the U.S. dollar, the euro and the British pound foreign currency rates on net earnings and comprehensive income. The sensitivity analysis on net earnings presents the impact of foreign currency denominated financial instruments and adjusts their translation at period end for a 10% strengthening in foreign currency rates. The sensitivity analysis on other comprehensive income presents the impact of a 10% strengthening in foreign currency rates on the fair value of foreign currency forward contracts designated as cash flow hedges and on net investment hedges.

2020 2019
Swedishkrona impact U.S. dollarimpact euroimpact Britishpoundimpact Swedishkrona impact U.S. dollarimpact euroimpact Britishpoundimpact
Increase in net earnings **** **** **** ****
Decrease in other comprehensive income (loss) ) ) ) ) ) ) ) )

All values are in US Dollars.

LIQUIDITY RISK

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due or can do so only at excessive cost. The Company’s activities are financed through a combination of the cash flows from operations, borrowing under existing unsecured committed revolving credit facility, the issuance of debt and the issuance of equity. One of management’s primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows. The Company regularly monitors its cash forecasts to ensure it has sufficient flexibility under its available liquidity to meet its obligations.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments (continued)

LIQUIDITY RISK (CONTINUED)

The following tables summarize the carrying amount and the contractual maturities of both the interest and principal portion of financial liabilities. All amounts contractually denominated in foreign currency are presented in Canadian dollar equivalent amounts using the period-end spot rate or floating rate.

As at September 30, 2020 Carryingamount Contractualcash flows Less thanone year Betweenone andthree years Betweenthree and fiveyears Beyondfive years
Non-derivative financial liabilities
Accounts payable and accrued liabilities
Accrued compensation
Senior U.S. and euro unsecured notes
Unsecured committed term loan credit facilities
Lease liabilities
Other long-term debt
Clients’ funds obligations
Derivative financial liabilities
Cash flow hedges of future revenue
Outflow
(Inflow) ) ) ) )
Cross-currency swaps
Outflow
(Inflow) ) ) ) )
Non deliverable forwards
Outflow
As at September 30, 2019 Carryingamount Contractualcash flows Less thanone year Betweenone andthree years Betweenthree and fiveyears Beyondfive years
Non-derivative financial liabilities
Accounts payable and accrued liabilities
Accrued compensation
Senior U.S. and euro unsecured notes
Unsecured committed revolving credit facility
Unsecured committed term loan credit facility
Obligations other than finance leases
Obligations under finance leases
Other long-term debt
Clients’ funds obligations
Derivative financial liabilities
Cash flow hedges of future revenue
Outflow
(Inflow) ) ) )
Cross-currency swaps
Outflow
(Inflow) ) ) ) )

All values are in US Dollars.

FISCAL 2020 RESULTS — 131

CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

32. Financial instruments (continued)

LIQUIDITY RISK (CONTINUED)

As at September 30, 2020, the Company held cash and cash equivalents, funds held for clients, short-term investments and long-term investments of $2,457,248,000 ($616,428,000 as at September 30, 2019). The Company also had available $1,490,301,000 in unsecured committed revolving credit facility ($1,155,369,000 as at September 30, 2019). As at September 30, 2020, trade accounts receivable amounted to $904,887,000 (Note 4) ($979,728,000 as at September 30, 2019). Given the Company’s available liquid resources as compared to the timing of the payments of liabilities, management assesses the Company’s liquidity risk to be low.

CREDIT RISK

The Company takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, accounts receivable, work in progress, long-term investments and derivative financial instruments with a positive fair value. The maximum exposure of credit risk is generally represented by the carrying amount of these items reported on the consolidated balance sheets.

The Company is exposed to credit risk in connection with long-term investments through the possible inability of borrowers to meet the terms of their obligations. The Company mitigates this risk by investing primarily in high credit quality corporate and government bonds with a credit rating of A- or higher. The application of the low credit exemption had no material impact on the Company’s consolidated financial statements.

The Company has accounts receivable derived from clients engaged in various industries including government; manufacturing, retail & distribution; financial services; communications & utilities; and health that are not concentrated in any specific geographic area. These specific industries may be affected by economic factors that may impact trade accounts receivable. However, management does not believe that the Company is subject to any significant credit risk in view of the Company’s large and diversified client base and that any single industry or geographic region represents a significant credit risk to the Company. Historically, the Company has not made any significant write-offs and had low bad debt ratios. The application of the simplified approach to measure expected credit losses for trade accounts receivable and work in progress had no material impact on the Company’s consolidated financial statements.

The following table sets forth details of the age of trade accounts receivable that are past due:

2020 2019
Not past due ****
Past due 1-30 days ****
Past due 31-60 days ****
Past due 61-90 days ****
Past due more than 90 days ****
****
Allowance for doubtful accounts ) )
****

All values are in US Dollars.

In addition, the exposure to credit risk of cash and cash equivalents and derivatives financial instruments is limited given that the Company deals mainly with a diverse group of high-grade financial institutions and that derivatives agreements are generally subject to master netting agreements, such as the International Swaps and Derivatives Association, which provide for net settlement of all outstanding contracts with the counterparty in case of an event of default.

Notes to the Consolidated Financial Statements

For the years ended September 30, 2020 and 2019

(tabular amounts only are in thousands of Canadian dollars, except per share data)

33. Capital risk management

The Company is exposed to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth. The main objectives of the Company’s risk management process are to ensure that risks are properly identified and that the capital base is adequate in relation to these risks.

The Company manages its capital to ensure that there are adequate capital resources while maximizing the return to shareholders through the optimization of the debt and equity balance. As at September 30, 2020, total managed capital was $13,459,695,000 ($9,463,626,000 as at September 30, 2019). Managed capital consists of long-term debt, including the current portion (Note 14), lease liabilities, cash and cash equivalents, short-term investments, long-term investments (Note 11) and shareholders’ equity. The basis for the Company’s capital structure is dependent on the Company’s expected business growth and changes in the business environment. When capital needs have been specified, the Company’s management proposes capital transactions for the approval of the Company’s Audit and Risk Management Committee and Board of Directors. The capital risk policy remains unchanged from prior periods.

The Company monitors its capital by reviewing various financial metrics, including the following:

- Net Debt/Capitalization
- Debt/EBITDA
--- ---

Net debt, capitalization and EBITDA are additional measures. Net debt represents debt (including the current portion and the fair value of foreign currency derivative financial instruments related to debt) less cash and cash equivalents, short-term investments and long-term investments. Capitalization is shareholders’ equity plus debt. EBITDA is calculated as earnings from continuing operations before finance costs, income taxes, depreciation, amortization, restructuring costs and acquisition-related and integration costs. The Company believes that the results of the current internal ratios are consistent with its capital management credit facility and unsecured committed revolving credit facilities. The ratios are as follows:

- Leverage ratios, which are the ratio of total debt to EBITDA for its Senior U.S. and euro unsecured notes and the ratio<br>of total debt net of cash and cash equivalent investments to EBITDA for its unsecured committed revolving credit facility and unsecured committed term loan credit facilities for the four most recent quarters^1^.
- An interest and rent coverage ratio, which is the ratio of the EBITDAR for the four most recent quarters to the total<br>finance costs and the operating rentals in the same periods. EBITDAR is calculated as EBITDA before rent expense^1^.
--- ---
- In the case of the Senior U.S. and euro unsecured notes, a minimum net worth is required, whereby shareholders’<br>equity, excluding foreign exchange translation adjustments included in accumulated other comprehensive income, cannot be less than a specified threshold.
--- ---

These ratios are calculated on a consolidated basis.

The Company is in compliance with these covenants and monitors them on an ongoing basis. The ratios are also reviewed quarterly by the Company’s Audit and Risk Management Committee. The Company is not subject to any other externally imposed capital requirements.

^1^ In the event of an acquisition, the available historical financial information of the acquired company will be used in the<br>computation of the ratios.

FISCAL 2020 RESULTS — 133

Shareholder Information

Shareholder information listing

IPO: 1986

Toronto Stock Exchange, April 1992: GIB.A

New York Stock Exchange, October 1998: GIB

Number of shares outstanding as of September 30, 2020:

230,690,875 Class A subordinate voting shares

28,945,706 Class B shares

High/Low of share price from October 1, 2019

to September 30, 2020:

TSX (CDN) NYSE <br>(U.S.$)
High: 87.13
Low: 46.32

All values are in US Dollars.

The certifications required by National Instrument 52-109 Certification of Disclosure inIssuers’ Annual and Interim Filings whereby CGI’s Chief Executive Officer and Chief Financial Officer certify the accuracy of the information contained in CGI’s Annual Information Form, Annual Audited Consolidated Financial Statements, and Annual Management’s Discussion and Analysis are available on the Canadian Securities Administrators’ website at www.sedar.com. Similar certifications required by Rule 13a-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to our Form 40-F, which is available on EDGAR at www.sec.gov. The certification required by Section 303A.12(c) of the NYSE Listed Company Manual is also filed annually with the New York Stock Exchange. CGI’s corporate governance practices conform to those followed by U.S. domestic companies under New York Stock Exchange listing standards. A summary of these practices is provided in the report of the Corporate Governance Committee contained in CGI’s Management Proxy Circular, which is available on the Canadian Securities Administrators’ website at www.sedar.com, on EDGAR at www.edgar.com and on CGI’s website at www.cgi.com.

Auditors

PricewaterhouseCoopers LLP

Transfer agent

Computershare Trust Company of Canada

100 University Avenue, 8^th^ floor

Toronto, Ontario M5J 2Y1

Telephone: 1 800 564-6253

www.investorcentre.com/service

Investor relations

For further information about the Company, additional copies of this report, or other financial information, please contact:

CGI Inc.

Investor Relations

Email: ir@cgi.com

Web: cgi.com/investors

1350 René-Lévesque Blvd West,

15^th^ floor

Montréal, Quebec H3G 1T4

Canada

Tel.: 514-841-3200

Annual general meeting of shareholders

The Annual General Meeting of Shareholders will be conducted online on January 27, 2021, at 11:00 a.m. (Eastern Standard Time) via live audio webcast at www.virtualshareholdermeeting.com/CGI2020. This year, shareholders will not be able to attend the Meeting in person, but will have the opportunity to participate in real time and vote at the Meeting online in the manner set forth in CGI’s Management Proxy Circular, through a web-based platform, regardless of their geographic location.

About us<br> <br><br><br><br>At CGI, we are insights-driven and outcomes-based to help clients accelerate returns on investments.<br><br><br><br> <br>We provide comprehensive, scalable, and sustainable IT and business consulting services that are<br>informed globally and delivered locally.
LOGO industry sectors
LOGO locations worldwide
LOGO consultants and professionals
© CGI Inc.

EX-99.2

Table of Contents

Exhibit 99.2

LOGO

Notice of Annual General Meeting of Shareholders and Management Proxy Circular

To be held online on Wednesday,

January 27, 2021 at 11:00 a.m.

LOGO

These materials are being sent to both registered and non-registered owners of shares. Non-registered shareholders are either objecting beneficial owners who object that intermediaries disclose information about their ownership in the Company, or non-objecting beneficial owners, who do not object to such disclosure. The Company pays intermediaries to send proxy-related materials to both objecting and non-objecting beneficial owners. Please return your voting instructions as specified in the request for voting instructions.

Table of Contents

LOGO

Table of Contents

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS i
LETTER TO SHAREHOLDERS ii
GENERAL INFORMATION 1
ATTENDING THE ONLINE MEETING 1
SUBMITTING QUESTIONS 1
NOTICE AND ACCESS 1
PROXIES 2
Solicitation of Proxies 2
Appointment and Revocation of Proxies 3
HOW TO VOTE 3
Registered Shareholders 3
Non-Registered Shareholders 3
Voting in Advance of the Meeting 4
By Internet 4
By Phone 4
By Mail 4
Voting at the Meeting 4
Changing your Vote 5
VOTING SHARES AND PRINCIPAL HOLDERS OF VOTING SHARES 5
Class A Subordinate Voting Shares and Class B Shares 5
First Preferred Shares 7
Second Preferred Shares 7
Normal Course Issuer Bid 7
Principal Holders of Class A Subordinate Voting Shares and Class B Shares 8
BUSINESS TO BE TRANSACTED AT THE MEETING 9
NOMINEES FOR ELECTION AS DIRECTORS 11
REPORT OF THE HUMAN RESOURCES COMMITTEE 20
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS 20
Executive Compensation Process for the 2020 Fiscal Year 20
The Human Resources Committee of the Board of Directors 20
Executive Compensation Related Fees 22
Composition of Comparator Group 22
Executive Compensation Components 23
Base Salary 24
Short-Term Incentive Plan – Profit Participation Plan 24
Long-Term Incentive Plans 26
Total At Risk Compensation and Actual Payouts 29
Incentive Plan Awards – Value Vested or Earned During the Year 30
Performance Graph 31
Defined Contribution Pension Plan and Deferred Compensation Plan 32
Compensation of Named Executive Officers 33
Net Total Compensation Table 34
KEY FEATURES OF CGI’S LONG-TERM INCENTIVE PLANS 36
Share Option Plan 36
Equity Compensation Plan Information as at September 30, 2020 38
COMPENSATION OF DIRECTORS 39
Board of Directors and Standing Committee Fees 39
Directors’ Compensation Table 40
Deferred Stock Units Plan and Deferred Stock Units Granted to Directors 40
Stock Options Held by Directors 41
Incentive Plan Awards – Value Vested or Earned During the Year 41
2020 MANAGEMENT PROXY CIRCULAR
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LOGO

Additional Disclosure relating to Directors and Named Executive Officers 42
REPORT OF THE CORPORATE GOVERNANCE COMMITTEE 43
CORPORATE GOVERNANCE PRACTICES 43
CGI’s Shareholders 43
Shareholder Satisfaction Assessment Program 44
Corporate Social Responsibility 44
Diversity 45
Majority Voting Policy 46
Clawback Policy 46
Insider Trading and Blackout Periods Policy 47
MANDATE, STRUCTURE AND COMPOSITION OF THE BOARD OF DIRECTORS 47
Board of Directors and Committee Charters 47
ROLE AND RESPONSIBILITIES OF THE FOUNDER AND EXECUTIVE CHAIRMAN OF THE BOARD AND OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER 48
ROLE AND RESPONSIBILITIES OF THE LEAD DIRECTOR AND STANDING COMMITTEE CHAIRS 49
Lead Director 49
Standing Committee Chairs 49
CRITERIA FOR TENURE ON CGI’S BOARD OF DIRECTORS 49
Independence 50
Expertise and Financial and Operational Literacy 50
Attendance at Board and Standing Committee Meetings 52
Share Ownership Guideline for Directors 52
Availability and Workload 54
Conflicts of Interest 54
Director Orientation and Continuing Education Program 55
Self-Assessment and Peer Review Processes 55
Retirement Age and Director Term Limits 56
NOMINATION PROCESS FOR THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS 56
Board of Directors 56
Succession Planning for Executive Officers 57
BOARD OF DIRECTORS PARTICIPATION IN STRATEGIC PLANNING 57
GUIDELINES ON TIMELY DISCLOSURE OF MATERIAL INFORMATION 57
CODES OF ETHICS 58
REPORT OF THE AUDIT AND RISK MANAGEMENT COMMITTEE 59
EXTERNAL AUDITOR 59
AUDITOR INDEPENDENCE POLICY 59
PERFORMANCE OF SERVICES 59
GOVERNANCE PROCEDURES 60
MANAGEMENT AND COMMITTEE RESPONSIBILITIES 60
ANNUAL EXTERNAL AUDITOR ASSESSMENT 60
FEES BILLED BY THE EXTERNAL AUDITOR 61
RELATED PARTY TRANSACTIONS 61
OTHER BUSINESS TO BE TRANSACTED AT THE ANNUAL GENERAL MEETING OF SHAREHOLDERS 61
ADDITIONAL INFORMATION 62
SHAREHOLDER PROPOSALS 62
APPENDIX A 63
STOCK OPTIONS AND SHARE-BASED AWARDS HELD BY NAMED EXECUTIVE OFFICERS 63
APPENDIX B 65
STOCK OPTIONS AND SHARE-BASED AWARDS HELD BY DIRECTORS 65
2020 MANAGEMENT PROXY CIRCULAR
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Table of Contents

LOGO

APPENDIX C 71
PROPOSED RESOLUTION RATIFYING, CONFIRMING AND APPROVING THE AMENDED AND RESTATED BY-LAW 71
APPENDIX D 72
SHAREHOLDER PROPOSALS 72
2020 MANAGEMENT PROXY CIRCULAR
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Table of Contents

LOGO

Notice of Annual General Meeting of Shareholders

Date, Time and Place

Notice is hereby given that an Annual General Meeting of Shareholders (the “Meeting”) of CGI Inc. (“CGI” or the “Company”) will be conducted online on January 27, 2021, at 11:00 a.m. (Eastern Standard Time) via live audio webcast at www.virtualshareholdermeeting.com/CGI2020. This year, shareholders will not be able to attend the Meeting in person, but will have the opportunity to participate in real time and vote at the Meeting online in the manner set forth in CGI’s Management Proxy Circular, through a web-based platform, regardless of their geographic location.

Business to be Transacted at the Meeting

1. To receive the report of the directors, together with the annual audited consolidated financial statements of the<br>Company and the report of the auditor for the fiscal year ended September 30, 2020;
2. to elect directors;
--- ---
3. to appoint the auditor for the fiscal year of the Company ending September 30, 2021 and authorize the Audit and<br>Risk Management Committee to fix its compensation;
--- ---
4. to consider and, if deemed advisable, to adopt a resolution, the full text of which is provided as<br>Appendix C, ratifying, confirming and approving an amendment to By-Law 1986-5 of the Company; and
--- ---
5. to transact such other business as may properly come before the Meeting or any adjournment thereof.<br>
--- ---

Attendance and Voting by Shareholders at the Meeting

By logging on to www.virtualshareholdermeeting.com/CGI2020 and following the instructions set forth in the Management Proxy Circular, shareholders will be able to attend the Meeting live, submit questions and vote their shares while the Meeting is being held.

Only shareholders shown on the register of shareholders of CGI at the close of business on December 7, 2020, and duly appointed proxyholders (including non-registered shareholders who have duly appointed themselves as proxyholders), will be entitled to vote at the Meeting during the live audio webcast. CGI’s register of shareholders is kept by its transfer agent, Computershare Investor Services Inc.

Registered and non-registered shareholders entitled to vote at the Meeting may vote by proxy in advance of the Meeting. Non-registered shareholders who have not duly appointed themselves as proxyholders will be able to attend the Meeting and ask questions, but will not be able to vote. Guests will be able to attend the Meeting but will not be able to submit questions or vote their shares (if any).

Proxy Voting

Proxies submitted by mail, phone or internet must be received by Broadridge Investor Communications Corporation (“Broadridge”) by 11:00 a.m., Eastern Standard Time, on Tuesday, January 26, 2021.

We wish to have as manyshares as possible represented and voted at the Meeting, and for this reason, regardless of whether you are able to attend the Meeting via the live audio webcast, shareholders are strongly encouraged to complete, date, sign and return theaccompanying form of proxy or voting instruction form, as applicable, in accordance with the instructions set out on such form and in the Management Proxy Circular or, alternatively, vote by phone or vote using the internet. Instructions on how tovote by phone or by using the internet are provided on the form of proxy or voting instruction form and in the Management Proxy Circular.

CGI has opted to use the Notice and Access rules adopted by Canadian securities regulators to reduce the volume of paper in the materials distributed for the Meeting. Instead of receiving the enclosed Management Proxy Circular with the form of proxy or voting instruction form, shareholders received a Notice of Meeting with instructions on how to access the remaining Meeting materials online.CGI’s Management Proxy Circular and other relevant materials are available on the internet at https://materials.proxyvote.com/12532H or on the Canadian Securities Administrators’ website at www.sedar.com**.** The webcast will be archived on the Company’s website afterwards.

If you have any questions regarding this Notice of Meeting, the Notice and Access procedures or the Meeting, please contact Broadridge at +1-855-887-2244.

Montréal, Quebec

Dated December 7, 2020

By order of the Board of Directors,

LOGO

Benoit Dubé

Executive Vice-President, Legal and Economic Affairs,

and Corporate Secretary

i 2020 MANAGEMENT PROXY CIRCULAR
Table of Contents

LOGO

Letter to Shareholders

Dear fellow shareholders,

Fiscal 2020 has been an unprecedented year. The pandemic has had a devastating impact on public health, with a ripple effect on economies around the world. Nothing in our 44-year history has had such far-reaching impacts on our people, our clients and our operations.

In the immediate aftermath of the pandemic declaration and subsequent lockdowns, we focused on the health of our consultants and professionals who rapidly and seamlessly pivoted to remote work, mostly from home, and quickly mobilized to ensure continuity of services to clients in a flexible and reliable manner. We would like to sincerely thank all of our clients for their trust and relentless support and effort during this difficult ”new normal” period, which we all hope will be over soon. We would also like to pay tribute to all of our CGI members for having been very prudent while continuing to be fully dedicated to their clients during this difficult time.

As for CGI operations, inspired from lessons learned through past difficult times, all CGI teams around the world, right from the beginning of the crisis, committed to managing their Company with the end-in-mind to be stronger post-pandemic.

We, unfortunately, had to proceed with temporary lay-offs in some countries. Local governments, in such countries, contributed in compensating at different degrees the affected members for their lost income. We were very touched when the majority of our leadership team around the world, including our Board of Directors, voluntarily agreed to a significant reduction of their compensation to help offset the furlough impact to our members.

Over the past year, and with more intensity over the last few months, we continued to deliver mission-critical technology and business process services to clients around the world, and are helping them re-examine their business value chains and ecosystems to accelerate digitization, achieve immediate cost savings, and drive revenue growth. Understanding that clients are moving forward at various paces, we developed a comprehensive business approach to help them respond to unprecedented challenges, rebound effectively, and reinvent ways of working.

In parallel, the pandemic gave us the opportunity to reflect on our Company’s resilience. Our annual results remained strong especially when excluding slightly lower revenue and costs related to COVID-19. Such quality results already demonstrate a high degree of resilience. This is thanks to our proximity-based model, which embeds operations within clients’ metro markets, a balanced revenue mix by economic sector at the Company level, and a good equilibrium between managed services and project revenue that stands at 60%-40%. However, living through this pandemic led us to reinforce our resilience by accelerating the diversification of our revenue mix by economic sector, not only at the Company level but also at the metro market level.

As we look ahead, one thing is certain: technology is now core to how our clients create value for their customers and shareholders. As one of the few firms with the scale, reach, capabilities and commitment to be a partner of choice for clients, both locally and globally, we remain committed to executing our growth strategy while maintaining our focus on creating incremental shareholder value.

We would like to sincerely thank all of you, our fellow shareholders for your unwavering support and trust over the years. Rest assured that we will continue to make CGI one of the best business and IT consulting companies in the world by seeking the best equilibrium between our three stakeholders: our clients, our members, and all of us as shareholders of your Company.

This year, Richard B. Evans announced he is retiring and would not present himself for re-election as a director of CGI. On behalf of our members and Board of Directors, we thank him warmly for his invaluable advice, counsel and leadership throughout the years, as well as for his remarkable contribution to our success. We also welcome Ms. Mary Powell and Mr. Stephen S. Poloz who joined CGI’s Board of Directors in June 2020 and are nominated for election as directors for the first time. Ms. Powell and Mr. Poloz will provide key insight as we continue to pursue our strategic objectives and deliver value to our clients, members and shareholders.

Thank you for your confidence and trust.

Serge Godin<br> <br>Founder and Executive<br><br><br>Chairman of the Board Julie Godin<br> <br>Co-Chair<br>of the Board, Executive Vice-President, Strategic Planning and Corporate Development George D. Schindler<br> <br>President and Chief Executive<br>Officer
2020 MANAGEMENT PROXY CIRCULAR ii
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Table of Contents

LOGO

General Information

This Management Proxy Circular is provided in relation to the solicitation of proxies by the management of CGI Inc. (“CGI” or the “Company”) for use at the Annual General Meeting of Shareholders (the “Meeting”) of the Company which will be held online, via live audio webcast, on January 27, 2021, and at any adjournment thereof. Unless otherwise indicated, the information provided in this Management Proxy Circular that relates to financial information is provided as at September 30, 2020, all other information is provided as at December 7, 2020, and all currency amounts are shown in Canadian dollars.

We encourage you to read our annual Management’s Discussion and Analysis, annual audited consolidated financial statements, and this Management Proxy Circular to become better acquainted with CGI. We are confident that, as you come to know us, you will appreciate the strength of our commitment to our three stakeholders, including you, our shareholders.

Attending the Online Meeting

To attend the Meeting, registered and non-registered shareholders will need to log-in on to www.virtualshareholdermeeting.com/CGI2020 and follow the instructions set forth in the Management Proxy Circular. The Meeting platform is fully supported across browsers and devices running the most updated version of applicable software plugins. You should ensure you have a strong, preferably high-speed, internet connection wherever you intend to attend the Meeting. The Meeting will begin promptly at 11:00 a.m. (Eastern Standard Time) on January 27, 2021. Online check-in will begin starting 15 minutes prior, at 10:45 a.m. (Eastern Standard Time). You should allow ample time for online check-in procedures. For any technical difficulties experienced during the check-in process or during the Meeting, please call the technical support number posted on the Meeting log-in page, located at www.virtualshareholdermeeting.com/CGI2020. Attending the Meeting online enables shareholders to ask questions in real time. Registered shareholders and duly appointed proxyholders (including non-registered shareholders who have duly appointed themselves as proxyholder) can vote at the appropriate times during the Meeting. If you are a non-registered shareholder located in the United States and wish to attend, submit questions or vote at the Meeting, see the heading How to Vote – Non-Registered Shareholders later in this document for additional instructions. Shareholders and duly appointed proxyholders who participate in the Meeting online, must be connected to the internet at all times during the Meeting in order to vote when balloting commences and it is their responsibility to ensure connectivity during the Meeting.

Non-registered beneficial shareholders who have not duly appointed themselves as proxyholders can attend the Meeting and ask questions by joining the webcast at www.virtualshareholdermeeting.com/CGI2020, but are not able to vote. Guests will be able to attend the Meeting but will not be able to submit questions nor vote their shares (if any).

Submitting Questions

At the Meeting, the Company will hold a live Q&A session to answer written questions submitted either before the Meeting through www.proxyvote.com (using the control number included on the form of proxy or voting instruction form, as applicable) or during the Meeting by shareholders participating via live audio webcast. Only shareholders and duly appointed proxyholders may submit questions at the Meeting, either before or during the Meeting.

The Chair of the Meeting reserves the right to edit questions or to reject questions he deems inappropriate in accordance with the rules of conduct of the Meeting which are available at www.cgi.com/en/investors and on the Meeting web page at www.virtualshareholdermeeting.com/CGI2020. Any questions pertinent to the Meeting that cannot be answered during the Meeting due to time constraints will be posted online and answered at www.cgi.com/en/investors. The questions and answers will be available as soon as practical after the Meeting and will remain available until one week after posting. The Chair of the Meeting has broad authority to conduct the Meeting in an orderly manner. To ensure the Meeting is conducted in a manner that is fair to all shareholders, the Chair of the Meeting may exercise broad discretion with respect to, for example, the order in which questions are asked and the amount of time devoted to any one question.

Notice and Access

CGI uses the Notice and Access rules adopted by Canadian securities regulators to reduce the volume of paper in the materials distributed for the Annual General Meeting of Shareholders. Instead of receiving this Management Proxy Circular with the form of proxy or voting instruction form, shareholders received a Notice of Meeting with instructions on how to access the remaining materials online. CGI intends to pay for intermediaries to deliver the Notice of Meeting and voting instruction form and other materials to non-objecting beneficial owners and objecting beneficial owners.

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This Management Proxy Circular and other relevant materials are available on the internet at https://materials.proxyvote.com/12532H or on the Canadian Securities Administrators’ website at www.sedar.com. If you would like to receive a paper copy of the materials distributed for the Annual General Meeting of Shareholders by mail, you must request it. Requesting a paper copy is free of charge. Shareholders may request a paper copy of the materials online by going to www.proxyvote.com, or by calling Broadridge toll free at +1-877-907-7643 (Canada and U.S.) or +1-905-507-5450 (international) and enter the control number indicated on the form of proxy or voting instruction form they received with the Notice of Meeting. To ensure you receive the materials in advance of the voting deadline and Meeting date, all requests must be received no later than January 11, 2021. If you do request a paper copy of the current materials, please note that another voting instruction form or proxy form will not be sent; please retain the one received with the Notice of Meeting for voting purposes.

To obtain a paper copy of the materials after the Meeting date, please contact CGI’s Investor Relations department by sending an e-mail to ir@cgi.com, by visiting the Investors section on the Company’s website at www.cgi.com or as follows:

Investor Relations

CGI Inc.

1350 René-Lévesque Blvd. West

15th Floor

Montréal, Quebec

Canada

H3G 1T4

Tel.: +1-514-841-3200

Proxies

Solicitation of Proxies

The solicitation of proxies will be made primarily by mail for registered and non-registered beneficial shareholders and by e-mail for participants in CGI’s Share Purchase Plan. Proxies may also be solicited personally by e-mail or by phone by members of the Company at minimal cost. The Company does not expect to pay any compensation for the solicitation of proxies, but will reimburse brokers and other persons holding shares for reasonable expenses for sending proxy materials to non-registered beneficial shareholders in order to obtain voting instructions.

The persons who may be appointed to act under the form of proxy or voting instruction form solicited by the management of the Company are all directors of the Company.

In order to be voted at the Meeting, a proxy must be received by Broadridge by 11:00 a.m., Eastern Standard Time, on Tuesday, January 26, 2021. Proxies may also be received by the Corporate Secretary of the Company prior to the Meeting or any adjournment thereof at 1350 René-Lévesque Boulevard West, 25th Floor, Montréal, Quebec, Canada, H3G 1T4 Attention: Corporate Secretary, at any time up to and including January 26, 2021, the last business day preceding the date of the Meeting.

The persons whose names are printed on the form of proxy or voting instruction form will vote all the shares in respect of which they are appointed to act in accordance with the instructions given on the form of proxy or voting instruction form. In the absence of a specified choice in relation to any matter tobe voted on at the Meeting, or if more than one choice is indicated, the shares represented by the form of proxy or the voting instruction form will be voted:

FOR the election as directors of the sixteen persons nominated in this Management Proxy Circular;

FOR the appointment of PricewaterhouseCoopers LLP as auditor; and

FOR the ratification, confirmation and approval of amended and restated By-Law 1986-5 of the Company.

Every proxy given to any person in the form of proxy or voting instruction form that accompanies the Notice of Meeting will confer discretionary authority with respect to amendments or variations to the items of business identified in the Notice of Meeting and with respect to any other matters that may properly come before the Meeting.

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Appointmentand Revocation of Proxies

Every shareholder has the right to appoint himself or herself or a person to act on his or her behalf at theMeeting other than the persons whose names are printed in the form of proxy or voting instruction form that accompanies the Notice of Meeting. To exercise this right, the shareholder should insert proxyholder’s name in the space provided forthat purpose in the form of proxy or voting instruction form or provide a revised proxy in proper form appointing the proxyholder. Non-registered shareholders located in the United States must follow the instructions under the heading How to Vote – Non-Registered Shareholders later in this document.

In addition to the first step above, shareholders will need to insert an “Appointee Name” and designate an eight-digit unique “Appointee Identification Number” in the spaces provided in the proxy form, voting instruction form, or online at www.proxyvote.com. Such appointee information is required to allow a shareholder’s proxyholder to attend and vote at the Meeting on a shareholder’s behalf.

Shareholders need to inform their proxyholder of the exact “Appointee Name” and eight-digit “Appointee Identification Number”prior to the Meeting.

The steps described above must be completed prior to 11:00 a.m., Eastern Standard Time, on Tuesday,January 26, 2021 or a shareholder’s proxyholder will not be able to attend and vote at the Meeting on a shareholder’s behalf.

A proxy may be revoked at any time by the person giving it to the extent that it has not yet been exercised. If you are a registered shareholder and you want to revoke your proxy, you may do so by providing new proxyholder appointment information at www.proxyvote.com or a new form of proxy to Broadridge at any time before by 11:00 a.m., Eastern Standard Time, on Tuesday, January 26, 2021. A proxy may also be revoked by a registered shareholder by delivering a written notice to the Corporate Secretary of the Company at 1350 René-Lévesque Boulevard West, 25th Floor, Montréal, Quebec, Canada, H3G 1T4 Attention: Corporate Secretary, which must be received at any time up to and including January 25, 2021, two business days preceding the date of the Meeting. A registered shareholder may also access the Meeting via the live audio webcast to vote at the Meeting, which will revoke any previously submitted proxy. If you do not wish to revoke a previously submitted proxy nor ask questions at the Meeting, you can attend the Meeting as a guest, as guests can listen to the Meeting, but are not able to vote nor to submit questions.

If you are a non-registered shareholder and you want to revoke your proxy, contact your broker or other Intermediary to find out what to do. Please note that your Intermediary will need to receive any new instructions sufficiently in advance of the Meeting to act on them.

How to Vote

Only persons shown on the register of shareholders at the close of business on Monday, December 7, 2020 and duly appointed proxyholders (including non-registered shareholders who have duly appointed themselves as proxyholders), will be entitled to vote at the Meeting. The register of holders of Class A subordinate voting shares and Class B shares are kept by CGI’s transfer agent, Computershare Investor Services Inc.

Registered Shareholders

You are a registered shareholder if your name appears on your share certificate or your direct registration statement. Your proxy form tells you whether you are a registered shareholder. If you are a registered shareholder, you will receive a form of proxy containing the relevant details concerning the business of the Meeting, including a control number that must be used in order to vote by proxy in advance of the Meeting or to join the live audio webcast the day of the Meeting to attend, ask questions and vote at the Meeting, as applicable.

Non-Registered Shareholders

Non-registered shareholders or “beneficial owners” are holders whose shares are held on their behalf through a “nominee” such as a bank, a trust company, a securities broker or other financial institution. When you receive a voting instruction form, this tells you that you are a non-registered shareholder. Most CGI shareholders hold their shares in this way. Non-registered shareholders must seek instructions from their nominees as to how to complete their voting instruction form if they wish to vote their shares themselves at the Meeting. Non-registered shareholders who received or who were given access to this Management Proxy Circular in a mailing from their nominee must adhere to the voting instructions provided to them by their nominee.

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Non-registered shareholders must use the control number on their voting instruction form to join the live audio webcast of the Meeting. Non-registered shareholders who wish to vote at the Meeting during the live audio webcast must appoint themselves by inserting their own name in the space provided on the voting instruction form and adhere to the signing and return instructions provided by their nominee. By doing so, non-registered shareholders are instructing their nominee to appoint them as proxyholder. In addition to the first step above, you will need to insert your name as the “Appointee Name” and designate an eight-digit unique “Appointee Identification Number” in the spaces provided in your voting instruction form, or online at www.proxyvote.com. Such appointee information is required to vote at the Meeting.

The steps described above must be completed prior to the proxy deadline or you will not be able to vote at the Meeting.

If you are a non-registered shareholder located in the United States and wish to attend, submit questions or vote at the Meeting or, if permitted, appoint a third party as your proxyholder, in addition to the steps described above and under the heading Attending the Online Meeting, you must obtain a valid legal proxy from your intermediary. Follow the instructions from your intermediary included with the legal proxy form and the voting instruction form sent to you, or contact your intermediary to request a legal proxy form if you have not received one. The legal proxy form will be mailed to the person and address written on the voting instruction form. After obtaining a valid legal proxy from your intermediary, you must then submit such legal proxy to Broadridge. Requests for registration from non-registered shareholders located in the United States that wish to attend, submit questions or vote at the Meeting or, if permitted, appoint a third party as their proxyholder must be sent by fax to +1-905-507-7793 or +1-514-281-8911, or, by courier to Broadridge at 2601 14^th^ Avenue, Markham, Ontario, Canada, L3R 0H9, and in both cases, must be labeled as “legal proxy” and received by no later than 11:00 a.m., Eastern Standard Time, on Tuesday, January 26, 2021. You must allow sufficient time to Broadridge for the mailing and return of the legal proxy by this deadline. If you have any questions, please contact the person who servicesyour account.

Non-registered shareholders who have not duly appointed themselves as proxyholders will be able to attend the Meeting and ask questions, but will not be entitled to vote their shares at the Meeting.

Voting in Advance of the Meeting

Shareholders are strongly encouraged to vote in advance of the Meeting whether or not they are able to attend the Meeting (or any adjournment thereof) via the live audio webcast. Below are the different ways in which registered and non-registered shareholders can give voting instructions, details of which are found on the form of proxy or voting instruction form provided, as applicable.

By Internet

If a shareholder elects to vote using the internet, the shareholder must access the following website: www.proxyvote.com. Shareholders must follow the instructions that appear on the screen and refer to the form of proxy or voting instruction form, as applicable, for their control number.

By Phone

If a shareholder wishes to vote by phone, the shareholder must call one of the following toll-free numbers +1-800-474-7493 (English) or +1-800-474-7501 (French). Shareholders must follow the instructions of the voice response system and refer to the form of proxy or voting instruction form, as applicable, for their control number.

By Mail

If a shareholder wishes to vote by mail, the shareholder must complete, date and sign the form of proxy or voting instruction form, as applicable, in accordance with the instructions set out on such form, and return it in the prepaid envelope provided to Data Processing Centre, P.O. Box 3700, STN Industrial Park, Markham, Ontario, Canada, L3R 9Z9.

Duly completed forms of proxy or voting instruction forms or internet or telephone voting instructions, as applicable, must be received by Broadridge by 11:00 a.m., Eastern Standard Time, on Tuesday, January 26, 2021. Proxies may also be received by the Corporate Secretary of the Company prior to the Meeting or any adjournment thereof at 1350 René-Lévesque Boulevard West, 25^th^ Floor, Montréal, Quebec, Canada, H3G 1T4 Attention: Corporate Secretary, at any time up to and including January 26, 2021, the last business day preceding the date of the Meeting.

Votingat the Meeting

Registered shareholders who wish to vote at the Meeting do not need to complete or return their proxy form. Non-registered shareholders who wish to vote at the Meeting must appoint themselves as proxyholder. The day of the Meeting, registered

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shareholders and non-registered shareholders who have duly appointed themselves as proxyholders, will be able to vote via the live audio webcast by completing a ballot online during the Meeting by visiting www.virtualshareholdermeeting.com/CGI2020 and logging-in using the control number included on their proxy form, in the case of registered shareholders, or entering the “Appointee Name” and eight-digit “Appointee Identification Number” as provided to them, in the case of the proxyholder of non-registered shareholders, as applicable, as further described under the heading Attending the OnlineMeeting.

Non-registered shareholders who have not duly appointed themselves as proxyholder will be able to attend the Meeting, but will not be able to vote their shares at the Meeting.

Even if you currently plan to attend and vote at the Meeting, you should consider voting your shares in advance so that your vote will be counted if you later decide not to attend the Meeting. You should note however that if you access and vote on any matterduring the Meeting, you will revoke any previously submitted proxy. If you do not wish revoke a previously submitted proxy nor ask questions at the Meeting, you can attend the Meeting as a guest, as guests can listen to the Meeting, but are not able to vote nor to submit questions.

If you wish to appoint someone as proxy to vote your shares for you at the Meeting during the live audio webcast, please follow the instructions found on either your proxy form or voting instruction form, as applicable. You will need to create a unique eight-digit “Appointee Identification Number” which will allow your proxyholder to join the Meeting and vote your shares on your behalf, as further described under the heading Appointment and Revocation of Proxies.

Changing your Vote

If you are a registered shareholder and you change your mind about how you voted before the Meeting, you may provide new voting instructions at www.proxyvote.com, or a new form of proxy to Broadridge at any time before by 11:00 a.m., Eastern Standard Time, on Tuesday, January 26, 2021. A proxy may also be revoked by delivering a written notice to the registered office of the Company at 1350 René-Lévesque Boulevard West, 25^th^ Floor, Montréal, Quebec, Canada, H3G 1T4 Attention: Corporate Secretary, which must be received prior to or on January 26, 2021, the last business day preceding the date of the Meeting, or any adjournment thereof. A registered shareholder may also access the Meeting via the live audio webcast to vote at the Meeting, which will revoke any previously submitted proxy. If you do not wish revoke a previously submitted proxy, you should attend the Meeting as a guest. Guests can listen to the Meeting, but are not able to vote nor to submit questions.

If you are a non-registered shareholder and you change your mind about how you voted before the Meeting, contact your broker or other Intermediary to find out what to do. Please note that your Intermediary will need to receive any new instructions sufficiently in advance of the Meeting to act on them.

Voting Shares and Principal Holders of Voting Shares

The Company’s authorized share capital consists of an unlimited number of First Preferred Shares, issuable in series, an unlimited number of Second Preferred Shares, issuable in series, an unlimited number of Class A subordinate voting shares and an unlimited number of Class B shares (multiple voting), all without par value, of which, as at December 7, 2020, 228,104,439 Class A subordinate voting shares and 28,945,706 Class B shares were issued and outstanding.

The following summary of the material features of the Company’s authorized share capital is given subject to the detailed provisions of its articles.

Class A Subordinate Voting Shares and Class B Shares

Voting Rights

The holders of Class A subordinate voting shares are entitled to one vote per share and the holders of Class B shares are entitled to ten votes per share. As at December 7, 2020, 44.07% and 55.93% of the aggregate voting rights were attached to the outstanding Class A subordinate voting shares and Class B shares, respectively.

Subdivision or Consolidation

The Class A subordinate voting shares or Class B shares may not be subdivided or consolidated unless simultaneously the Class B shares and the Class A subordinate voting shares are subdivided or consolidated in the same manner and in such an event, the rights, privileges, restrictions and conditions then attaching to the Class A subordinate voting shares and Class B shares shall also attach to the Class A subordinate voting shares and Class B shares as subdivided or consolidated.

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Rights upon Liquidation

Upon liquidation or dissolution of the Company or any other distribution of its assets among its shareholders for the purposes of winding up its affairs, all the assets of the Company available for payment or distribution to the holders of Class A subordinate voting shares and holders of Class B shares will be paid or distributed equally, share for share.

Conversion Rights of Class A Subordinate Voting Shares in Specific Circumstances

Subject to what is hereinafter set out, if a take-over bid or exchange bid or an issuer bid, other than an exempt bid (as defined in the articles of the Company), for the Class B shares is made to the holders of Class B shares without being made simultaneously and on the same terms and conditions to the holders of Class A subordinate voting shares, each Class A subordinate voting share shall become convertible into one Class B share, from the date the offer is made, at the holder’s option, in order to entitle the holder to accept the offer. However, this right of conversion shall be deemed not to come into effect if the offer is not completed by its offeror or if the offer is rejected by one or several of the senior executives and full-time employees of the Company or its subsidiaries and any corporate entity under their control, who are, as a group, owners, directly or indirectly, in any manner whatsoever, of more than 50% of the outstanding Class B shares.

The articles of the Company contain a complete description of the types of bids giving rise to the rights of conversion, provide certain procedures to be followed to perform the conversion and stipulate that upon such a bid, the Company or the transfer agent will communicate in writing to the holders of Class A subordinate voting shares full details as to the bid and the manner of exercising the right of conversion.

Conversion of Class B Shares

Each Class B share may, from time to time, at the holder’s option, be converted into one Class A subordinate voting share.

Issue of Class B Shares

The Company’s articles provide for pre-emptive rights in favour of holders of Class B shares. Therefore, the Company may not issue Class A subordinate voting shares or securities convertible into Class A subordinate voting shares without offering, in the manner determined by the Board of Directors, to each holder of Class B shares, pro rata to the number of Class B shares it holds, the right to subscribe concurrently with the issue of Class A subordinate voting shares or of securities convertible into Class A subordinate voting shares, as the case may be, an aggregate number of Class B shares or securities convertible into Class B shares, as the case may be, sufficient to fully maintain its proportion of voting rights associated with the Class B shares. The consideration to be paid for the issuance of each Class B share or security convertible into Class B shares, as the case may be, shall be equal to the issue price of each Class A subordinate voting share or security convertible into Class A subordinate voting shares then issued.

The pre-emptive rights do not apply in the case of the issuance of Class A subordinate voting shares or securities convertible into Class A subordinate voting shares:

• in payment of stock dividends;
• pursuant to the stock option plans or share purchase plans of the Company;
--- ---
• further to the conversion of Class B shares into Class A subordinate voting shares pursuant to the articles of<br>the Company; or
--- ---
• further to the exercise of the conversion, exchange or acquisition rights attached to securities convertible into<br>Class A subordinate voting shares.
--- ---

Any holder of Class B shares may assign its pre-emptive rights to other holders of Class B shares.

Dividends

The Class A subordinate voting shares and Class B shares participate equally, share for share, in any dividend which may be declared, paid or set aside for payment thereon. In fiscal 2020, considering, among other matters, the needs for reinvestment in the Company’s operations, the scope of investment projects, the repayment of the Company’s debt, and the repurchase of outstanding Class A subordinate voting shares under the Company’s Normal Course Issuer Bid (“NCIB”), the Board of Directors determined that the Company, in keeping with its long-standing practice, would not pay a dividend. The Board of Directors re-evaluates the Company’s dividend policy annually.

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Amendments

The rights, privileges, conditions and restrictions attaching to the Class A subordinate voting shares or Class B shares may respectively be amended if the amendment is authorized by at least two-thirds of the votes cast at a meeting of holders of Class A subordinate voting shares and Class B shares duly convened for that purpose. However, if the holders of Class A subordinate voting shares as a class or the holders of Class B shares as a class were to be affected in a manner different from that of the other classes of shares, such amendment would, in addition, have to be authorized by at least two-thirds of the votes cast at a meeting of holders of shares of the class of shares so affected in a different manner.

Rank

Except as otherwise provided hereinabove, each Class A subordinate voting share and each Class B share carry the same rights, rank equally in all respects and are to be treated by the Company as if they constituted shares of a single class.

First Preferred Shares

The First Preferred Shares may be issued from time to time in one or more series and the Board of Directors of the Company has the right to determine, by resolution, the designation, rights, privileges, restrictions and conditions attaching to each series. The First Preferred Shares of each series rank equal to the First Preferred Shares of all other series and rank prior to the Second Preferred Shares, the Class A subordinate voting shares and Class B shares with respect to payment of dividends and repayment of capital. The holders of First Preferred Shares are entitled to receive notice of and attend any shareholders’ meetings and are entitled to one vote per share. As at December  7, 2020, no First Preferred Shares were outstanding.

Second Preferred Shares

The Second Preferred Shares may be issued from time to time in one or more series and the Board of Directors has the right to determine, by resolution, the designation, rights, privileges, restrictions and conditions attaching to each series. The Second Preferred Shares of each series rank equal to all other Second Preferred Shares of all other series and rank after the First Preferred Shares, but prior to the Class A subordinate voting shares and Class B shares with respect to payment of dividends and repayment of capital. The Second Preferred Shares are non-voting. As at December 7, 2020, no Second Preferred Shares were outstanding.

Normal Course Issuer Bid

On January 29, 2020, the Board of Directors authorized and subsequently received the approval from the Toronto Stock Exchange (“TSX”) for the renewal of its NCIB and the purchase for cancellation of up to 10% of the public float of the Company’s Class A subordinate voting shares as at January 22, 2020. The current NCIB enables the Company to purchase on the open market through the facilities of the TSX and the New York Stock Exchange (“NYSE”) and through alternative trading systems, as well as outside the facilities of the TSX by private agreements pursuant to exemption orders issued by securities regulators, up to 20,149,100 Class A subordinate voting shares for cancellation. As at January 22, 2020, there were 240,398,273 Class A subordinate voting shares of the Company outstanding of which approximately 84% were widely held. The Company was authorized to purchase Class A subordinate voting shares under the current NCIB commencing on February 6, 2020 and may continue to do so until February 5, 2021, or until such earlier date when the Company will either have acquired the maximum number of Class A subordinate voting shares allowable under the NCIB or elected to terminate the NCIB.

As at December 7, 2020, the Company had purchased for cancellation 13,242,564 Class A subordinate voting shares under its NCIB for approximately $1,280 million at a weighted average price of $96.67 per share. The purchased shares include 6,008,905 Class A subordinate voting shares purchased for cancellation on February 19, 2020 from Caisse de dépôt et placement du Québec for a cash consideration of $600 million, by way of private agreement. In the case of such purchase, a favourable decision was obtained from the Quebec securities regulator to exempt the Company from issuer bid requirements and it is considered within the annual aggregate limit that the Company is entitled to purchase under its current NCIB. A copy of the Company’s Notice of Intention relating to its NCIB may be obtained free of charge from CGI’s Investor Relations department. See the heading AdditionalInformation at the end of this document.

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PrincipalHolders of Class A Subordinate Voting Shares and Class B Shares

As at December 7, 2020, to the knowledge of the directors and executive officers of the Company, the only persons who beneficially owned, directly or indirectly, or exercised control or direction over 10% or more of CGI’s outstanding Class A subordinate voting shares or Class B shares were Messrs. Serge Godin and André Imbeau and Caisse de dépôt et placement du Québec. Their holdings are set out in the tables that follow.

Name Shares – Class “A” Shares – Class “B” Shares – Class “A” and “B”
Number % Number % Total % of<br>Equity Total<br>Number of<br>Votes Total % of<br>Votes
Serge Godin 281,606 0.12% 0.11% 478,906 0.09%
25,545,706 88.25% 9.94% 255,457,060 49.36%
Total **** 281,606 **** 0.12% **** 25,545,706 **** 88.25% **** 10.05% **** 255,935,966 **** 49.45%
Name Shares – Class “A” Shares – Class “B” Shares – Class “A” and “B”
Number % Number % Total % of<br>Equity Total<br>Number of<br>Votes Total % of<br>Votes
André Imbeau 30,478 0.01% 0.01% 30,478 0.01%
3,400,000 11.75% 1.32% 34,000,000 6.57%
Total **** 30,478 **** 0.01% **** 3,400,000 **** 11.75% **** 1.33% **** 34,030,478 **** 6.58%
Name Shares – Class “A” Shares – Class “B” Shares – Class “A” and “B”
Number % Number % Total % of<br>Equity Total<br>Number of<br>Votes Total % of<br>Votes
Caisse de dépôt et placement du<br>Québec 31,405,299 13.77% 12.22% 31,405,299 6.07%
– – – – –
Total **** 31,405,299 **** 13.77% **** – **** – **** 12.22% **** 31,405,299 **** 6.07%

CGI’s Investor Relations department regularly surveys the Company’s largest institutional shareholders. The following table sets out, as at December 7, 2020, the top ten institutional holders of CGI’s Class A subordinate voting shares, based on the shareholder identification data available to the Company.

Name Shares – Class “A” Shares – Class “B” Shares – Class “A” and “B”
Number % Number % Total % of<br>Equity Total<br>Number of<br>Votes Total % of<br>Votes
Caisse de dépôt et placement du Québec 31,405,299 13.77% – – 12.22% 31,405,299 6.07%
BlackRock Asset Management Canada Limited 14,405,000 6.32% – – 5.60% 14,405,000 2.78%
Jarislowsky, Fraser, Limited 8,466,430 3.71% – – 3.29% 8,466,430 1.64%
The Vanguard Group, Inc. 6,375,107 2.79% – – 2.48% 6,375,107 1.23%
Fidelity Investments Canada ULC 6,295,194 2.76% – – 2.45% 6,295,194 1.22%
RBC Global Asset Management Inc. 5,658,210 2.48% – – 2.20% 5,658,210 1.09%
Manulife Asset Management <br>(North America) Limited 5,539,850 2.43% – – 2.16% 5,539,850 1.07%
Invesco Advisers, Inc. 4,557,539 2.00% – – 1.77% 4,557,539 0.88%
RBC Dominion Securities Inc. 3,664,058 1.61% – – 1.43% 3,664,058 0.71%
TD Asset Management Inc. 2,759,762 1.21% – – 1.07% 2,759,762 0.53%

As at December 7, 2020, the directors and executive officers of the Company, as a group, beneficially owned, directly or indirectly, or exercised control or direction over, 1,576,567 Class A subordinate voting shares and 28,945,706 Class B shares representing respectively approximately 0.69% of the issued and outstanding Class A subordinate voting shares and 100% of the issued and outstanding Class B shares.

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Business to be Transacted at the Meeting

The following items of business will be presented to the shareholders at the Meeting:

1. Presentation of the Annual Audited Consolidated Financial Statements

The annual audited consolidated financial statements of the Company for the fiscal year ended September 30, 2020 and the report of the auditor will be placed before the Meeting. The annual audited consolidated financial statements were mailed with the Notice of Meeting to shareholders who requested them. Copies of the annual audited consolidated financial statements of the Company for the fiscal year ended September 30, 2020 may be obtained from the Company upon request and are available on the internet at https://materials.proxyvote.com/12532H or on the Canadian Securities Administrators’ website at www.sedar.com.

2. Election of Directors

Sixteen directors are to be elected to hold office until the close of the next Annual General Meeting of Shareholders or until such director’s resignation, unless the office is earlier vacated. Each of the sixteen persons presented in this Management Proxy Circular is nominated for election as a director of the Company and each nominee has agreed to serve as a director if elected.

The persons named as proxies in the proxy form or voting instruction form, as applicable, intend to cast the votesrepresented by proxy at the Meeting FOR the election as directors of the sixteen persons nominated in this Management Proxy Circular unless shareholders direct otherwise.

3. Appointment of Auditor

The Board of Directors recommends that PricewaterhouseCoopers LLP be appointed as the auditor of the Company to hold office until the next Annual General Meeting of Shareholders or until its successor is appointed. PricewaterhouseCoopers LLP was first appointed as the Company’s auditor at the Annual General and Special Meeting of Shareholders held on January 30, 2019.

The persons named as proxies in the proxy form or voting instruction form, as applicable, intend to cast the votes represented byproxy at the Meeting FOR the appointment of PricewaterhouseCoopers LLP as auditor and to vote to authorize the Audit and Risk Management Committee to fix the compensation of the auditor unless shareholders direct otherwise.

4. Ratification, Confirmation and Approval of Amended and Restated<br>By-Law 1986-5 of the Company

The shareholders will be asked to consider and, if deemed advisable, to pass an ordinary resolution ratifying, confirming and approving amended and restated By-Law 1986-5 of the Company that was approved by the Board of Directors on December 8, 2020 (the “Amended and Restated By-Law”) to allow meetings of shareholders, whether annual or special, to be held entirely with the use of a full scope of modern communication facilities such as by the means of a telephonic, electronic or other communication facility and to allow participants to attend and participate in such meetings by telephonic, electronic or other communication facility. The Meeting is being held online pursuant to Ministerial Order 2020-029 issued by the Government of Québec on April 26, 2020.

Pursuant to the provisions of the Business Corporations Act (Quebec), the Amended and Restated By-Law must be submitted to the shareholders for ratification, confirmation and approval by ordinary resolution at the Meeting. The full text of the Amended and Restated By-Law is available on the internet at https://materials.proxyvote.com/12532H.

The Amended and Restated By-Law grants the discretion to the Board of Directors to determine that a meeting of shareholders, such as the Meeting, shall be held entirely by telephonic, electronic or other communication facility, including by way of teleconference, video conference, computer link, webcast or other similar means.

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The Amended and Restated By-Law also provides that any person participating in a meeting by telephonic, electronic or other communication facility, including by way of teleconference, video conference, computer link, webcast or other similar means shall be deemed to be present at the meeting for all purposes, including for the purposes of establishing quorum and exercising voting rights.

The text of the ordinary resolution is provided as Appendix C.

The persons named as proxies in the proxy form or voting instruction form, as applicable,intend to cast the votes represented by proxy at the Meeting FOR the adoption of the proposed resolution ratifying, confirming and approving amended and restated By-Law.

5. Shareholder Proposals

Five shareholder proposals were initially submitted by the Mouvement d’éducation et de défense des actionnaires (“MÉDAC”). MÉDAC is a not-for-profit company whose registered office is located at 82 Sherbrooke Street West, Montréal, Quebec, Canada, H2X 1X3, holding 32 Class A subordinate voting shares that were acquired on February 19, 2014.

One shareholder proposal with respect to a pension fund deficiency was withdrawn by the MÉDAC and the other four proposals are enclosed as Appendix D hereto, along with the responses of CGI’s Board of Directors. However, at CGI’s request and due to the exceptional sanitary measures currently in place as a result of the COVID-19 pandemic, MÉDAC agreed not to submit the remaining Shareholder Proposals to a vote at the Meeting.

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Nominees for Election as Directors

The persons whose names are printed in the form of proxy intend to vote for the election as directors of the proposed nominees whose names are set forth in the following pages. Each director elected will hold office until the next Annual General Meeting of Shareholders or until such director’s resignation, unless the office is earlier vacated.

The information below lists the name of each candidate proposed by the Board of Directors, on the recommendation of the Corporate Governance Committee, for election as a director; whether the candidate has been determined by the Board of Directors to be independent of, or related to, the Company; whether the candidate complies with the Company’s share ownership guideline; the candidate’s age; the principal occupation of the candidate; the municipality, province or state, and country of residence of the candidate; the year when the candidate first became a director, if currently a director; the voting results for the candidate in the previous year’s election; the standing committee memberships of the candidate; the skills the candidate brings to the Board of Directors based on the Board of Directors’ skills matrix; the number of shares of the Company beneficially owned, directly or indirectly, or over which control or direction is exercised; the number of Deferred Stock Units (“DSUs”) of the Company held (see the heading Deferred Stock Units Planand Deferred Stock Units Granted to Directors later in this document); the number of stock options of the Company held (see the heading Share OptionPlan later in this document); the number of Performance Share Units (“PSUs”) of the Company held (see the heading Performance Share UnitPlans later in this document); as well as current and previous directorships.

Information relating to shares, DSUs, stock options and PSUs, if any, beneficially owned, or over which control or direction is exercised, is provided as at December 7, 2020.

Alain Bouchard<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br><br><br>Montréal, Quebec, Canada<br> <br><br><br><br>Director since: 2013<br> <br>Age: 71<br><br><br><br> <br>Independent director,<br><br><br>complies with the share<br> <br>ownership<br>guideline Mr. Bouchard is the<br>Founder and Executive Chairman of the Board of Alimentation Couche-Tard Inc., a position he has occupied since he ceased acting as President and Chief Executive Officer in 2014 after having served in such capacity for 25 years.<br>Mr. Bouchard was one of the founders of Alimentation Couche-Tard Inc. in 1980 and has been instrumental in its growth. Alimentation Couche-Tard Inc. is the largest independent convenience store operator in North America in terms of number of<br>company-operated stores and comprises a network of more than 16,000 convenience stores in Canada, the United States, Europe, and sixteen other countries and territories. Mr. Bouchard was named an Officer of the Order of Canada and an Officer of<br>the Ordre national du Québec. He holds an honorary Doctorate degree in Consumer Sciences from Université Laval in Québec City and an honorary Doctorate degree in Management from McGill University in Montreal.<br><br><br><br> <br>Member of the Human<br>Resources Committee<br> <br><br> <br>Class A subordinate voting<br>shares: 25,000 (*)<br> <br>Deferred Stock Units: 20,837 (+)<br><br><br>Stock options: 21,151 (‡)
2020 votes in favour: 99.18%
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George A. Cope<br> <br><br><br><br><br> <br><br><br><br>LOGO<br><br> <br>Toronto, Ontario, Canada<br> <br><br><br><br>Director since: 2020<br> <br>Age: 59<br><br><br><br> <br>Independent director,<br><br><br>complies with the share<br> <br>ownership<br>guideline Mr. Cope is a corporate director. Prior to<br>his retirement in January 2020, he was President and Chief Executive Officer of BCE Inc. and Bell Canada, a position he had held since 2008. He was recognized as Corporate Citizen of the Year in the Report on Business CEO of the Year Awards (2019),<br>one of the Top 100 Best-Performing CEOs in the World by Harvard Business Review (2019) and as Canada’s Outstanding CEO of the Year for 2015 by the Financial Post. Under his leadership, Bell announced the Bell Let’s Talk initiative in<br>2010, the largest-ever corporate commitment to Canadian mental health and now one of the country’s most prominent community investment campaigns. Mr. Cope was named Ivey Business Leader of the Year in 2013 and serves on the school’s<br>advisory board. He has been awarded honorary Doctorate degrees by his alma mater, University of Windsor and Trent University, was Chair of United Way Toronto’s record-breaking 2013 campaign, and received the Queen’s Diamond Jubilee Medal<br>for his work on Bell Let’s Talk. He recently retired from the board of Maple Leaf Sports & Entertainment Ltd. (MLSE). Mr. Cope is Chair of the board of the Bank of Montreal, and serves as a director of its U.S. subsidiary, BMO<br>Financial Corp. In addition, he sits on the board of directors of the Brain Canada Foundation. Mr. Cope was appointed a Member of the Order of Canada in 2014 and was inducted into the Canadian Business Hall of Fame in 2018. Mr. Cope is a<br>graduate of the Ivey School of Business at Western University.<br> <br><br><br><br>Member of the Corporate Governance Committee and Human Resources Committee<br><br><br><br> <br>Class A subordinate voting shares: 21,540<br>(*)<br> <br>Deferred Stock Units: 1,346 (+)
2020 votes in favour: 99.93%
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Paule Doré<br> <br><br><br><br><br> <br><br><br><br>LOGO<br><br> <br>Outremont, Quebec, Canada<br> <br><br><br><br>Director since: 1995<br> <br>Age: 69<br><br><br><br> <br>Independent director,<br><br><br>complies with the share ownership guideline Ms. Doré is a<br>corporate director. She joined CGI in 1990 and served in a number of roles, including as Executive Vice-President and Chief Corporate Officer when she retired in 2006. Ms. Doré has served on the board of directors of other publicly<br>listed companies, including Ault Food Limited, AXA Canada, Groupe Covitec Inc., Groupe Laperrière & Verreault Inc. and Cogeco Inc. Ms. Doré currently serves as a director of Héroux-Devtek Inc. and of the Institute<br>for the Governance of Public and Private Organizations (IGOPP). Ms. Doré holds an honorary Doctorate degree in Philosophy from the Dominican University College in Ottawa.<br><br><br><br> <br>Chair of the Corporate Governance<br>Committee<br> <br><br> <br>Class A subordinate voting shares: 54,274 (*)<br> <br>Deferred Stock Units: 13,295 (+)<br><br><br>Stock options: 625 (‡)
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2020 votes in favour: 95.30%
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Julie Godin<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Verdun (Nuns’ Island),<br><br><br>Quebec, Canada<br> <br><br><br><br>Director since: 2013<br> <br>Age: 45<br><br><br><br> <br>Director related to CGI,<br><br><br>complies with the share ownership guideline Ms. Godin, as Co-Chair of the CGI Board of Directors, collaborates with<br>the Board to set the strategic direction of the company, including overseeing the development and execution of its rolling three-year strategic plan, which is updated annually. As part of this, she and the Board focus on achieving results for and<br>maintaining equilibrium among CGI’s three stakeholders – clients, employees (whom we call members) and shareholders – to ensure each stakeholders’ long-term success. As Executive Vice-President of Strategic Planning and Corporate<br>Development, Ms. Godin oversees the ongoing development of the CGI Management Foundation, which includes the key elements and best practices that define and guide the company’s actions for the benefit of all three stakeholders. She also<br>leads the strategic planning, marketing & communications and mergers & acquisitions functions. In this role, she directs the company’s continuous improvement through structured stakeholder insights and metrics, and drives<br>forward the successful execution of the Build and Buy Strategy, equipping leaders to bring forward CGI’s end-to-end services and merging with IT and business<br>consulting firms that strengthen our footprint and capabilities. Before joining CGI, Ms. Godin founded Oxygen Corporate Health, a company that manages comprehensive health and wellbeing programs in the workplace, which merged with CGI.<br><br><br><br> <br>Co-Chair of the Board, Executive Vice-President, Strategic Planning and Corporate Development<br> <br><br><br><br>Class A subordinate voting shares: 7,434 (*)<br><br><br>Stock options: 257,946 (‡)<br><br><br>Performance Share Units: 32,614 (§)
2020 votes in favour: 97.86%
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Serge Godin<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Westmount, Quebec, Canada<br><br><br><br> <br>Director since: 1976<br><br><br>Age: 71<br> <br><br> <br>Director related to CGI,<br> <br>complies with the share ownership guideline Mr. Godin is the Founder and Executive<br>Chairman of the Board of CGI. Under Mr. Godin’s leadership, CGI has grown into one of the largest independent information technology and business process services firms in the world. Mr. Godin is a member of the Order of Canada and<br>the Ordre national du Québec. In 2008, he was inducted into the Canadian Business Hall of Fame. In 2011, Mr. Godin was named an Honorary Associate by the Conference Board du Canada. In 2015, he became a lifelong member of the Horatio<br>Alger Association. In 2016, he was promoted to Officer of the Order of Canada for his information technology sector and philanthropic contributions. Mr. Godin was also awarded an honorary Doctorate degree from ÉTS (École de<br>technologie supérieure), an honorary Doctorate degree in Law from York University and Concordia University, an honorary Management degree from HEC Montréal and an honorary Doctorate degree in Administrative Sciences from<br>Université Laval. Mr. Godin was appointed as director of Alstom SA on October 29, 2020. He will enter into office on January 1^st^, 2021, subject to completion of Alstom SA’s Bombardier<br>Transportation acquisition. Mr. Godin owns a majority interest in CGI’s Class B shares (see Principal Holders of Class**A Subordinate Voting Shares andClass B Shares earlier in this document).<br><br><br><br> <br>Founder and<br>Executive Chairman of the Board<br> <br><br><br><br>Class A subordinate voting shares: 281,606 (*)<br><br><br>Class B shares: 25,545,706 (*)<br><br><br>Performance Share Units: 227,954 (§)
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2020 votes in favour: 97.85%
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Timothy J. Hearn<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Calgary, Alberta, Canada<br><br><br><br> <br>Director since: 2015<br><br><br>Age: 76<br> <br><br> <br>Independent director,<br> <br>complies with the share ownership guideline Mr. Hearn is a corporate director. Prior<br>to his retirement in 2008, he was Chairman and Chief Executive Officer of Imperial Oil Limited. Mr. Hearn has over 40 years of experience in the oil and gas industry and has, in the course of his career, held executive leadership positions in<br>Canada and abroad. He spent, among others, ten years at Exxon Mobil Corporation heading global businesses while living in the United States and Asia. He served on the board of directors of other publicly listed issuers, including Imperial Oil<br>Limited, Royal Bank of Canada and ARC Resources Ltd. Mr. Hearn currently serves as Chairman of Hearn and Associates Inc., a consulting, investment management and philanthropic organization. Mr. Hearn holds a Bachelor of Science<br>degree from University of Manitoba.<br> <br><br> <br>Lead Director, Member<br>of the Human Resources Committee and of the Corporate Governance Committee<br> <br><br><br><br>Class A subordinate voting shares: 28,000 (*)<br><br><br>Deferred Stock Units: 8,328 (+)<br><br><br>Stock Options: 4,697 (‡)
2020 votes in favour: 99.58%
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André Imbeau<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Beloeil, Quebec, Canada<br><br><br><br> <br>Director since: 1976<br><br><br>Age: 71<br> <br><br> <br>Director related to CGI,<br> <br>complies with the share ownership guideline Mr. Imbeau is the Founder and Advisor to the Executive Chairman of the Board of CGI. He co-founded CGI with Mr. Serge Godin in 1976 and was, until 2006, Executive Vice-President and Chief Financial Officer and, until 2016, Founder, Vice-Chairman of the Board and Corporate Secretary of the Company.<br>Mr. Imbeau’s financial and operational expertise and deep understanding of CGI’s operations enables him to provide valuable insight to management and the Board of Directors. Mr. Imbeau was awarded an honorary Doctorate degree<br>from Université du Québec à Chicoutimi. Mr. Imbeau holds an interest in the Company’s Class B shares (see the heading Principal Holders of Class A Subordinate Voting Shares andClass B Shares earlier in this document).<br> <br><br><br><br>Founder and Advisor to the Executive Chairman of the Board<br><br><br><br> <br>Class A subordinate voting shares: 30,478 (*)<br> <br>Class B shares: 3,400,000 (*)<br><br><br>Stock options: 69,144 (‡)
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2020 votes in favour: 98.10%
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Gilles Labbé<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Montréal, Quebec, Canada<br><br><br><br> <br>Director since: 2010<br><br><br>Age: 64<br> <br><br> <br>Independent director,<br> <br>complies with the share ownership guideline Mr. Labbé is the Executive Chairman of the Board of Héroux-Devtek Inc., an international company<br>specializing in the design, development, manufacture, repair, and overhaul of landing gear systems and components for the aerospace market. Prior to June 2019, Mr. Labbé had been President and Chief Executive Officer of<br>Héroux-Devtek Inc. since the acquisition of Devtek Corporation by Héroux Inc. in 2000 and previously, he was the President and Chief Executive Officer of Héroux Inc. since 1989. Mr. Labbé holds a Bachelor of<br>Business Administration degree from Université de Montréal and is a Fellow Chartered Professional Accountant (FCPA, FCA).<br> <br><br><br><br>Chair of the Audit and Risk Management Committee<br><br><br><br> <br>Class A subordinate voting shares: 15,000<br>(*)<br> <br>Deferred Stock Units: 29,809 (+)<br><br><br>Stock options: 37,732 (‡)
2020 votes in favour: 99.86%
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Michael B. Pedersen<br> <br><br><br><br><br> <br><br><br><br>LOGO<br><br> <br>Toronto, Ontario, Canada<br> <br><br><br><br>Director since: 2017<br> <br>Age: 60<br><br><br><br> <br>Independent director,<br><br><br>complies with the share ownership guideline Mr. Pedersen is a corporate director.<br>Prior to his retirement in June 2018, he was Special Advisor to the Chief Executive Officer of The Toronto-Dominion Bank since June 2017 and Group Head, U.S. Banking of The Toronto-Dominion Bank as well as President and Chief Executive Officer and a<br>director of TD Bank US Holding Company, TD Bank, N.A. and TD Bank USA, N.A. from 2013 to 2017, where he was responsible for leading the bank’s retail and commercial banking operations in the United States. Prior to joining TD Bank Group in<br>2007, Mr. Pedersen worked at Barclays plc in the United Kingdom where he was responsible for three global businesses and prior to that he worked at CIBC where he held senior executive roles in retail and business banking. Mr. Pedersen<br>served as Chairman of the Canadian Bankers Association and currently serves as a director of SNC-Lavalin and as Chairman of the board of directors of the Business Development Bank of Canada. Mr. Pedersen<br>holds a Bachelor of Commerce degree from University of British Columbia and a Master’s degree in Industrial Relations from University of Toronto.<br> <br><br><br><br>Member of the Audit and Risk Management Committee<br><br><br><br> <br>Class A subordinate voting shares: 24,350<br>(*)<br> <br>Deferred Stock Units: 8,221 (+)
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2020 votes in favour: 99.93%
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Stephen S. Poloz<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Orleans, Ontario, Canada<br><br><br><br> <br>Director since: 2020<br><br><br>Age: 65<br> <br><br> <br>Independent director,<br> <br>complies with the share ownership guideline Mr. Poloz is a corporate director. A<br>widely-recognized economist with nearly 40 years of experience in financial markets, forecasting and economic policy, Stephen S. Poloz served a seven-year term as the Governor of the Bank of Canada, starting in 2013. As Governor, he served as<br>Chairman of the Bank’s board of directors. He was a director of the Bank for International Settlements (BIS) and the Canada Deposit Insurance Corporation. He was also Chair of the BIS Audit Committee and former Chair of the Consultative Council<br>for the Americas. Previously, Mr. Poloz was President and CEO of Export Development Canada, a major public sector financial intermediary providing various forms of insurance and lending to facilitate international business on behalf of Canadian<br>companies.<br> <br><br> <br>Member of the Audit and Risk<br>Management Committee<br> <br><br> <br>Deferred Stock Units: 298 (+)
New candidate for election as director
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Mary Powell<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Vermont, United States<br><br><br><br> <br>Director since: 2020<br><br><br>Age: 60<br> <br><br> <br>Independent director,<br> <br>complies with the share ownership guideline Ms. Powell is a corporate director. Recognized as an energy transformation visionary, Mary Powell has served as<br>President and Chief Executive Officer for Green Mountain Power Corporation (GMP) in the state of Vermont from 2008 through 2019. She led GMP’s ambitious energy transformation program to provide low carbon, low cost and reliable power to Vermont<br>citizens. Ms. Powell has received various accolades, including the prestigious Rachel Carson Award in 2018, which honors distinguished female leaders influencing the environment. She is Chair of The Solar Foundation, Director of the Rocky<br>Mountain Institute, and an active member of the board of directors for several leading companies.<br> <br><br><br><br>Member of the Corporate Governance Committee and Human Resources Committee
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New candidate for election as director
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Alison C. Reed<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>London, United Kingdom<br><br><br><br> <br>Director since: 2018<br><br><br>Age: 63<br> <br><br> <br>Independent director,<br> <br>complies with the share ownership guideline Ms. Reed is a corporate director. She<br>previously held senior management roles at Marks and Spencer plc where she spent more than 20 years, including as Chief Financial Officer from 2001 to 2005, and at Standard Life Assurance Company and Standard Life plc, where she served as Chief<br>Financial Officer from 2005 to 2006 and led the company’s listing on the London Stock Exchange. Ms. Reed has served on the board of directors of several companies, including Darty plc and HSBC Bank plc. She currently serves as Deputy<br>Chairman of British Airways plc, as a director of NewDay Ltd and as a Member of Council of Exeter University. Ms. Reed holds a Bachelor of Arts degree from Exeter University and is a Chartered Accountant (ACA).<br><br><br><br> <br>Member of the Audit and Risk Management<br>Committee<br> <br><br> <br>Class A subordinate voting shares: 3,000 (*)
2020 votes in favour: 99.90%
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Leadership IT Industry Geography Vertical market Finance Accounting Risk Resources
✓ Global Multiple vertical<br>markets ✓ ✓ ✓ ✓
Michael E. Roach<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Montréal, Quebec, Canada<br><br><br><br> <br>Director since: 2006<br><br><br>Age: 68<br> <br><br> <br>Director related to CGI,<br> <br>complies with the share ownership guideline Mr. Roach is a corporate director. Retired<br>President and Chief Executive Officer of CGI (2006-2016) and President and Chief Operating Officer (2002-2006), he joined CGI in a senior management position in 1998, from a major telecommunications company. Mr. Roach was named CEO of the Year<br>2013 by the Québec-based business journal Les Affaires and Most Innovative CEO of the Year 2014 by Canadian Business magazine. He currently serves on the board of directors of CAE Inc. and is a member<br>of the National Advisory Board for Canada’s Outstanding CEO of the Year. He is the former Chair of Interac Inc. Mr. Roach holds a Bachelor of Arts in Economics and Political Science, as well as an Honorary Doctorate in Business<br>Administration from Laurentian University in Sudbury, Ontario.<br> <br><br> <br>Member of the Board of Directors<br> <br><br><br><br>Class A subordinate voting shares: 951,335 (*)<br><br><br>Deferred Stock Units: 5,104 (+)
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2020 votes in favour: 98.36%
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Executive Consulting<br>Services and Financial Literacy Governance<br>and Human
Leadership IT Industry Geography Vertical market Finance Accounting Risk Resources
✓ ✓ Global Multiple vertical<br>markets ✓ ✓ ✓ ✓
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George D. Schindler<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Fairfax, Virginia,<br><br><br>United States<br> <br><br><br><br>Director since: 2016<br> <br>Age: 57<br><br><br><br> <br>Director related to CGI,<br><br><br>complies with the share ownership guideline Mr. Schindler is the President and Chief<br>Executive Officer of CGI. He joined the Company through its acquisition of American Management Systems, Inc. in 2004 and has since then held numerous leadership roles, including leading the strategy and growth of CGI’s end-to-end services and solutions for commercial and government clients in the United States and Canada. Prior to his appointment as President and Chief Executive Officer in<br>2016, Mr. Schindler served as President and Chief Operating Officer of CGI since 2015 and as President, United States and Canada Operations since 2011. A recognized industry leader, Mr. Schindler has twice been named a Top 100<br>Leader by Federal Computer Week. He holds a Bachelor of Science degree in Computer Science from Purdue University.<br> <br><br><br><br>President and Chief Executive Officer<br> <br><br> <br>Class A subordinate voting shares: 31,390 (*)<br><br><br>Stock options: 1,154,339 (‡)<br><br><br>Performance Share Units: 201,693 (§)
2020 votes in favour: 99.53%
Operational<br>Literacy Governance Risk and<br>Compliance
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Executive Consulting<br>Services and Financial Literacy Governance<br>and Human
Leadership IT Industry Geography Vertical market Finance Accounting Risk Resources
✓ ✓ Global Multiple vertical<br>markets ✓ ✓ ✓ ✓
Kathy N. Waller<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Atlanta, Georgia,<br><br><br>United States<br> <br><br><br><br>Director since: 2018<br> <br>Age: 62<br><br><br><br> <br>Independent director,<br><br><br>complies with the share ownership guideline Ms. Waller is a corporate director. She<br>served as the Executive Vice President, Chief Financial Officer and President, Enabling Services of The Coca-Cola Company until March 2019 where she was responsible for leading the company’s global finance organization. Ms. Waller joined<br>The Coca-Cola Company in 1987 as a senior accountant and held numerous accounting and finance roles. She was Vice President, Controller from August 2009 to September 2013 and Senior Vice President, Finance from September 2013 to April 2014, prior to<br>becoming Executive Vice President and Chief Financial Officer. She assumed responsibility for the company’s strategic governance areas as Executive Vice President, Chief Financial Officer and President Enabling Services from May 2017 to March<br>2019. Ms. Waller currently serves on the board of directors of Beyond Meat, Inc., Delta Air Lines, Inc. and Cadence Bancorporation. Previously she served on the board of directors of Coca-Cola FEMSA, S.A.B. de C.V and Monster Beverage<br>Corporation. She holds a Bachelor of Arts degree and a Master’s degree in Business Administration from the University of Rochester and is a Certified Public Accountant (CPA, CGMA).<br><br><br><br> <br>Member of<br>the Audit and Risk Management Committee<br> <br><br><br><br>Deferred Stock Units: 3,712 (+)
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2020 votes in favour: 99.80%
Operational<br>Literacy Governance Risk and<br>Compliance
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Leadership IT Industry Geography Vertical market Finance Accounting Risk Resources
✓ Global Manufacturing,<br>retail and<br>distribution ✓ ✓ ✓ ✓
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Joakim Westh<br> <br><br><br><br><br><br><br>LOGO<br><br> <br><br> <br>Stockholm, Sweden<br><br><br><br> <br>Director since: 2013<br><br><br>Age: 59<br> <br><br><br><br>Independent director,<br><br><br>complies with the share<br><br><br>ownership guideline Mr. Westh is a corporate director. He<br>served as Senior Vice-President of LM Ericsson AB until 2009 where he was responsible for strategy, operations and sourcing. Mr. Westh is well-known as a leading expert in the fields of technology and management, particularly in Scandinavia. He<br>served on the board of directors of other publicly listed issuers, including Arcam AB. He currently serves as a director of Saab AB, Swedish Match AB and Absolent Group AB. Mr. Westh holds Master’s degrees in Science from the Royal<br>Institute of Technology and the Massachusetts Institute of Technology.<br> <br><br><br><br>Chair of the Human Resources Committee<br><br><br><br> <br>Class A subordinate voting shares: 8,755<br>(*)
2020 votes in favour: 98.38%
Operational Literacy Governance Risk and Compliance
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Leadership IT Industry Geography Vertical market Finance Accounting Risk Resources
✓ ✓ Global Multiple vertical<br>markets ✓ ✓ ✓ ✓
(*) Number of shares beneficially owned, controlled or directed, directly or indirectly.
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(+) For more information concerning DSUs, please refer to the heading Compensation of Directorslater in this document.
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(‡) For more information concerning stock options, please refer to the headings Share Option Planand Compensation of Directors later in this document.
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(§) The number of PSUs includes PSUs that were awarded at the beginning of fiscal 2021 to Ms. Godin and Messrs. Godin<br>and Schindler as part of their target compensation for fiscal 2021, but which have not yet become eligible to vest and remain subject to the achievement of performance conditions, which will be determined at end of fiscal 2021. For more information<br>concerning PSUs, please refer to the heading Performance Share Unit Plans later in this document.
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Report of the Human Resources Committee

Executive Compensation Discussion and Analysis

Executive Compensation Process for the 2020 Fiscal Year

CGI’s executive compensation policy emphasizes incentive compensation linked to the success of the Company to ensure that the financial interests of the Company’s executives are closely aligned with those of shareholders. CGI measures business success on the basis of profit and growth as well as the satisfaction of clients and employees, whom we call members.

CGI’s compensation policy is rooted in its fundamental belief that a company with an inspiring dream, uncompromising integrity, a caring human resources philosophy and solid values is better able to attract and respond to the profound aspirations of high-calibre, competent people. These individuals in turn will deliver high-quality services, in keeping with the Company’s profitability objectives. The growth and profitability generated as a result will allow CGI to continue to offer its shareholders value for their investment.

This belief drives the Company’s compensation programs, which are designed to attract and retain the key talent CGI needs to remain competitive in a challenging market and achieve continued and profitable growth for its shareholders.

In keeping with CGI’s compensation policy, the principles used to determine the compensation of the named executive officers (the President and Chief Executive Officer, the Executive Vice-President and Chief Financial Officer and the three other most highly compensated executive officers of the Company, hereafter referred to as the “Named Executive Officers”) are also applied to all management team members, taking into account the results of their respective business units. In the case of CGI’s senior executives, there is an added emphasis on closely aligning executives’ financial interests with those of shareholders through incentive compensation.

Fiscal 2020 has been impacted by the COVID-19 pandemic and CGI re-evaluated its approach to executive compensation during this period of uncertainty. Temporary measures have been proactively taken to respond to this unprecedented crisis. These measures will be further explained in this document under the heading Base Salary.

The sections below outline the main features of CGI’s executive compensation policy and programs.

The Human Resources Committee of the Board of Directors

The Committee reviews management’s proposals and makes recommendations to the Board of Directors of the Company in relation to the compensation of certain senior executives, including the entitlements under short and long-term incentive and benefit plans and the corporate objectives that the Founder and Executive Chairman of the Board, the President and Chief Executive Officer and other senior executives are responsible for achieving. Similarly, the Committee is responsible for approving and making recommendations in relation to the compensation of the Company’s outside directors and succession plans for senior executives.

The Committee is made up of Messrs. Joakim Westh, Chair of the Committee, Alain Bouchard, George A. Cope, Timothy J. Hearn, Lead Director, and Ms. Mary Powell all of whom are independent directors. The Committee held four regular meetings in fiscal 2020. Mr. Westh’s role and responsibilities as Chair of the Committee are described later in this document in the report of the Corporate Governance Committee under the heading Role and Responsibilities of the Lead Director and Standing Committee Chairs.

The members of the Committee have significant experience in matters relating to human resources management and executive compensation, which they have acquired in their role as senior executives or as members of the Human Resources Committee of other publicly listed issuers. Mr. Westh was Senior Vice-President of LM Ericsson AB, Mr. Bouchard was President and Chief Executive Officer and is now Founder and Executive Chairman of the board of directors of Alimentation Couche-Tard Inc. Mr. Hearn was Chairman and Chief Executive Officer of Imperial Oil Limited and Chair of the Human Resources and Compensation Committee of ARC Resources Ltd, Mr. George A. Cope was President and Chief Executive Officer of BCE Inc. and Bell Canada and Ms. Powell was President and Chief Executive Officer for Green Mountain Power Corporation.

The role and responsibilities of the Committee are contained in the Committee’s charter, which is incorporated by reference in this Management Proxy Circular (see the heading Mandate, Structure and Composition of the Board of

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Directors later in this document). The Committee’s charter is available on CGI’s website at www.cgi.com. The role and responsibilities of the Committee include:

• Advising the Board of Directors on human resources planning;
• Reviewing and advising the Board of Directors on management’s succession plans for executive officers, with special<br>emphasis on the Founder and Executive Chairman of the Board and President and Chief Executive Officer succession;
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• Reviewing and advising the Board of Directors on CGI’s compensation philosophy and policies, including the<br>compensation strategy and compensation policies for the executive officer level as proposed by the Founder and Executive Chairman of the Board and the President and Chief Executive Officer;
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• Making recommendations to the Board of Directors for the appointment of the Founder and Executive Chairman of the Board,<br>the President and Chief Executive Officer and other executive officers, while considering and promoting the diversity of the executive team’s background, including in terms of gender, ethnicity, age and experience, and the corporate<br>objectives which the Founder and Executive Chairman of the Board, the President and Chief Executive Officer and other executive officers, as the case may be, are responsible for meeting, as well as the assessment of the Founder and Executive<br>Chairman of the Board and of the President and Chief Executive Officer against these objectives;
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• Monitoring the performance of the Founder and Executive Chairman of the Board and the President and Chief Executive<br>Officer and providing advice and counsel in the execution of their duties;
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• Reviewing and advising the Board of Directors on CGI’s overall compensation plan including the adequacy and form of<br>compensation realistically reflecting the responsibilities and risks of the position for the Founder and Executive Chairman of the Board and for the President and Chief Executive Officer of the Company and, in that regard, considering appropriate<br>information;
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• Reviewing and advising the Board of Directors on the compensation of executive officers, annual adjustment to executive<br>salaries, and the design and administration of short and long-term incentive plans, stock options, performance share units, benefits and perquisites as proposed by the Founder and Executive Chairman of the Board and the President and Chief Executive<br>Officer;
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• Reviewing and advising the Board of Directors on employment and termination arrangements for senior executives;<br>
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• Making recommendations on the adoption of new, or significant modifications to, pay and benefit plans;<br>
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• Recommending the appointment of new officers as appropriate while considering and promoting the diversity of the<br>executive team’s background, including gender, ethnicity, age and experience;
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• Reviewing and advising the Board of Directors on significant organizational changes;
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• Reviewing and approving the Committee’s executive compensation report to be contained in the Company’s annual<br>Management Proxy Circular;
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• Reviewing and advising the Board of Directors on management development programs for the Company;
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• Reviewing and advising the Board of Directors on special employment contracts or arrangements with officers of the<br>Company, including any contracts relating to change of control, if any; and
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• Reviewing and advising the Board of Directors on the compensation of the members of the Board of Directors and its<br>committees, including the adequacy and form of compensation realistically reflecting the responsibilities and risks of the positions, and recommending changes where applicable.
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The Committee also performs such other duties from time to time as assigned by the Board of Directors.

The Committee reports to the Board of Directors on its proceedings, the reviews it undertakes, and its recommendations.

In executing its mandate for fiscal 2020, the Committee retained the services of Willis Towers Watson, the Company’s external human resources consultant. Willis Towers Watson was first retained to provide consulting services in 1995. The services provided by Willis Towers Watson to the Committee include:

• Providing the Committee with information on market trends and good practices on executive and director compensation;<br>
• Developing recommendations on the composition of the comparator groups of companies used as the basis for determining the<br>compensation of the directors, the Founder and Executive Chairman of the Board, the President and Chief Executive Officer and other senior executives of the Company;
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• Conducting market research and providing the Committee with data and analysis on compensation practices of companies in<br>comparator groups to allow the Company to align its compensation policy with the market as it applies to the directors, the Founder and Executive Chairman of the Board, the President and Chief Executive Officer and other senior executives; and<br>
• Reviewing the design of the annual and long-term incentive plans and providing data and analysis on comparator group<br>company practices in this area.
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To ensure the quality of services provided to the Committee by external human resources consultants, as well as their independence, the Committee has established the following processes as part of its annual work plan:

• Once a year or as required, external consultants that may be retained by the Committee provide to the Committee a<br>statement of the services that may be provided to the Committee at its request and those that may be provided at the request of management for the purpose of enabling the Committee to pre-approve all services<br>that may be provided by such external consultants;
• The Committee may request from each external consultant information concerning the consultant’s organizational<br>structure and employees who provide services to the Committee so that the Committee may agree with the external consultant on measures to address any real or perceived conflicts of interest that may arise from the services provided by the external<br>consultant to the Company at the request of management; and
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• The Committee reviews the external consultant independence policy annually to ensure that it continues to meet the<br>Committee’s requirements.
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Executive Compensation Related Fees

The fees of Willis Tower Watson, CGI’s external human resources consultant, for services rendered during the fiscal years ended September 30, 2020 and 2019 are detailed below:

Service retained Fees billed
2020 2019
Advice in relation to executive compensation and the compensation of directors^(a)^ $ 45,000 $ 112,000
All other fees^(b)^ $ 250,000 $ 215,000
Total fees billed $ 295,000 $ 327,000
(a) All fees billed by the human resources consultant for the years ended September 30, 2020 and 2019 were related to<br>annually recurring work for the Committee.
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(b) The other fees billed by the human resources consultant for the years ended September 30, 2020 and 2019 were<br>mainly in relation to pension and benefits matters.
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Composition of Comparator Group

To determine appropriate compensation levels, the Named Executive Officers’ positions are compared with similar positions within a comparator group made up of leading companies in a number of industries. These companies include information technology consulting firms and companies similar to CGI in terms of size, and operational and managerial complexity. With 85% of its 2020 revenues generated outside Canada and constant international expansion, CGI must offer competitive compensation in each of the challenging markets in which it operates in order to recruit and retain high-performing executives. All of the Company’s major competitors are based either in the U.S., Europe or in the Asia Pacific region and they compete against CGI both in Canada and internationally. In response to this market reality, the Committee based Named Executive Officers’ compensation for the year ended September 30, 2020 on the compensation of executives in the U.S. and Canadian market for the Named Executive Officers based in Canada and the U.S. The Committee reviews the composition of the comparator group annually and in fiscal 2020, adjusted the U.S. & Canada Comparator Group to reflect market changes.

The selection criteria used to determine the companies included in the comparator group are the following:

• Autonomous and publicly-traded companies;
• Large number of professionals;
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• Growing companies;
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• High-end IT and business consulting, systems integration, outsourcing services<br>and intellectual property solution providers;
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• International scope;
• Companies for which IT is very strategic; and
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• Participation in the data bank for the relevant countries maintained by Willis Towers Watson, the Company’s external<br>human resources consultant.
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Each company in the following table meets one or more of the foregoing criteria.

U.S. & Canada Comparator Group: Executives from 13 companies

Accenture plc<br><br><br>Automatic Data Processing, Inc.<br><br><br>Booz Allen Hamilton Holding Corporation<br><br><br>CACI International Inc.<br><br><br>Capgemini S.E.<br><br><br>Cognizant Technology Solutions Corporation<br><br><br>Conduent Incorporated DXC Technology Company<br><br><br>Experian plc<br><br><br>Fidelity National Information Services Inc.<br><br><br>Fiserv, Inc.<br><br><br>Leidos Holdings, Inc.<br><br><br>Science Application International Corporation

The foregoing comparator group was used to determine the compensation of the Named Executive Officers for the fiscal year ended September 30, 2020.

Executive Compensation Components

CGI’s total executive compensation is made up of five components: base salary, short-term incentive, long-term incentive, benefits and perquisites. In keeping with the Company’s values, incentive compensation and share ownership are emphasized to ensure that executives’ interests are aligned with CGI’s profitability and growth objectives, which in turn results in increased value for all shareholders under normal market conditions. CGI’s Named Executive Officers do not participate in any defined benefit pension plans.

Component Description Policy Alignment with Comparator Group
Base Salary Annual base salary based on each executive’s responsibilities, competencies and<br>contribution to the Company’s success. Aligned with median base salary offered in the comparator group.
Short-Term Incentive Annual payout based on the achievement of performance objectives in accordance with the<br>Profit Participation Plan. Aligned with median short-term incentives of the comparator group when performance<br>objectives are met.
Long-Term Incentive Grants under the Share Option Plan and/or awards under the Performance Share Unit Plans, as<br>applicable in each case, based on achievement of performance objectives. Aligned with median total compensation of the comparator group when business objectives are<br>met, or above the median to recognize an executive’s exceptional performance.
Benefits Group benefits and employer contributions under CGI’s Share Purchase Plan. Aligned with median benefits of the comparator group.
Perquisites Principal perquisites include company car and related expenses, tax services, relocation<br>costs and medical exams. Aligned with median perquisites of the comparator group.
Total Compensation Taking into account the number of years of experience in the role, aligned over time with<br>the median of the total compensation of the comparator group when business objectives are met, while exceptionally allowing for compensation above the median as necessary to recognize an executive’s exceptional and sustained contribution to the<br>Company’s success.
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The following table shows for each Named Executive Officer the compensation components as a percentage of their total compensation, at target levels, for the year ended September 30, 2020:

Name and title as at September 30, 2020 Base Salary Short-Term<br>Incentive Long-Term<br>Incentive Benefits and<br>Perquisites
Serge Godin<br><br><br>Founder and Executive Chairman of the Board 9.35% 18.70% 71.76% 0.19%
George D. Schindler<br><br><br>President and Chief Executive Officer 12.02% 24.04% 63.49% 0.45%
François Boulanger<br><br><br>Executive Vice-President and Chief Financial Officer 20.43% 20.43% 58.29% 0.85%
Timothy J. Hurlebaus<br><br><br>President, CGI Federal 30.30% 18.18% 49.46% 2.06%
David L. Henderson<br><br><br>President, United States Operations, Commercial and State Government 31.25% 18.75% 47.84% 2.16%

The Founder and Executive Chairman of the Board, the Co-Chair of the Board and the President and Chief Executive Officer may from time to time exercise their discretion to recommend to the Committee and the Board of Directors that incentive compensation under the Profit Participation Plan, and the performance-based vesting of stock options under the Share Option Plan for Employees, Officers and Directors of CGI Inc. and its Subsidiaries (the “Share Option Plan”) and of PSUs under the Performance Share Unit Plan for Designated Leaders of CGI Inc. and its Subsidiaries (the “2017 PSU Plan” and collectively with the 2014 Performance Share Unit Plan for Designated Participants of CGI Inc., the “PSU Plans”), as applicable, be adjusted in order to ensure that actual profit participation, vested stock options and vested PSUs are equitable and balance the interests of each of the Company’s stakeholders based on the overall performance of the Company and exceptional market conditions.

Base Salary

The base salaries paid to Named Executive Officers are reviewed every year based on each executive’s scope of responsibilities, competencies and contribution to the Company’s success. The objective of CGI’s compensation policy for base salaries is to align them over time with the median base salary in the relevant comparator group, taking into account the number of years of experience in the role, while allowing for compensation to rise above the median in recognition of a particular executive’s exceptional and sustained contribution to the Company’s success. As part of the methodology used for fiscal 2020, the positions of Named Executive Officers were compared with generic positions in the compensation databases for the relevant countries maintained by Willis Towers Watson, the Company’s external human resources consultant. When differences in the level and scope of responsibilities for the comparable generic executive position are observed, the value of the generic position is adjusted to ensure that there is an appropriate basis for comparison.

As part of the measures taken to mitigate the financial impact of COVID-19, a number of senior executives and vice-presidents in Corporate Services and in other impacted Strategic Business Units voluntarily agreed to a significant reduction of their base salary during fiscal 2020 for the period during which CGI had members on leave without pay in order to supplement employment income lost by such members. Mr. George Schindler, President and Chief Executive Officer and Ms. Julie Godin, Co-Chair of the Board, Executive Vice-President, Strategic Planning and Corporate Development, agreed to forfeit 100% of their base salary during this period, and Mr. Serge Godin, Founder and Executive Chairman of the Board, agreed to forfeit 100% of his base salary for the remainder of the 2020 calendar year. In support these measures, the outside directors also agreed to forfeit a significant portion of their compensation during fiscal 2020 for the period during which CGI had members on leave without pay. For more information concerning the outside directors’ compensation reductions, please refer to the heading Board of Directors and Standing Committee Fees later in this document.

Short-Term Incentive Plan – Profit Participation Plan

The Named Executive Officers participate in the Profit Participation Plan, a short-term incentive plan that pays an annual cash payout based on achievement of performance objectives as approved at the beginning of the fiscal year by the Board of Directors on the recommendation of the Committee. The Profit Participation Plan is designed to provide CGI’s management and members with an incentive to increase the profitability and growth of the Company.

Individual payouts are based on the executive’s profit participation target under the Profit Participation Plan and the achievement of performance objectives. The profit participation target varies as a percentage of base salary depending on

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the executive’s position and is adjusted in accordance with the performance factors that are directly linked to the level of achievement of the performance objectives set out in the Company’s annual budget and strategic plan. The Profit Participation Plan provides that the Founder and Executive Chairman of the Board, the Co-Chair of the Board or the President and Chief Executive Officer may recommend to the Committee and to the Board of Directors to modify payment amounts or propose revised targets based on the overall performance of the Company, the individual’s performance, exceptional market conditions and other factors.

Executive profit participation targets are reviewed annually to ensure they remain aligned with the Company’s compensation policy and continue to be competitive with CGI’s applicable comparator group.

Performance Factors

The performance factors used to adjust each Named Executive Officer’s profit participation target in fiscal 2020 were based on two separate measures: profitability and growth. The achievement of profitability and growth objectives determines the performance factors that are applied to calculate the annual payout under the Profit Participation Plan. Such adjustment may result in a reduction or an increase in the annual payout. In the latter case, the payout may not exceed two times the target. The relative performance of the companies in CGI’s comparator group is not a factor in determining the annual payout being paid under the Profit Participation Plan.

The profitability performance factor is based on the degree of achievement of the net earnings excluding specific items margin. The growth performance factor is based on the degree of achievement of year-over-year percentage constant currency revenue growth. Both factors are approved by the Board of Directors as part of the Company’s annual budget and strategic plan approval,

Only items that are the result of actual management operation activities are taken into account in the calculation of performance factors for compensation purposes. The performance factors are prorated between target levels.

The profitability performance factor and growth performance factor are established by determining the actual level of achievement of the budgeted profitability and growth objectives which correspond to a pre-determined numerical performance factor.

Profitability Growth
Net earnings excluding<br>specific items margin^(a)^ Profitability<br>Performance<br>Factor Constant currency<br>revenue^(a)^ Growth<br>Performance<br>Factor
Budgeted margin<br><br><br>objectives on a<br> <br>scale of five levels 0<br> <br>0.25<br><br><br>0.50<br> <br>1.00<br><br><br>1.25 Budgeted revenue<br><br><br>objectives on a<br> <br>scale of five levels 0<br> <br>2.00<br><br><br>3.00<br> <br>3.50<br><br><br>4.00
(a) Net earnings excluding specific items is a non-generally accepted accounting<br>principle (“non-GAAP”) measure of net earnings excluding acquisition and integration related costs, restructuring costs and tax adjustments. Constant currency revenue is a non-GAAP measure of revenue excluding currency conversion effects. Management believes these measures are useful for executive compensation purposes as they best reflect the Company’s performance and allow for<br>better comparability from period to period. These measures do not have any standardized meaning under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures used by other companies. A<br>reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found on page 28 of the Company’s Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019, which is available<br>on the Canadian Securities Administrators’ website at www.sedar.com.
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Once the profitability performance factor and the growth performance factor are established, the following formula is used to determine the payout under the Profit Participation Plan:

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The effect of the formula is to place importance on achieving both the growth and the profitability objectives. If the minimum threshold for either growth or profitability is not met, there is no annual payout under the Profit Participation Plan.

The profit participation targets of the Founder and Executive Chairman of the Board, the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer were based on the formula above as it pertains solely to the overall Company performance. In the case of Presidents of operating segments of the Company, also referred to as Strategic Business Units, half of their profit participation target was based on the formula above as it pertains to the performance of the Company, while the other half was determined based on the performance of the Strategic Business Units for which they are responsible using the same performance measures and certain quality metrics (including client and member satisfaction).

CGI does not disclose specific profitability and growth objectives because it considers that the information would place it at a significant competitive disadvantage if the objectives became known. Disclosing the specific performance objectives that are set as part of the Company’s annual budget and strategic planning process would expose CGI to serious prejudice and negatively impact its competitive advantage. For example, to the extent that the Company’s performance objectives became known, its ability to negotiate accretive business agreements could be significantly impaired, putting incremental pressure on its profit margins. In addition, CGI believes that disclosing performance objectives would be inconsistent with CGI’s policy of not providing guidance to the market and limiting the disclosure of forward-looking information.

For fiscal 2020, the profit participation targets and payouts received by the Named Executive Officers under the Profit Participation Plan are as follows:

Name and title as at September 30, 2020 Annual profit<br>participation<br>target Annual profit<br>participation<br>payout
Serge Godin<br><br><br>Founder and Executive Chairman of the Board $2,750,000 $0
George D. Schindler^(a)^<br><br><br>President and Chief Executive Officer $3,200,000 $0
François Boulanger<br><br><br>Executive Vice-President and Chief Financial Officer $766,000 $0
Timothy J. Hurlebaus^(a)^<br><br><br>President, CGI Federal $461,844 $134,570
David L.<br>Henderson^(a)^<br> <br>President, United States Operations, Commercial and State<br>Government $474,763 $134,570
(a) Messrs. Schindler, Hurlebaus and Henderson are paid in U.S. dollars. The amounts shown are in Canadian dollars<br>converted on the basis of the average exchange rate used in the Company’s annual audited consolidated financial statements which was CAD1.3457, for each U.S. dollar in fiscal 2020. Please refer to the disclosure concerning the foreign<br>exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019.
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Long-Term Incentive Plans

CGI’s long-term incentive plans are designed to ensure that executives’ interests are closely aligned with those of all shareholders and include the Share Option Plan and the PSU Plans. In line with practices among certain of the Company’s peers, the Company’s current compensation practice is to grant, on a case by case basis, stock options issued under the Share Option Plan, PSUs awarded under the 2017 PSU Plan or a combination of both as the long-term incentive component of certain of its senior executives’ compensation. For fiscal 2020, Named Executive Officers’ target long-term incentive compensation was composed solely of PSU awards awarded under the 2017 PSU Plan.

Share Option Plan

The Share Option Plan is designed to ensure that executives’ interests are closely aligned with those of all shareholders. Company’s practice is to apply performance vesting conditions for all stock options granted under the Share Option Plan. CGI’s annual long-term incentive grant of stock options is made in connection with the beginning of the fiscal year. The percentage of stock options that become eligible to vest is based on the degree of achievement of profitability and growth objectives determined following the completion of the fiscal year and subject to adjustment in accordance with the Share Option Plan. Stock options that do not become eligible to vest are forfeited and cancelled.

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Stock options that have become eligible to vest then typically vest on a time basis as follows: one-quarter when the fiscal year results are approved, one quarter on the second anniversary of the grant, one-quarter on the third anniversary of the grant, and the final quarter on the fourth anniversary of the grant.

See the heading Key Features of CGI’s Long-Term Incentive Plans later in this document for a summary of the features of the Share Option Plan.

Performance Share Unit Plans

Each PSU entitles the holder to receive one Class A subordinate voting share subject to the achievement of performance and time vesting conditions and to the terms and conditions set out in the PSU Plans. Unlike Class A subordinate voting shares issued in connection with the exercise of stock options under the Share Option Plan, which are issued from treasury, the PSUs are settled with Class A subordinate voting shares purchased in the open market by the plan trustees with funds provided by CGI.

PSUs have performance conditions that are determined by the Board of Directors at the time of each grant. CGI’s annual long-term incentive awards of PSUs are made at the beginning of the fiscal year. The percentage of PSUs that become eligible to vest is based on the degree of achievement of the same profitability and growth objectives that apply to stock options. Both objectives are approved by the Board of Directors concurrently with the Company’s annual budget and strategic plan approval.

PSUs that become eligible to vest then vest on a time basis. PSUs that do not become eligible to vest under the PSU Plans are forfeited and cancelled.

See the heading Key Features of CGI’s Long-Term Incentive Plans later in this document for a summary of the features of the PSU Plans.

Award Date Fair Value

The accounting fair value of the PSUs was determined in accordance with IFRS 2 as the market value of the underlying Class A subordinate voting shares on the award date. The stock-based compensation cost related to PSUs recorded in costs of services, selling and administrative expenses takes into account the actual result of the performance-based vesting and amortizes the resulting net PSU value over the four-year vesting period. Since fiscal 2018, the Company has used the accounting fair value of the PSUs as the award date fair value for compensation purposes in order to align the earned compensation with performance results.

Performance Factors and Vesting Conditions

The performance factors used to determine the number of stock options or PSUs that will vest under CGI’s long-term incentive plans are based on two separate measures: profitability and growth. The achievement of profitability and growth objectives determines the performance factors that are applied to calculate the number of PSUs or stock options that vest under CGI’s long-term incentive plans. The total percentage of PSUs or stock options eligible to vest is capped at 100%.

The profitability performance factor is based on the degree of achievement of the net earnings excluding specific items margin. The growth performance factor is based on the degree of achievement of year-over-year percentage constant currency revenue growth. Both factors are approved by the Board of Directors concurrently with the Company’s annual budget and strategic plan approval. If the minimum thresholds for profitability and growth are not met, no PSUs or stock options become eligible to vest under the long-term incentive plans. The relative performance of the companies in CGI’s comparator group is not a factor in determining the number of PSUs or stock options that will vest under CGI’s long-term incentive plans.

Only items that are the result of actual management operation activities are taken into account in the calculation of vesting conditions for compensation purposes. The performance factors are prorated between target levels.

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The profitability performance factor and growth performance factor are established by determining the actual level of achievement of the budgeted profitability and growth objectives which correspond to a pre-determined numerical performance factor.

Profitability Growth
Net earnings excluding<br>specific items margin^(a)^ Profitability<br>Performance<br>Factor Constant currency<br>revenue^(a)^ Growth<br>Performance<br>Factor
Budgeted margin<br><br><br>objectives on a<br> <br>scale of five levels 0<br> <br>0.25<br><br><br>0.50<br> <br>1.00<br><br><br>1.25 Budgeted revenue<br><br><br>objectives on a<br> <br>scale of five levels 0<br> <br>0.25<br><br><br>0.75<br> <br>1.00<br><br><br>1.25
(a) Net earnings excluding specific items is a non-GAAP measure of net earnings<br>excluding acquisition and related integration costs, restructuring costs and tax adjustments. Constant currency revenue is a non-GAAP measure of revenue excluding currency conversion effects. Management<br>believes these measures are useful for executive compensation purposes as they best reflect the Company’s performance and allow for better comparability from period to period. These measures do not have any standardized meaning under IFRS and<br>may not be comparable to similar measures used by other companies. A reconciliation of the net earnings excluding specific items to its closest IFRS measure can be found on page 28 of the Company’s Management’s Discussion and Analysis for<br>the years ended September 30, 2020 and 2019, which is available on the Canadian Securities Administrators’ website at www.sedar.com.
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Once the profitability performance factor and growth performance factor are established, the following formula is used to determine the proportion of performance-based vesting under CGI’s long-term incentive plans.

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Long Term Incentive Plan Awards in Fiscal 2020

For fiscal 2020, an aggregate of 224,108 PSUs were awarded to the Named Executive Officers under the 2017 PSU Plan as part of their fiscal 2020 target compensation. The number of PSUs awarded was determined based on the long-term compensation value required to align the Named Executive Officer’s total compensation with the Company’s compensation policy. No stock options were granted to the Named Executive Officers as part of their fiscal 2020 target compensation. The details of these awards are shown in the Net Total Compensation Table and in the Summary Compensation Table later in this document.

For fiscal 2020, the performance vesting of the PSUs based on the formula above, as it pertains to the overall Company was 43.7%. However, the Board of Directors established performance vesting as it pertains to the overall Company at 45% as the profitability performance factor was negatively impacted by unplanned restructuring costs related to the impact of the COVID-19 pandemic.

In the case of the performance vesting of the PSUs awarded to the Presidents of Strategic Business Units, half of the performance vesting was based on the overall performance of the Company, while the other half was determined based on the performance of the Strategic Business Unit for which they are responsible using the same performance measures.

Based on the foregoing, 45% of the PSUs awarded to Messrs. Serge Godin, George D. Schindler and François Boulanger for fiscal 2020 became eligible to vest and 22.5% of the PSUs awarded to Mr. Timothy J. Hurlebaus and 45.63% of the PSUs awarded to Mr. David L. Henderson for fiscal 2020 became eligible to vest. PSUs granted in fiscal 2020 under the 2017 PSU Plan that are eligible to vest will vest on the fourth anniversary of the award.

A table showing all outstanding unvested PSU awards held as at September 30, 2020 by the Named Executive Officers as well as the market value of such unvested PSU as of such date is provided in Appendix A.

CGI does not disclose specific profitability and growth objectives because it considers that the information would place it at a significant competitive disadvantage if the objectives became known. Disclosing the specific performance objectives

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that are set as part of the Company’s annual budget and strategic planning process would expose CGI to serious prejudice and negatively impact its competitive advantage. For example, to the extent that the Company’s performance objectives became known, its ability to negotiate accretive business agreements could be significantly impaired, putting incremental pressure on its profit margins. In addition, CGI believes that disclosing performance objectives would be inconsistent with CGI’s policy of not providing guidance to the market and limiting the disclosure of forward-looking information.

Total At Risk Compensationand Actual Payouts

A significant portion of the Named Executive Officers’ compensation, namely payments under the Profit Participation Plan, grants under the Share Option Plan and awards under the PSU Plans, is performance-based and therefore “at risk”. The percentage of total compensation of the Named Executive Officers that was “at risk” in fiscal 2020 ranged from 66.59% to 90.46%.

The achievement of the performance factors under the Profit Participation Plan and the performance vesting conditions under the Share Option Plan and PSU Plans also present a meaningful challenge for the Company’s senior executives and management team because the Company consistently sets ambitious goals as part of its annual budget and strategic planning process. This is evidenced by the fact that the aggregate payout to the reported Named Executive Officers for fiscal 2020, 2019 and 2018 that was “at risk”, or subject to the achievement of performance factors or performance vesting conditions, was respectively 33.98%, 91.93% and 78.82% of the target “at risk” compensation.

The table below shows the portion of the total compensation “at risk” as well as the portion of that “at risk” compensation that was actually paid out to the Named Executive Officers for the 2020 fiscal year.

Name and title as at September 30, 2020 Percentage of total target<br>compensation “at <br>risk”^(a)^ Percentage payout<br>of<br>“at risk” compensation^(b)^
Serge Godin<br><br><br>Founder and Executive Chairman of the Board 90.46% 35.70%
George D. Schindler<br><br><br>President and Chief Executive Officer 87.53% 32.64%
François Boulanger<br><br><br>Executive Vice-President and Chief Financial Officer 78.72% 33.32%
Timothy J. Hurlebaus<br><br><br>President, CGI Federal 67.64% 24.28%
David L. Henderson<br> <br>President, United States<br>Operations, Commercial and State Government 66.59% 40.76%
(a) This column shows the proportion of the Named Executive Officer’s total target compensation for fiscal 2020 that<br>was “at risk” composed of the annual payout under the Profit Participation Plan and awards under the 2017 PSU Plan.
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(b) This column shows the proportion of the Named Executive Officer’s total target compensation “at risk”<br>that was actually paid out in fiscal 2020.
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The Committee is responsible for ensuring that CGI’s executive compensation policies do not expose the Company to significant risks such as providing incentives for senior executives to engage in business strategies that could yield compensation for the executives, while negatively impacting the interests of the Company.

The Committee considers that the Company’s executive compensation policies, including those that relate to the portion of compensation for which the achievement of performance measures apply, do not expose the Company to significant risks. The short-term and long-term incentive performance-based compensation components require that the Company’s profitability and growth objectives be met. Business strategies that impair the Company’s profitability or growth, whether in the short or long-term, will not result in payouts to senior executives or management.

All of the Company’s senior executives and directors are required to prepare and file reports disclosing their trading activities in the Company’s securities and the Company prepares and files the reports on their behalf. The Company therefore monitors all securities transactions by its senior executives and directors and also requires that they pre-clear their transactions with the Company.

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IncentivePlan Awards – Value Vested or Earned During the Year

The table below shows the value of option grants (referred to as option-based awards) and PSU awards (referred to as share-based awards) made to the Named Executive Officers that vested in fiscal 2020 as well as the value of non-equity incentive plan compensation earned by the Named Executive Officers in fiscal 2020.

Name Option-based awards –<br>Value vested during<br>the year^(a)^<br>($) Share-based awards –<br>Value vested during<br>the year^(b)^<br>($) Non-equity incentive plan<br>compensation –Value earned<br>during<br>the year^(c)^<br>($)
Serge Godin<br><br><br>Founder and Executive Chairman of the Board – $13,925,486 –
George D. Schindler^(d)^<br><br><br>President and Chief Executive Officer $6,964,516 – –
François Boulanger<br><br><br>Executive Vice-President and Chief Financial Officer $2,703,105 – –
Timothy J. Hurlebaus^(d)^<br><br><br>President, CGI Federal $   772,232 – $134,570
David L.<br>Henderson^(d)^<br> <br>President, United States Operations, Commercial and State Government $1,138,558 – $134,570
(a) The option-based awards that vested during fiscal 2020 were the performance-based stock options granted to Messrs.<br>Schindler, Boulanger, Hurlebaus and Henderson during the 2016, 2017, 2018 and 2019 fiscal years that became eligible to vest and for which the exercise prices were $48.16 for fiscal 2016, $63.23 for fiscal 2017 and for fiscal 2018 and $85.62 for<br>fiscal 2019. In fiscal 2020, one-quarter of such stock options eligible to vest for fiscal 2016, one-quarter of such stock options eligible to vest for fiscal 2017 and<br>one quarter of such stock options eligible to vest for fiscal 2018 vested on October 1, 2019 when the closing price of the shares was $103.00 and one-quarter of such stock options granted for fiscal 2019<br>vested on November 5, 2019 when the closing price of the shares was $102.06.
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(b) The share-based awards that vested during fiscal 2020 were the performance-based PSUs awarded to Mr. Godin for<br>fiscal 2016, 2017, 2018 and 2019 respectively. The proportion of performance-based vesting for these PSUs was 50%, 83.01%, 70.16% and 83.40% for the PSUs awarded in respect of fiscal 2016, 2017, 2018 and 2019 and these became eligible to vest after<br>the end of each such fiscal year. In fiscal 2020, one-quarter of such PSUs awarded for fiscal 2016, one-quarter of such PSUs awarded for fiscal 2017 and one quarter of<br>such PSUs awarded for fiscal 2018 vested on October 1, 2019 and one-quarter of such PSUs awarded for fiscal 2019 vested on November 5, 2019.
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(c) This column shows the value of the annual payouts under the Profit Participation Plan received by the Named Executive<br>Officers in respect of fiscal 2020.
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(d) Messrs. Schindler, Hurlebaus and Henderson are paid in U.S. dollars. The amounts shown are in Canadian dollars<br>converted on the basis of the average exchange rate used in the Company’s annual audited consolidated financial statements which was CAD1.3457, CAD1.3270 and CAD1.2838, for each U.S. dollar in fiscal 2020, 2019 and 2018 respectively. Please<br>refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019 and on page 16 of the<br>Management’s Discussion and Analysis for the fiscal year ended September 30, 2019 under the heading Foreign Exchange.
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PerformanceGraph

The Class A subordinate voting shares are listed for trading on the TSX under the symbol GIB.A and on the NYSE under the symbol GIB. The following graph compares the annual variations in the cumulative total shareholder return on the Class A subordinate voting shares with the cumulative total shareholder return of the S&P/TSX and the S&P 500 stock indexes for the past five fiscal years of the Company.

Value of $100 invested on September 30, 2015

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Cumulative Total Shareholder Return

September 30,<br>2015 September 30,<br>2016 September 30,<br>2017 September 30,<br>2018 September 30,<br>2019 September 30,<br><br><br>2020
CGI 100.00 129.25 133.82 172.24 216.67 186.93
S&P/TSX 100.00 114.21 124.70 132.02 141.35 141.31
S&P 500 100.00 115.43 136.91 161.43 168.30 193.80

CGI’s executive compensation policy emphasizes incentive compensation linked to the success of the Company to ensure that the financial interests of the Company’s executives are closely aligned with those of shareholders. CGI’s management team, including the Named Executive Officers, are compensated on the basis of metrics that the Company considers to be fundamental, namely the Company’s growth and profitability. Over the five-year period between October 1, 2015 and September 30, 2020, 63.9% of the aggregate compensation of the reported Named Executive Officers was linked to the share price, and to returns to shareholders.

Since 1986, the year the Company became publicly listed, the price of CGI’s Class A subordinate voting shares increased on average by approximately 17.3% per year. Over the five-year period between October 1, 2015 and September 30, 2020, the price of the Company’s shares increased by more than 187% and the cumulative total shareholder return outperformed the S&P/TSX by 46%.

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The following graph illustrates the relationship between the net total compensation paid to the Company’s reported Named Executive Officers and cumulative total shareholder return over the period between October 1, 2015 and September 30, 2020.

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The chart demonstrates the relationship between cumulative total shareholder return (as calculated on the performance graph earlier in this document) and the net total compensation of the Named Executive Officers. While cumulative total shareholder return has greatly increased during this period, net total compensation has generally decreased as a proportion of cumulative total shareholder return since fiscal 2015, as the net total compensation of the Named Executive Officers is linked to the performance of the Company but not directly to shareholder return. In fiscal 2020, while total shareholder return has been negatively impacted by the COVID-19 pandemic, net total compensation has decreased by a much larger proportion. Please refer to the headingsNet Compensation Table and Base Salary of the present document.

The net aggregate compensation paid to the Named Executive Officers for fiscal 2020 was below the aggregate median of CGI’s comparator group at approximately 44% of the median target total compensation of the comparator group.

Defined Contribution PensionPlan and Deferred Compensation Plan

Defined Contribution Pension Plan

In fiscal 2020, Messrs. George D. Schindler, Timothy J. Hurlebaus and David L. Henderson participated in a U.S. 401(k) Plan that is a benefit available to all eligible U.S. members. The following table sets out the amount contributed to the plan by the Company as well as the accumulated value of the plan at the beginning and the end of the Company’s fiscal year.

Name and title as at September 30, 2020 Accumulated value at start of<br>year^(a)^ Compensatory^(a)^ Accumulated value<br>at<br>year-end^(a)^
George D. Schindler<br> <br>President and Chief Executive<br>Officer $1,385,290 $3,364 $1,606,571
Timothy J. Hurlebaus<br> <br>President, CGI Federal $1,018,683 $3,364 $1,205,027
David L. Henderson<br><br><br>President, United States Operations,<br> <br>Commercial and State Government $  736,474 $3,364 $  988,139
(a) The amount shown is in Canadian dollars converted on the basis of the average exchange rate used in the Company’s<br>annual audited consolidated financial statements which was CAD1.3457 for each U.S. dollar in fiscal 2020. Please refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s<br>Discussion and Analysis for the years ended September 30, 2020 and 2019 under the heading Foreign Exchange.
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Deferred Compensation Plan

Messrs. George D. Schindler, Timothy J. Hurlebaus and David L. Henderson participate in CGI’s Non-Qualified Deferred Compensation Plan which allows participants to defer annually between 5% and 75% of their base salary, and between 5% and 90% of their awards under the Profit Participation Plan. The plan allows participants to withdraw amounts during employment and to elect, upon retirement, to receive either a lump sum payment, or instalment payments for a period of up to ten years. Decisions concerning withdrawals may be made each year at the time that the participant determines the amount of compensation to be deferred for the year. The plan offers an array of mutual funds for investment from which the plan participant may choose. Participants may change their investment directions from time to time during the plan year. The mutual fund investments are subject to market gains and losses.

Compensation of Named Executive Officers

The Net Total Compensation Table and the Summary Compensation Table that follow show detailed information on actual net total compensation, and total compensation in the form provided for by securities regulation, respectively, for Messrs. Serge Godin, George D. Schindler, François Boulanger, Timothy J. Hurlebaus, and David L. Henderson, for services rendered during the fiscal years ended September 30, 2020, 2019 and 2018.

The securities regulation that determines the content of the Summary Compensation Table results in an overstatement of the compensation awarded to CGI’s Named Executive Officers. The overstatement arises because securities regulation requires that, for stock option grants (referred to as option based awards) and PSU awards (referred to as share-based awards), the amount of compensation shown must be the grant date fair value. In the case of CGI’s compensation policies, all long-term incentive compensation, including all stock options granted and PSU awards, is subject to performance vesting conditions. As a portion of stock options granted and PSUs awarded for fiscal 2020, 2019 and 2018 generally failed to become eligible to vest as a result of the degree of achievement of performance objectives, such portion of the stock options granted and PSUs awarded has been forfeited and cancelled. The regulatory requirements do not allow for such forfeited compensation to be reduced from the compensation disclosed in the Summary Compensation Table. Therefore, the compensation presented in such table overstates compensation actually earned by the Named Executive Officers.

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The following table shows the amount by which the combined value of the stock option grants (referred to as option based awards) and PSU awards (referred to as share-based awards) must be reduced to reflect the net compensation amount attributable to those components of compensation disclosed in the Summary Compensation Table below. The table is necessary to communicate the true, actual total compensation earned by each of the Named Executive Officers.

Net Total Compensation Table

Name and Principal Position as at September 30, 2020 Year Summary<br>Compensation Table<br>Total compensation<br>($) Performance-based<br>vesting<br>reduction^(a)^<br>($) Net total<br>compensation<br>($)
Serge Godin 2020 11,267,140 (5,803,704) 5,463,436
Founder and 2019 14,113,849 (1,671,596) 12,442,253
Executive Chairman of the Board 2018 13,875,153 (3,162,083) 10,713,070
George D. Schindler^(b)^ 2020 9,459,342 (4,647,497) 4,811,845
President and Chief 2019 10,352,766 – 10,352,766
Executive Officer 2018 8,568,137 (656,565) 7,911,572
François Boulanger 2020 2,886,429 (1,202,226) 1,684,203
Executive Vice-President and 2019 3,406,900 – 3,406,900
Chief Financial Officer 2018 2,929,667 (205,746) 2,723,921
Timothy J. Hurlebaus^(b)^ 2020 2,215,938 (973,931) 1,242,007
President, 2019 2,181,350 (28,443) 2,152,907
CGI Federal 2018 1,654,945 (242,842) 1,412,103
David L. Henderson^(b)^ 2020 2,193,287 (658,481) 1,534,806
President, United States Operations, 2019 2,224,791 (27,304) 2,197,487
Commercial and State Government 2018 2,196,919 (190,940) 2,005,979
(a) The performance vesting of the PSUs awarded as part of the long-term incentive plan for the fiscal year ended<br>September 30, 2020 to Messrs. Godin, Schindler and Boulanger was established by the Board of Directors at 45% as it pertains to overall Company performance. In the case of Messrs. Hurlebaus and Henderson, the performance-based vesting<br>conditions of their PSUs depended both on the overall performance of the Company and on the performance of their respective Strategic Business Units. Based on such factors, 22.5% of the PSUs awarded to Mr. Hurlebaus became eligible to vest and<br>45.63% of the PSUs awarded to Mr. Henderson became eligible to vest. PSUs that did not become eligible to vest based on such performance conditions were forfeited and cancelled. The amount of the reduction shown is the dollar value required to<br>be deducted from the fair value of the awards to accurately reflect the net value of the PSU awards for the Named Executive Officers as part of their total compensation for the 2020 fiscal year.
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(b) Messrs. Schindler, Hurlebaus and Henderson are paid in U.S. dollars. The amounts shown are in Canadian dollars<br>converted on the basis of the average exchange rate used in the Company’s annual audited consolidated financial statements which was CAD1.3457, CAD1.3270 and CAD1.2838, for each U.S. dollar in fiscal 2020, 2019 and 2018 respectively. Please<br>refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019 and on page 16 of the<br>Management’s Discussion and Analysis for the fiscal year ended September 30, 2019 under the heading Foreign Exchange.
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The following table shows the compensation paid to the Company’s Named Executive Officers as required by securities regulation.

As noted above, securities regulation requires that for stock option grants (referred to as option-based awards) and PSU awards (referred to as share-based awards), the amount of compensation to be disclosed must be the grant date fair value. In the case of CGI’s compensation policies, all long-term incentive compensation, including all stock option grants and PSU awards are performance-based. A number of stock options granted and PSUs awarded to Named Executive Officers do not become eligible to vest as a result of the degree of achievement of performance objectives, and those stock options and PSUs are then forfeited and cancelled. To that extent, the total compensation amount shown in this table overstates the true total compensation received by the Company’s Named Executive Officers.

Summary Compensation Table

Name and Principal Position<br><br><br>as at September 30, 2020 Year Salary() Share-basedawards(a)() Option-basedawards(b)() Non-equityincentive plancompensationAnnualincentiveplans(c)() Pensionvalue() All othercompen-sation(d)() Totalcompen-sation()
Serge Godin<br><br><br>Founder and Executive Chairman<br> <br>of the Board 2020
2019
2018
George D. Schindler^(e)^<br> <br>President and Chief<br> <br>Executive<br>Officer 2020
2019
2018
François<br>Boulanger<br> <br>Executive Vice- President<br> <br>and Chief Financial Officer 2020
2019
2018
Timothy J. Hurlebaus^(e)^<br> <br>President,<br> <br>CGI Federal 2020
2019
2018
David L. Henderson^(e)^<br><br><br>President, United States Operations, Commercial and State Government 2020
2019
2018 ^(f)^

All values are in US Dollars.

(a) In fiscal 2020, 2019 and 2018, the award date fair value used for determining the number of PSUs awarded to the Named<br>Executive Officers as a component of their total compensation was established using the accounting fair value, resulting in an award date fair value of $104.76, $83.28 and $64.70 respectively.
(b) The fair value of the stock option grants is the accounting fair value of the stock options determined in accordance<br>with IFRS 2 using the Black-Scholes stock option pricing model. The fair value of the stock options yielded a grant date fair value of $16.76 and $13.01 in fiscal 2019 and 2018 respectively. The table below shows the assumptions used to determine<br>the Black-Scholes values for fiscal 2019 and 2018.
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2019 2018
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Dividend yield (%) 0.00 0.00
Expected volatility (%) 19.61 23.84
Risk-free interest rate (%) 2.28 1.73
Expected life (years) 4.00 4.00
(c) This column shows the value received **** by the Named Executive Officers under the Profit Participation Plan as part<br>of the short-term incentive plan of the Company.
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(d) This amount includes the Company’s contribution under CGI’s Share Purchase Plan, the contribution towards<br>health insurance benefits and related insurance coverage, but excludes the value of perquisites and other personal benefits which in the aggregate was less than $50,000 or 10% of the aggregate salary and bonus under the Profit Participation Plan for<br>the particular fiscal year and which is therefore not required to be disclosed.
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(e) Messrs. Schindler, Hurlebaus and Henderson are paid in U.S. dollars. The amounts shown (other than those for<br>option-based awards) are in Canadian dollars converted on the basis of the average exchange rate used in the Company’s annual audited
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consolidated financial statements which was CAD1.3457, CAD1.3270 and CAD1.2838, for each U.S. dollar in fiscal 2020, 2019<br>and 2018 respectively. Please refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019 and on<br>page 16 of the Management’s Discussion and Analysis for the fiscal year ended September 30, 2019 under the heading Foreign Exchange.
(f) The amount includes costs relating to Mr. Henderson’s relocation from CGI’s Dallas office to its Fairfax<br>office, amounting to $23,108 for fiscal 2018. The amount is in Canadian dollars converted on the basis of the average exchange rate used in the Company’s annual audited consolidated financial statements which was CAD1.2838, for each U.S. dollar<br>in fiscal 2018. Please refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019 and on page<br>16 of the Management’s Discussion and Analysis for the fiscal year ended September 30, 2019 under the heading Foreign Exchange.
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Key Features of CGI’s Long-Term Incentive Plans

ShareOption Plan

The Share Option Plan is governed by the Board of Directors. The Committee makes recommendations to the Board of Directors in relation to the Share Option Plan and to grants of stock options, and is responsible for overseeing its administration. The Board of Directors has the ultimate and sole power and authority to grant stock options under the Share Option Plan and to interpret the terms and conditions of stock options that have been granted. The Board of Directors grants stock options by identifying the members, directors, and officers of eligible CGI entities who are to receive stock options, including the number of stock options, the subscription price, the stock option period and the vesting conditions. The determinations, designations, decisions and interpretations of the Board of Directors are binding and final. Management of the Company looks after the day-to-day administration of the Share Option Plan.

The total number of Class A subordinate voting shares authorized to be issued under the Share Option Plan is 53,600,000, being 20.64% of the issued and outstanding Class A subordinate voting shares and Class B shares as at September 30, 2020. As at September 30, 2020, 8,934,097 stock options were outstanding under the Share Option Plan, representing approximately 3.44% of the issued and outstanding Class A subordinate voting shares and Class B shares, 5,748,402 of which were vested as of September 30, 2020. As at such date, a total of 15,508,412 stock options remained issuable under the Share Option Plan, representing approximately 5.97% of the issued and outstanding Class A subordinate voting shares and Class B shares.

The maximum number of stock options that may be issued in the aggregate to any single individual under the Share Option Plan cannot exceed 5% of the total number of Class A subordinate voting shares and Class B shares issued and outstanding at the time of the grant. The number of Class A subordinate voting shares issuable to insiders in the aggregate, at any time, pursuant to the Share Option Plan and any other securities-based compensation arrangement cannot exceed 10% of the Class A subordinate voting shares and Class B shares issued and outstanding. The number of Class A subordinate voting shares issued to insiders within any one-year period pursuant to the Share Option Plan and any other securities-based compensation arrangement cannot exceed 10% of the Class A subordinate voting shares and Class B shares issued and outstanding.

The following table discloses the burn rate for each of the three most recently completed fiscal years for the Share Option Plan of the Company:

Burn Rate 2020 2019 2018
Total number of stock options granted under the Share Option Plan during the applicable<br>fiscal year, divided by the weighted average number of Class A subordinate voting shares and Class B shares outstanding for the applicable fiscal year 0.35 % 0.66 % 1.03 %

Under the Share Option Plan, the Board of Directors may at any time amend, suspend or terminate the Share Option Plan, in whole or in part, subject to obtaining any required approval from the TSX, the Company’s shareholders or other regulatory authorities. For more information concerning the rules to amend the Share Option Plan, please refer to the heading Amendments to Share Option Plan later in this document. Stock options may not be assigned, pledged or otherwise encumbered other than by will or in accordance with the laws relating to successions.

Under the Share Option Plan, the Board of Directors, on the recommendation of the Committee, may grant to eligible participants stock options to purchase Class A subordinate voting shares. The exercise price of the stock options granted is determined by the Board of Directors and cannot be lower than the closing price of the Class A subordinate voting shares on the TSX on the trading day immediately preceding the day on which the stock options are granted. The Board of Directors also determines the applicable stock option period and vesting rules.

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Employees, officers, and directors of the Company may receive stock options under the Share Option Plan. The Board of Directors made the decision to cease granting stock options to outside directors effective October 1, 2015.

Stock options that have been granted under the Share Option Plan cease to be exercisable and all rights under those stock options lapse upon the expiry of their term, which cannot exceed ten years from their date of grant.

Upon resignation or termination, stock options that have not vested are forfeited and cancelled, and vested stock options must be exercised during a 90-day period following termination or resignation.

Retiring members who meet the eligibility criteria set out in the Share Option Plan, directors who leave the Board of Directors and the estates of deceased stock option holders benefit from the automatic vesting of stock options that have become eligible to vest in accordance with performance vesting rules, but that have yet to vest due to time-based vesting. Those stock options must be exercised within 90 days in the case of retirement or 180 days if the stock option holder dies, subject to the extension of the exercise periods explained in more detail below. The Board of Directors, on the recommendation of the Committee, has the discretion to vary these periods and to accelerate the vesting period, provided that the maximum term for any stock option is ten years from the time it is granted.

The Company does not provide any financial assistance to participants under the Share Option Plan.

Blackout Periods

In keeping with CGI’s Insider Trading and Blackout Periods Policy, stock options may not be exercised by insiders when a trading blackout period is in effect. If the date on which a stock option expires occurs during a blackout period or within ten business days after the last day of a blackout period, the date of expiry of the stock option will be the tenth business day following the termination of the blackout period.

Extensions for Length of Service

Retiring members who meet the eligibility criteria set out in the Share Option Plan, directors and officers, as well as the estates of deceased stock option holders earn one day of extension for every three days of service to the Company, up to a maximum extension period of three years. The extension period is earned pro-rata day by day during the stock option holder’s service to the Company. The extension period for length of service cannot extend the life of a stock option beyond the period of time determined by the Board of Directors as the stock option term and, which may not exceed ten years from the date of grant.

Amendments to Share Option Plan

The Board of Directors, on the recommendation of the Committee, may amend, suspend or terminate the Share Option Plan, or amend any term of an issued and outstanding stock option provided that no amendment, suspension or termination may be made without:

• obtaining approval of the shareholders of the Company, except when approval is not required under the terms of the Share<br>Option Plan, as explained in more detail below;
• obtaining any required approval of any applicable regulatory authority or stock exchange; and
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• in the case of issued and outstanding stock options, obtaining the consent or, subject to regulatory approval, the deemed<br>consent of the concerned optionee in the event that the amendment materially prejudices the optionee’s rights.
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Shareholder approval is not required with respect to the following amendments, in as much as the amendment is in accordance with applicable regulatory requirements:

• changing the eligibility for, and limitations on, participation in the Share Option Plan;
• modifying the periods during which stock options may be exercised, subject to (i) the stock option period<br>terminating on or before the tenth anniversary of the date of the grant of the stock option and subject to the effect of blackout periods, and (ii) a maximum stock option exercise period extension of three years;
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• changing the terms on which stock options may be granted and exercised including, without limitation, the provisions<br>relating to the price at which shares may be purchased under the Share Option Plan, to the extent that the subscription price is not reduced, vesting, expiry, assignment and the adjustments to be made in the event of certain changes such as stock<br>splits that affect all shareholders;
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• making amendments that are necessary to comply with applicable law or the requirements of any applicable regulatory<br>authority or stock exchange;
• correcting or rectifying any ambiguity, defective provision, error or omission in the Share Option Plan; and<br>
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• changing the provisions of the Share Option Plan that relate to its administration.
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Finally, any amendment that would reduce the subscription price of an issued and outstanding stock option, lead to a significant or unreasonable dilution of the issued and outstanding shares, extend the expiry date of stock options held by insiders beyond the exercise periods contemplated under the Share Option Plan, or provide additional material benefits to insiders of the Company, requires shareholder approval.

Equity Compensation Plan Information as at September 30, 2020

The following table shows the total number of shares to be issued upon the exercise of outstanding stock options under all of CGI’s equity-based compensation plans, their weighted average exercise price, and the number of shares available for future issuance.

Plan Category Number of Class A subordinate<br>voting shares to<br>be issued<br>upon the exercise of<br>outstanding stock options<br>(#) Weighted average exercise price<br>of outstanding<br>stock options<br>($) Number of Class A subordinate<br>voting shares<br>remaining<br>available for future issuance<br>under equity compensation<br>plans (excluding shares<br>issuable under outstanding<br>stock options)<br>(#)
Equity compensation plans approved by shareholders 8,934,097 61.33 15,508,412
Equity compensation plans not approved by shareholders – – –
Total 8,934,097 61.33 15,508,412

Performance Share Unit Plans

The PSU Plans are governed by the Board of Directors and the Committee may make recommendations to the Board of Directors in relation to the PSU Plans and to awards of PSUs. The Board of Directors has the ultimate and sole power and authority to award PSUs under the PSU Plans and to interpret the terms and conditions of PSUs that have been awarded.

Under the PSU Plans, the Board of Directors may at any time amend, suspend or terminate the PSU Plans, in whole or in part, or amend any term of any issued and outstanding awards including the earning, vesting and expiry of an outstanding award. PSUs may not be assigned, pledged or otherwise encumbered other than by will or in accordance with the laws relating to successions.

Under the PSU Plans, the Board of Directors may award PSUs to executives and to other eligible participants. Each PSU entitles the participant to receive one Class A subordinate voting share, subject to the achievement of performance and time vesting conditions.

Following an award of PSUs, the applicable plan trustee purchases in the open market the shares required to be delivered to the participants on settlement. The applicable plan trustee holds the shares in trust for the purposes of the PSU Plans.

Subject to trading blackout periods, PSUs are settled within 30 days of vesting. On the settlement date, participants receive from the applicable plan trustee a number of Class A subordinate voting shares equal to the number of PSUs that have vested, less any Class A subordinate voting shares sold in the open market on behalf of the participant to satisfy tax obligations. Participants under the 2014 PSU Plan may elect to defer the settlement of PSUs to a later date not later than the expiry date of the PSUs.

Upon resignation or termination, PSUs that have not become eligible to vest are forfeited and cancelled, and PSUs that have become eligible to vest are settled on the date of resignation or termination.

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Participants who retire, and meet the eligibility criteria set out in the PSU Plans, and the estates of deceased participants benefit from the automatic vesting of PSUs that have become eligible to vest in accordance with performance vesting conditions, but that have yet to vest due to time-based vesting. Those PSUs are settled on the date of retirement or death.

PSUs expire on the business day preceding December 31 of the third calendar year following the end of the fiscal year during which the PSU award is made. On the expiry date, all remaining PSUs in the participant’s account that are eligible to vest but that have not yet vested are automatically vested and settled.

The Company does not provide any financial assistance to participants under the PSU Plans.

Blackout Periods

In keeping with CGI’s Insider Trading and Blackout Periods Policy, there cannot be any settlement of PSUs under the PSU Plans when a trading blackout period is in effect. If the date of settlement of a PSU falls during a blackout period, such date will be postponed until the first business day following the termination of the blackout period or the expiry of any regulatory notice period, as applicable.

Termination Benefits

The Named Executive Officers do not benefit from special contractual rights upon employment termination. They are therefore entitled to the same rights as those available to all members under the laws applicable to their employment. The provisions that apply to termination of employment under the Share Option Plan and under the PSU Plans apply in the same way to all participants under those plans and they are described above under the headings Share Option Plan and Performance Share Unit Plans.

Compensation of Directors

Board of Directors and Standing Committee Fees

The compensation paid to the outside directors changed to a flat fee structure on October 1, 2015. The Board of Directors also decided to cease granting stock options to outside directors as of that date. Following a recommendation by the Human Resources Committee based on a comparison of general market compensation as well as within the companies forming CGI’s comparator group the Board of Directors decided to change the compensation paid to outside directors effective as of October 1, 2019 as set forth in the following table:

Component Amount
Board Retainer (includes membership in Committees) $ 225,000
Lead Director or Committee Chair Retainer $ 25,000

Directors must receive at least half of their Board retainer in DSUs, subject to the exceptions listed below. The remaining half of the Board retainer and the other retainers may also be payable in DSUs at the election of the director. A director can elect to receive the entire amount of the Board retainer in cash instead of in DSUs if (i) the director is not a resident of Canada for income tax purposes, (ii) the director purchased in the open market the same number of Class A subordinate voting shares he or she would have received in the form of DSUs, or (iii) the director is otherwise exempted by the Board of Directors. Directors who must travel significant distances to attend meetings of the Board of Directors and its standing committees also receive long distance travel allowances.

For fiscal 2020, Ms. Julie Godin and Messrs. Serge Godin, André Imbeau and George D. Schindler were not compensated for their roles as directors of the Company.

As part of the measures taken to mitigate the financial impact of the COVID-19 pandemic as explained earlier in this document under the heading Report of the Human Resources Committee, outside directors have decided to support the measures taken by the Company to supplement employment income lost by our members on leave without pay by forfeiting a significant portion of their compensation during such period.

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For the year ended September 30, 2020, the compensation paid to directors was as follows:

Directors’ Compensation Table

Name^(a)^ Cash <br>Fees^(b)^^^($) Share-Based<br>Awards^(c)^<br>($) All other<br>compensation^(d)^<br>($) Total()
Alain Bouchard – 190,875 –
Sophie Brochu^(e)^ 55,875 56,250 –
George A. Cope^(f)^ – 117,125 –
Paule Doré 116,646 95,437 –
Richard B. Evans^(g)(h)^ – 256,860 13,457
Timothy J. Hearn 106,042 106,041 10,000
Gilles Labbé – 212,083 –
Michael B. Pedersen – 190,875 –
Stephen S. Poloz^(h)(i)^ 26,250 26,250 –
Mary Powell^(h)(i)^ 70,649 – –
Alison C. Reed^(h)^ 256,860 – 6,729
Michael E. Roach 95,438 95,437 –
Kathy N. Waller^(h)^ 128,430 128,430 13,457
Joakim Westh^(h)^ 285,401 – 53,828

All values are in US Dollars.

(a) Ms. Godin and Messrs. Godin, Imbeau and Schindler were not compensated for their roles as directors of the<br>Company. Ms. Godin received $1,698,074 in fiscal 2020 as compensation in respect of her services as an executive officer of the Company and Mr. Imbeau received $453,419 in fiscal 2020 as compensation in respect of his services as an<br>officer of the Company. Please refer to the Net Compensation Table and the Summary Compensation Table earlier in this document for a summary of Messrs. Godin and<br>Schindler’s fiscal 2020 compensation.
(b) This column shows the retainer fees paid in cash to the directors for fiscal 2020. Ms. Brochu, Messrs. Bouchard,<br>Cope, Evans, Labbé and Pedersen elected to receive 100% of their total annual retainers in the form of DSUs. Mses. Powell, Reed and Waller and Mr. Westh were exempted from the requirement to receive 50% of their Board retainers in DSUs<br>as they are non-resident of Canada for income tax purposes.
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(c) This column shows the value of the retainer fees paid in DSUs to the directors for fiscal 2020.
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(d) The amounts shown as “All other compensation” are in respect of long distance travel allowances.<br>
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(e) Ms. Brochu resigned as a member of the Board of Directors and member of the Corporate Governance Committee on<br>April 6, 2020.
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(f) Mr. Cope joined the Board of Directors on January 29, 2020 and was appointed as member of the Human Resources<br>Committee and as member of the Corporate Governance Committee.
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(g) Mr. Evans is not seeking reelection on the Board of Directors and will therefore cease to be a director and a<br>member of the Audit and Risk Management Committee on January 27, 2021.
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(h) Messrs. Evans and Westh and Mses. Powell, Reed and Waller are paid in U.S. dollars at par, based on the same fee<br>arrangement as other outside directors. The amounts shown are in Canadian dollars converted on the basis of the average exchange rate used to present expense information in the Company’s annual audited consolidated financial statements which<br>was CAD1.3457 for each U.S. dollar for fiscal 2020. Please refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended<br>September 30, 2020 and 2019 under the heading Foreign Exchange.
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(i) Mr. Poloz and Ms. Powell joined the Board of Directors on June 9, 2020. Mr. Poloz was appointed as<br>member of the Audit and Risk Management Committee on July 28, 2020. Ms. Powell was appointed as member of the Human Resources Committee and as member of the Corporate Governance Committee also on July 28, 2020.
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Deferred Stock Units Plan and Deferred Stock Units Granted to Directors

CGI’s deferred stock unit plan for members of the Board of Directors (the “DSU Plan”) provides non-cash compensation to directors. The DSU Plan is governed by the Board of Directors and the Committee may make recommendations to the Board of Directors in relation to the DSU Plan and to awards of DSUs. The Board of Directors has the ultimate and sole power and authority to award DSUs under the DSU Plan and to interpret the terms and conditions of DSUs that have been awarded. Management of the Company is responsible for the day-to-day administration of the DSU Plan.

The Board of Directors may at any time amend or terminate the DSU Plan, including to suspend or limit the right of directors to participate in the DSU Plan. DSUs may not be assigned, sold or otherwise disposed of, except by will or other testamentary document, or otherwise in accordance with the laws relating to successions.

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The number of DSUs credited to a director on each retainer payment date is equal to the amount of the retainer due to be paid in DSUs divided by the closing price of the Class A subordinate voting shares on the TSX on the day immediately preceding the retainer payment date. Once credited, the value of the DSUs credited to a director’s DSU account is determined based on the market price of the Class A subordinate voting shares.

The value of DSUs credited to the director’s account is payable only after the director has ceased to be a member of the Board of Directors. The amount paid at the time of redemption corresponds to the number of DSUs accumulated by the member multiplied by the closing price of the Class A subordinate voting shares on the payment date. The amount is paid in cash and is subject to applicable withholding taxes.

Stock Options Held by Directors

Up until fiscal 2015, members of the Board of Directors were entitled to grants of stock options under the Share Option Plan. Each such stock option was issued with a ten-year exercise period and a four-year vesting period and the exercise price of all options granted to directors was equal to the closing price of the Class A subordinate voting shares on the TSX on the trading day immediately preceding the date of the grant.

See the table in Appendix B for an overview of all outstanding stock options held as at September 30, 2020 by the members of the Board of Directors who are not Named Executive Officers as well as the in-the-money value of such stock options and the aggregate value of outstanding and vested DSUs held in respect of their services for completed fiscal years. For members of the Board of Directors who are Named Executive Officers, please refer to the table in Appendix A.

Incentive Plan Awards – Value Vested or Earned During the Year

The table below shows the value of stock option grants (referred to as option-based awards) and DSU awards (referred to as share-based awards) made to members of the Board of Directors who are not Named Executive Officers that vested in fiscal 2020. Outside directors did not receive any non-equity incentive plan compensation in fiscal 2020.

Name^(a)^ Option-based awards – Value<br>vested during the year^(b)^<br>($) Share-based awards – Value<br>vested during the year^(c)^<br>($) Non-equity incentive plan<br>compensation – Value<br>earned during the<br>year<br>($)
Alain Bouchard – 190,875 –
Sophie Brochu^(d)^ – 56,250 –
George A. Cope^(e)^ – 117,125 –
Paule Doré – 95,437 –
Richard B. Evans^(f)(g)^ – 256,860 –
Julie Godin 1,260,662 – –
Timothy J. Hearn – 106,041 –
André Imbeau 544,548 – –
Gilles Labbé – 212,083 –
Michael B. Pedersen – 190,875 –
Stephen S. Poloz^(h)^ – 26,250 –
Mary Powell^(h)^ – – –
Alison C. Reed – – –
Michael E. Roach – 95,437 –
Kathy N. Waller^(g)^ – 128,430 –
Joakim Westh – – –
(a) The value vested or earned during fiscal 2020 for Messrs. Godin and Schindler are set out in the table titled Incentive Plan Awards – Value Vested During the Year under the heading Compensation of Named Executive Officers earlier in this document as they are Named Executive Officers.<br>
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(b) This column shows the value of stock options held by Ms. Godin and Mr. Imbeau that vested during fiscal 2020.<br>The values indicated in the table above relate to vested stock options they received until the end of fiscal 2020 as compensation for their services as an executive officer and an officer of the Company, respectively. The exercise prices for the<br>stock options that vested during fiscal 2020 were as follows: (i) for grants made in fiscal 2016, of $48.16 for Ms. Godin and $48.16 and $52.63 for Mr. Imbeau, (ii) for grants<br>
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made in fiscal 2017 and in fiscal 2018, $63.23 for Ms. Godin and Mr. Imbeau and (iii) for grants made in<br>fiscal 2019 of $85.62 for Ms. Godin and Mr. Imbeau. Among the stock options that became eligible to vest, one quarter of the stock options granted for fiscal 2016, one quarter of the stock options granted for fiscal 2017 and one quarter of<br>the stock options granted for fiscal 2018 vested on October 1, 2019 when the closing price of the shares was $103.00, and one quarter of the stock options granted for fiscal 2019 vested on November 5, 2019 when the closing price for the<br>shares was $102.06.
(c) The share-based awards are DSUs. See the heading Deferred Stock Units Plan and Deferred StockUnits Granted to Directors earlier in this document for a description of DSUs granted to directors.
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(d) Ms. Brochu resigned as a member of the Board of Directors and member of the Corporate Governance Committee on<br>April 6, 2020.
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(e) Mr. Cope joined the Board of Directors on January 29, 2020 and was appointed as member of the Human Resources<br>Committee and as member of the Corporate Governance Committee.
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(f) Mr. Evans is not seeking reelection on the Board of Directors and will therefore cease to be a director and a<br>member of the Audit and Risk Management Committee on January 27, 2021.
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(g) Mr. Evans and Mrs. Waller are paid in U.S. dollars at par, based on the same fee arrangement as other outside<br>directors. The amounts shown are in Canadian dollars converted on the basis of the average exchange rate used in the Company’s annual audited consolidated financial statements which was CAD1.3457 for each U.S. dollar in fiscal 2020. Please<br>refer to the disclosure concerning the foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019.
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(h) Mr. Poloz and Ms. Powell joined the Board of Directors on June 9, 2020. Mr. Poloz was appointed as<br>member of the Audit and Risk Management Committee on July 28, 2020. Ms. Powell was appointed as member of the Human Resources Committee and as member of the Corporate Governance Committee also on July 28, 2020.
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Additional Disclosure relating to Directors and Named Executive Officers

As at December 7, 2020, no directors, Named Executive Officers, former directors or former senior officers of the Company were indebted to the Company.

To the best knowledge of the Company and based upon information provided by each nominee director, no such nominee is, as at the date of this Management Proxy Circular, or has been within ten years before the date of this Management Proxy Circular a director or executive officer of any company (including the Company) that, while such person was acting in that capacity or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangements or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

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Report of the Corporate Governance Committee

The Committee has responsibility for all corporate governance matters including making recommendations to the Board of Directors in relation to the composition of the Board of Directors and its standing committees. The Committee also administers the self-assessment process for the Board of Directors, its standing committees and individual directors.

The Committee is composed of Ms. Paule Doré, Chair of the Committee, Ms. Mary Powell, Mr. George A. Cope and Mr. Timothy J. Hearn, Lead Director, all of whom are independent directors. The Committee held four regular meetings during fiscal 2020.

The role and responsibilities of the Chair of the Committee are described under the heading Role andResponsibilities of the Lead Director and Standing Committee Chairs later in this document.

The role and responsibilities of the Committee are contained in the Committee’s charter, which is incorporated by reference in this Management Proxy Circular (see the heading Mandate, Structure andComposition of CGI’s Board of Directors). The Committee’s charter is available on CGI’s website at www.cgi.com. The role and responsibilities of the Committee include:

• developing the Company’s approach to governance issues and the Company’s response to corporate governance<br>requirements and guidelines;
• reviewing the composition of the Board of Directors, its standing committees and members, and recommending Board<br>nominees;
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• carrying out the annual Board of Directors self-assessment process;
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• overseeing the orientation and continuing education program for directors; and
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• helping to maintain an effective interaction between the Board of Directors and management, notably with respect to the<br>purpose of CGI as an organization.
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Corporate Governance Practices

Adherence to high standards of corporate governance is a hallmark of the way CGI conducts its business. The disclosure that follows sets out CGI’s corporate governance practices. CGI’s corporate governance practices conform to those followed by U.S. domestic companies under the NYSE listing standards.

CGI’s Shareholders

CGI’s shareholders are the first and most important element in the Company’s governance structures and processes. At each Annual General Meeting of Shareholders, the Company’s shareholders elect the members of the Company’s Board of Directors and give them a mandate to manage and oversee the management of the Company’s affairs for the coming year. Shareholders have the option of withholding their votes for individual directors, should they wish to do so.

In the normal course of operations, certain corporate actions which may be material to CGI are initiated from time to time by the Company’s senior management and, at the appropriate time, are submitted to CGI’s Board of Directors for consideration and approval. When appropriate, such matters are also submitted for consideration and approval by CGI’s shareholders. All such approvals are sought in accordance with the charters of the Board of Directors and its standing committees, CGI’s corporate governance practices and applicable corporate and securities legislation and regulations. Messrs. Serge Godin and André Imbeau, respectively CGI’s Founder and Executive Chairman of the Board, and CGI’s Founder and Advisor to the Chairman of the Board, are directors of CGI and, as at December 7, 2020, beneficially owned, directly or indirectly, or exercised control or direction over, shares of CGI representing respectively approximately 49.45% and 6.58% of the votes attached to all of the Company’s outstanding voting shares.

As with other stakeholders, its clients and its members, CGI constantly solicits feedback from shareholders as well as from the investment community. This feedback is an integral input to our strategic planning process and assists the Company to continuously improve its investor relations program, financial disclosure, and to compare its performance objectively against other publicly traded companies. Several years ago, the Company adopted the Shareholder Partnership Management Framework (“SPMF”) which describes the management of its information and relationship with its investors beyond the prescribed activities associated with corporate governance, transparency and the disclosure of results. The SPMF structures the processes and information flows between CGI and its shareholders as well as the

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investment community, including both buy-side (institutional investors) and sell-side (investment dealers) research analysts. Following the SPMF assessment, suggestions for improvement received in the course of the survey are acted upon as a means of assuring continuous improvement. The Company obtained ISO 9001 certification for the application of the SPMF in its operations and for the management of its relationship with its shareholders.

As part of the SPMF process, CGI conducts a survey of sell-side analysts and institutional shareholders every year as a means of measuring shareholder satisfaction. The survey is designed to provide insights into investor sentiment and to improve the investor relations program. Through the SPMF, continuous feedback is gathered, recorded and measured from approximately 200 meetings held annually with existing shareholders and prospective investors. During fiscal 2020, the Company held 197 meetings with shareholders and other investors worldwide. The SPMF annual assessment conducted during fiscal 2020 returned an overall score for CGI of 8.2 out of 10.

In addition to the SPMF process, any shareholder of CGI who wishes to contact CGI’s independent directors directly may do so by e-mail sent to the Lead Director at lead_director@cgi.com or by using the contact page for the Lead Director on CGI’s website at www.cgi.com.

Shareholder Satisfaction Assessment Program

In fiscal 2019, the Company added a new Shareholder Satisfaction Assessment Program (“SSAP”) questionnaire to its SPMF processes. The SSAP questionnaire solicits direct feedback from shareholders on key corporate governance practices, including in respect of executive compensation, and requests shareholder ratings of governance practices on a 10-point scale. With respect to institutional investors, the SSAP is provided directly to the individuals responsible for the investment in the Company and not to proxy departments or external advisors who are less likely to have a complete understanding of the investment in CGI. The SSAP was provided to shareholders and other investors with whom SPMF meetings were held in fiscal 2020. The average SSAP score of the Company in fiscal 2020 was 8.0/10 and little concerns were raised by shareholders or investor with respect to the Company’s corporate governance practices, including its executive compensation practices. The Company is committed to maintaining an open and transparent dialogue with its shareholders and addressing their concerns with respect to executive compensation. The Company believes that the measures in place are more meaningful than a simple binary advisory vote.

The Company will continue to use the SSAP questionnaire in fiscal 2021 to solicit direct feedback on its corporate governance practices with a view to tracking shareholder feedback over time on key corporate governance issues, such as the appropriateness of executive compensation. Shareholders of CGI who wish to participate in the SSAP process directly may contact CGI’s Investor Relations department by sending an e-mail to ir@cgi.com or as follows:

Investor Relations

CGI Inc.

1350 René-Lévesque Blvd. West

15^th^ Floor

Montréal, Quebec

Canada

H3G 1T4

Tel.: +1-514-841-3200

Corporate Social Responsibility

Corporate social responsibility (“CSR”) is one of CGI’s six core values and one of the Company’s strategic goals is for the communities in which we are present to recognize us as a caring and responsible corporate citizen. We are committed to contributing to the development of an inclusive, collaborative and sustainable world. We aim to achieve this by contributing to the well-being of society through our operations and partnerships with stakeholders. Our CSR commitment motivates us to grow our clients’ businesses, enhance the lives and careers of our professionals and generate superior value for our shareholders through socially and environmentally sustainable and ethical business strategies and practices. Our CSR commitment engages the Company to:

• partner with our clients in developing environmentally sustainable solutions and collectively supporting charitable<br>causes;
• provide our professionals with health and wellness programs that positively influence their well-being and satisfaction;<br>
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• improve the environment through sustainable operating practices, community service activities and green IT offerings;<br>
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• operate ethically through strong Codes of Ethics and strong corporate governance;
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• ensure responsible supply chain management; and
• offer an ownership program (which both creates wealth within local communities, and provides every member the same rights<br>and opportunities as all shareholders).
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A specific CSR priority is to encourage careers in information technology by acting as a global leader, and working with our clients, to encourage and educate more people to improve technical and business literacy through local mentoring programs and partnerships with clients, local schools and universities for initiatives such as Science, Technology, Engineering and Math (STEM) programs. CGI creates diverse, equitable and inclusive learning opportunities by reducing barriers for underrepresented groups in the technology field. These activities help attract a diverse pool of talent to start and build a career at CGI, creating an environment of new and unique perspectives. The global pandemic crisis changed the way students interact with our STEM events and CGI adapted by launching STEM@CGI At Home. This virtual program helps parents, caregivers and educators across communities to continue teaching STEM to students in a home environment. To date, STEM@CGI is active in the United States, Canada, United Kingdom, Australia, India, France, Netherlands, Belgium, Finland and Sweden. In France, CGI was the first company in the IT sector to create its own coding school, U’DEV. Students of the U’DEV program enter into a work-study with CGI where they receive a recognized degree and CGI recruits qualified developers. After three years of activity, this program counts seven campuses in France, one in Morocco, and more than 500 graduated students. Our strategic goal of solving the shortage of developers leads to an engaged environment that promotes diversity without discrimination, resulting in actively and responsibly sharing our social values with our clients.

Another specific CSR priority is to leverage technology for the good of the overall well-being of the communities in which we and our clients are present by using CGI’s technology and business consulting expertise to deliver pro bono IT work for local charities and community organizations. Dream Connectors is CGI’s flagship CSR program. The program brings CGI members together from across the world to collaborate and benefit our local communities. All projects receive CGI support in the form of funding, technology and volunteers. In fiscal 2020, our members implemented over 100 Dream Connectors initiatives that supported local communities in response to the COVID-19 pandemic.

A third specific CSR priority is to leverage technology to promote environmental and economic sustainability through operating practices, community service activities and projects delivered in collaboration with our clients. CGI combines our in-depth knowledge and end-to-end services to help our clients manage sustainability challenges and opportunities. These solutions seek to reduce environmental impact and energy costs while improving our clients’ regulatory compliance and the well-being of their employees, citizens and customers. Our reduction in carbon emissions is driven by many of our departments including facilities, data center management, procurement, and our members, all working together to embed their actions and initiatives into the way we operate. In fiscal 2020, an environmental internal program was launched in the United Kingdom (No Planet B), a roadmap for “fossil free competitiveness” was prepared for the Swedish government and improved power usage effectiveness was obtained in data centers in Finland.

CGI has qualified for inclusion within top indices that cover the world’s most sustainable companies, including the Dow Jones Sustainability Indices for the past nine years and, the FTSE4 Good Index Series for over a decade. In fiscal 2020, for the third year, CGI was recognized for its CSR commitments to the environment by EcoVadis. Receiving the Gold standard positions puts CGI in the top 5% of companies across all industries. The Company also responds annually to the Carbon Disclosure Project disclosing its progress in furthering steps to effectively reduce emissions to promote advanced environmental stewardship.

In March 2020, CGI joined the United Nations Global Compact with a commitment to mainstream its ten universal principles in the areas of human rights, labor, environment and anti-corruption in CGI’s strategy, culture and day-to-day operations. We seek to advance and engage in the United Nations’ broader development goals, particularly the Sustainable Development Goals.

In addition, CGI’s operations in the majority of European countries in which it operates are ISO 14001 certified for effective environmental management systems (France, UK, Sweden, Finland, Netherlands, Portugal, Spain, Czech Republic and Slovakia). In doing so, these operations are reporting key performance metrics and local initiatives which contribute to the continuous improvement of the economic, social and environmental well-being of the communities in which they are based.

You can read more about CGI’s corporate social responsibility and environmental, social and governance initiatives on CGI’s website at www.cgi.com/en/corporate-social-responsibility.

Diversity

The notion of diversity is a core element to CGI’s values and it is included in its Board of Directors’ and standing committees’ charters and related work programs. The mandates of the Human Resources Committee and Corporate

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Governance Committee specifically detail the criteria to be considered for board candidates and officer appointments to support diversity among the Board of Directors and the Company’s executives. Nominees proposed to join the Board of Directors or the executive team are selected after considering, among other things, the persons’ skills and expertise required to achieve stewardship and management of CGI, their knowledge of the vertical markets in which the Company operates, their operational and financial literacy, as well as the diversity of their background, including gender, ethnicity, age, experience and geographical representation.

The work program of the Corporate Governance Committee also provides for an annual review of the measures applied by the Company to promote diversity, their effectiveness, and the annual and cumulative progress made in achieving their objectives, which results are then reviewed annually by the Board of Directors. The charters of the Board of Directors and of the Corporate Governance Committee include the Company’s objective of having a Board of Directors composed of at least 30% of women. CGI is very proud to have met this objective and we will continue to monitor our progress.

The Corporate Governance Committee and the Board of Directors continue to believe in the importance of balancing all eligibility criteria, including appropriate competencies, skills, industry knowledge, financial experience and personal qualities of candidates, as well as the diversity of their background (including gender, ethnicity, age, experience and geographical representation), when considering director candidates and officer appointments. CGI’s success is due in large measure to the Company’s experience and expertise in the vertical markets in which it operates. The selection criteria for CGI’s Board of Directors and executive officers recognize this important factor and are designed to ensure that the Company, while supporting diversity objectives, continues to have the subject matter experts on the Board of Directors and among its executives who can effectively provide experience, expertise and business and operational insight into each of the vertical markets in which the Company operates.

Majority Voting Policy

The Company has adopted a Majority Voting Policy for Directors (the “Majority Voting Policy”) to ensure that the Board of Directors of the Company remains composed of directors elected by a majority of the votes cast in favour of their election.

In an uncontested election of directors of the Company, a nominee for election to the Board of Directors must immediately offer to resign by tendering a resignation letter to the Chairman of the Board of Directors following the shareholders meeting at which the election took place if the number of votes that have been withheld from the director is equal to or greater than the number of votes cast in favour of the director. The Committee will meet promptly following the receipt of the resignation to consider the director’s offer to resign.

The Committee will recommend to the Board of Directors that the resignation be accepted unless the Committee determines that exceptional circumstances exist that justify the Committee’s recommendation that the resignation not be accepted. The Board of Directors will act on the Committee’s recommendation within 90 days following the shareholders’ meeting at which the director was elected. In deciding whether to accept the recommendation of the Committee, the Board of Directors will consider the factors examined by the Committee and may in addition consider any information it determines in its sole discretion to be relevant to its decision. The Board of Directors will accept the resignation unless it determines that exceptional circumstances justify otherwise. Following its decision, the Board of Directors will issue a press release concerning its decision, and stating the reasons for not accepting the resignation if that is the case, a copy of which shall be promptly provided to the TSX.

A director who is required to offer a resignation in accordance with the Majority Voting Policy shall not participate in any manner in the meeting or meetings of the Committee and of the Board of Directors convened to consider the resignation. A director who fails to offer to resign in accordance with the Majority Voting Policy will not be re-nominated by the Board of Directors for election by the shareholders.

Clawback Policy

The Company has adopted an incentive compensation clawback policy (the “Clawback Policy”) which allows the Board of Directors to require the reimbursement of short-term and long-term incentive compensation received by certain officers and other employees, if such compensation was paid in whole or in part as a result of gross negligence, intentional misconduct, theft, embezzlement, fraud or other serious misconduct, or in the event of a restatement of the Company’s annual or interim financial statements resulting from material non-compliance with any financial reporting requirements under applicable laws, and in circumstances in which the Board of Directors determines that such individual would not have been entitled to such compensation had a restatement not been required.

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The Clawback Policy applies to any officer of the Company and any other individual who may be designated from time to time by the Board of Directors and includes compensation under any short-term or long-term incentive plan, including the Profit Participation Plan, the Share Option Plan, the PSU Plans and any other contingent compensation. Recovery under the Clawback Policy is limited to compensation paid, granted or awarded to, or received or earned by, or vested in favour of any covered leader in the then current fiscal year and the immediately preceding three financial years and may be implemented through various forms, including direct reimbursement, deduction from salary or future payments, grants or awards of incentive compensation, or cancellation or forfeiture of vested or unvested stock options, PSUs or any other incentive awards held by the individual.

Insider Trading andBlackout Periods Policy

The Company has adopted an Insider Trading and Blackout Periods Policy which is designed to prevent improper trading in the securities of CGI and the improper communication of privileged or material information with respect to CGI that has not been generally disclosed, including compliance with insider trading and tipping rules. Under the policy, those who normally have access to material information that has not been generally disclosed may only trade in CGI securities within the period beginning on the third business day following the release of CGI’s quarterly financial results and fiscal year-end results and ending at the close of business on the fourteenth calendar day preceding the end of the following fiscal quarter. Discretionary blackout periods and restrictions on trading in securities applicable to certain designated members may also be prescribed from time to time for such period of time as is deemed necessary as a result of special circumstances relating to the Company. The policy also provides processes for the pre-clearance of trades in CGI securities and for reporting by the reporting insiders of the Company.

The Insider Trading and Blackout Periods Policy contains anti-hedging restrictions to ensure that senior executives, including the Chief Executive Officer, are restricted from engaging in short sales, transactions in derivatives in respect of Company’s securities or any other hedging or equity monetization transaction in which the individual’s economic interest and risk exposure in Company securities are changed.

Mandate, Structure and Composition of the Board of Directors

The Committee and the Board of Directors are of the view that the size and composition of the Board of Directors and its standing committees are well suited to the circumstances of the Company and allow for the efficient functioning of the Board of Directors as an independent decision-making body.

Board of Directors and Committee Charters

Each standing committee operates according to its charter approved by the Board of Directors which sets out the committee’s duties and responsibilities.

The Board of Directors’ charter and the charter of each of the standing committees require that they be reviewed annually. As part of that process each standing committee undertakes a review of its mandate and tables any recommendations for changes with the Committee. The Committee reviews the submissions of the standing committees and also reviews the Board of Directors’ charter. The Committee then makes a recommendation to the Board of Directors based on the conclusion of the review. The Board of Directors takes the Committee’s recommendation into account in making such changes as it determines to be appropriate.

The Board of Directors and standing committee charters are attached as Appendix A to CGI’s Annual Information Form for the fiscal year ended September 30, 2020 (the “2020 Annual Information Form”) which is available on the Canadian Securities Administrators’ website at www.sedar.com and on CGI’s website at www.cgi.com. A copy of the 2020 Annual Information Form will be provided to shareholders by CGI upon request. The charters of the Board of Directors and its standing committees are hereby incorporated by reference from Appendix A to the 2020 Annual Information Form.

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The key responsibilities of each standing committee are summarized in the reports contained in this Management Proxy Circular and each standing committee is composed entirely of independent directors. The following table summarizes the current membership of each of the Company’s standing committees.

Committee Membership
Audit and Risk Management Committee
Gilles Labbé (Chair)<br> <br>Richard B. Evans^(a)^<br> <br>Michael B. Pedersen <br>Stephen S. Poloz^(b)^<br>Alison C.<br>Reed <br>Kathy N. Waller
Corporate Governance Committee
Paule Doré (Chair) <br>George A. Cope^(c)^<br><br><br>Timothy J. Hearn <br>Mary Powell^(b)^
Human Resources Committee
Joakim Westh (Chair)^^<br>Alain Bouchard ^^George A. Cope^(c)^<br> <br>Timothy J. Hearn <br>Mary Powell^(b)^
(a) Mr. Evans is not seeking reelection on the Board of Directors and will therefore cease to be a director and a<br>member of the Audit and Risk Management Committee on January 27, 2021.
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(b) Mr. Poloz and Ms. Powell joined the Board of Directors on June 9, 2020. Mr. Poloz was appointed as<br>member of the Audit and Risk Management Committee on July 28, 2020. Ms. Powell was appointed as member of the Human Resources Committee and as member of the Corporate Governance Committee also on July 28, 2020.
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(c) Mr. Cope joined the Board of Directors on January 29, 2020 and was appointed as member of the Human Resources<br>Committee and as member of the Corporate Governance Committee.
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Role and Responsibilities of the Founder and Executive Chairman of the Board and of the President and Chief Executive Officer

The Board of Directors has delegated to management the responsibility for day-to-day management of the business of the Company in accordance with the Company’s Operations Management Framework which was adopted by the Board of Directors. The Operations Management Framework sets out the overall authority of the Company’s management team as well as the level of management approval required for the various types of operations and transactions in the ordinary course of the Company’s business.

The role of Founder and Executive Chairman of the Board allows Mr. Serge Godin to devote his time to the development and implementation of strategic initiatives, including strengthening the Company’s partnerships with existing clients and fostering key relationships that lead to new business, including large outsourcing contracts and strategic mergers. The nature of the responsibilities of the Founder and Executive Chairman of the Board are such that he is a senior executive officer of the Company and is not an independent Chairman of the Board.

All operational and corporate functions, other than the office of the Founder and Executive Chairman of the Board which reports to the Founder and Executive Chairman of the Board, report to the President and Chief Executive Officer who reports directly to the Board of Directors. The President and Chief Executive Officer, jointly with the management team, develop the strategies and corporate objectives which are approved by the Board of Directors. Each year, the Human Resources Committee assesses the performance of executive officers in achieving the objectives and makes recommendations to the Board of Directors in relation to the grant and vesting of stock options, the award and vesting of PSUs and the payment of bonuses under the Profit Participation Plan to executive officers, including the Named Executive Officers.

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Taken together, the Operations Management Framework and the corporate objectives approved by the Board of Directors annually define the scope of management’s authority and responsibilities, including those of the Founder and Executive Chairman of the Board and of the President and Chief Executive Officer, in relation to the Company’s day-to-day operations and the attainment of its objectives. At each regularly scheduled Board meeting the Founder and Executive Chairman of the Board and the President and Chief Executive Officer report on their stewardship of the Company’s operations, and their performance relative to fixed objectives is assessed annually. Ultimately, the Board of Directors reports to the shareholders at the Annual General Meeting of Shareholders.

Role and Responsibilities of the Lead Director and Standing Committee Chairs

Lead Director

The charter of the Board of Directors, which is incorporated by reference in this Management Proxy Circular (see the heading Mandate, Structure and Composition of the Board of Directors earlier in this document), requires that the Board of Directors appoint a Lead Director from among the independent directors. The Lead Director is responsible for ensuring that the Board of Directors acts independently of the Company’s management and strictly in accordance with its obligations towards shareholders.

Mr. Timothy J. Hearn, an independent member of the Board of Directors, was appointed as CGI’s Lead Director on January 30, 2019.

In fulfilling his responsibilities, the Lead Director provides input to the Founder and Executive Chairman of the Board in the preparation of the agendas of the meetings of the Board of Directors, sets the agenda for, and chairs the meetings of, the independent directors, and leads the annual self-evaluation process for the Board of Directors and director peer review process every two years.

Together with the Founder and Executive Chairman of the Board, the Lead Director facilitates the effective and transparent interaction of Board members and management. The Lead Director also provides feedback to the Founder and Executive Chairman of the Board and acts as a sounding board with respect to strategies, accountability, relationships and other matters.

Standing Committee Chairs

The role and responsibilities of each of the Chairs of the standing committees of the Board of Directors are set forth in the charter of each committee. The standing committees’ charters are incorporated by reference in this Management Proxy Circular (see the heading Mandate, Structure and Composition of the Board of Directors earlier in this document).

The Chair of each committee is responsible for leading the committee’s work and, in that capacity, ensuring that the committee’s structure and mandate are appropriate and adequate to support the fulfilment of its responsibilities, that the committee has adequate resources as well as timely and relevant information to support its work, and that the scheduling, organization and procedures of committee meetings provide adequate time for the consideration and discussion of relevant issues. The committee Chair is responsible for ensuring that the effectiveness of the committee is assessed on a regular basis.

The Chair presides the committee’s meetings and works with the Founder and Executive Chairman of the Board, the Corporate Secretary and the Company’s relevant executive officers in setting the agendas for each meeting and has the authority to convene special meetings of the committee. The Chair of the Corporate Governance Committee also works with the Founder and Executive Chairman of the Board, the Corporate Secretary and the Company’s relevant executive officers in setting the calendars of the committees’ meetings. The committee Chair acts as liaison with the Company’s management in relation to the committee’s work program and ensures that the committee reports to the Board of Directors at each subsequent meeting of the Board of Directors in relation to the committee’s deliberations, decisions and recommendations.

Criteria for Tenure on CGI’s Board of Directors

Each year, the Committee reviews all of the Company’s corporate governance practices as part of an exercise that takes place well in advance of the annual preparation and review of the Company’s Management Proxy Circular, so that such practices, including those that govern the conditions for tenure on the Board of Directors, receive careful consideration in advance of the Company’s fiscal year end and the preparation of materials for the Annual General Meeting of Shareholders.

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Independence

CGI’s corporate governance practices require that a majority of the members of the Board of Directors be independent, as per the requirements set forth in National Instrument 52-110 – Audit Committees. This means that they must be and remain free from any material ties to the Company, its management and its external auditor that could, or could reasonably be perceived to, materially interfere with the directors’ ability to act in the best interests of the Company, and otherwise in keeping with the definitions of independence applicable under the governance regulations, rules and guidelines of the relevant stock exchanges and securities regulators.

The Board of Directors has concluded that the position of Lead Director, which has existed since 1996, ensures that the Board of Directors is able to act independently of management in an effective manner. The Lead Director holds meetings of the outside directors after each regular meeting of the Board of Directors, without management and related directors present.

The Board of Directors has determined that the directors identified as being independent in this Management Proxy Circular do not have interests in or relationships with CGI or with any of CGI’s significant shareholders that could, or could reasonably be perceived to, materially interfere with the directors’ ability to act in the best interests of the Company, and that they are therefore independent under applicable regulations, rules and guidelines.

The independence of the Board of Directors and each standing committee is further enhanced by their ability to engage outside advisors as needed. In addition, individual directors may also retain the services of outside advisors with the authorization of the Chair of the Committee.

Shareholders of CGI, or any other person who has an interest in the Company, who wish to contact CGI’s non-management or independent directors may do so by e-mail sent to the Lead Director at lead_director@cgi.com or by using the contact page for the Lead Director on CGI’s website at www.cgi.com.

Expertise and Financial and Operational Literacy

CGI’s corporate governance practices require that all members of the Board of Directors be both financially and operationally literate. The financial literacy of individual directors who do not sit on the Audit and Risk Management Committee need not be as extensive as that of members who sit on such committee. Having operational literacy means that the director must have substantial experience in the execution of day-to-day business decisions and strategic business objectives acquired as a result of meaningful past experience, such as a Chief Executive Officer or as a senior executive officer in another capacity but with a broad responsibility for operations.

The directors’ experience and subject matter expertise are examined by the Committee annually when it reviews and makes recommendations to the Board of Directors in relation to succession planning for the Board of Directors in the context of the Board of Directors and standing committee self-evaluation process (see the heading Self-Assessmentand Peer Review Process). Expertise in the vertical markets in which the Company operates (financial services; government; health; communications and utilities; and manufacturing, retail and distribution), operational expertise and literacy, and financial literacy make up the key criteria that are used to select candidates for Board membership, to review and determine the composition of the Board of Directors, and to assess the performance of directors annually as part of the annual Board of Directors and standing committee self-evaluation process. The Board of Directors’ objective in relation to its composition is to ensure that it has expert representation for each of the Company’s targeted vertical markets.

The members of the Board of Directors who serve on the Audit and Risk Management Committee must be operationally literate and be financially literate in accordance with applicable governance standards under applicable securities laws, regulations and stock exchange rules, and in the sense of having the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues such as those which could reasonably be expected to be raised by CGI’s financial statements.

The Committee and the Board of Directors have determined that all members of the Audit and Risk Management Committee are financially literate and that the Chair, Mr. Gilles Labbé, and Ms. Alison C. Reed and Ms. Kathy N. Waller have the necessary experience to qualify as financial experts under the NYSE corporate governance rules and the rules adopted by the U.S. Securities and Exchange Commission (“SEC”) in accordance with the Sarbanes Oxley Act of 2002. Mr. Labbé is a Fellow of the Institute of Chartered Professional Accountants Canada (FCPA, FCA), Ms. Alison C. Reed is a Chartered Accountant (ACA) and served as Chief Financial Officer of Marks and Spencer plc and of Standard Life Assurance Company and Standard Life plc and Ms. Kathy N. Waller is a Certified Public Accountant (CPA, CGMA) and served as Executive Vice President, Chief Financial Officer and President, Enabling Services of The Coca-Cola Company.

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The remaining members of the Audit and Risk Management Committee who are nominee directors, Messrs. Michael B. Pedersen and Stephen S. Poloz are financially literate in the sense that they have the knowledge and skills necessary to allow them to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues such as those which could reasonably be expected to be raised by CGI’s financial statements.

Mr. Michael B. Pedersen acquired his financial literacy at Barclays plc and CIBC, as well as while serving as Group Head, U.S. Banking of The Toronto-Dominion Bank and as President and Chief Executive Officer of TD Bank US Holding Company, TD Bank, N.A. and TD Bank USA, N.A. In his role as President and Chief Executive Officer he was responsible for leading the bank’s retail and commercial banking operations in the United States.

Mr. Stephen S. Poloz acquired his financial literacy while serving as the Governor of the Bank of Canada and Chairman of the Bank of Canada’s board of directors, as well as while serving as Chair of the BIS Audit Committee and President and CEO of Export Development Canada, a major public sector financial intermediary providing various forms of insurance and lending to facilitate international business on behalf of Canadian companies. The following table presents a skills matrix for each of the Company’s nominee directors:

Operational Literacy Financial Literacy Governance<br>and Human<br> <br>Resources
Director Executive<br> Leadership Consulting<br>Services and<br> IT Industry Geography Vertical market Finance Accounting Risk
Alain Bouchard ✓ Global Manufacturing, retail<br> and distribution ✓ ✓ ✓ ✓
George A. Cope ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Paule Doré ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Julie Godin ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Serge Godin ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Timothy J. Hearn ✓ Global Manufacturing, retail<br> and distribution ✓ ✓ ✓ ✓
André Imbeau ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Gilles Labbé ✓ ✓ Global Manufacturing, retail<br> and distribution ✓ ✓ ✓ ✓
Michael B. Pedersen ✓ Global Financial<br> services ✓ ✓ ✓ ✓
Stephen S. Poloz ✓ Global Financial<br> services ✓ ✓ ✓ ✓
Mary Powell ✓ Global Communications &<br> Utilities ✓ ✓ ✓ ✓
Alison C. Reed ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Michael E. Roach ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
George D. Schindler ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
Kathy N. Waller ✓ Global Manufacturing, retail<br> and distribution ✓ ✓ ✓ ✓
Joakim Westh ✓ ✓ Global Multiple vertical<br> markets ✓ ✓ ✓ ✓
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Attendanceat Board and Standing Committee Meetings

The Committee monitors director attendance in relation to the recommendation for directors to be proposed for election at the Annual General Meeting of Shareholders. The overall attendance rate for the nominee directors of CGI for fiscal 2020 was 98% for the Board of Directors, 100% for the Audit and Risk Management Committee, 100% for the Human Resources Committee and 100% for the Corporate Governance Committee. Detailed meeting and attendance information to regular meetings of the Board of Directors and its standing committees is provided in the following table.

Board and Standing Committee Meetings and Attendance

Year ended September 30, 2020

Committee Meetings Attended
Audit 6 regular meetings
Board Meetings Attended Governance 4 regular meetings
Director^(a)^ 7 regular meetings Human Resources 4 regular meetings
Alain Bouchard 5 of 7 71% Human Resources 4 of 4 100%
George A. Cope 4 of 4 100% Human Resources 2 of 2 100%
Governance 3 of 3 100%
Paule Doré 7 of 7 100% Governance (Chair) 4 of 4 100%
Julie Godin 7 of 7 100% N/A – –
Serge Godin (Chair) 7 of 7 100% N/A – –
Timothy J. Hearn 7 of 7 100% Human Resources 4 of 4 100%
Governance 4 of 4 100%
André Imbeau 7 of 7 100% N/A – –
Gilles Labbé 7 of 7 100% Audit (Chair) 6 of 6 100%
Michael B. Pedersen 7 of 7 100% Audit 6 of 6 100%
Stephen S. Poloz^(b)^ 2 of 2 100% Audit 1 of 1 100%
Mary Powell^(b)^ 2 of 2 100% Human Resources 1 of 1 100%
Governance 1 of 1 100%
Alison C. Reed 7 of 7 100% Audit 6 of 6 100%
Michael E. Roach 7 of 7 100% N/A – –
George D. Schindler 7 of 7 100% N/A – –
Kathy N. Waller 7 of 7 100% Audit 6 of 6 100%
Joakim Westh 7 of 7 100% Human Resources (Chair) 4 of 4 100%
(a) Ms. Brochu resigned as a member of the Board of Directors and member of the Corporate Governance Committee on<br>April 6, 2020. Mr. Evans is not seeking reelection on the Board of Directors and will therefore cease to be a director and a member of the Audit and Risk Management Committee on January 27, 2021.
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(b) Mr. Poloz and Ms. Powell joined the Board of Directors on June 9, 2020. Mr. Poloz was appointed as<br>member of the Audit and Risk Management Committee on July 28, 2020. Ms. Powell was appointed as member of the Human Resources Committee and as member of the Corporate Governance Committee also on July 28, 2020.
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Share Ownership Guideline for Directors

CGI’s directors are required to hold Class A subordinate voting shares or DSUs having a value of $300,000 within five years of their election or appointment to the Board of Directors pursuant to the Company’s share ownership guideline for directors. All directors currently comply with the ownership guideline. The share ownership on the part of the Company’s outside directors as at December 7, 2020 and the date on which their holding must meet the minimum level of share ownership are set out in the following table.

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Outside Directors’ Share Ownership^(a)^
Director^(b)^ Fiscal Year Number of<br>Class A<br>subordinate<br>voting shares Number<br>of DSUs Total<br>number<br>of Class A<br>subordinate<br>voting shares<br>and DSUs Total “at<br>risk” value of<br>Class A<br>subordinate<br>voting shares<br>and DSUs^(c)^ Value of Class A<br>subordinate<br>voting shares<br>or DSUs to be<br>acquired<br>to meet minimum<br>ownership<br>level Date by which<br>minimum ownership<br>level must be met
Alain Bouchard 2020 25,000 20,837 45,837 $ 4,484,692 Complies with the<br> <br>ownership guideline
2019 17,500 18,782 36,282 $ 3,951,110 N/A
Change **** 7,500 **** 2,055 **** 9,555 $ 533,582 ****
George A. Cope 2020 21,540 1,346 22,886 $ 2,239,166 Complies with the<br> <br>ownership guideline
2019 0 0 0 0 N/A
Change **** 21,540 **** 1,346 **** 22,886 $ 2,239,166 ****
Paule Doré 2020 54,274 13,295 67,569 $ 6,610,951 Complies with the<br> <br>ownership guideline
2019 54,274 12,267 66,541 $ 7,246,315 N/A
Change **** 0 **** 1,028 **** 1,028 $ (635,364 )
Richard B. Evans^(d)^ 2020 10,000 35,027 45,027 $ 4,405,442 Complies with the<br> <br>ownership guideline
2019 10,000 32,243 42,243 $ 4,600,263 N/A
Change **** 0 **** 2,784 **** 2,784 $ (194,821 )
Timothy J. Hearn 2020 28,000 8,328 36,328 $ 3,554,332 Complies with the<br> <br>ownership guideline
2019 27,000 7,187 34,187 $ 3,722,964 N/A
Change **** 1,000 **** 1,141 **** 2,141 $ (168,633 )
Gilles Labbé 2020 15,000 29,809 44,809 $ 4,384,113 Complies with the<br> <br>ownership guideline
2019 15,000 27,525 42,525 $ 4,630,973 N/A
Change **** 0 **** 2,284 **** 2,284 $ (246,860 )
Michael B. Pedersen 2020 24,350 8,221 32,571 $ 3,186,747 Complies with the<br> <br>ownership guideline
2019 24,350 6,166 30,516 $ 3,323,192 N/A
Change **** 0 **** 2,055 **** 2,055 $ (136.446 )
Stephen S. Poloz^(e)^ 2020 0 298 298 $ 601,960 Complies with the<br> <br>ownership guideline
2019 0 0 0 $ 0 N/A
Change **** 0 **** 298 **** 298 $ 601,960 ****
Mary Powell^(e)^ 2020 0 0 0 $ 0 June 8, 2025
2019 0 0 0 $ 0 N/A
Change **** 0 **** 0 **** 0 $ 0 ****
Alison C. Reed 2020 3,000 0 3,000 $ 293,520 November 5, 2023
2019 3,000 0 3,000 $ 326,700 N/A
Change **** 0 **** 0 **** 0 $ (33,180 )
Michael E. Roach 2020 951,335 5,104 956,439 $ **** 93,577,992 Complies with the<br> <br>ownership guideline
2019 951,335 4,076 955,411 $ 104,044,258 N/A
Change **** 0 **** 1,028 **** 1,028 $ (10,466,266 )
Kathy N. Waller 2020 0 3,712 3,712 $ 363,182 Complies with the<br> <br>ownership guideline
2019 0 2,320 2,320 $ 252,648 N/A
Change **** 0 **** 1,392 **** 1,392 $ 110,534 ****
Joakim Westh 2020 8,755 0 8,755 $ 856,589 Complies with the<br> <br>ownership guideline
2019 8,755 0 8,755 $ 953,420 N/A
Change **** 0 **** 0 **** 0 $ (96,830 )
(a) 2020 information is provided as at December 7, 2020 and 2019 information is provided as at December 9, 2019.<br>
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(b) Ms. Brochu resigned as a member of the Board of Directors and member of the Corporate Governance Committee on<br>April 6, 2020.
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(c) Based on the closing prices of the Company’s shares on the TSX on December 7, 2020 ($97.84) and<br>December 9, 2019 ($108.90) respectively.
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(d) Mr. Evans is not seeking reelection on the Board of Directors and will therefore cease to be a director and a<br>member of the Audit and Risk Management Committee on January 27, 2021.
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(e) Mr. Poloz and Ms. Powell joined the Board of Directors on June 9, 2020. Mr. Poloz was appointed as<br>member of the Audit and Risk Management Committee on July 28, 2020. Ms. Powell was appointed as member of the Human Resources Committee and as member of the Corporate Governance Committee also on July 28, 2020.
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Availability and Workload

The Board of Directors has endorsed the Committee’s recommendation not to adopt formal guidelines on the number of boards or committees on which independent directors may sit on the basis that the contribution of each director to the work of the Board of Directors forms part of the Board of Directors’ self-assessment process and that arbitrary limits might not serve the interests of the Company.

Some nominee directors are presently directors of other public companies, as shown in the table below:

Director Public Company Committee(s)
Alain Bouchard Alimentation Couche-Tard Inc. (TSX) –
George A. Cope Bank of Montreal<br> <br>(TSX,<br>NYSE and NASDAQ) Chair of the Board, member of the Governance and Nominating Committee and the Human<br>Resources Committee
Paule Doré Héroux-Devtek Inc. (TSX) Chair of the Human Resources and Corporate Governance Committee
Serge Godin Alstom SA (Euronext Paris)^(a)^ –
Gilles Labbé Héroux-Devtek Inc. (TSX) –
Michael B. Pedersen SNC-Lavalin (TSX) Member of the Human Resources Committee and of the Safety, Workplace, and Project Risk<br>Committee
Stephen S. Poloz Enbridge Inc. (TSX and NYSE) Member of the Audit, Finance and Risk Committee and of the Safety and Reliability<br>Committee
Mary Powell Hawaiian Electric Industries Inc. (NYSE)<br><br><br>Sunrun Inc. (NYSE) Member of the Compensation Committee<br><br><br>Member of the Audit Committee and of the Compensation Committee
Michael E. Roach CAE Inc. (TSX and NYSE) Member of the Audit Committee and of the Governance Committee
Kathy N. Waller Beyond Meat, Inc. (NASDAQ)<br> <br><br><br><br>Cadence Bancorporation (NYSE)<br> <br><br><br><br>Delta Air Lines, Inc. (NYSE) Chair of the Audit Committee and Member of the Nominating and Corporate Governance<br>Committee<br> <br>Member of the Risk Management Committee and Compensation Committee<br><br><br>Member of the Corporate Governance Committee, the Audit Committee and the Safety & Security Committee
Joakim Westh Absolent Group AB (Nasdaq Stockholm)<br><br><br>Saab AB (Nasdaq Stockholm)<br> <br>Swedish Match AB (Nasdaq Stockholm) –<br><br><br>Chair of the Audit Committee<br> <br>Chair of the Audit<br>Committee
(a) Mr. Godin’s appointment as director of Alstom SA was approved on October 29, 2020 and he will enter into<br>office on January 1^st^, 2021, subject to completion of Alstom SA’s Bombardier Transportation acquisition.
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The Board of Directors and the Committee have determined that none of the nominee directors’ commitments impair their capacity to serve the Company, the Board of Directors or any standing committee effectively.

Conflicts of Interest

A process is in place for directors to annually acknowledge CGI’s Code of Ethics and Business Conduct in the same way as all officers and members do. All directors have also declared their interests in all other companies where they serve as directors or officers. The Board of Directors has endorsed the Committee’s recommendation to maintain the practice of having directors tender their resignation for consideration upon a major change in their principal occupation.

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Director Orientation and Continuing Education Program

New Director Orientation

Each new director participates in a formal orientation program. The program consists of a detailed presentation of the Company’s current three-year strategic plan, coupled with a series of meetings between the new director and each of the Founder and Executive Chairman of the Board, the Lead Director, the President and Chief Executive Officer, the Chair of any standing committee to which the director will be assigned and other key senior executives of the Company. Depending on the director’s experience and background and the results of the executive meetings, additional meetings may be scheduled. In addition to the executive briefings, new directors receive CGI’s Director Reference Materials, a comprehensive set of documents containing both public and non-public information concerning the Company, which includes detailed information in relation to the Company, its operations, financial condition and management structure; policies and public disclosure record; the work programs and minutes of past meetings of the Board of Directors and of its standing committees; biographies of CGI’s key senior executive officers; materials related to the director’s duties and responsibilities, including, a summary of the Company’s insurance coverage for directors and officers liability; and the Company’s process for reporting transactions in its securities carried out by its reporting insiders.

Continuing Education Program

In addition to the formal orientation program, the directors participate in a continuing education program which provides “in-depth” information on key issues relating to the Company’s business, including the material risks the Company faces and recent developments in the global information technology market. Detailed presentations are also made to the standing committees on technical subjects such as the application of key accounting principles in the preparation of the Company’s financial statements, corporate governance rules and practices, and trends in executive officers’ and directors’ compensation.

Directors also receive updates on business and governance initiatives as well as responses to questions raised by the members of the Board of Directors from time to time. Directors who wish to do so may make arrangements with the Corporate Secretary to participate, at CGI’s expense, in board-level industry associations or conferences, to attend continuing education courses that are relevant to their role as a director of the Company or otherwise to pursue activities that contribute in a meaningful way to the value they bring to the Board of Directors.

All members of the Board of Directors are invited to attend CGI’s annual Leadership Conference, a key part of the Company’s strategic planning cycle and can participate in sessions of CGI’s Leadership Institute management professional development program, including CGI 101, a three day immersive seminar for CGI managers covering all aspects of the Company’s business.

2020 Continuing Education Presentations

The following table lists key presentations that were made available to directors of the Company in fiscal 2020 both by CGI members and external providers:

Date Presentation Topic Attendance
November 2019 Security and Data Privacy Board of Directors
November 2019 IFRS Update Audit and Risk Management Committee
April 2020 Corporate Governance Corporate Governance Committee
June 2020 Leadership Conference Board of Directors
September 2020 Intangibles, Capitalization and Impairment Process Audit and Risk Management Committee

Self-Assessment and Peer Review Processes

The Lead Director, in concert with the Committee, coordinates an annual self-assessment of the effectiveness of the Board of Directors as a whole and of its standing committees, as well as, every two years, a peer review of the independent directors. The Committee is also responsible for establishing the competencies, skills and qualities it seeks in new Board members and directors are assessed against the contribution they are expected to make by way of a questionnaire.

Once responses are received, the Lead Director compiles and analyses the results and discusses the self-assessments and peer reviews with each director. Following one-on-one discussions with directors, the Lead Director reviews the

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overall results of the annual self-assessment process and of the peer review process, with the Founder and Executive Chairman of the Board. The Committee then meets to review the results of the annual self-assessment process and of the peer review process, and subsequently presents the final results to the Board of Directors for discussion.

The peer review of the independent directors was scheduled for fiscal 2020. However, given the number of new directors having joined the Board of Directors during the year and the fact that few physical meetings had been held due to the COVID-19 pandemic, the Committee resolved to postpone the peer review to fiscal 2021.

The Board of Directors annually reviews the assessment of its performance and the recommendations provided by the Committee with the objective of increasing the Board’s effectiveness in carrying out its responsibilities. The Board of Directors takes appropriate action based on the results of the review process.

Retirement Age and Director Term Limits

The Board of Directors has endorsed the Committee’s recommendation not to adopt a formal retirement age or term limits for directors.

CGI’s success is due in large measure to the Company’s experience and expertise in the vertical markets in which it operates. The selection criteria for CGI’s Board of Directors, which are explained earlier in this document under the heading Expertise and Financial and OperationalLiteracy, recognize this and are designed to ensure that the Company has subject matter experts on the Board of Directors who can effectively provide intelligence, experience, expertise, and business and operational insight into each of the Company’s vertical markets. Imposing a term limit or an arbitrary retirement age would unnecessarily expose the Company to losing valuable expertise and insight that could not be easily replaced. The Committee and the Board of Directors are therefore of the view that a mandatory retirement age or term limits might arbitrarily and needlessly deprive the Board of Directors of valuable talent.

As with the other aspects of CGI’s corporate governance practices, term limits and formal retirement age for directors are considered on a regular basis by the Board of Directors. In the event of a vote, the directors who would be affected if such limits were adopted withdraw from the meeting and abstain from voting on the matter. The Board of Directors believes that the effectiveness of this approach to board renewal is proven as 55% of the independent nominee directors were not directors five years ago.

Nomination Process for the Board of Directors and Executive Officers

Board of Directors

The shareholders are responsible for electing CGI’s directors. The responsibility for proposing candidates for election by the shareholders lies with the Board of Directors, which relies on the recommendations of the Committee.

Based on the results of the Board of Directors self-evaluation and peer review process (see the heading Self-Assessment and Peer Review Processes earlier in this document) and, from time to time, on its own assessment of the needs of the Company, the Committee may recommend that the composition of the Board of Directors or its standing committees be varied in order to continue to serve the best interests of the Company and to ensure an appropriate succession of directors. By way of example, when it is appropriate to do so, additional directors may be appointed to committees so that knowledge is transmitted to new members to facilitate a smooth transition as standing committee composition evolves.

When changes to the composition of the Board of Directors are required, potential candidates are identified either through referrals from directors or senior management, or with the assistance of third parties. The selection of nominees from among the potential candidates is based on the candidate’s expertise and knowledge in the vertical markets in which the Company operates and their operational and financial literacy based on the Board of Directors’ skills matrix (see the heading Expertise and Financial and Operational Literacy earlier in this document), taking into account criteria that promote diversity, including gender (with the objective of having a Board of Directors composed of at least 30% of women), ethnicity, age, experience and geographical representation. The Committee, the Founder and Executive Chairman of the Board, and the Lead Director consult with each other with respect to the actions to be taken and the necessary steps are then taken to interview the candidates and confirm their willingness to serve on the Board of Directors.

Once the selection of candidates is completed, the Committee recommends to the Board of Directors that the candidate or candidates be either appointed by the Board of Directors if there is a vacancy to be filled or if there is a need to increase the size of the Board of Directors, or be nominated for election at the next Annual General Meeting of Shareholders.

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Five out of **** sixteen (or 31.25%) of CGI’s nominee directors are women. As mentioned earlier in this document (see the heading Diversity earlier in this document), the charters of the Board of Directors and of the Corporate Governance Committee include the Company’s objective of having a Board of Directors of which at least 30% would be women. CGI is very proud to have met this objective and we will continue to monitor our progress.

Succession Planning for Executive Officers

Succession planning is a priority of the Board of Directors as part of its responsibility to ensure that CGI has a robust pipeline of leaders at executive and management levels, including for the President and Chief Executive Officer position. As provided in its charter, the Board of Directors oversees the succession planning, including the appointment, training and monitoring, of senior management. The Human Resources Committee plays a key role in supporting the Board of Directors in its oversight of talent management and succession planning by reviewing annually the succession plan for the Chief Executive Officer and other executive roles. The Human Resources Committee also provides annually a report to the Board of Directors on succession planning, which identifies key talent and potential successors’ capabilities, the roles that they can assume in the future and the development programs required to prepare them for these roles. ****

The charter of the Human Resources Committee also provides that in identifying potential candidates for appointment as executive officers, the Human Resources Committee will consider the diversity of the executive team’s background, including in terms of gender, ethnicity, age and experience. As at the date of this Management Proxy Circular, three out of sixteen (or approximately 19%) of the Company’s current executive officers, were women. In addition, a total of thirteen women occupy senior management positions, which represents approximately 15% of the Company’s total number of senior managers.

Board of Directors Participation in Strategic Planning

The Board of Directors is directly and closely involved in the preparation and approval of CGI’s rolling three-year strategic plan which is reviewed and assessed annually by the Board of Directors.

CGI has adopted a bottom-up process for budgeting and strategic planning in order to ensure that the resulting business plan is as closely attuned as possible to maximizing the Company’s business opportunities and mitigating operational and other risks. The Board of Directors receives a detailed briefing early in the planning process covering all aspects of CGI’s strategic planning so that the directors are in a position to contribute to the process in a meaningful way before the final business plan has taken shape.

In keeping with CGI’s three-year rolling strategic planning process, the strategic plan begins with the initiatives, directions and priorities identified at the business unit level by the Company’s management team that are shared at the Company’s annual Leadership Conference. The plan is then presented to the directors in July for review and discussion, refined by management and subsequently presented to the Board of Directors for approval in September. The rolling three-year planning process provides a meaningful opportunity for the directors to contribute to the strategic planning process. In addition to the formal planning process, every Board of Directors meeting agenda features a standing item that serves as a forum for continuing free-ranging discussion between the Board of Directors and management in relation to the Company’s strategic direction.

Guidelines on Timely Disclosure of Material Information

CGI has adopted Guidelines on Timely Disclosure of Material Information (the “Disclosure Guidelines”) whose purpose is to ensure that communications with the investment community, regulator, the media and the general public about the Company, particularly in respect of material information, are timely, accurate, broadly released in accordance with, and otherwise responsive to, all applicable legal and regulatory requirements.

Under the Disclosure Guidelines, the Board of Directors has the responsibility to oversee the Company’s compliance with its continuous and timely disclosure obligations. The Board of Directors believes that it is management’s role to communicate on behalf of the Company with its shareholders and the investment community. The Company maintains an effective investor relations process to respond to shareholder questions and concerns. The Company also adopted the SPMF (which stands for Shareholder Partnership Management Framework, as defined under the heading CGI’s Shareholders earlier in this document), which structures the processes and how information flows between CGI and the investment community, including both buy-side (institutional investor) and sell-side (investment dealer) research analysts. CGI obtained an ISO 9001 certification for the application of the SPMF in the Company’s operations.

The Board of Directors reviews and, where required, approves statutory disclosure documents prior to their dissemination to the market and to the Company’s shareholders.

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Codes of Ethics

CGI’s Codes of Ethics are attached as Appendix A to CGI’s 2020 Annual Information Form which is available on the Canadian Securities Administrators’ website at www.sedar.com and on CGI’s website at www.cgi.com. A copy of the 2020 Annual Information Form will be provided to shareholders by CGI upon request.

The Codes of Ethics are comprised of CGI’s Code of Ethics and Business Conduct that applies to all members, officers and directors of CGI (and which incorporates CGI’s Anti-Corruption Policy) and CGI’s Executive Code of Conduct which supplements the Code of Ethics and Business Conduct for certain officers.

The Board of Directors monitors compliance with the Codes of Ethics and is, under its charter, responsible for any waivers of their provisions granted to directors or officers. No such waivers have been granted to date. The Committee is principally responsible for the annual review of the Codes of Ethics, overseeing compliance therewith, reviewing any request for a waiver from their application, and making recommendations on these matters to the Board of Directors.

Under the terms of the Code of Ethics and Business Conduct, all of CGI’s members are required to comply with its content and to assist with its application. In particular, the Code of Ethics and Business Conduct requires that incidents be reported to human resources, management or alternatively to the Corporate Secretary or, if a senior executive officer is identified in an ethics alert, to an external legal counsel.

The Board of Directors has established procedures approved by the Audit and Risk Management Committee for the receipt, retention, and treatment of ethical incidents relating to, among others, accounting, internal accounting control or auditing matters, discrimination and harassment, corruption and data privacy, as well as other potential breaches of the Code of Ethics and Business Conduct (which incorporates CGI’s Anti-Corruption Policy) or of the Executive Code of Conduct. In that regard, the Company adopted an Ethics Reporting Policy which allows members who wish to submit a report to do so via a third party ethics reporting hotline and secure website which ensures that members who wish to preserve their anonymity are able to do so with confidence. The Audit and Risk Management Committee is primarily responsible for the review and oversight of these incident reports. A quarterly report on incidents reported is provided by the Corporate Secretary to the Audit and Risk Management Committee.

An integration program has been designed for new members to become familiar with CGI’s policies, their responsibilities as members and the benefits to which they are entitled. In order to ensure that all CGI members are aware of the importance that the Company attaches to compliance with the Code of Ethics and Business Conduct, each new member is informed of its content and the process for reporting ethical incidents, and is required to undertake in writing to comply with its provisions. CGI’s Leadership Institute also provides new managers with an intensive curriculum of courses designed to allow them to become familiar with CGI’s methods of operation and its policies, including the Code of Ethics and Business Conduct and the process for reporting incidents. In addition, the Company provides an internet portal for all members to access the Company’s policies, including the Codes of Ethics and the process for reporting ethical incidents.

These measures are in addition to quarterly reports prepared for the Audit and Risk Management Committee by the internal audit department, the internal controls review function and the legal department. These quarterly reports may include reports of breaches of the Codes of Ethics when such breaches are raised in internal audit mandates or in claims made against the Company.

In addition to CGI’s Code of Ethics and Business Conduct, CGI’s principal executive and financial officers, including the Founder and Executive Chairman of the Board, the President and Chief Executive Officer, and the Executive Vice-President and Chief Financial Officer, the principal accounting officer or controller, and other persons performing similar functions, are subject to CGI’s Executive Code of Conduct which they are required to review and acknowledge on an annual basis.

CGI Federal Inc., the Company’s operating subsidiary that provides services to the U.S. Federal government, has adopted separate policies and procedures to comply with specific requirements under U.S. Federal government procurement laws and regulations.

CGI has also developed a Third Party Code of Ethics which applies to its business partners, including but not limited to, its primes, subcontractors, independent contractors, consultants, distributors, licensees, suppliers and other agents to ensure that they understand and adhere to the Company’s commitment to integrity and high standards of business conduct.

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Report of the Audit and Risk Management Committee

The Audit and Risk Management Committee of the Board of Directors is composed entirely of independent directors who meet the independence and experience requirements of National Instrument 52-110 – Audit Committees adopted by the Canadian securities regulators as well as those of the NYSE and of the SEC.

The Committee is composed of Mr. Gilles Labbé, Chair of the Committee, Messrs. Richard B. Evans, Michael B. Pedersen and Stephen S. Poloz and Mses. Alison C. Reed and Kathy N. Waller. The Committee met six times during fiscal 2020. Mr. Labbé’s role and responsibilities as Chair of the Committee are described earlier in this document in the report of the Corporate Governance Committee under the heading Role and Responsibilities of the Lead Director and Standing Committee Chairs.

Mr. Evans has decided that he will not seek reelection at the Meeting and, as a result, his term as director and member of the Audit and Risk Management Committee will come to an end at the time of the Meeting.

The role and responsibilities of the Committee are contained in the Committee’s charter, which is incorporated by reference in this Management Proxy Circular (see the heading Mandate, Structure and Composition of the Board of Directors) and is available on the Canadian Securities Administrators’ website at www.sedar.com and on CGI’s website at www.cgi.com. The role and responsibilities of the Committee include:

• reviewing all public disclosure documents containing audited or unaudited financial information concerning CGI;<br>
• identifying and examining the financial and operating risks to which the Company is exposed, reviewing the various<br>policies and practices of the Company that are intended to manage those risks, and reporting on a regular basis to the Board of Directors concerning risk management;
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• reviewing and assessing the effectiveness of CGI’s accounting policies and practices concerning financial reporting;<br>
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• reviewing and monitoring CGI’s internal control procedures, programs and policies and assessing their adequacy and<br>effectiveness;
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• reviewing the adequacy of CGI’s internal audit resources including the mandate and objectives of the internal<br>auditor;
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• recommending to the Board of Directors the appointment of the external auditor, asserting the external auditor’s<br>independence, reviewing the terms of its engagement, conducting an annual auditor performance assessment, and pursuing ongoing discussions with it;
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• reviewing all related party transactions in accordance with the rules of IFRS and applicable laws and regulations;<br>
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• reviewing the audit procedures including the proposed scope of the external auditor examinations; and<br>
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• performing such other functions as are usually attributed to audit committees or as directed by the Board of Directors.<br>
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External Auditor

The Committee is required to assert the independence of CGI’s external auditor addresses the applicable criteria with the external auditor and obtains yearly confirmations from it as to its independence.

Auditor Independence Policy

In order to satisfy itself as to the independence of the external auditor, the Committee has adopted an auditor independence policy which covers (a) the services that may and may not be performed by the external auditor, (b) the governance procedures to be followed prior to retaining services from the external auditor, and (c) the responsibilities of management and the Committee. The following is a summary of the material provisions of the policy.

Performance of Services

Services are either acceptable services or prohibited services.

The acceptable services are audit and review of financial statements, prospectus work, the audit of pension plans, special audits on control procedures, tax planning services on mergers and acquisitions activities, due diligence relating to mergers and acquisitions, tax services related to transfer pricing, sales tax planning and returns, research and interpretation related to taxation, research relating to accounting issues, tax planning services, preparation of tax returns, and all other services that are not prohibited services. The prohibited services are: bookkeeping services, the design and implementation of financial information systems, appraisal or valuation services or fairness opinions, actuarial services, internal audit services, management functions, human resources functions, broker-dealer services, legal services, services based on contingency fees, and expert services.

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Governance Procedures

The following control procedures are applicable when considering whether to retain the external auditor services:

For all services falling within the permitted services category, whether they are audit or non-audit services, a request for approval must be submitted to the Committee through the Executive Vice-President and Chief Financial Officer prior to engaging the auditor to perform the services.

In the interests of efficiency, certain permitted services are pre-approved quarterly by the Committee and thereafter only require approval by the Executive Vice-President and Chief Financial Officer as follows:

• The Committee can pre-approve envelopes for certain services to pre-determined dollar limits on a quarterly basis;
• Once pre-approved by the Committee, the Executive Vice-President and Chief<br>Financial Officer may approve the services prior to the engagement;
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• For services not captured within the pre-approved envelopes and for costs in<br>excess of the pre-approved amounts, separate requests for approval must be submitted to the Committee; and
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• At each meeting of the Committee, a consolidated summary of all fees by service type is presented including a breakdown<br>of fees incurred within each of the pre-approved envelopes.
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Management and Committee Responsibilities

Management and the Committee are the Company’s two key participants for the purposes of the Company’s Auditor Independence Policy. The primary responsibilities of management are creating and maintaining a policy that follows applicable auditor independence standards, managing compliance with the policy, reporting to the Committee all mandates to be granted to the external auditor, and monitoring and approving services to be performed within the pre-approved envelopes.

The primary responsibilities of the Committee are nominating the external auditor for appointment by the Company’s shareholders, approving fees for audit services, approving the Auditor Independence Policy and amendments thereto, monitoring management’s compliance with the policy, obtaining yearly confirmations of independence from the external auditor, monitoring audit partner rotation requirements, monitoring the twelve month “cooling off” period when hiring members of the audit engagement team in a financial reporting oversight role, reviewing the appropriateness of required audit fee disclosure, interpreting the Auditor Independence Policy, and approving all mandates of the auditor or pre-approving envelopes for specific services.

Under the Auditor Independence Policy, the Committee has the ultimate responsibility to assert the independence of CGI’s external auditor.

Annual External Auditor Assessment

The Committee performs an annual assessment process to assist in making its recommendation to the Board of Directors in relation to the appointment of the Company’s external auditors. In fiscal 2020, the process was initiated in November and was completed prior to the Committee’s recommendation that was made on December 8 2020.

The annual external auditors’ assessment is based on the recommendations of Chartered Professional Accountants Canada in collaboration with the Canadian Public Accountability Board. The process is expected to provide an additional element of structure for the Committee in making its recommendation and to help in identifying areas for improvement for the external audit firm and the Company’s audit processes.

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Fees Billed by the External Auditor

During the years ended September 30, 2020 and 2019, CGI’s external auditor invoiced the following fees for its services:

Fees billed
Service retained 2020 2019
Audit fees $ 7,900,049 $ 7,207,258
Audit related fees^(a)^ $ 1,398,224 $ 345,639
Tax<br>fees^(b)^^^ $ 2,102,969 $ 2,370,713
All other fees^(c)^^^ $ 9,338 $ 86,165
Total fees billed $ 11,410,580 $ 10,009,775
(a) The audit related fees billed by the external auditor for the fiscal years ended September 30, 2020 and 2019 were<br>primarily in relation to service organization control procedures audits.
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(b) The tax fees billed by the external auditor for the fiscal years ended September 30, 2020 and 2019 were in<br>relation to tax compliance and advisory services.
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(c) The other fees billed by the external auditor for the fiscal year ended September 30, 2020 were not significant<br>and for the fiscal year ended September 30, 2019 were primarily in relation to training of a general nature provided to CGI which was not related to financial reporting or internal controls over financial reporting.
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Related Party Transactions

The Committee is responsible under its charter for reviewing and making recommendations to the Board of Directors in relation to any transaction in which a director or a member of senior management has an interest. To the extent that it is necessary to do so, the Committee may retain outside advisors to assist it in reviewing related party transactions.

For more important transactions, the Board of Directors generally establishes a special committee made up entirely of independent directors that is mandated to review the transaction and to make a recommendation to the Board of Directors. Such committee may retain independent legal and financing advisors to assist in reviewing the transaction.

Whether it is the Committee or a special committee, the committee mandated with reviewing the transaction tables its report with the Board of Directors and it is the Board of Directors that has the responsibility of approving the transaction if it determines that it is appropriate to do so.

No such ad hoc committee was established or required to be established in fiscal 2020.

Other Business to be Transacted at the Annual General Meeting of Shareholders

Management of the Company is not aware of any matter to be submitted at the Meeting other than the matters set forth in the Notice of Meeting. Every proxy given to any person in the form of proxy that accompanied the Notice of Meeting will confer discretionary authority with respect to amendments or variations to the items of business identified in the Notice of Meeting and with respect to any other matters that may properly come before the Meeting.

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Additional Information

The Company will provide to any person, upon request to the Corporate Secretary, a copy of this Management Proxy Circular, together with one copy of any document, or the pertinent pages of any document, incorporated by reference in this Management Proxy Circular.

Additional financial and other information relating to the Company is included in its 2020 annual audited and quarterly unaudited consolidated financial statements, annual and quarterly Management’s Discussion and Analysis of Financial Position and Results of Operations and other continuous disclosure documents which are available on the Canadian Securities Administrators’ website at www.sedar.com and on EDGAR at www.sec.gov. For additional copies of this Management Proxy Circular, for a copy of the Company’s Notice of Intention in relation to its NCIB, or other financial information, please contact Investor Relations by sending an e-mail to ir@cgi.com, by visiting the Investors section on the Company’s website at www.cgi.com, or by contacting us by mail or phone:

Investor Relations

CGI Inc.

1350 René-Lévesque Blvd. West

15^th^ Floor

Montréal, Quebec, Canada

H3G 1T4

Tel.: +1-514-841-3200

Shareholder Proposals

The Company initially received five shareholder proposals for inclusion in this Management Proxy Circular. One proposal with respect to a pension fund deficiency was withdrawn by MÉDAC and the texts of the four remaining shareholder proposals are reproduced in Appendix D hereto. The texts of such proposals have not been modified from their original French version except that they have been translated. At CGI’s request and due to the exceptional sanitary measures currently in place as a result of the coronavirus COVID-19 pandemic, MÉDAC agreed not to submit the remaining Shareholder Proposals to a vote at the Meeting.

To propose any matter for a vote by the shareholders at an annual meeting of CGI, a shareholder must send a proposal to the Corporate Secretary at CGI’s office at 1350 René-Lévesque Boulevard West, 25th Floor, Montréal, Quebec, Canada, H3G 1T4 at least 90 days before the anniversary date of the notice for the previous year’s annual meeting. Proposals for CGI’s 2021 annual meeting must be received no later than September 8, 2021. CGI may omit any proposal from its Management Proxy Circular and annual meeting for a number of reasons under applicable Canadian corporate law, including receipt of the proposal by CGI subsequent to the deadline noted above.

Approval by the Directors

The Board of Directors has approved the content and the delivery of this Management Proxy Circular.

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Serge Godin

Founder and Executive Chairman of the Board

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Appendix A

Stock Options and Share-Based Awards held by Named Executive Officers

The following tables show all outstanding stock options (referred to as option-based awards) and PSUs (referred to as share-based awards) held by the Named Executive Officers as at September 30, 2020.

Option-based Awards Share-based Awards
Name and title Number of<br><br><br>securities<br> <br>underlying<br>unexercised<br><br><br>options^(a)^<br><br><br>(#) Option<br><br><br>exercise<br> <br>price<br><br><br>($) Option<br><br><br>expiration date Value of<br><br><br>unexercised<br> <br>in-the-money<br> <br>options^(b)^<br><br><br>($) Number of<br><br><br>shares or units<br> <br>of shares that<br><br><br>have not<br> <br>vested^(c)^<br> <br>(#) Market or<br>payout value of share-based<br>awards that have not<br>vested(b)(d)<br>() Market or payout<br><br><br>value of vested<br> <br>share-based<br><br><br>awards not<br> <br>paid out or<br><br><br>distributed<br> <br>($)
Serge Godin<br><br><br>Founder and Executive Chairman of the Board 0 279,683
Total: 0 **** 279,683

All values are in US Dollars.

Option-based Awards Share-based Awards
Name and title Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value ofunexercisedin-the-moneyoptions(b) () Number of<br>shares or units<br>of shares that<br>have not<br>vested^(c)^<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested^(b)(d)^<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed<br><br><br>($)
George D. Schindler<br><br><br>President and Chief Executive Officer 34,400 September 30, 2021
182,577 November 26, 2022
53,226 September 30, 2023
113,695 September 22, 2024
117,000 September 22, 2025
289,721 September 26, 2026
168,884 September 24, 2027
194,836 September 22, 2028 154,150 14,058,185
Total: 154,150 14,058,185

All values are in US Dollars.

Option-based Awards Share-based Awards
Name and title Number of<br>securities<br>underlying<br>unexercised<br>exercise<br>options^(a)^<br> <br>(#) Optionprice() Option<br>expiration date Value ofunexercisedin-the-moneyoptions(b) () Number of<br>shares or units<br>of shares that<br>have not<br>vested^(c)^<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards that<br>have not<br>vested^(b)(d)^<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards<br>not<br>paid out or<br>distributed<br> <br>($)
François Boulanger 33,695 September 22, 2024
Executive Vice- 70,000 September 22, 2025
President and Chief 97,127 September 26, 2026
Financial Officer 53,725 September 24, 2027
59,260 September 22, 2028 44,179 3,992,898
Total: 44,179 3,992,898

All values are in US Dollars.

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Option-based Awards Share-based Awards
Name and title Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares that<br>have not<br>vested^(c)^<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested^(b)(d)^<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed<br><br><br>($)
Timothy J. Hurlebaus<br><br><br>President, CGI Federal 3,033 September 22, 2025 128,053
16,825 September 26, 2026 456,799
11,163 September 24, 2027 303,075
30,006 September 22, 2028 142,829 23,613 2,153,460
Total: 1,030,756 23,613 2,153,460

All values are in US Dollars.

Option-based Awards Share-based Awards
Name and title Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares that<br>have not<br>vested^(c)^<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested^(b)(d)^<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed<br><br><br>($)
David L. Henderson<br><br><br>President, United<br><br><br>States Operations,<br><br><br>Commercial and State<br><br><br>Government 12,605 November 12, 2023 671,468
13,196 November 11, 2024 671,808
19,500 September 22, 2025 823,290
46,028 September 26, 2026 1,249,660
28,805 September 24, 2027 782,056
30,947 September 22, 2028 147,308 25,021 2,281,867
Total: 4,345,590 25,021 2,281,867

All values are in US Dollars.

(a) Shows stock options held as at September 30, 2020. Please refer to the headings StockOptions Granted as part of Fiscal 2020 Compensation and Performance Factors and Vesting Conditions earlier in this document for an explanation of stock options and performance factors.<br>
(b) Based on $90.38, the closing price of the Company’s Class A subordinate voting shares on the TSX on<br>September 30, 2020, the last trading day in fiscal 2020.
--- ---
(c) Shows PSUs held as at September 30, 2020 and which have not vested, and include PSUs that had been awarded on<br>October 1, 2019 as part of the Named Executive Officers’ target compensation for fiscal 2020 and for which performance-based vesting was only determined after September 30, 2020. Please refer to the headings<br>Performance Share Units Awarded in Fiscal 2020 and Performance Factors and Vesting Conditions earlier in this document for an explanation of PSU awards in fiscal 2020 and<br>performance factors.
--- ---
(d) Shows the market value for the aggregate number of PSUs held as at September 30, 2020 and which had not vested, as<br>indicated in footnote (c) above. For Messrs. Serge Godin and Francois Boulanger, the market value was calculated based on $90.38, the closing price of the Company’s Class A subordinate voting shares on the TSX on September 30,<br>2020, the last trading day in fiscal 2020. For Messrs. George D. Schindler, Timothy J. Hurlebaus and David L. Henderson, the market value was calculated using the closing price of the Company’s Class A subordinate voting shares on the NYSE<br>on September 30, 2020 multiplied by the average foreign exchange rates used for financial reporting purposes on page 18 of the Management’s Discussion and Analysis for the years ended September 30, 2020 and 2019.<br>
--- ---
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Appendix B

Stock Options and Share-Based Awards held by Directors

The following tables show all outstanding stock options (referred to as option-based awards) held by the members of the Board of Directors who are not Named Executive Officers as at September 30, 2020 as well as the in-the-money value of such stock options. For outside members of the Board of Directors, the following tables also show the market value of outstanding and vested DSUs (referred to as share-based awards) granted in respect of fiscal 2020 and previous fiscal years. For more information, please refer to the headings Stock Options Held by Directors and Deferred Stock Units and Deferred Stock Units Granted to Directors earlier in this document. All DSUs are fully vested at the time of issuance.

The corresponding information for directors who are also Named Executive Officers may be found in Appendix A.

Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Option<br>exercise<br>price<br><br><br>($) Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br>($)
Alain Bouchard 3,813 27.28 April 28, 2023 240,600
650 30.79 July 10, 2023 38,734
2,442 36.15 September 30, 2023 132,430
1,198 38.41 October 16, 2023 62,260
1,471 34.68 January 22, 2024 81,935
1,410 36.17 April 16, 2024 76,436
1,360 37.50 July 23, 2024 71,917
2,500 37.82 September 22, 2024 131,400
1,340 38.07 October 29, 2024 70,095
1,077 47.36 January 21, 2025 46,333
1,067 56.69 April 15, 2025 35,947
1,286 50.94 July 22, 2025 50,720
1,537 47.81 October 14, 2025 65,430 1,883,333
Total: 1,104,237 1,883,333
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Option<br>exercise<br>price<br><br><br>($) Option<br>expiration date Value of<br>unexercised<br>in-the-money<br>options^(b)^<br> <br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Sophie Brochu^(d)^ 0 N/A N/A 0 0
Total: 0 0
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Option<br>exercise<br>price<br><br><br>($) Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards<br>not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
George A. Cope 0 N/A N/A 0 121,654
Total: 0 121,654
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Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Option<br>exercise<br>price<br><br><br>($) Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards<br>not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Paule Doré 625 37.82 September 22, 2024 32,850 1,201,607
Total: 32,850 1,201,607
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Option<br>exercise<br>price<br><br><br>($) Option<br>expiration date Value of<br>unexercised<br>in-the-money<br>options^(b)^<br> <br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Richard B. Evans^(e)^ 1,997 19.28 January 27, 2021 141,987
1,825 20.30 April 24, 2021 127,896
1,779 20.51 July 28, 2021 124,299
1,688 19.71 September 30, 2021 119,291
2,024 19.30 October 20, 2021 143,866
2,034 19.39 January 26, 2022 144,394
1,798 21.31 April 19, 2022 124,188
1,629 23.99 July 26, 2022 108,149
1,441 26.16 October 18, 2022 92,541
3,813 23.65 November 26, 2022 254,441
1,554 24.41 January 23, 2023 102,517
277 27.12 February 13, 2023 17,523
1,724 26.62 April 17, 2023 109,922
1,539 30.79 July 10, 2023 91,709
2,442 36.15 September 30, 2023 132,430
1,207 38.41 October 16, 2023 62,728
1,576 34.68 January 22, 2024 87,783
1,507 36.17 April 16, 2024 81,694
1,430 37.50 July 23, 2024 75,618
2,500 37.82 September 22, 2024 131,400
1,476 38.07 October 29, 2024 77,210
1,276 47.36 January 21, 2025 54,894
1,103 56.69 April 15, 2025 37,160
1,251 50.94 July 22, 2025 49,339
1,382 47.81 October 14, 2025 58,832 3,165,797
Total: 2,551,811 3,165,797
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Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market orpayout value ofshare-basedawards<br>thathave notvested () Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Julie Godin 6,330 September 30, 2021 447,341
33,363 November 26, 2022 2,226,313
25,000 November 26, 2022 1,668,250
21,367 November 12, 2023 1,138,220
37,898 September 22, 2024 1,991,919
26,000 September 22, 2025 1,097,720
50,639 September 26, 2026 1,374,849
28,293 September 24, 2027 768,155
29,056 September 22, 2028 138,307 24,931
Total: 10,851,074 **** 24,931
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value<br>of<br>unexercised<br>in-the-money<br>options^(b)^<br><br><br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market orpayout value ofshare-basedawards<br>thathave notvested () Market or payout<br>value of vested<br>share-based<br>awards<br>not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Timothy J. Hearn 2,500 January 27, 2025 108,650
462 April 15, 2025 15,565 1
825 July 22, 2025 32,538
910 October 14, 2025 38,739 752,761
Total: 195,492 752,761
Option-based Awards Share-based Awards
Name Number of<br><br><br>securities<br> <br>underlying<br><br><br>unexercised<br> <br>options^(a)^<br> <br>(#) Option<br>exercise price<br>() Option<br><br><br>expiration date Value of<br><br><br>unexercised<br> <br>in-the-money<br> <br>options^(b)^<br><br><br>($) Number of<br><br><br>shares or units<br> <br>of shares that<br><br><br>have not<br> <br>vested<br><br><br>(#) Market or<br>payout value of share-based<br>awards that have not<br>vested () Market or payout<br><br><br>value of vested<br> <br>share-based<br><br><br>awards not<br> <br>paid out or<br><br><br>distributed^(b)(c)^<br><br><br>($)
André Imbeau^(f)^ 3,813 November 26, 2022 254,441
2,442 September 30, 2023 132,430
2,500 November 11, 2024 127,275
2,000 September 22, 2025 84,440
9,250 November 9, 2025 349,188
16,603 September 26, 2026 450,771
17,525 September 24, 2027 475,804
14,916 September 22, 2028 71,000
14,110 November 30, 2029 0
Total: 1,945,349

All values are in US Dollars.

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Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value ofunexercisedin-the-moneyoptions(b) () Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payoutvalue of vestedshare-basedawards notpaid out ordistributed(b)(c) ()
Gilles Labbé 1,349 January 27, 2021
1,281 April 24, 2021
1,268 July 28, 2021
1,688 September 30, 2021
1,347 October 20, 2021
1,315 January 26, 2022
1,278 April 19, 2022
1,172 July 26, 2022
1,075 October 18, 2022
3,813 November 26, 2022
1,152 January 23, 2023
277 February 13, 2023
1,925 April 17, 2023
1,665 July 10, 2023
2,442 September 30, 2023
1,334 October 16, 2023
1,658 January 22, 2024
1,590 April 16, 2024
1,533 July 23, 2024
2,500 September 22, 2024
1,510 October 29, 2024
1,214 January 21, 2025
1,014 April 15, 2025
1,129 July 22, 2025
1,203 October 14, 2025
Total:
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value ofunexercisedin-the-moneyoptions(b) () Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payoutvalue of vestedshare-basedawards notpaid out ordistributed(b)(c) ()
Michael B. Pedersen 0 N/A
Total:
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value ofunexercisedin-the-moneyoptions(b) () Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payoutvalue of vestedshare-basedawards notpaid out ordistributed(b)(c) ()
Stephen S. Poloz 0 N/A
Total:

All values are in US Dollars.

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Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value of<br>unexercised<br>in-the-money<br>options^(b)^<br> <br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Mary Powell 0 N/A 0 0
Total: 0 0
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br>(#) Optionexerciseprice<br>() Option<br>expiration date Value of<br>unexercised<br>in-the-money<br>options^(b)^<br> <br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Alison C. Reed 0 N/A 0 0
Total: 0 0
Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br>(#) Optionexerciseprice<br>() Option<br>expiration date Value of<br>unexercised<br>in-the-money<br>options^(b)^<br> <br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Michael E. Roach 0 N/A 0 461,320
Total: 0 461,320
Name Option-based Awards Share-based Awards
Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value of<br>unexercised<br>in-the-money<br>options^(b)^<br> <br>($) Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payout<br>value of vested<br>share-based<br>awards not<br>paid out or<br>distributed^(b)(c)^<br> <br>($)
Kathy N. Waller 0 N/A 0 335,514
Total: 0 335,514

All values are in US Dollars.

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Option-based Awards Share-based Awards
Name Number of<br>securities<br>underlying<br>unexercised<br>options^(a)^<br> <br>(#) Optionexerciseprice<br>() Option<br>expiration date Value ofunexercisedin-the-moneyoptions(b) () Number of<br>shares or units<br>of shares<br>that<br>have not<br>vested<br> <br>(#) Market or<br>payout value of<br>share-based<br>awards<br>that<br>have not<br>vested<br> <br>($) Market or payoutvalue of vestedshare-basedawards notpaid out ordistributed(b)(c) ()
Joakim Westh 0 N/A
Total:

All values are in US Dollars.

(a) Shows stock options held as at September 30, 2020.
(b) Based on $90.38, the closing price of the Company’s Class A subordinate voting shares on the TSX on<br>September 30, 2020, the last trading day in fiscal 2020.
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(c) Shows the aggregate payout value of DSUs granted in respect of fiscal 2020 and previous fiscal years.<br>
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(d) Ms. Brochu resigned as a member of the Board of Directors on April 6, 2020.
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(e) Mr. Evans is not seeking reelection on the Board of Directors and will therefore cease to be a director on<br>January 27, 2021.
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(f) Mr. Imbeau received stock options in fiscal 2020 as compensation in respect of his service as an officer of the<br>Company.
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Appendix C

Proposed resolution ratifying, confirming and approving the Amended and Restated By-Law

CGI INC.

RESOLUTION OF THE

SHAREHOLDERS OF THE COMPANY

JANUARY 27, 2021

WHEREFORE, BE IT RESOLVED:

1. THAT the amended and restated By-Law<br>1986-5 of the Company approved by the Company’s Board of Directors on December 8, 2020, is hereby ratified, confirmed and approved; and
2. THAT any director or officer of the Company be and each of them is hereby authorized, for and on behalf of the Company,<br>to do all such things and to sign, execute, deliver, file or cause to be delivered or filed all such documents, as may be necessary or useful in order to give full effect to the intent and purpose of this resolution.
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Appendix D

Shareholder Proposals

Proposal Number One – Purpose and Engagement

Proposal

It is proposed that the Board of Directors and management clarify the purpose of CGI as an organization, and that one of the Board’s committees be given the mandate to monitor the implementation of the policies, undertakings and initiatives aimed at achieving this new strategic direction, including with respect to health, environmental, human resources and stakeholder relationships matters.

In August 2019, the Business Roundtable, an association comprised of leaders of large U.S. businesses, published a statement saying that the purpose of a company could not be limited to the sole pursuit of profit, and needed to take into account all of the stakeholders that can be impacted by its business: clients, employees, suppliers, communities and shareholders. Absent a social role, businesses have no reason to exist.

The purpose of a company is defined as the role it intends to play in society, beyond its sole economic activity. According to [the head of a very large European company]^1^, “The purpose is what unites past and present; it is a company’s DNA. It has no economic significance, and is rather a matter of vision and meaning^2^” Fundamentally, it is “what the company wishes to contribute to the major social, societal, environmental and economic issues related to its area of activity, by involving its key stakeholders.”

Although many businesses have taken several good initiatives to achieve this goal throughout the years, the review of different institutional reports has not allowed us to find a purpose that would meet the above-mentioned definition. In addition, there is no Board committee whose mandate is to coordinate all of the measures that support the achievement of the chosen purpose. More specifically, such committee’s mandate should be:

• to prepare and inform the Board’s work with respect to the implementation of the policies, undertakings and<br>initiatives established by CGI in connection with its strategic direction, including with respect to health, environmental, human resources and stakeholder relationships matters;
• to engage with the different stakeholders with respect to its progress towards such goals and to report to the Board<br>regarding the meetings it holds;
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• to review the extra-financial accountability and control systems as well as the key outcomes of the extra-financial<br>information published by CGI; and
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• to inform the shareholders on the different issues raised as a result of its work.
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For such a notion of purpose to turn into reality and not remain a marketing tagline only, it must translate tangibly into an institution’s governance practices.

In conclusion, it should be reminded that in the mind of a growing number of investors, organizations that have no social purpose lose their reason to exist.

Board of Directors Response

One of CGI’s founding principles – and the principle that continues to guide our company today – is to seek the best equilibrium among our three stakeholders: clients, employees (whom we call members) and shareholders. Our business decisions across the global locations in which we live and work are made to ensure we benefit all three, and do so in alignment with building more prosperous and sustainable communities.

This is why, over the years, for each qualitative objective of our defining elements – our Dream, Vision, Mission and Values – we introduced quantitative measures, to make results visible and to nurture our culture across all levels of the organization.

^1^ The original version of the text of the proposal has been modified by the passage in square brackets at the request of<br>CGI. The original version of the text is in a document that can be found at https://medac.qc.ca/cgi.
^2^ Jean-Dominique Senard : “Le sens et le pourquoi nourrissent la motivation”, Les Échos, June 8, 2018<br>https://business.lesechos.fr/directions-generales/innovation/innovation-sociale/0301754783119-jean-dominique-senard-president-de-michelin-le-sens-et-le-<br> pourquoi-nourrissent-la-motivation-321483.php.
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Likewise, our strategic plan is formed around a set of goals that include priorities and measures for how we satisfy our clients, members, shareholders and communities – and includes a structured process to regularly gather their feedback so we continuously evolve to meet their needs.

This structured process includes the ongoing development and evolution of programs that address health and well-being, environmental commitments, human resources practices, and education through our STEM programs, including our belief that diversity, equity and inclusion is key to living our Company Dream: to create an environment in which we enjoy working together and, as owners, contribute to building a company we can be proud of.

As a people-led consulting services firm, we thrive thanks to our culture of ownership and accountability. The Company has shared the fundamentals of the CGI culture which is available at www.cgi.com/culture, the basis of which is always seeking the best equilibrium between our three stakeholders, our clients, members and shareholders, while being a caring and responsible corporate citizen in the communities in which we live and work.

The Board of Directors does not believe that adding more reports, creating new committees or making new statements adds to CGI’s existing efforts with respect to health, environment and human resources. The matters that guide the direction of our purpose are at the core of the concerns and duties of the Board of Directors as a whole, based on the recommendations of the Corporate Governance Committee, and already make up a substantial part of its work. In fact, we believe that changing the clear and well-established communications and policies that are widely adhered to through the common set of organizational principles and measures described above could lead to confusion and hinder the smooth-running set of processes already in place.

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Proposal Number Two –VirtualMeetings and Shareholders’ Rights

Proposal

It is proposed that the Board of Directors adopt a policy specifying how virtual annual meetings should be held.

Last year, banks and many other organizations have, as a result of the pandemic, used new teleconferencing technologies to hold their annual general meetings. While being aware that organizations were often using these new technologies for the first time, MÉDAC, as well as other persons or organizations that submit shareholder proposals or that wish to submit comments or suggestions at these virtual meetings, have unfortunately encountered problems which limited the scope of their participation. More specifically, our impression with regard to the 2020 virtual annual meetings was the following: “we unfortunately did not have a right to speak at these meetings. As a matter of fact, shareholders were unable to take the microphone and speak and these virtual meetings. The only persons who spoke at these meetings were representatives [of the corporations], namely the chairs (of the boards, therefore of the meetings), the CEOs, etc.^1^^^For smaller shareholders, this limited presence at the annual meetings can have an impact on the success of their proposals on the long term, since they do not have the opportunity to argue in favour of such proposals in person in order to obtain the additional support they may need if they submit such proposals afterwards.

These threats are a concern for shareholder participation because when the dialogue with the issuer fails (or for any other reason), such participation takes the form of shareholder proposal submissions in the management circulars or at annual meetings.

Shareholder participation experience over the past twenty years has demonstrated that shareholder proposals provide value with regard to governance matters such as the separation of the duties of the president and CEO and the chair of the board of directors, the advisory vote on executive compensation, the disclosure of auditor and compensation consultants’ compensation, the representation of women on boards and in executive positions, the access to proxies for the nomination of directors, etc.

We recommend that the Board of Directors adopt a policy setting out the terms of shareholder participation at virtual annual meetings:

• shareholder proposals presented verbally by the persons or organizations submitting them, the duration of such<br>presentations being at least equal to the time needed to read the proposals;
• the shareholders and executive officers appearing on screen while speaking;
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• giving the opportunity to ask spontaneous questions following comments made by management;
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• real-time interactions between shareholders and the chair of the meeting; and
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• in the event that questions raised by the shareholders cannot be addressed at the annual meeting, publishing the answers<br>of management online on the corporation’s website and on SEDAR within ten days of the meeting.
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Board of DirectorsResponse

This year, our Meeting will be conducted in a virtual-only format by audio webcast. Shareholders will not be able to attend the Meeting in person, but they will have the opportunity to participate in real time and vote at the Meeting online, through a web-based platform, regardless of their geographic location. The Company has always supported open dialogue with shareholders at its annual meeting and believes that the virtual-only format does not limit the ability of shareholders to meaningfully participate in the Meeting. It is important, however, that registered and non-registered beneficial shareholders closely follow the instructions in the Management Proxy Circular and in their form of proxy or voting instruction form, as applicable, to attend and participate at the Meeting. Anecdotally, the Company understands that the great majority of the problems which have limited the scope of participation of shareholders at other virtual annual meetings resulted from shareholders failing to follow these instructions. See the headings Attending the Online Meeting, Submitting Questions and How to Vote earlier in this document for instructions on attending and participating at the Meeting.

The nature of virtual-only meetings means that there is no microphone for shareholders to take and speak into. In fact, it is difficult to conceive of an orderly meeting, whether physical or virtual, in which shareholders could participate spontaneously without regard to meeting rules. In advance of its first virtual-only Meeting, the Company has, like other issuers, adopted rules of conduct to better align with shareholder expectations around participation at the Meeting. The

^1^ https://medac.qc.ca/1798/
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rules of conduct of the Meeting, which are available at www.cgi.com/en/investors, address, amongst other matters, the process around questions at the Meeting as well as the manner in which the Company will respond to pertinent questions which cannot be answered during the Meeting.

The microphone of the physical meeting, has been replaced by a live Q&A session which will allow shareholders participating via the audio webcast to ask questions in writing in real time. If they prefer, shareholders may also submit written questions before the Meeting. As is the case with a physical annual meeting, those shareholders who have submitted a shareholder proposal are always provided with the opportunity to speak to the Meeting in respect of the proposal for a reasonable period of time.

The Company is excited to be holding its first virtual-only annual meeting and encourages all shareholders to vote, attend and participate in the Meeting.

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Proposal Number Three –Disclosure of Voting Results by Class of Shares

Proposal

It is proposed that the company break down the voting results by class of shares, namely by shares carrying only one voting right and shares carrying multiple voting rights.

For the last five years, the support for this proposal continued to increase – up from 16% to 25% in 2020. We estimate that one out of every two holders of Class A Shares, namely those only holding one vote per share, supported our proposal.

As indicated in the following text, it is a question of transparency that incites us to submit this proposal once again, but also a desire to establish a constructive dialog between the holders of both classes of shares. Our experience over the last few years has shown that holders of both types of shares might not share the same concerns. Take, for example, the implementation of an advisory vote on executive compensation, the renewal of the mandate of one or several directors, the greater gender balance on the boards of directors and the disclosure of voting results by class of shares.

As mentioned in our recent proposals, multiple voting shares offer interesting advantages both to controlling and minority investors, provided the legal framework and governance principles adequately protect minority shareholders. To ensure this adequate protection, minority shareholders need quick and direct access to the results of their votes in order to be sure their voices have been heard and will lead to action that better meets their expectations. This information would allow minority shareholders to better monitor the actions taken by the Company to meet their expectations and could promote a more sustained dialogue between these two shareholder classes. It could even develop the loyalty of minority shareholders and bring about a unity of thought and a mutual trust – two things that can help any organization through difficult times.

Board of Directors Response

The Company and the Board of Directors reaffirm the position previously communicated with respect to this proposal.

CGI’s disclosure practice regarding voting results complies with the rules set out by the Business Corporations Act (Quebec) (“QBCA”), which govern the Company and provide that the declaration of the chair of the meeting to the effect that a resolution was passed is sufficient and appropriate. The Company considers that all votes should be treated equally and that there are no legal or practical reasons for distinguishing between classes of shares.

The Board of Directors believes that disclosing the voting results separately for each class of shares would not provide any additional protection or benefits to the holders of Class A subordinate voting shares. Our position is in line with applicable legislation, which does not require the disclosure of votes per class of shares but otherwise contains sections dealing with the protection of shareholders. Our Lead Director and other members of the Board of Directors, which is composed of a majority of independent directors, also have the fiduciary obligation to ensure that the interests of all shareholders, irrespective of the class of shares held, are adequately protected.

Furthermore, we believe that the interests of the vast majority of CGI’s shareholders are well aligned, and that the culture of transparency and dialogue established between CGI and its shareholders ensures that all shareholders who wish to be heard have the opportunity to engage in dialogue with the Company. CGI shareholders have access to a broad range of information through the continuous disclosure documents of the Company. As such, they invest in CGI knowing the manner in which CGI’s share capital is structured and characteristics attributed to the multiple voting shares.

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Proposal Number Four – AdvisoryVote on the Compensation of Senior Executives

Proposal

It is proposed that the Board of Directors give its shareholders the opportunity to express their opinions about the executive compensation policy.

In recent years, we submitted this proposal twice. The support for this proposal was 22.94%, which is considerably higher than the 15.8% support obtained in 2017.

Last year, we had agreed not to submit this proposal to a vote of shareholders since CGI had informed us that it had put in place a “Shareholder Satisfaction Assessment Program” and other measures to engage with its shareholders in order to obtain feedback on the Company’s corporate governance practices, including on executive compensation. The information given on the method used to conduct the survey and on the results of said survey does not meet our expectations. On the one hand, the shareholders who wish to take part in the satisfaction survey must request the form of satisfaction, which limits the number of shareholders who are likely to take the survey. On the other hand, the results disclosed are overall results, and they do not provide feedback from shareholders by topic surveyed and by type of shares held.

It should be reminded that in recent years, we submitted this proposal twice. The support for this proposal was 22.94% in 2018, and 15.8% in 2017.

As a result of the pandemic, certain companies adopted policies aimed at reducing the compensation of their executive officers so that they, like the shareholders and employees, absorb the impact of the health and economic crisis. Do these decisions meet the expectations of shareholders? Compensation policies are key indicators of an organization’s values and, in that regard, shareholders have the knowledge needed to express an opinion.

It is counterproductive that their only solution for expressing dissent is to sell their shares, a decision that can prove costly under some circumstances. In a context of multiple voting shares, such initiative would allow to obtain the minority shareholders’ perspective on executive compensation while establishing a dialog with them.

Board of Directors Response

The Company and the Board of Directors reaffirm the position previously communicated with respect to this proposal.

Devising a compensation policy and related practices as a solid foundation for a successful business is a challenging task that requires a deep understanding of the business and its competitive environment to ensure that our overall compensation approach serves the best interests of the Company.

CGI’s directors have developed an executive compensation policy that emphasizes incentive compensation linked to business performance, thereby ensuring that the financial interests of the Company’s executives are closely aligned with those of shareholders. CGI measures business performance on the basis of profitability and growth as well as client and member satisfaction. These factors drive the Company’s compensation programs, which are designed to attract and retain the key talent CGI needs to remain competitive in a challenging market and achieve continued and profitable growth for shareholders.

Advisory votes, by their binary yes or no nature, do not provide useful insight to the Board of Directors and therefore cannot promote meaningful dialogue with shareholders. We do not believe that the only solution for expressing dissent is for shareholders to sell their shares given the numerous opportunities for meaningful dialogue promoted by the Company. The current Canadian regulatory framework prevents public companies from knowing who their shareholders really are and it is therefore unclear how an advisory vote can lead to a meaningful dialogue with shareholders who, for the most part, remain anonymous.

The advisory vote process also raises the question of whether all shareholders should benefit from the same voting rights. Studies have shown that, on average, shares of North American public companies are held for short periods of time, often less than six months. A review of applicable legislation to distinguish between short-term speculators and investors who have an interest in the long-term interests of companies would therefore be needed before an advisory vote of this nature could be considered.

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Furthermore, several institutional investors exercise their voting power based on the recommendations of proxy advisory firms, thereby essentially delegating their voting rights to them. Our experience has been that these firms’ one-size-fits-all approach and the quality of their research can be deficient. Advisory firms are also often in blatant conflicts of interest as they provide corporate governance advisory services while also providing voting recommendations based on the practices that they advocate.

We do not believe that the only solution for expressing dissent is for shareholders to sell their shares given the numerous opportunities for meaningful dialogue promoted by the Company. During fiscal 2020, despite the COVID-19 pandemic, CGI nonetheless solicited input through the Shareholder Satisfaction Assessment Program (“SSAP”) and otherwise from a significant number of shareholders and other investors for feedback on key corporate governance practices, including executive compensation. See the headings CGI’s Shareholders and Shareholder Satisfaction Assessment Program earlier in this document for additional information on the Company’s ShareholderSatisfaction Assessment Program and the other measures put in place by the Company to engage with its shareholders.

It is not clear that MÉDAC has a clear understanding of the manner in which the SSAP operates. Shareholders do not need to request the survey in order to participate – they may request to participate but the Company actively solicits input from its shareholder base. There is also no uncertainty as to the type of shares from whom feedback is solicited -It is a used to solicit feedback from holders of Class A shares only. At last year’s Annual General Meeting of Shareholders, MÉDAC addressed the meeting and spoke very positively about CGI’s Shareholder Partnership Management Framework (“SPMF”) and the addition of our SSAP questionnaire. The Company finds it difficult to reconcile those statements with this shareholder proposal given that the SPMF and SSAP continue to operate today in a similar manner.

We continue to believe that our directors, whose fiduciary duties include ensuring that the Company’s executive compensation policies and practices are appropriate in light of the Company’s business in the challenging markets in which it operates, are uniquely qualified and positioned to effectively play this important governance function in an effective manner.

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About CGI<br> <br><br><br><br>Founded in 1976, CGI is among the largest IT and business consulting services firms in the world. Operating in hundreds of locations across the globe, CGI delivers an end-to-end portfolio of capabilities, from strategic IT and business consulting, to systems integration and managed IT and business process services, to intellectual property<br>solutions.<br> <br><br> <br>CGI works with clients through a local relationship model complemented by a global<br>delivery network to help clients achieve their goals, including becoming customer-centric digital enterprises<br> <br><br><br><br>cgi.com

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