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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN

PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant   x                             Filed by a Party other than the Registrant   ¨

Check the appropriate box:

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April 18, 2012

To the Shareholders of QLT Inc.

I am pleased to invite you to attend the Annual Meeting of shareholders of QLT Inc. to be held on Thursday, May 24, 2012 at 10:00 a.m. (Pacific Time) at QLT’s offices at 887 Great Northern Way, Vancouver, British Columbia. A reception will follow the Annual Meeting to allow you to meet the Directors and Management of QLT.

The attached Notice of Annual Meeting and Proxy Statement provide details of the business to be conducted at the Annual Meeting. The Notice of Annual Meeting and Proxy Statement, the Instrument of Proxy, and the Annual Report on Form 10-K are first being mailed to shareholders on or about April 24, 2012. A copy of QLT’s Annual Report on Form 10-K is enclosed.

Your vote on the enclosed Instrument of Proxy is very important to us. Whether or not you plan to attend our Annual Meeting, please communicate your vote in accordance with the instructions in the Proxy Statement and the enclosed Instrument of Proxy.

Thank you for your continued support of QLT and I look forward to seeing you at the Annual Meeting on May 24, 2012.

Sincerely,

QLT Inc.

ROBERT L. BUTCHOFSKY President and Chief Executive Officer

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QLT Inc.

887 Great Northern Way, Suite 101

Vancouver, British Columbia V5T 4T5

Notice of Annual Meeting of Shareholders

to be held May 24, 2012

NOTICE IS HEREBY GIVEN that the Annual Meeting (the “Annual Meeting”) of shareholders of QLT Inc. (“QLT”) will be held at QLT’s head office at 887 Great Northern Way, Vancouver, British Columbia, on Thursday, May 24, 2012 at 10:00 a.m. (Pacific Time) for the following purposes, each of which is described in more detail in the accompanying Proxy Statement (the “Proxy Statement”):

You are entitled to receive notice of and attend the Annual Meeting, and may vote at the Annual Meeting, if you were a shareholder of QLT at the close of business on April 5, 2012, which we refer to as the “record date.” If you are unable to attend the Annual Meeting in person, you may vote by proxy on the matters to be considered at the Annual Meeting. Please read the notes accompanying the Instrument of Proxy enclosed with these materials and then follow the instructions for voting by proxy contained in this Proxy Statement. If on April 5, 2012, your shares in QLT were held of record in your brokerage firm, securities dealer, trust company, bank or another similar organization, you may vote at the Annual Meeting if you obtain a proxy card from that organization issued in your name and carefully follow any instructions that are provided to you in connection with that proxy card.

In order for it to be voted at the Annual Meeting, a proxy must be received (whether delivered by mail, telephone or Internet) by no later than 10:00 a.m. (Pacific Time)/1:00 p.m. (Eastern Time) on Tuesday, May 22, 2012 by our registrar and transfer agent, Computershare Investor Services Inc., Attn: Proxy Department, 100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1, telephone number: 1-866-732-VOTE (8683), website: www.investorvote.com. The Chairman of the Annual Meeting may determine, in his sole discretion, to accept or reject an Instrument of Proxy that is delivered in person to the Chairman at the Annual Meeting as to any matter in respect of which a vote has not already been cast.

The enclosed Instrument of Proxy is solicited by our Board of Directors and management, but you may amend it if you wish by striking out the names listed in the Instrument of Proxy and inserting in the space provided the name of the person you wish to represent you at the Annual Meeting.

DATED at Vancouver, British Columbia, this 18th day of April, 2012.

BY ORDER OF THE BOARD OF DIRECTORS

Robert L. Butchofsky

President and Chief Executive Officer

Whether or not you plan to attend the Annual Meeting, please communicate your vote in accordance with the instructions in the Proxy Statement and the enclosed Instrument of Proxy as soon as possible. If you are able to attend the Annual Meeting and wish to vote your shares in person, you may do so at any time before the proxy is exercised.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 24, 2012:

This Proxy Statement and our Annual Report for the fiscal year ended December 31, 2011 are available at www.qltinc.com by clicking on “2012 Proxy Materials and Annual Report” or directly at: http://phx.corporate-ir.net/phoenix.zhtml?c=67181&p=irol-proxy.

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ATTACHMENT

APPENDIX A        AMENDED AND RESTATED QLT 2000 INCENTIVE STOCK PLAN

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QLT INC.

887 Great Northern Way, Suite 101

Vancouver, British Columbia V5T 4T5

PROXY STATEMENT FOR

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 24, 2012

We have sent this Notice of Annual Meeting and Proxy Statement, together with the enclosed Instrument of Proxy, because our Board of Directors and management are soliciting your proxy to vote at our Annual Meeting of shareholders to be held on Thursday, May 24, 2012. This Proxy Statement contains information about the matters being voted on at the Annual Meeting and important information about QLT. Unless otherwise stated, information in this Proxy Statement is given as of April 13, 2012. As many of our shareholders are expected to be unable to attend the Annual Meeting in person, proxies are solicited by mail to give each shareholder an opportunity to vote on all matters that will properly come before the Annual Meeting. QLT intends to mail this Proxy Statement and accompanying Instrument of Proxy on or about April 24, 2012 to all shareholders of record as at the close of business on April 5, 2012, which we refer to as the “record date.”

We use a number of abbreviations in this Proxy Statement. We refer to the company as “the Company,” “we,” “us” or “our” and to our board of directors as the “Board” or the “Board of Directors.” The term “proxy solicitation materials” includes this Proxy Statement and the enclosed Instrument of Proxy. References to “fiscal 2011” and “fiscal 2012” mean our 2011 fiscal year which began on January 1, 2011 and ended on December 31, 2011 and our 2012 fiscal year which began on January 1, 2012 and will end on December 31, 2012, respectively. Our Annual Meeting of Shareholders to be held on Thursday, May 24, 2012 is referred to as the “Annual Meeting” or the “Meeting.” References in this Proxy Statement to the Annual Meeting include any adjournment or postponement of the Meeting.

QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND OUR ANNUAL MEETING

Why did I receive this Proxy Statement?

You are receiving these proxy materials from us because you owned common shares of QLT at the close of business on the record date. When you vote using the Instrument of Proxy, you appoint Messrs. Robert L. Butchofsky and C. Boyd Clarke as your representatives at the Annual Meeting. Messrs. Butchofsky and Clarke will vote your shares at the Annual Meeting as you have instructed them on the Instrument of Proxy. This way, your shares will be voted whether or not you attend the Annual Meeting. Even if you plan to attend the Meeting, it is a good idea to vote by proxy in advance of the Annual Meeting just in case your plans change.

Can I access the proxy materials on the Internet?

Yes. This Proxy Statement and our Annual Report for the fiscal year ended December 31, 2011 are available on our website at www.qltinc.com by clicking “2012 Proxy Materials and Annual Report” or directly at: http://phx.corporate-ir.net/phoenix.zhtml?c=67181&p=irol-proxy.

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What is the date, time and place of the Annual Meeting?

The Annual Meeting will be held at our head office at 887 Great Northern Way, Vancouver, British Columbia, on Thursday, May 24, 2012 at 10:00 a.m. (Pacific Time). Directions to our head office location are available at www.qltinc.com.

Who is entitled to vote at the Annual Meeting?

Only shareholders of record at the close of business on the record date may vote at the Annual Meeting. On a show of hands every shareholder present in person has one vote, and on a poll every shareholder present in person or by proxy has one vote for each QLT common share registered in the shareholder’s name. There are no other classes of voting securities other than the common shares. Cumulative voting is not permitted.

What am I voting on at the Annual Meeting?

At the Annual Meeting, shareholders will be asked to vote on the following items of business:

QLT does not know of any business or proposals to be considered at the Annual Meeting other than those set out in this Proxy Statement. If any other business is proposed and properly presented at the Annual Meeting, the proxies received from our shareholders give the proxy holders the authority to vote on the matter at their discretion. The proxy holders intend to vote the shares they represent as directed by our Board.

How does the Board recommend that I vote?

Our Board believes the election of our seven nominees to the Board and the appointment of Deloitte & Touche LLP as our independent auditors are in the best interests of QLT and our shareholders and, accordingly, recommends that each shareholder vote his or her shares “FOR” each of the director nominees and “FOR” the approval of Deloitte & Touche LLP as our independent auditors for fiscal 2012. Our Board also recommends that each shareholder vote his or her shares “FOR” the approval of the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission (the “SEC”), and “FOR” the approval of the Restated Plan.

What vote is required to approve each proposal?

Broker Non-Votes and Abstentions. Common shares that are represented by “broker non-votes” (i.e. common shares held by a bank, broker or other holder of record holding shares for a beneficial owner that are represented at the Annual Meeting but with respect to which the bank, broker or other holder of record is not empowered to vote on a particular proposal) and common shares held by holders who

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abstain from voting (or voted “withhold”) on any matter will have no effect on the outcome of the matter, but are included for quorum purposes. We encourage all shareholders that hold shares through a bank, broker or other holder of record to provide voting instructions to such parties to ensure that their shares are voted at the Annual Meeting.

Election of Directors. For Proposal 1, the election of seven directors, the nominees will be elected by a plurality of the votes cast at the Annual Meeting. This means that the seven nominees with the most votes for election will be elected. You may choose to vote, or withhold your vote, separately for each nominee.

Appointment of Auditors. For Proposal 2, the appointment of Deloitte & Touche LLP as auditors and authorization of the Board to fix the remuneration to be paid to the auditors, the affirmative vote of a simple majority of the common shares voted at the Annual Meeting will be required for approval.

Advisory Vote on the Compensation of Named Executive Officers. For Proposal 3, the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, the affirmative vote of a simple majority of the common shares voted at the Annual Meeting will be required for approval, on an advisory basis. Because your vote is advisory, it will not be binding on the Board of Directors, the Compensation Committee or the Company. However, the Board of Directors will review the voting results and take them into consideration when making future decisions about executive compensation.

Approval of the Amended and Restated QLT 2000 Incentive Stock Plan. For Proposal 4, the approval of the Restated Plan, the affirmative vote of a simple majority of the common shares voted at the Annual Meeting will be required for approval. In order to comply with the requirements of the Toronto Stock Exchange (“TSX”), the Restated Plan must be approved by a resolution of the disinterested shareholders (being the approval of all of the shareholders of the Company other than insiders of QLT who may receive securities under the Plan). Accordingly, the votes attached to the 422,287 common shares held by persons who do not qualify as disinterested shareholders (representing approximately 0.9% of the issued and outstanding common shares as at April 5, 2012) will not be counted for the purpose of determining whether the required level of shareholder approval has been obtained for the resolution amending the Restated Plan.

Who may attend the Annual Meeting?

All QLT shareholders are invited to attend the Annual Meeting, including shareholders whose shares are held by their brokerage firm or another similar organization.

What is the quorum for the Annual Meeting?

At least (i) two shareholders, (ii) two proxy holders representing two shareholders, or (iii) one shareholder and a proxy holder representing another shareholder entitled to vote at the Annual Meeting, present in person at the beginning of the Meeting and collectively holding or representing by proxy in the aggregate not less than 33 1/3% of the issued and outstanding QLT common shares as of the record date, will constitute a quorum for the Annual Meeting. There were 49,070,638 common shares of QLT issued and outstanding on the record date. To the knowledge of the directors and executive officers of QLT, the only persons or companies that beneficially own, control or direct, directly or indirectly, 10% or more of QLT’s common shares are Axial Capital Management, LLC which, as evidenced by public filings, own 8,865,036 common shares, representing approximately 18.1% of the issued and outstanding common shares and NB Public Equity K/S which, as evidenced by public filings, own 7,397,626 common shares, representing approximately 15.1% of the issued and outstanding common shares.

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How do I vote?

Carefully read and consider the information contained or incorporated by reference in this Proxy Statement. You should also determine whether you hold your shares directly in your name as a registered shareholder or through a broker or other nominee, because this will determine the procedure that you must follow in order to vote. If you are a registered shareholder of QLT (that is, if your shares are registered in your name, as opposed to being held through a broker or other intermediary), you may vote in any of the following ways:

All votes made by proxy must be received (whether delivered by mail, telephone or Internet) no later than Tuesday, May 22, 2012 at 10:00 a.m. (Pacific Time) / 1:00 p.m. (Eastern Time).

If your shares are not registered in your name but instead are held through your broker or another intermediary, then you will have received this material from your broker or the intermediary seeking your instructions as to how you wish your shares to be voted. In that case, follow the instructions given to you by your broker or the other intermediary. The Chairman may determine, in his sole discretion, to accept or reject an Instrument of Proxy that is delivered in person to the Chairman at the Annual Meeting as to any matter in respect of which a vote has not already been cast. You have the right to appoint another person to attend and act on your behalf at the Annual Meeting other than the persons named in the enclosed Instrument of Proxy. To exercise this right, you should strike out the names of the persons named in the Instrument of Proxy and insert the name of your nominee in the blank space provided. A person appointed as a proxy holder need not be a shareholder of QLT.

How will proxies be exercised?

The proxy holder will vote or withhold from voting according to instructions in the Instrument of Proxy on any ballot that may be called for and for which a choice has been specified. Unless otherwise indicated by you on the Instrument of Proxy, your shares will be voted “FOR” the election of the seven nominees for election to the Board as set out in this Proxy Statement, “FOR” the approval of the appointment of Deloitte & Touche LLP as our independent auditors until the close of the next annual meeting of shareholders, “FOR” the approval of the compensation of our named executive officers, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, and “FOR” the proposal to approve the Restated Plan. If you properly return your Instrument of Proxy, but do not include instructions on how to vote, your shares will be voted as recommended by the Board.

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The Instrument of Proxy also confers upon the proxy holder discretionary authority to vote all shares represented by the proxy with respect to amendments or variations to matters identified in the Notice of Meeting and any other matter that properly comes before the Annual Meeting. We know of no such amendment, variation or other matter that is to be presented for action at the Annual Meeting. However, if any other matters which are not now known to us should properly come before the Annual Meeting, the proxies will be voted, or not voted, by the proxy holder in his or her discretion.

What does it mean if I receive more than one set of proxy materials?

You may receive more than one set of proxy materials because you own QLT common shares that are registered under different names. For example, you may own some shares directly as a shareholder of record and other shares through a broker, or you may own shares through more than one broker. In these situations, you will receive multiple sets of proxy materials. It is necessary for you to vote all of the Instruments of Proxy according to the instructions contained in this Proxy Statement and to follow the instructions for any alternative voting procedures you receive in order to vote all of the shares you own. Each Instrument of Proxy you receive will come with its own prepaid return envelope. If you vote by mail, please make sure you return each Instrument of Proxy in the return envelope that accompanies that Instrument of Proxy.

Can I change my vote after I have voted?

You may revoke your proxy at any time before it is exercised at the Annual Meeting. A proxy may be revoked by voting in person at the Annual Meeting, by an instrument in writing stating that the proxy is revoked and signed and delivered as follows, or in any other manner provided by law:

If your shares are held in the name of an intermediary such as a brokerage firm, securities dealer, trust company, bank or other nominee institution, you may change your vote by submitting new voting instructions to your intermediary, as applicable. You will need to contact your brokerage firm, securities dealer, trust company, bank or other nominee institution to learn how to make that change.

Who will tabulate the votes?

Our transfer agent, Computershare Investor Services Inc., will tabulate votes cast by proxy by an automated system. Votes cast by proxy or in person at the Meeting will be counted by the persons appointed by us to act as scrutineer for the Annual Meeting.

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Who pays the cost of the proxy solicitation?

We will pay the cost of soliciting these proxies, including the printing, handling and mailing of the proxy materials. Copies of these materials will be given to brokerage firms, securities dealers, trust companies, banks and other institutions that hold our shares that are beneficially owned by others. We will reimburse these brokerage firms, securities dealers, trust companies, banks and other institutions for their reasonable out-of-pocket expenses in forwarding proxy materials to beneficial owners of our shares. Proxies may be solicited by certain directors, officers and employees of QLT personally or by telephone, mail, facsimile or e-mail. No additional compensation will be paid to directors, officers or other QLT employees for soliciting proxies. In addition, we may engage external proxy solicitation services to solicit proxies from brokers, banks and other institutional holders and from beneficial owners and individual holders of record of common shares. In the event we engage such proxy solicitation services, we anticipate that the services would be provided at a standard fee and on other typical commercial terms.

How can shareholders submit proposals for QLT’s 2013 Annual Meeting?

If you want to propose a matter for consideration at the 2013 Annual Meeting, then notice of that proposal must be received at our registered office at 26th Floor, Toronto Dominion Bank Tower, 700 West Georgia Street, Vancouver, British Columbia, V7Y 1B3 before February 25, 2013. For a proposal to be valid, it must, according to the Business Corporations Act (British Columbia) (the “BCA”), be in writing, accompanied by the requisite declarations and signed by the submitter and qualified shareholders who at the time of signing are the registered or beneficial owners of shares that, in the aggregate, (i) constitute at least 1% of the issued shares of QLT that have the right to vote at general meetings, or (ii) have a fair market value in excess of $2,000. For the submitter or a qualified shareholder to be eligible to sign the proposal, that shareholder must have been the registered or beneficial owner of QLT shares that carry the right to vote at general meetings for an uninterrupted period of at least two years before the date the proposal is signed.

CORPORATE GOVERNANCE

Overview of Our Corporate Governance Principles

We believe that effective and transparent corporate governance is critical to our long-term success and our ability to create value for our shareholders. We frequently review our corporate governance policies, monitor emerging developments in corporate governance and update our policies and procedures when our Board determines that it would benefit the Company and our shareholders to do so.

We maintain a corporate governance page on our website that includes key information about our corporate governance, including our Code of Ethics and Code of Exemplary Conduct and the charters for the Audit and Risk, Corporate Governance and Nominating, Compensation and Scientific Review Committees of our Board, all of which can be found at www.qltinc.com by clicking on “Corporate Governance” under “Investors.” The charter of the Audit and Risk Committee is also available on EDGAR at www.sec.gov and on SEDAR at www.sedar.com. The documents noted above will also be provided without charge to any shareholder who requests them. Any changes to these documents, and any waivers granted by us with respect to our Code of Ethics, will be posted on our website.

We also monitor our corporate governance policies and practices to maintain compliance with the provisions of the Sarbanes-Oxley Act of 2002, rules of the SEC, National Instrument 58-101 - Disclosure of Corporate Governance Guidelines, National Policy 58-201 - Corporate Governance Guidelines, Multilateral Instrument 52-110 - Audit Committees, the Marketplace Rules of The NASDAQ Stock Market (“NASDAQ”), and the policies of the TSX (collectively, the “Governance Guidelines”). Our policies and practices meet or exceed the Governance Guidelines.

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Disclosure Practices

QLT has in place disclosure controls and procedures to ensure QLT meets its information disclosure obligations on a timely basis. These disclosure controls and procedures are evaluated on an ongoing basis, not less than quarterly, to ensure the controls and procedures allow QLT to accomplish this objective. To implement and review our disclosure controls and procedures, our President and Chief Executive Officer and our Chief Financial Officer have established a Disclosure Practices Committee. The role of this Disclosure Practices Committee is to identify and consider the information gathered for disclosure purposes and also to make recommendations to the President and Chief Executive Officer and the Chief Financial Officer with respect to the disclosures to be made by QLT.

The disclosure controls and procedures include procedures for ensuring prompt and effective communication of any material or reportable event to the appropriate executives, the President and Chief Executive Officer and the Chief Financial Officer, and also for designating those individuals within QLT responsible for preparing, reviewing and approving the content of any disclosure.

Corporate Code of Ethics and Code of Exemplary Conduct

QLT has adopted a Code of Ethics which is applicable to all directors, officers and employees of QLT, as well as a Code of Exemplary Conduct which applies to the Chief Executive Officer, all other executive officers and all senior financial managers, internal legal counsel and human resources managers of QLT. As further described in the charter of the Audit and Risk Committee (available on our website at www.qltinc.com), the Audit and Risk Committee is responsible for monitoring compliance with the Code of Ethics and Code of Exemplary Conduct, and, together with the Board of Directors, reviewing and, if determined appropriate, updating them annually.

Our Audit and Risk Committee and our management review and discuss with the Board from time to time the effectiveness of our Code of Ethics and our Code of Exemplary Conduct and any areas or systems that may be further improved. QLT has not been required to, and has not, filed a material change report that pertains to any conduct of any of our directors or executive officers that constitutes a departure from these codes.

QLT complies with the provisions of the BCA that deal with conflict of interest situations. QLT, through directors’ and officers’ questionnaires and other systems, also gathers and monitors relevant information in relation to potential conflicts of interest that a director or officer may have.

The Code of Ethics and Code of Exemplary Conduct are available on QLT’s website at www.qltinc.com. QLT will also post on its website any amendments to those codes or waivers of compliance by directors or executive officers. In fiscal 2011, there were no such amendments made or waivers granted.

Mandate of the Board and the Chairman of the Board

Our Board is responsible for the supervision of the management of the business and affairs of QLT, the stewardship of QLT and the enhancement of shareholder value. The Board has adopted a written Mandate, which is applicable to all directors, and which has formalized its position on corporate governance. The Board has also developed a written position description for the Chairman of the Board, which is detailed in the Mandate of the Chairman of the Board and described below. The Mandate of the Board of Directors and the Mandate of the Chairman of the Board are incorporated herein by reference and are available on our website at www.qltinc.com and on SEDAR at www.sedar.com, or copies will be

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provided without charge to any shareholder who requests them. The Corporate Governance and Nominating Committee of the Board has the mandate to actively review and ensure that good corporate governance practices and the Mandate of the Board of Directors are followed. The Corporate Governance and Nominating Committee is also responsible for reviewing and, if determined appropriate, updating the Mandate of the Board of Directors.

Under its Mandate, our Board is responsible for developing a succession plan for the Chief Executive Officer, and for discussing with the Chief Executive Officer succession plans for other senior management personnel. The Chief Executive Officer is responsible for recommending and then implementing the corporate strategy approved by the Board and for managing QLT’s business with the objective of meeting the corporate goals. On an annual basis, the Board reviews, approves and documents in writing the annual corporate goals and objectives that the Chief Executive Officer is responsible for meeting each year, and the Board, together with the Compensation Committee, assesses the Chief Executive Officer’s performance against those goals.

Our directors are kept informed of QLT’s business through open discussions with the Chief Executive Officer and other key members of management. Our Board also keeps itself informed by reviewing documents, such as detailed quarterly and periodic management reports and financial statements, by attending presentations made during Board meetings and through periodic reports given to the full Board from each of QLT’s committees. Our directors have access to all books, records and reports upon request, and members of management are available at all times to answer any questions.

Role of the Board in Risk Oversight

The Board is actively involved in overseeing risk management for QLT. In accordance with our Mandate of the Board of Directors, the Board, as a whole, oversees the development and application of policies regarding corporate governance, and is responsible for adopting the corporate strategies and plans for QLT’s business, identifying the principal risks of QLT’s business and ensuring the implementation of the appropriate systems to manage these risks, overseeing the integrity of QLT’s internal controls and management information systems and maintaining a continuing dialogue with senior management in order to ensure QLT’s ability to respond to changes, both internal and external, which may affect its business operations from time to time. This oversight is also conducted through committees of the Board. The Board receives full reports from each committee Chair regarding the committee’s consideration and actions. The oversight responsibility of the Board and its committees is enabled by management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks. These areas of focus include financial reporting, compliance, compensation and operations, as summarized below.

The Audit and Risk Committee reviews and discusses with management significant financial risks and the actions management has taken to monitor and mitigate potential exposures. The Audit and Risk Committee also assesses other areas of enterprise risk exposure as determined by the Board of Directors from time to time, and QLT’s policies with respect to risk assessment and risk management.

The Corporate Governance and Nominating Committee oversees risk management as it relates to, among other things, the development and assessment of our corporate governance framework, board and Chairman succession, including board and committee nominations, membership and standards, and potential conflicts of interest.

The Compensation Committee oversees risk management as it relates to our compensation plans, policies and practices in connection with structuring our executive compensation programs and reviewing our incentive compensation programs for other employees. This includes a review of our material

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compensation policies and practices under which, in early 2012, the Compensation Committee concluded that these policies and practices are not reasonably likely to have a material adverse effect on the Company.

The Scientific Review Committee reviews management’s direction and investment in QLT’s research, development and technology initiatives to ensure that the scientific strategy and its implementation are consistent with and support the strategic and business objectives of QLT. The Scientific Review Committee works with management to identify operational risks with respect to current and future research and development programs and products and technology in which QLT is investing its research and development efforts.

Board Leadership Structure

We operate under a corporate governance structure where the Chairman of the Board and the Chief Executive Officer are separate positions held by different individuals. Due to the demands of each position, we believe separating these roles enhances the ability of each to discharge his duties and fosters more accountability. The members of the Board annually elect a Chairman of the Board who will satisfy the independence standards established by the Board and applicable laws. Our Chairman’s extensive knowledge and experience regarding QLT, combined with a perspective that comes from a separation from day-to-day affairs, makes him well-suited to assist the Board in determining the strategic direction of QLT, to evaluate management’s strategic plans and initiatives, and to provide leadership to the Board in its various responsibilities. The services that our Chairman provides, include, among others: (i) providing leadership to the Board, (ii) providing advice and counsel to management, including, in particular, the Chief Executive Officer, (iii) communicating with the Board and apprising the Board on major developments with respect to QLT, (iv) presiding at meetings of our shareholders and directors, (v) providing input to our Corporate Governance and Nominating Committee with respect to Board and committee candidates, (vi) leading QLT’s director development program in consultation with our Corporate Governance and Nominating Committee, (vii) assessing whether the Board and its committees have appropriate administrative support, access to senior management and access to outside advisors for the purposes of the Board fulfilling its mandate and (viii) overseeing and coordinating activities of the Board. We believe that having the Board operate under the leadership and direction of a Board member who is independent from management provides the Board with the most appropriate mechanism to fulfill its oversight responsibilities.

Board Attendance at Annual Meeting

It is a policy of the Board to encourage directors to attend regular Board meetings, Board committee meetings on which they serve and each annual general meeting of the shareholders. In 2011, with the exception of Mr. Crossgrove, all members of the Board attended QLT’s annual general meeting. It is anticipated that all director nominees will attend our 2012 Annual Meeting.

Decisions Requiring Prior Approval of the Board

In addition to matters that must, by law or by the Articles of QLT, be approved by the Board, management is required to seek approval from the Board for major transactions, for any single expense that exceeds certain specified dollar values, and for certain transactions with related persons. Additional information relating to transactions with related persons is set forth below under the heading “Review, Approval or Ratification of Transactions with Related Persons.”

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Orientation and Continuing Education Programs

It is the intention of the Board that as and when a new Board nominee is appointed, the Board will ensure that a full program of orientation and education is provided for the nominee, including, but not limited to, provision of a complete corporate history, copies of past minutes of meetings of the Board and the Mandate of the Board, and information regarding our business and operations. The Corporate Governance and Nominating Committee is responsible for reviewing the current orientation and education program and recommending and initiating improvements to this program as warranted. As part of the ongoing commitment of the Board to effective governance and director continuing education, our directors are encouraged to periodically attend accredited courses on current trends in corporate governance and other relevant areas.

Outside Advice

In certain circumstances it may be appropriate for an individual director to engage an outside professional advisor at the expense of QLT. The engagement of the outside professional advisor would be subject to approval of the Chairman of the Board. Each of the Audit and Risk Committee, the Compensation Committee and the Corporate Governance and Nominating Committee also has the authority to engage external advisors as set forth in each of their respective charters. The Scientific Review Committee is also authorized to engage independent consultants with the approval of the Chairman of the Board.

Director and Officer Liability Insurance

We maintain directors’ and officers’ liability insurance coverage through a policy covering QLT and its subsidiaries. This insurance provides coverage for indemnity payments made by QLT to our directors and officers as required or permitted by law for losses, including legal costs, incurred by our directors and officers in their capacity as such. This policy also provides coverage directly to individual directors and officers if they are not indemnified by QLT. The insurance coverage for our directors and officers has customary exclusions, including those acts determined to be uninsurable under law, deliberately fraudulent or dishonest, or that have resulted in personal profit or advantage.

Minimum Share Ownership Guidelines for Directors

The Board believes it to be in the best interests of our shareholders to specify a minimum level of equity holdings in QLT by each independent director to further align the interests of our Board and shareholders. As a result, following consultation with Radford, an Aon Hewitt company (“Radford”), the independent compensation advisor to our Compensation Committee, we adopted share ownership guidelines for our independent directors. Under these guidelines, independent directors are encouraged to acquire (if not already held) common shares of QLT as follows:

Holdings of vested deferred share units (referred to as “DSUs”) are counted towards fulfilling the guidelines, while unexercised stock options, if any, are not. According to Radford, the implementation of share ownership guidelines instituted by the Board is consistent with ISS’ best practices.

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The value of the shares owned for the purposes of fulfilling the share ownership guidelines is determined as the greater of the acquisition cost or the market value at the time of the determination. Compliance with the share ownership guidelines is evaluated on an annual basis by the Corporate Governance and Nominating Committee. All of our current directors, other than Mr. Turner, have satisfied the guidelines. Mr. Turner joined the Board in 2010 and intends to satisfy the share ownership guidelines within four years of his appointment.

Our share ownership guidelines for executive officers are described below in this Proxy Statement under the heading “Compensation Discussion and Analysis.”

Director Nomination Process

To assist with director nominations, the Board has designated a standing committee, the Corporate Governance and Nominating Committee, as being responsible for reviewing and recommending nominees to the Board. In evaluating prospective nominees, the Corporate Governance and Nominating Committee looks for the following minimum qualifications: strong business acumen, previous experience as an executive or director with successful companies, the highest standards of integrity and ethics, and a willingness and ability to make the necessary time commitment to diligently perform the duties of a director. Nominees are selected with a view to the best interests of QLT as a whole.

The Board prefers a mix of experience among its members to maintain a diversity of viewpoints and ensure that the Board can achieve its objectives. In searching for a new director, the Corporate Governance and Nominating Committee identifies particular areas of specialization that it considers beneficial, in addition to the general qualifications, having regard to the skill sets of the other members of the Board.

Although we do not have a formal diversity policy, to foster and maintain a diversity of viewpoints, backgrounds and experience on the Board, the Corporate Governance and Nominating Committee evaluates the mix of skills and experience of the directors and assesses nominees and potential candidates in the context of the current composition of the Board and the requirements of QLT. In accordance with its charter, the Corporate Governance and Nominating Committee considers, among other things, the following in recommending candidates for election to the Board: (i) personal and professional integrity, ethics and values, (ii) experience in corporate management, such as serving as an officer or former officer of a publicly-held company, and a general understanding of marketing, finance, product development and other elements relevant to the success of a publicly-traded company in today’s business environment, (iii) experience in QLT’s industry and in the principal jurisdictions in which QLT conducts its business, namely Canada and the United States, (iv) experience as a board member of another publicly-held company, (v) academic or therapeutic expertise in an area of QLT’s operations and (vi) practical and mature business judgment, including the ability to make independent and analytical inquiries.

The Corporate Governance and Nominating Committee may retain the assistance of a recruiting firm to assist it to identify and recruit candidates that possess the desired qualifications. The Corporate Governance and Nominating Committee may also involve other members of the Board or other Board committees to assist it with the recruitment of new directors. Potential nominees and their respective references are interviewed extensively in person before any nomination is endorsed by that Board committee. All nominations proposed by the Corporate Governance and Nominating Committee must receive the approval of the Board.

The Board will also consider any director nominees proposed by shareholders. Shareholders may submit nominations to the Board by addressing a communication to the Chair of the Corporate Governance and Nominating Committee and providing sufficient information to the Corporate Governance and Nominating Committee to permit it to conduct an assessment of the qualifications of the proposed

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nominee, including biographical information about the candidate and his or her professional experience, confirmation of the candidate’s willingness to serve as a director, and complete contact information for the candidate and the nominating shareholder. The methods by which a shareholder may communicate with the Corporate Governance and Nominating Committee are set out on QLT’s website at www.qltinc.com. As a matter of policy, the Corporate Governance and Nominating Committee is committed to giving due and fair consideration to proposed nominations submitted by shareholders using the same criteria and processes as other nominations that come before it.

Independence of Directors

To ensure good objective governance is maintained at QLT, the Board strives to maintain strong independence from management. In determining whether directors are independent, each year the Board considers and discusses the nature and materiality of all direct or indirect relationships between each director nominee and QLT, including any family, supplier or service provider relationships. The Board considers a relationship material where that relationship could, in the view of the Board, reasonably interfere with the exercise of the director’s independent judgment.

Six of the seven director nominees are considered “independent,” including the Chairman of the Board, Mr. Boyd Clarke. Mr. Butchofsky is not considered “independent” since he is also our President and Chief Executive Officer. Messrs. Crossgrove and Wood, two of our current members of our Board of Directors who are not standing for re-election at the Annual Meeting, are also considered “independent” directors.

Executive Session of Independent Directors

The independent members of the Board meet without management and non-independent directors present during a session of each quarterly Board meeting (unless the independent directors determine such a session is not required) and during such other meetings where considered appropriate.

Independence of Committee Members

The members of each of the Audit and Risk Committee, the Compensation Committee, the Corporate Governance and Nominating Committee and the Scientific Review Committee are all “independent” directors within the meaning ascribed to it in Multilateral Instrument 52-110 - Audit Committees and the Marketplace Rules of the NASDAQ, respectively, and, in the case of the Audit and Risk Committee, the additional independence requirements set out by the SEC.

Audit Committee Financial Expert

Each member of the Audit and Risk Committee is financially sophisticated, as defined by the Marketplace Rules of NASDAQ, and is financially literate, as defined by Canadian securities regulations, and as required by such rules, able to read and understand fundamental financial statements, including QLT’s consolidated balance sheet, consolidated statement of income and consolidated statement of cash flows. The Board has determined that each of Ms. Falberg and Messrs. Crossgrove and Turner, three of our four Audit and Risk Committee members, is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act and that all of our Audit and Risk Committee members are also “independent,” as independence for audit committee members is defined by the NASDAQ, TSX and applicable Canadian securities rules. If Dr. Milne, a director nominee for election at the Annual Meeting, is elected to the Board of Directors, it is expected that he will be appointed to the Audit and Risk Committee in replacement of Messrs. Crossgrove and Wood, each of whom are retiring from the Board this year. The Board has determined that Dr. Milne is “independent,” as independence for audit committee members is defined by the NASDAQ, TSX and applicable Canadian securities rules, and is financially literate, as defined by Canadian securities regulations.

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Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee during fiscal 2011 or as of the date of this Proxy Statement is a current officer or employee of QLT or has any interlocking relationship as set forth in applicable SEC rules. In addition, none of QLT’s executive officers serves as a member of the compensation committee or board of directors of any entity that has one or more executive officers serving as a member of our Compensation Committee or Board.

The director nominees are also directors of the following publicly-traded companies:

Communicating with the Board of Directors

Any shareholder or interested party who wishes to communicate with the Board or any specific director, including independent directors, the Chairman of the Board, or committee members, may write to:

QLT Inc.

Attn: Board of Directors

887 Great Northern Way, Suite 101

Vancouver, British Columbia, V5T 4T5

Canada

Depending on the subject matter of the communication, the corporate secretary will:

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Shareholders and other interested persons may submit concerns regarding accounting matters by following the instructions for making a report published in the Corporate Governance subsection of the Investor Relations section of our website.

Board of Directors and Board Committees

The Board held nine meetings (in person or by teleconference) during fiscal 2011, a number of which included sessions with only independent directors. Each director attended at least 75% of the aggregate of (1) the total number of meetings of the Board, and (2) the total number of meetings held by all committees of the Board on which he or she served during fiscal 2011. Set forth below is a summary of Board and Committee attendance during 2011:

Summary of Attendance of Directors in 2011:

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The Board has a standing Audit and Risk Committee, Corporate Governance and Nominating Committee, Compensation Committee, and Scientific Review Committee. In addition, from time to time, the Board establishes special committees to assist the Board in respect of certain matters. The Board did not establish any special committees in 2011. Set forth below is a chart indicating, by committee, each committee’s members, key functions and the number of committee meetings held in 2011:

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COMPENSATION OF DIRECTORS

2011 Independent Director Compensation Program

Overview

The compensation program for our independent directors is intended to fairly compensate them for the time and effort required of a director based upon the size and complexity of our business, as well as, through an equity component of the program, to further align the interests of our independent directors with those of our shareholders. The amount and form of director compensation is reviewed periodically by the Compensation Committee, with any resulting recommendations made to the Board, to ensure that such compensation realistically reflects the responsibilities and risks of being an effective director. To assist in its evaluation of director compensation, the Compensation Committee has the authority to retain independent compensation consultants.

Our independent directors receive cash and equity-based compensation for their service on the Board. As an employee, our President and Chief Executive Officer is not additionally compensated for his service on the Board.

Cash Compensation

The cash compensation component of our program includes annual Board and Committee member or chair position retainers, meeting attendance fees, and fees paid for attending to Board or Committee business other than for attendance at a meeting. Directors are also eligible for reimbursement of their expenses incurred in connection with attendance at Board meetings in accordance with our policies. Director fees are paid quarterly in arrears.

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The cash compensation levels under our director compensation program have remained constant from early 2008 through 2011, with the exception of an increase during 2011 for the annual retainer fee for the Chair of the Scientific Review Committee. In 2011, the fees paid to our independent directors were based on the following:

Equity-Based Compensation

In addition to cash compensation, our independent directors also receive equity-based compensation to ensure that their interests are fully aligned with those of our shareholders.

We maintain a Directors’ Deferred Share Unit Plan, which we refer to as the “DDSU Plan.” Under the DDSU Plan, at the discretion of the Board, independent directors receive all or a percentage of their equity-based compensation in the form of deferred share units, or “DSUs,” each of which has a value equal to the price of our common shares on the TSX. A DSU is convertible only into cash (no shares are issued), and can only be converted after the independent director ceases to be a member of the Board. The DSUs vest monthly over 36 months from the date of grant.

The value of a DSU, when converted to cash, will be equivalent to the market value of a QLT common share at the time the conversion takes place. We do not have a history of paying dividends on our common shares; however, if dividends ever are paid on our common shares, an independent director’s DSU account will be credited with dividends at the same rate.

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The Compensation Committee’s objective in granting DSUs to independent directors is to provide a reasonable, market-based, incentive for directors to deliver increased value to shareholders. Based in part on advice received from Radford, the Compensation Committee and the Board have concluded that DSUs are an effective way to align the interests of the independent directors with those of the shareholders, without resulting in additional share dilution to shareholders. In May 2011, following his or her appointment at the Annual Meeting of shareholders, each independent director received 7,500 DSUs, except the Chairman of the Board, who received 15,000 DSUs.

Our directors are also eligible to receive stock options under the QLT 2000 Incentive Stock Option Plan (the “2000 Plan”); however, no stock options were granted to our independent directors in fiscal 2011.

The following table provides information regarding the compensation of our independent directors for fiscal 2011.

2011 Director Compensation

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None of our independent directors held QLT stock options as of December 31, 2011.

Review of 2011 Independent Director Compensation Program

In 2011, the Compensation Committee engaged Radford to conduct an independent assessment of our director compensation practices relative to a comparator group of peer companies. The Radford director compensation report (the “Report”) was received in September 2011. A description of the peer group selected by Radford and approved by the Compensation Committee is described below in the section entitled “Compensation Discussion and Analysis” under “Executive Compensation.”

According to the Report, overall, the cash component of our director compensation program is competitive at the 50^th percentile of our comparator group and the equity component (DSUs) is competitive between the 25^th and 50^th percentiles. Following a review of the results and recommendations of the Report and the Compensation Committee, the Board determined that the compensation levels and structure of our director compensation program are competitive and provide the proper incentive and compensation mechanisms for the Board of Directors.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Upon the recommendation of the Corporate Governance and Nominating Committee, the Board has nominated for election at the Annual Meeting a slate of seven nominees, including Dr. George M. Milne, Jr., a nominee for director not currently on the Board. As more specifically described below, Dr. Milne augments our Board with his extensive experience as both an executive and board member of companies in the life sciences industry. It is expected that, if elected to the Board at the Annual Meeting, Dr. Milne will be appointed to serve on the Company’s Scientific Review Committee and Audit and Risk Committee. Messrs. Crossgrove and Wood, current directors of the Company, are retiring from the Board of Directors this year and, therefore, will not stand for re-election at the Annual Meeting.

The Board of Directors of QLT has consistently sought Board membership that reflects a mix of experience among its members to maintain a diversity of perspectives and to ensure that QLT can meet its objectives. The Board believes the current Board nominees achieve this goal, reflecting as a whole diverse knowledge and experience, including in the areas of finance, science and biotechnology and healthcare executive management. The names and biographical information about each nominee are set out below.

Each director elected will hold office until the next Annual Meeting or until his or her successor is duly elected, unless he or she resigns earlier. The Board is permitted to increase the number of directors by up to one-third of the number of directors elected at the Annual Meeting at any time prior to the next Annual Meeting.

In the unanticipated event that a nominee is unable to or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted at the discretion of the proxy holder to elect another nominee designated by the Board, if presented, or the Board will comprise a lesser number of directors accordingly. As of the date of this Proxy Statement, the Board is not aware of any nominee who is unable or who intends to decline to serve as a director, if elected.

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Information Regarding Director Nominees

The names of the nominees and certain information about them are set forth below:

There is no family relationship between any of our directors, director nominees or executive officers. The number of common shares owned by each of the nominees for election as a director is set forth under “Security Ownership of Certain Beneficial Owners and Management” in this Proxy Statement.

Robert L. Butchofsky was appointed as President and Chief Executive Officer and a director of QLT in February 2006 following his earlier appointment as Acting Chief Executive Officer of QLT in September 2005. Mr. Butchofsky joined QLT in 1998 as Associate Director, Ocular Marketing and was appointed Vice President, Marketing and Sales Planning in September 2001. Mr. Butchofsky was promoted to Senior Vice President, Marketing and Sales Planning in early 2005, responsible for QLT’s ongoing marketing of the pharmaceutical products, Visudyne^® and Eligard^®, including managing significant partnerships, as well as corporate strategy development and investor relations activities. From June 1990 to August 1998, Mr. Butchofsky was employed at Allergan Inc., a pharmaceutical company, where he built an extensive background with ocular pharmaceutical products and Botox^®, including sales, health economics, worldwide medical marketing, and product management. Prior to joining Allergan Inc., Mr. Butchofsky spent several years managing clinical trials at the Institute for Biological Research and Development. Mr. Butchofsky also serves as Chairman of the Board of Superna Life Sciences Inc., a privately-held pharmaceutical company located in Vancouver, British Columbia. Mr. Butchofsky has a Bachelor of Arts degree in Biology from the University of Texas and a Masters of Business Administration from Pepperdine University.

For the following reasons, the Board has concluded that Mr. Butchofsky has the requisite qualifications, skills, perspectives and experience that make him well-qualified to serve on the Board. With greater than 20 years of experience in the biopharmaceutical industry, including extensive commercial and development experience in the ocular therapeutic area and several years of experience in managing

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significant partnerships and developing and implementing corporate strategy, Mr. Butchofsky has a deep understanding of the pharmaceutical development and marketing process. Mr. Butchofsky’s nearly 15 years of experience with QLT, the most recent six years of which have been as President and Chief Executive Officer, provides him with intimate knowledge of and experience with all aspects of the operations, opportunities and challenges of QLT.

Dr. Bruce L.A. Carter has been a director of QLT since November 2006. Since November 2009, Dr. Carter has been the Chairman of the Board of Immune Design Corp., a privately-held biotechnology company in Seattle, Washington, focused on the development and commercialization of therapeutic vaccines for treatment of infectious and malignant disease. From April 2005 until October 2010, Dr. Carter was also Chairman of the Board of ZymoGenetics, Inc., a publicly-traded biopharmaceutical company in Seattle, Washington, focused on the development and commercialization of therapeutic proteins for the treatment of viral infection, cancer, inflammatory disease and bleeding, which was acquired by Bristol-Myers Squibb in October 2010. In addition, Dr. Carter was ZymoGenetics’ Chief Executive Officer from April 1998 to January 2009, during which time ZymoGenetics developed and commercialized Recothrom, an aid to hemostasis. Dr. Carter first joined ZymoGenetics in 1986 as Vice President of Research and Development. In 1988, Novo Nordisk A/S acquired ZymoGenetics and, in 1994, Dr. Carter was promoted to Corporate Executive Vice President and Chief Scientific Officer for Novo Nordisk. In 2000, Dr. Carter led the negotiations that established ZymoGenetics as an independent company from Novo Nordisk. Dr. Carter also held various positions of increasing responsibility at G.D. Searle & Co., Ltd. from 1982 to 1986 and was a lecturer at Trinity College, University of Dublin from 1975 to 1982. Dr. Carter is also Chairman of the Board of Directors of TB Alliance, a global non-profit organization focused on the acceleration of the discovery and development of new tuberculosis drugs, and Xencor, Inc., a privately-held biotechnology company. He also serves on the Board of Dr. Reddy Ltd. and Moksha8, Inc., both of which are global pharmaceutical companies. Dr. Carter has a B.Sc. with Honors in Botany from the University of Nottingham, England, and a Ph.D. in Microbiology from Queen Elizabeth College, University of London.

For the following reasons, the Board has concluded that Dr. Carter has the requisite qualifications, skills, perspectives and experience that make him well-qualified to serve on the Board. Dr. Carter gained valuable management and leadership skills, as well as an understanding of the biopharmaceutical industry, through his experiences as Chief Executive Officer of ZymoGenetics and Chief Scientific Officer of Novo Nordisk A/S. Through his tenure as the Chairman of the Board of ZymoGenetics, Dr. Carter acquired insight into the role of the board of directors of a biotechnology company such as QLT. Dr. Carter’s experience in serving as a director or executive officer of North American, European and Asian companies gives him familiarity with health care trends internationally. He is well-versed in the complex challenges of research and development of a pharmaceutical company, given his extensive educational and leadership background in the life sciences, and provides the QLT Board with invaluable insight into a broad range of issues that impact the Company’s research and development efforts.

C. Boyd Clarke has been a director of QLT since 2003 and was appointed as Chairman of the Board in February 2006. Since September 2007, Mr. Clarke has been a Venture Advisor to ProQuest Investments, a healthcare venture capital firm. From March 2002 to May 2006, Mr. Clarke was President and Chief Executive Officer of Neose Technologies, Inc., a U.S. publicly-listed biotechnology company focused on the development of protein therapeutics. Mr. Clarke served on the Board of Directors of Neose from 2002 to May 2007. From December 1999 through March 2002, Mr. Clarke was President and Chief Executive Officer of Aviron, Inc., a biotechnology company developing vaccines, which was acquired by MedImmune, Inc., and was also Chairman from January 2001 through March 2002. From 1998 through 1999, Mr. Clarke was Chief Executive Officer and President of U.S. Bioscience, Inc., a biotechnology company focused on products to treat cancer, which was also acquired by MedImmune, Inc. Mr. Clarke served as President and Chief Operating Officer of U.S. Bioscience, Inc. from 1996 to 1998. From 1977

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to 1996, Mr. Clarke held a number of positions at Merck & Co., Inc., including being the first President of Pasteur-Merieux MSD, and most recently as Vice President of Merck Vaccines. Mr. Clarke was formerly a director of the Biotechnology Industry Association. He is currently a director of NovaDigm Therapeutics, Inc., Rib-X Pharmaceuticals and Ligocyte Pharmaceuticals, Inc., and Chairman of the Board of Mersana Therapeutics, Inc., all of which are privately-held biotechnology companies. Mr. Clarke has a Bachelor of Science in biochemistry and a Master of Arts in History from the University of Calgary.

For the following reasons, the Board has concluded that Mr. Clarke has the requisite qualifications, skills, perspectives and experience that make him well-qualified to serve on the Board. Mr. Clarke’s service on several boards of directors, including past service on the boards of publicly-held companies, provides him with extensive governance experience. Mr. Clarke developed his leadership skills over more than 30 years in the biotechnology industry, including his tenures as an executive officer at multiple pharmaceutical and biotechnology companies, which experience provides Mr. Clarke with seasoned tactical, operational and industry-specific experience.

Kathryn E. Falberg has been a director of QLT since March 2009. Ms. Falberg is currently Executive Vice President and Chief Financial Officer of Jazz Pharmaceuticals plc, a specialty pharmaceutical company, since March 2012. Prior to this, from December 2009 to February 2012, Ms. Falberg was Senior Vice President and Chief Financial Officer of Jazz Pharmaceuticals. From February 2009 to November 2009, Ms. Falberg was Chief Financial Officer and Chief Operating Officer of ARCA biopharma, Inc., a biopharmaceutical company. From 2003 to 2009, Ms. Falberg was President of Canyon Capital & Consulting, a private investment and consulting firm, where she was an active investor and consultant to small companies. From October 2001 to June 2002, Ms. Falberg was a consultant to Inamed, a medical device company, and briefly served as its interim Chief Financial Officer. Ms. Falberg joined Amgen Inc., a global biotechnology company, in 1995 as Treasurer, and advanced through a series of positions of increasing responsibility, culminating in her appointment as Senior Vice President, Finance and Strategy, and Chief Financial Officer in 1998. Ms. Falberg currently serves on the Board and Audit Committee (Chair) of ESS Technology, Inc., a privately-held semiconductor company, and the Board, Audit Committee (Chair) and Compensation Committee of Halozyme Therapeutics, Inc., a publicly-traded biopharmaceutical company. Ms. Falberg has an M.B.A. and B.A. in Economics from the University of California, Los Angeles.

For the following reasons, the Board has concluded that Ms. Falberg has the requisite qualifications, skills, perspectives and experience that make her well-qualified to serve on the Board. Ms. Falberg has a deep understanding of financial management and reporting as a result of her greater than 24 years of financial experience with companies of varying sizes across multiple industries, including technology, life sciences, medical device and consumer products. Ms. Falberg has extensive experience serving as the Chief Financial Officer of biotechnology and pharmaceutical companies, including publicly-held companies, which provides her with valuable perspective on the financial performance, prospects and strategy of a biotechnology company such as QLT. Ms. Falberg’s current and past service as the audit committee chair of other publicly-traded biotechnology companies gives her insight and perspective into the best practices with respect to biotechnology companies and the audit committee function.

Dr. Ian J. Massey has been a director of QLT since June 2006. In 2006, Dr. Massey joined Synosia Therapeutics, Inc., a private biotechnology company focused in the fields of neurology and psychiatry, as its President and Chief Executive Officer. In February 2011, Synosia Therapeutics, Inc. was acquired by Biotie Therapies Corp., following which Dr. Massey holds the offices of Chief Operating Officer and President of U.S. operations of Biotie Therapies Corp. From 2002 to 2006, Dr. Massey was the Senior Vice President and Head of Research and Preclinical Development at Roche Palo Alto, where he built and led a research and preclinical development organization of approximately 700 people in multiple

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therapeutic areas. From 1995 to 2002, Dr. Massey held positions of increasing responsibility at Roche Bioscience, including Senior Vice President, Head of Neurobiology Business Unit and Central Research & Development and Vice President and Director of Preclinical Research and Development. Prior to joining Roche, Dr. Massey was at Syntex Research for over 15 years where he held a number of senior positions, culminating in the position of Vice President and Director, Institute of Analytical Research. Dr. Massey has a D. Phil. degree in Organic Chemistry from the University of Oxford, England, a M.A. in Organic/Natural Product Chemistry and a B.A. in Chemistry.

For the following reasons, the Board has concluded that Dr. Massey has the requisite qualifications, skills, perspectives and experience that make him well-qualified to serve on the Board. As a senior pharmaceutical executive with experience in all phases of the drug discovery and development process, Dr. Massey possesses valuable insight into the challenges and opportunities inherent to the drug development process. Dr. Massey’s extensive leadership experience in the biopharmaceutical industry, and in particular as an executive officer at Roche Palo Alto, provides Dr. Massey with an in-depth understanding of research and preclinical development in the pharmaceutical industry. Having gained experience in various levels of seniority within the research function of the pharmaceutical industry, Dr. Massey provides the valuable insight of a research scientist and is deeply familiar with the strategic, product development and technological issues of a pharmaceutical company such as QLT.

Dr. George M. Milne, Jr. is currently a venture partner of Radius Ventures, LLC, a health and life sciences venture capital firm. Dr. Milne also currently serves on the Board of Directors of the following publicly-traded companies: Mettler-Toledo International Inc. since 1999, Charles River Laboratories, Inc. since 2002 and Athersys, Inc. since 2002, and serves on the Boards of several private companies and charitable organizations, including as a member of the Audit Committees of Athersys, Inc. and three privately-held companies. He has also previously served on the Board of Directors of the following publicly-traded companies: Aspreva, Inc. from 2004 to 2008, MedImmune Inc. from 2005 to 2007, and Conor Medsystems, Inc. from 2003 to 2006. Dr. Milne held various research and management positions with Pfizer from November 1970 to August 2002, including President of Worldwide Strategic and Operations Management, Executive Vice President of Pfizer Global Research and Development, and Senior Vice President of Pfizer Inc. From September 1993 to September 2000, he served as President of Central Research with worldwide responsibility for Human and Animal Health Research and Development and was a member of Pfizer’s Corporate Management Committee. Dr. Milne has a B.Sc. in Chemistry from Yale University and a Ph.D. in Organic Chemistry from the Massachusetts Institute of Technology (MIT). He was an NIH Postdoctoral Fellow at Stanford University and completed postdoctoral training in central nervous system pharmacology at Medical College of Virginia.

For the following reasons, the Board has concluded that Dr. Milne has the requisite qualifications, skills, perspectives, and experience that make him well-qualified to serve on the Board. With his strong educational background supplemented by his experience at Pfizer for over 30 years, his work as a venture partner of Radius Ventures, LLC, and his service on the boards of various life science companies, Dr. Milne has a deep understanding of life sciences, the life sciences industry, and research and development processes, helping him to understand and assess industry drivers and trends as well as product and service development and marketing opportunities and strategies. Dr. Milne’s current and past service on the audit committees of other publicly-traded biotechnology companies gives him the skills, knowledge and insight necessary to serve as a member of QLT’s Board and Audit and Risk Committee.

Joseph L. Turner has been a director of QLT since February 2010. Most recently, Mr. Turner served as Chief Financial Officer at Myogen, Inc., a biopharmaceutical company, which he joined in 1999, remaining until it was acquired by Gilead Sciences in 2006. At Myogen, Mr. Turner was responsible for, among other things, all financial and accounting matters and assisted to raise over $300 million through a number of private and public financings. Previously, he was Chief Financial Officer at Centaur

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Pharmaceuticals, Inc. and Vice President, Finance and Administration at Cortech, Inc. Mr. Turner began his career at Eli Lilly and Company, where he served for 12 years in various financial positions. Mr. Turner has provided consulting services to LigoCyte Pharmaceuticals, Inc. and GlobeImmune, Inc., both of which are privately-held biopharmaceutical companies, since 2007 and 2012, respectively. He currently serves on the Board of Directors and as Chair of the Audit Committee of each of Alexza Pharmaceuticals, Inc., Corcept Therapeutics Inc. and Allos Therapeutics, Inc., each of which are publicly-traded pharmaceutical companies, and of Kythera Biopharmaceutics, Inc., a privately-held pharmaceutical company. Since 2009, Mr. Turner has also served on the Board of Managers and, since 2010, the Finance Committee, the Academic Affairs Committee and the Student Affairs Committee of Swarthmore College. Previously, Mr. Turner served on the Board of Directors of ApopLogic Pharmaceuticals, Inc., the Board and Audit Committee of SGX Pharmaceuticals, Inc., a publicly-traded pharmaceutical company, and the Board and as Chair of the Audit Committee of each of NovaCardia, Inc. and Sequel Pharmaceuticals, Inc., both of which are privately-held biotechnology companies. Mr. Turner has an M.B.A. from University of North Carolina at Chapel Hill, an M.A. in Molecular Biology from University of Colorado, and a B.A. from Swarthmore College.

For the following reasons, the Board has concluded that Mr. Turner has the requisite qualifications, skills, perspectives and experience that make him well-qualified to serve on the Board. Mr. Turner’s greater than 25 years of experience in financial management in the biotechnology and pharmaceutical industries, including 14 years as a Chief Financial Officer, has honed Mr. Turner’s leadership skills and made him well-versed in the operational, financial and strategic challenges and opportunities of biotechnology companies such as QLT. Mr. Turner’s current and past service on boards of directors and audit committees of pharmaceutical companies brings valuable industry-specific insight and perspective to QLT’s Board and Audit and Risk Committee.

Vote Required and Board of Directors’ Recommendation

Director nominees will be elected by a plurality of the votes cast at the Annual Meeting. This means that the seven nominees with the highest number of affirmative votes cast at the Annual Meeting will be elected as directors. You may choose to vote, or withhold your vote, separately for each nominee. Proxies cannot be voted for more than seven nominees for election to the Board.

The Board of Directors recommends that shareholders vote “FOR” the election of all seven nominees for director. The proxyholders intend to vote the shares represented by proxies “FOR” the election of the seven nominees named in the Instrument of Proxy unless authority to vote for those persons is withheld.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the shares of our common stock beneficially owned by (1) each of our directors and director nominees, (2) each of our current named executive officers listed in the Summary Compensation Table below, (3) all of our directors, director nominees and executive officers as a group, and (4) all persons known by us to beneficially own more than 5% of our outstanding voting shares. We have determined the beneficial ownership shown on this table in accordance with the rules of the SEC and the applicable Canadian securities regulators. Under those rules, shares are considered beneficially owned if held by the person indicated, or if such person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares the power to vote, to direct the voting of and/or to dispose of or to direct the disposition of such security. Except as otherwise indicated in the accompanying footnotes, beneficial ownership is shown as of April 13, 2012.

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For additional information on our equity compensation plan, and our common shares that may be issued upon the exercise of options, warrants and other rights granted to employees, consultants or directors under our existing equity compensation plan, see our Annual Report on Form 10-K which is available on our website at www.qltinc.com, SEDAR at www.sedar.com and EDGAR at www.sec.gov.

EXECUTIVE COMPENSATION

The following sets forth information about our named executive officers as of April 13, 2012. The executive officers listed below serve in their respective capabilities at the discretion of our Board of Directors.

Robert L. Butchofsky

President and Chief Executive Officer

See the section entitled “Proposal No. 1 - Election of Directors” above for Mr. Butchofsky’s biography.

Cameron R. Nelson

Senior Vice President, Finance and Chief Financial Officer

Mr. Nelson, age 46, joined QLT in May 2000 as Associate Director, Financial Analysis and Planning and has made many contributions to QLT during his time with the Company. He was promoted to Director, Financial Analysis and Planning in January 2002 and later to Senior Director, Financial Reporting and Planning. In early 2005, he was promoted to Vice President, Finance and was named Chief Financial Officer in August 2005. Mr. Nelson was promoted to Senior Vice President, Finance in May 2011 and continues in his role as the Company’s Chief Financial Officer.

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Prior to joining QLT, Mr. Nelson held finance and accounting positions with Mattel Inc. and Equity Marketing Inc. in Los Angeles. Mr. Nelson earned his Bachelor of Commerce from the University of British Columbia and his Master of Business Administration from Dartmouth College.

Linda M. Lupini

Senior Vice President, Human Resources and Organizational Development

Since joining QLT in 1997, Ms. Lupini, age 52, has been responsible for overseeing the global planning, development, implementation and administration of all of the compensation and benefits, recruitment, training and employee relations programs for QLT, as well as facilities management in Canada and the U.S. Ms. Lupini is responsible for establishing long-range human resource strategies and practices for QLT to meet specific business objectives, including managing QLT’s growing demand for highly skilled science and technology specialists and commercial sales staff. She brings nearly 20 years of experience to the role, including 10 years experience with MacDonald Detwiler and Associates, a leading international software firm. Her broad experience encompasses all aspects of human resources management and organization development. Ms. Lupini is a past board member of BC Biotech and was previously a member of the BC Employment Standards Tribunal. She is currently on the advisory board of Simon Fraser University’s MBA in Biotechnology Program, and is a past member of the Board of Directors of BioTalent Canada. Ms. Lupini holds a Bachelor of Arts degree in Psychology from the University of British Columbia.

Alexander R. Lussow, Ph.D.

Senior Vice President, Business Development & Commercial Operations

Alexander Lussow, age 49, joined QLT in July 2006 as Vice President, Business Development and became Senior Vice President, Business Development and Commercial Operations in May 2008. Dr. Lussow is responsible for QLT’s business development activities, including product licensing, acquisitions and strategic partnering opportunities, as well as QLT’s product manufacturing and supply chain.

Before joining QLT, Dr. Lussow was Gryphon Therapeutics’ Chief Business Officer and Vice President of Business Development where he was responsible for the licensing of the company’s products, the formation of strategic alliances, corporate communications and fundraising. Before joining Gryphon, Dr. Lussow served as the head of business development at Sangstat Medical Corporation (now wholly-owned by Genzyme Corp.). He also has broad experience in biotechnology management consulting, advising on venture financing, strategic business planning and licensing transactions for several biotechnology companies.

Dr. Lussow received his BSc at McGill University in Montreal and his Ph.D. in immunology at the University of Geneva, Switzerland. He has been an adjunct professor of pharmacology at the University of North Carolina, USA and has worked extensively for the World Health Organization (WHO) in West Africa.

Suzanne M. Cadden

Senior Vice President, Development

Suzanne Cadden, age 53, joined QLT in September 2010 as Vice President, Regulatory Affairs and was appointed Vice President, Regulatory and Clinical Affairs in February 2011. She was promoted to Senior Vice President, Development in September 2011. Ms. Cadden is responsible for the QLT research and development portfolio, including clinical, pharmaceutical and formulation development, as well as regulatory affairs.

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Ms. Cadden came to QLT with almost 25 years’ experience in global regulatory affairs, clinical research and drug development. Beginning in 1987, she filled progressively responsible positions at Ciba Canada, where she served as Acting Vice President, Research and Development. At Glaxo Wellcome, in addition to having responsibility for regulatory affairs and clinical compliance, she was a member of the International Regulatory Affairs Board overseeing U.S., E.U. and other regional worldwide drug approval strategies. Ms. Cadden has held executive positions in established and emerging biotechnology companies in the U.S. and Canada, including Lorus Therapeutics, ActivBiotics, and ImmunoGen, where she had responsibilities for overseeing global clinical development and regulatory strategies, relationships with regulatory authorities, and achieving global Orphan Drug Designations and associated development strategies. An author/co-author of numerous publications, Ms. Cadden has been Chair of the BioteCanada Government Relations Committee, Chair of the Rx&D Medical R&D Section, and has served on numerous government committees and task forces addressing clinical development and regulatory issues. She holds a B.Sc. in Biochemistry and Nutrition from the University of Guelph and a M.Sc. in Pharmacology from the University of Western Ontario.

Christopher A. Muller

Chief Commercial Officer, QLT Ophthalmics, Inc.

Christopher Muller, age 50, joined QLT on April 16, 2012 as Chief Commercial Officer of QLT Ophthalmics, Inc., our U.S. commercial operations subsidiary. Mr. Muller is responsible for global marketing and sales for QLT, including the sale of Visudyne in the U.S., commercial strategy and development of global launch plans for products in QLT’s product pipeline.

Mr. Muller came to QLT with over 20 years’ experience in the pharmaceutical industry, focusing on ophthalmology. During the course of his career, Mr. Muller has been responsible for and participated in multiple successful product launches, particularly in glaucoma. He most recently was Head of Corporate Strategy and Key Opinion Leaders at Abbott Medical Optics Inc., a wholly-owned subsidiary of Abbott Laboratories (formerly known as Advanced Medical Optics Inc. prior to becoming a wholly-owned subsidiary of Abbott Laboratories in 2009), where he was responsible for strategy globally and across all business divisions. Prior to that position, Mr. Muller held the position of Vice President of Global Refractive Marketing, Global Corneal Marketing, and Global Medical Marketing at Abbott Medical Optics Inc. Prior to the acquisition of Advanced Medical Optics Inc. by Abbott Laboratories, Mr. Muller held the positions of Vice President Worldwide Marketing for Eye Care/Medical Marketing and Vice President Global Medical Marketing at Advanced Medical Optics Inc. Before joining Advanced Medical Optics Inc. in 2005, Mr. Muller spent over 15 years at Allergan, Inc., where he held a series of positions of increasing responsibility in sales, sales management, medical marketing, project management, and product management, including most recently as Vice President and Director of Worldwide Medical Marketing. Mr. Muller holds a Bachelor of Arts degree in Biology from Whittier College and a Master of Business Administration from Whittier College/Pepperdine University.

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis section discusses our executive compensation policies and programs and the compensation decisions made in 2011 for our named executive officers during 2011, which consisted of Robert L. Butchofsky, our President and Chief Executive Officer; Cameron R. Nelson, our Senior Vice President, Finance and Chief Financial Officer; Linda M. Lupini, our Senior Vice President, Human Resources and Organizational Development; Alexander R. Lussow, our Senior Vice President, Business Development and Commercial Operations; Suzanne M. Cadden, our Senior Vice President, Development since September 2011; and Dr. Dipak Panigrahi, our former Senior Vice President, Research and Development and Chief Medical Officer, who departed from the Company in February 2011. Mr. Nelson was promoted from Vice President, Finance and Chief Financial Officer to Senior Vice President, Finance and Chief Financial Officer on May 25, 2011. Ms. Cadden was promoted from Vice President, Regulatory and Clinical Affairs to Senior Vice President, Development on September 14, 2011.

The Compensation Committee administers the compensation policies and programs for our named executive officers. A summary discussion of the 2011 activities follows below and in this Compensation Discussion and Analysis report.

Executive Summary

The Compensation Committee evaluates and sets executive compensation consistent with our stated philosophy to provide a compensation package that attracts, retains and motivates executives and rewards business successes that have the potential to increase shareholder value. More specifically, the Compensation Committee seeks to:

Consistent with our performance-based philosophy, we reserve a significant portion of potential compensation for performance- and equity-based programs. These programs include awards that are based on our operational and financial performance and provide compensation in the form of cash, and equity-based incentive awards that are tied to both our short-term and long-term performance. The performance-based bonus program rewards short-term performance; while our equity awards, coupled with our stock ownership guidelines, reward long-term performance and align the interests of management with those of our shareholders.

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Highlights of Our 2011 Executive Compensation Program. The Compensation Committee reviews our executive compensation program and practices throughout the year. Executive compensation program highlights for 2011 include:

Base Salaries and Target Bonus Opportunities in 2011. After consideration of the practices of our comparator group, for 2011, the Compensation Committee did not adjust the base salary levels for our Chief Executive Officer and our other named executive officers, resulting in base salaries at or near the 75^th percentile of our comparator group. Our Senior Vice President, Development’s base salary, however, was increased 11.4% in connection with her promotion in September 2011. For 2011, there was no change to the target annual cash incentive award percentages for our named executive officers.

Linking Compensation to the Attainment of Performance Goals. We use annual performance-based cash incentive awards to reward our executives for achieving annual operational and financial goals and to reward annual individual performance. The incentive potential is expressed as a percentage of base salary, determined with reference to the 75th percentile of our comparator group. This is intended to provide focus on annual corporate and individual goals without overemphasizing short-term performance, and to place at risk a significant portion of an executive’s annual cash compensation. The annual incentive award for our Chief Executive Officer is based 100% on the achievement of corporate goals. With regard to our other named executive officers, 75% of his or her annual incentive award is based on the achievement of corporate goals and 25% is based on the achievement of individual goals.

Our performance goals for the 2011 calendar year were based on the following: (i) Synthetic Retinoid Program, (ii) Sustained Drug Delivery – Punctal Plug Development, (iii) Visudyne^®, and (iv) Management of Business to Drive Intermediate-Term Shareholder Value. These goals focused on maintaining significant research and development investment to fuel our long-term growth and maintaining or growing revenues for our current product. The Compensation Committee determined that we achieved 85% of our corporate objectives for 2011, having achieved or exceeded certain of our corporate goals, including our objectives related to the research and development programs, but not achieving our objectives related to U.S. Visudyne sales and profitability or business development. As a result, the cash incentive compensation payment to our Chief Executive Officer was approximately 63.8% of his base salary for 2011. With regard to our other current named executive officers, the individual goal achievement in 2011 varied between 100% and 160% due to each executive achieving, and in some cases, exceeding, certain individual goals unrelated to Visudyne and business development initiatives. Therefore, our cash incentive compensation payments to our other current named executive officers ranged from approximately 39.9% to 55.9% of their base salaries for 2011.

Using Equity as a Key Component of Compensation. Equity awards serve to align the interests of our executive officers with those of our shareholders. Therefore, stock options are a key component of our compensation program. Equity awards, solely in the form of stock options, represented approximately 39% of our current executive officers’ aggregate cash and equity compensation in 2011. Stock options more closely align the interests of our executives with those of our shareholders because the recipient will only realize a return on the option if our stock price increases over the term of the option. In addition, awards of stock options align with our growth strategy and provide significant leverage if our growth objectives are achieved, and place a significant portion of compensation at risk if our objectives are not achieved.

Minimum Share Ownership Guidelines. In September 2009, the Board, on the recommendation of the Compensation Committee, approved share ownership guidelines for executive officers. The share ownership guidelines encourage our Chief Executive Officer to own an amount equal to 1.5 times his base salary as of the date of the implementation of the guidelines, to be satisfied within four years from the implementation of the guidelines, and our other executive officers to each own an amount equal to 0.5 times his or her base salary as of the latest of the date of the implementation of the guidelines and the date he or she becomes an executive officer, in all cases to be satisfied within four years from the applicable date. The value of QLT stock options held by the executive officers is not counted towards fulfilling the share ownership guidelines. The minimum share ownership guidelines continued for 2011. As of April 13, 2012, our Chief Executive Officer and Chief Financial Officer have already achieved their respective target share ownership guidelines.

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The Compensation Committee’s decisions with respect to 2011 are discussed in more detail below. In addition, the compensation and benefits provided to our named executive officers for the last three fiscal years are set forth in detail in the Summary Compensation Table and other tables that follow this Compensation Discussion and Analysis, and in the footnotes and narrative material that accompany those tables.

Compensation Governance and Best Practices. We are committed to having strong governance standards with respect to our compensation programs, procedures and practices. The Compensation Committee has, among other things, taken the following actions:

Shareholder Advisory Vote on Executive Compensation

At our 2011 annual general meeting of shareholders, our shareholders voted, in non-binding advisory votes (i) to approve the compensation of our named executive officers and (ii) in favor of having a non-binding shareholder vote on executive compensation every year. The Compensation Committee reviewed the result of the shareholder advisory vote on executive compensation. In light of the approval by a substantial majority of our shareholders of the compensation programs described in our 2011 proxy statement (representing over 95% of the shares represented in person or by proxy at the meeting and entitled to vote), the Compensation Committee did not implement changes to our executive compensation programs as a result of the shareholder advisory vote. The compensation for each of the Company’s named executive officers for the fiscal year 2011 reflects the continued high level of achievement in each individual’s performance and the changes regarding the Company’s financial and operating performance.

Objectives of Our Compensation Program

Compensation Philosophy. We are engaged in a highly specialized and competitive industry. Success in this environment requires talented and motivated executives. The goal of our named executive officer compensation program is to attract, retain and motivate executives and reward business successes that have the potential to increase shareholder value. The Compensation Committee, which is composed of independent members of the Board, is responsible for implementing our executive compensation

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program and establishing corporate performance objectives and reviewing individual performance objectives that reward our named executive officers when those objectives are met. In considering executive compensation, the Compensation Committee ensures that our total compensation program is competitive, supports our overall strategy and objectives, reflects both risk and reward for our named executive officers and aligns our executive officers’ interests with those of our shareholders. The combination of base salary, annual incentives and long-term incentives that we provide to our named executive officers is designed to accomplish this.

The Compensation Committee obtains information from a number of sources, including North American surveys and reports on executive compensation in the biotechnology industry, as well as internally generated reports of executive compensation practices of a sub-group of biotechnology companies. To assist with its evaluation of executive compensation, the Compensation Committee has the authority to retain independent compensation consultants. The Compensation Committee has periodically engaged Radford to provide director and executive compensation assessments and recommendations to the Compensation Committee. Radford provides data on the compensation and relative performance of peer companies, provides opinions on the degree to which our compensation arrangements are consistent with market practices and our objectives, consults on other compensation matters as needed and, if applicable, recommends compensation guidelines and program designs. Additionally, a representative from Radford attends Compensation Committee meetings at the request of the Compensation Committee, including during in-camera executive sessions without members of management present, as appropriate.

Components of the Compensation Package. At the foundation of the Compensation Committee’s strategy is the principle that there should be both consequences for underperformance and incentives for outstanding performance. This is achieved through a compensation program that emphasizes fixed and variable components which make up the “pay mix” for each executive officer.

There are three major elements to our executive compensation:

In addition, our executives are eligible to participate in the benefit plans generally available to all of our employees and to receive an annual executive medical screening consultation (as described in “Health and Life Benefits” below).

Our executive officers are paid in Canadian dollars but, for reporting purposes only, their compensation is set out below in U.S. dollars.

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Determining Compensation

Compensation Consultant and Peer Group. In early 2011, the Compensation Committee engaged Radford to provide market data and a comprehensive executive compensation assessment intended to help inform our Compensation Committee for 2011. The Compensation Committee periodically adjusts our comparator group so that QLT compares itself with industry-appropriate peers of comparable size (50 to 300 employees), revenue (generally less than $200 million), market capitalization (generally less than $1 billion), and stage of product pipeline (small commercial biotechnology / specialty pharmaceuticals with products on market). The following 14 public biotechnology companies in the Radford 2010 Global Life Sciences Survey of biotechnology and life-sciences entities, located in North America, comprised our 2011 comparator group for both our director and executive officer compensation review:

We removed Angiotech Pharmaceuticals, Inc. from the Canadian Peer Companies we used in 2010 because in 2011 it fell outside of the range of the employee size, revenue and market capitalization metrics described above. We removed ViroPharma Incorporated from our 2010 U.S. Peer Companies because in 2011 it fell outside of the range of the revenue and market capitalization metrics described above. Labopharm Inc. was removed from our 2010 Canadian Peer Companies and ZymoGenetics, Inc. was removed from our 2010 U.S. Peer Companies following their acquisitions by larger pharmaceutical companies.

In considering the market data provided by Radford, the Compensation Committee uses the percentiles or range of percentiles described below from the comparative data as a reference point in determining the amount and mix of compensation for our named executive officers. The Compensation Committee also considers many other factors in determining compensation, consistent with the Company’s compensation philosophy. The result of the Compensation Committee’s review of 2011 executive compensation is described below.

Base Salary. Annual base salary is designed to provide a competitive fixed rate of pay recognizing different levels of responsibility and performance within the Company. Base salaries for our named executive officers are benchmarked against the base salaries paid to executives with similar roles at the companies within our comparator group using the 50th percentile and the 75th percentile as reference points. Actual salaries reflect the Compensation Committee’s consideration of numerous factors, including the individual named executive officer’s experience, length of service, position criticality, scope of responsibilities and performance. In determining whether to increase the base salary for a particular named executive officer, the Compensation Committee considers the results of each named executive officer’s individual goal achievement and overall performance, comparative survey data for equivalent executive positions in our comparator group, along with the other elements of compensation received by our named executive officers.

After consideration of the Radford report and overall corporate and individual performance, in March 2011, the Board, on the recommendation of the Compensation Committee, determined that the base salary of Mr. Butchofsky, our President and Chief Executive Officer, and each of our other named executive officers fall at or around the 75^th percentile of our comparator group and would not be adjusted. Ms. Cadden’s base salary was set at slightly over the 25^th percentile of our comparator group when she was

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promoted to Senior Vice President, Development in September 2011. In approving Ms. Cadden’s base salary, the Compensation Committee considered many factors, including her relative experience in the position and the other components of Ms. Cadden’s total compensation package.

Pay-at-Risk Compensation. We have a compensation philosophy that includes a pay-at-risk component under our annual cash incentive compensation program. The annual cash incentive award represents income at risk - it is only paid if and to the extent certain goals and objectives are met. The annual cash incentive compensation that each named executive officer is eligible to receive is based on a pre-determined target percentage of his or her base salary, determined in accordance with practices of our comparator group and taking into account scope and level of responsibility. The Compensation Committee also believes that the success of the Company is based in part on the achievements of the named executive officers as a group and, therefore, the target annual award percentage is determined by considering competitive rates of incentive compensation for the named executive officers as a group and not just on a position-specific basis.

The target annual award percentage of base salary for each named executive officer is reviewed by the Compensation Committee annually, using the 75th percentile of our comparator group as a reference point. When combined with base salaries, cash incentive awards provide the opportunity for a named executive officer to achieve total cash compensation, when targeted levels of performance are achieved or exceeded, exceeding the 50th percentile of our comparator group. We define “total cash compensation” as base salary plus annual target bonus under our annual cash incentive compensation program. The Compensation Committee believes that, given our competitive industry, this pay-for-performance compensation strategy allows a biotechnology company in our location and of our size to competitively attract and retain talented executives while aligning the strategic interests of our executives and shareholders.

According to the Radford report, the 75% target annual award percentage for Mr. Butchofsky and the 45% target annual award percentage for each of Ms. Lupini, Dr. Lussow and Mr. Nelson was determined to fall at or near the 75^th percentile of our comparator group. Following a review of each of the named executive officer’s scope and level of responsibility within the Company, the Compensation Committee did not adjust the target annual award percentage for these named executive officers in 2011. In connection with her promotion in September 2011, Ms. Cadden’s target annual award percentage was set at 45% of her base salary based upon her scope and level of responsibility and the Compensation Committee’s desire to maintain internal parity.

The amount of annual cash incentive compensation that our executive officers were eligible to receive for 2011 is as follows:

The breakdown between corporate and individual objectives that determine the cash payout amounts are weighted heavily toward overall achievement of corporate objectives to align our executives with objective measures of corporate performance while ensuring that specific functional/departmental objectives are also achieved so to align employees below the executive level.

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Establishing Goals

Individual Goals. At the beginning of each performance year period and thereafter each quarter, the criteria for assessing an individual named executive officer’s performance (other than that of the Chief Executive Officer) are developed and reviewed by the Chief Executive Officer in consultation with the particular named executive officer. The individual goals are primarily objective and measurable, relate to the individual named executive officer’s area of responsibility and are designed to facilitate the achievement of our corporate goals. It is possible for a named executive officer to attain between 0% and 200% of his or her individual goals depending on performance, although the Compensation Committee has the discretion to recognize additional factors and award bonuses outside of this range. The extent to which those individual goals have been achieved or exceeded is determined largely from the annual performance recommendations for each of the other named executive officers prepared by the Chief Executive Officer and approved by the Compensation Committee. Cash incentive compensation for the Chief Executive Officer is determined based solely on achievement of the corporate goals as approved by the Board.

Corporate Goals. At the beginning of each performance year period, the criteria for assessing QLT’s performance are: (i) developed by the Chief Executive Officer in consultation with management, (ii) reviewed and approved by the Compensation Committee, (iii) approved by the Board, and (iv) communicated to the participants. In early 2011, on the recommendation of the Compensation Committee, the Board approved specific corporate goals for QLT to achieve. The corporate goals include base corporate goals which are described below and measure from 0 – 100% achievement. The Compensation Committee, however, has the discretion to recognize additional factors and assess the Company’s corporate goal achievement up to a maximum 200%. In determining whether the Company’s corporate goals have been achieved beyond 100% and up to a possible 200%, the Compensation Committee will consider factors and achievements it considers appropriate, including, but not limited to, the bonus corporate goals described below.

The Compensation Committee recommended, and the Board set, the following high-level base corporate goals and bonus corporate goals, and the relative weighting for each goal for QLT for 2011. Our strategic plans, corporate goal achievements from prior years and industry trends assist in determining realistic but challenging goals for each year. The weightings are intended to reflect the relative priority, importance and impact of each objective on the Company’s successes.

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To reflect the relative value of each achievement to the resulting value for QLT and our shareholders, within each base corporate goal and bonus corporate goal, the Compensation Committee set out criteria that had to be reached for the goal to be met. In setting these criteria, the Compensation Committee determined that the goals would require significant effort and be difficult for the executives to achieve and would not be achieved with average or below average performance.

Evaluating Goal Achievement

After each fiscal year, our Chief Executive Officer presents a recommendation to the Compensation Committee for performance bonus payments based on the results achieved as compared to targets established for that fiscal year. The Compensation Committee has the discretion to award the amount corresponding to that level of achievement, or to modify the award payable if it believes a modification would be in the best interests of QLT and its shareholders. In performing its assessment, the Compensation Committee may also consider market, business or organizational factors that may have impacted achievement of a specific goal.

In early 2012, the Compensation Committee considered the performance of QLT relative to the corporate objectives set in early 2011. Based on the achievement of QLT against the base corporate goals and the bonus corporate goals, the Compensation Committee determined that QLT achieved 85% of its 2011 corporate objectives. The following chart illustrates the level of achievement of the 2011 corporate goals:

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In evaluating our performance against the goals established for 2011, and determining the extent to which those goals were successfully achieved, the Compensation Committee recognized the following factors:

As a result, QLT was determined to have achieved 45% out of a possible 40% with respect to this goal.

As a result, QLT was determined to have achieved 25% out of a possible 20% for this goal.

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In addition to the achievements noted above, the Compensation Committee also gave consideration to additional achievements made during the year, namely, (i) the Company’s completion of a comprehensive marketing compliance and corporate training program, and (ii) the research and regulatory progress made in the development of a proprietary photodynamic therapy (PDT) laser for use in Visudyne therapy. These accomplishments were determined to enhance the overall corporate goal achievement by an aggregate 5%.

Analysis of Named Executive Officers Compensation and Goals

President and Chief Executive Officer. Our President and Chief Executive Officer has no individual goals and our corporate goals determine our President and Chief Executive Officer’s bonus. As noted above, the Compensation Committee determined that QLT achieved 85% of its corporate goals for 2011, resulting in a 2011 annual cash incentive compensation payment to Mr. Butchofsky of $348,533, which represented approximately 63.8% of his base salary for 2011.

Senior Vice President, Finance and Chief Financial Officer. In 2011, the following individual goals were established for Mr. Nelson: (i) support efforts to drive intermediate-term shareholder value, including through supporting development of a strategic corporate plan, supporting business development efforts and effectively managing capital structure, (ii) provide high-caliber financial and other support (including implementing information technology initiatives) for the Company’s Visudyne commercial operations, (iii) maintain accurate financial reporting, including internal control over financial reporting (Sarbanes-Oxley compliance) for QLT and its subsidiaries, (iv) continue to identify processes and initiatives to streamline and enhance efficiencies in the accounting process and budgeting and forecasting cycles, and (v) foster and support a commercial culture throughout the organization. Mr. Nelson was determined to have met, partially met or exceeded each of these goals, to achieve, overall by percentage, 108% of his individual goals for 2011. Based upon the achievement of the corporate goals and his individual goals, and the relative weighting between them (75% dependent upon corporate goal achievement; 25% dependent upon individual goal achievement), Mr. Nelson was awarded a cash incentive compensation amount for 2011 equal to $145,179, which represented approximately 40.8% of his base salary for 2011.

Senior Vice President, Human Resources and Organizational Development. In 2011, the following individual goals were established for Ms. Lupini: (i) manage organizational change and growth, including completing and integrating key new hires, (ii) implement programs to motivate and retain key employees, including competitive compensation programs and programs/training to foster a performance-driven culture, (iii) manage human resources and facilities operations in Canada and the U.S., (iv) support strategic corporate initiatives, including business development opportunities, and (v) provide support to the commercial team, including various organizational initiatives that foster a commercially compliant culture. Ms. Lupini was assessed as having met, partially met or exceeded each of these goals, to achieve, overall by percentage, 160% of her individual goals for 2011. Based upon the achievement of the corporate goals and her individual goals, and the relative weighting between them (75% dependent upon corporate goal achievement; 25% dependent upon individual goal achievement), Ms. Lupini was awarded a cash incentive compensation amount for 2011 equal to $135,795, which represented approximately 46.9% of her base salary for 2011.

Senior Vice President, Business Development and Commercial Operations. In 2011, the following individual goals were established for Dr. Lussow: (i) identify, evaluate and negotiate strategic business development initiatives consistent with overall corporate strategy, (ii) conduct market research supporting the Company’s product pipeline, (iii) manage Visudyne product supply chain, (iv) support commercial sales team, and (v) foster and support a commercial culture throughout the organization. Dr. Lussow was assessed as having met, partially met or exceeded each of these goals, to achieve, overall by

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percentage, 100% of his individual goals for 2011. Based upon the achievement of the corporate goals and his individual goals, and the relative weighting between them (75% dependent upon corporate goal achievement; 25% dependent upon individual goal achievement), Dr. Lussow was awarded a cash incentive compensation amount for 2011 equal to $129,436, which represented approximately 39.9% of his base salary for 2011.

Senior Vice President, Development. In 2011, individual goals were established for Ms. Cadden under our annual cash incentive compensation program (at a target 35% of base salary prior to Ms. Cadden’s promotion to Senior Vice President, Development in September 2011, and increased to 45% of base salary following Ms. Cadden’s promotion) (75% dependent upon corporate goal achievement; 25% dependent upon individual goal achievement), and in February 2011, upon her promotion to Vice President, Regulatory and Clinical Affairs following the departure of Dr. Dipak Panigrahi, individual goals were established to enable additional annual cash incentive compensation of up to 20% of Ms. Cadden’s base salary. Ms. Cadden’s 2011 individual goals were: (i) achieve specified clinical and regulatory milestones related to the punctal plug drug delivery system program, including completion of the Phase II L-PPDS clinical trial within the target time frame, (ii) achieve specified clinical and regulatory milestones related to the synthetic retinoid program within target time frames, including (A) expand the QLT091001 Phase Ib study into multiple investigator sites in the U.S. and Europe through submission of an Investigational New Drug Application in the U.S. and equivalent applications in the European Union, (B) complete RP subject enrolment in the QLT091001 Phase Ib study, (C) complete assessment and report the LCA subject data in the QLT091001 Phase Ib study; and (D) advance regulatory efforts with the FDA and the European Medicines Agency to advance the QLT091001 LCA program towards a pivotal trial, (iii) assist to develop and implement a staffing resources plan to manage critical clinical and pre-clinical deliverables, (iv) oversee the Visudyne life cycle management team, and (v) review and oversee development of updated promotion review and other internal clinical and regulatory procedures. Ms. Cadden was assessed as having met, partially met or exceeded each of these goals, to achieve, overall by percentage, 125% of her individual goals under our annual cash incentive compensation program and 100% of her individual goals established in February 2011. Based upon the achievement of the corporate goals and her individual goals, and the relative weighting between them to attain up to 65% of base salary, Ms. Cadden was awarded a cash incentive compensation amount for 2011 equal to $163,863, which represented approximately 55.9% of her base salary for 2011, prorated to reflect her promotion date of September 14, 2011.

Equity Grants Policy. Equity compensation represents a significant portion of named executive officer total compensation at QLT. The amount and type of equity awards are intended to align our named executive officers’ interests with shareholder interests, increasing named executive officer compensation derived from sustained increases in the value of our common stock. These equity-based awards also serve as a retention incentive. In setting the equity compensation levels of our named executive officers, the Compensation Committee considers the prior grants of stock options to the named executive officer, the level of responsibility and expected future contributions of the named executive officer, the performance of the named executive officer in the year, the total cash compensation level of the named executive officer, the fair value of long-term incentives awarded to executives in similar positions in our comparator group, and the ability of stock options to retain executive officers.

QLT currently maintains one equity compensation plan, the 2000 Plan, as discussed under “Securities Authorized for Issuance Under Equity Compensation Plans” below in this Proxy Statement, which provides for the issuance of stock options to directors, officers, employees and key consultants of QLT and its affiliates. Option grants are meant to directly link executive compensation to value creation for shareholders, and the amount (if any) each executive ultimately realizes from the options depends solely on the increase in value of our shares from the date of grant through the date of exercise. If the Restated Plan is approved, the Restated Plan will also provide for the issuance of restricted stock units (RSUs).

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Our Board has adopted a policy for granting equity awards to all employees, including our executive officers. Pursuant to that policy, and as was our practice in the past, only our Board or the Compensation Committee are authorized to grant equity awards and, except in the case of awards for new hires, equity awards will be decided once a year at a regularly scheduled meeting. Under the 2000 Plan, all stock option grants are approved after the market close and the exercise price of stock options will not be less than the closing price on the TSX on the date of grant.

All options granted to our named executive officers are exercisable for a term of five years and vest in 36 equal monthly instalments. In our view, monthly vesting over three years facilitates retention while also providing a program that is consistent with market practices to attract and retain talent. In addition, in the event a named executive officer’s employment is terminated without cause (other than due to a change of control), 50% of the options then unvested will automatically vest. Whether or not the executive officer’s employment with us continues following a change of control of QLT, 100% of the then unvested options will vest upon the occurrence of a change of control of QLT. These terms provide our executives with certain financial security that enhances our ability to attract and retain key employees.

On May 25, 2011, our Compensation Committee granted Mr. Butchofsky an option to purchase 300,000 common shares and each of our other named executive officers (other than Ms. Cadden who had not yet been promoted to Senior Vice President, Development at the time of the option grant) an option to purchase 90,000 common shares. Mr. Butchofsky received a larger grant given his responsibility overall for the Company. The size of the grants was based upon internal parity among our Senior Vice Presidents and determined with reference to falling between the 50^th and 75^th percentiles of our comparator group in terms of value delivered to the named executive officers. Prior to her designation as a named executive officer in September 2011, Ms. Cadden was granted 80,000 options in May 2011, which also reflected a grant made at the 50^th percentile of our comparator group. The stock option grants to our named executive officers in 2011 were made in accordance with our equity grants policy, are exercisable for a term of five years and vest in 36 equal monthly instalments. Dr. Panigrahi did not receive any stock option grants in 2011.

Minimum Share Ownership Guidelines for Executive Officers. To further align our executives’ financial interests with those of our shareholders, in September 2009, the Board, on the recommendation of the Compensation Committee, approved share ownership guidelines for executive officers, encouraging share ownership as follows:

The value of QLT stock options held by the executives is not counted towards fulfilling the share ownership guidelines. The value of the shares owned for the purposes of fulfilling the share ownership guidelines is determined as the greater of the acquisition cost or the market value at the time of the determination. Compliance with the share ownership guidelines is evaluated on an annual basis by the Corporate Governance and Nominating Committee. As of April 13, 2012, Messrs. Butchofsky and Nelson have satisfied the guidelines. Ms. Lupini, Dr. Lussow and Ms. Cadden are progressing toward satisfying the guidelines.

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Health and Life Benefits. Our named executive officers receive medical, dental, life insurance and other benefits generally made available to all of our employees. In addition, our named executive officers may participate in a screening and disease prevention program, under which our named executive officers and their immediate family members are eligible to obtain a full medical and disease prevention evaluation each year reimbursed by QLT as a taxable benefit and subject to certain fee caps agreed upon by QLT with the external benefit provider.

Registered Retirement Savings Plan (RRSP) Matching Program. Our named executive officers resident in Canada are eligible, along with all other QLT employees resident in Canada, to participate in our registered retirement savings plan (RRSP) matching program. Under this program, we match the amount contributed by the named executive officer into his or her RRSP annually (or into QLT’s group RRSP Plan) up to 50% of the annual maximum amount allowable by the Canada Revenue Agency, less any applicable tax withholdings.

Tax and Accounting Considerations. The Board and the Compensation Committee generally consider the financial accounting and tax implications of their named executive officer compensation decisions. While generally QLT is not subject to tax in the United States, when applicable, the Compensation Committee and the Board will consider the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our named executive officers. Section 162(m) disallows a tax deduction for any publicly-held corporation for individual compensation exceeding $1.0 million in any taxable year for our Chief Executive Officer and each of the other named executive officers (other than our Chief Financial Officer), unless compensation is performance-based. The Compensation Committee, where it determines that Section 162(m) is applicable and it is reasonably practicable, will seek to qualify the variable compensation paid to our named executive officers for an exemption from the deductibility limitations of Section 162(m).

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Compensation of Executive Officers

2011 Summary Compensation Table

The following table summarizes total compensation for the 2011, 2010 and 2009 fiscal years earned by our named executive officers.

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Grants of Plan-Based Awards for the Fiscal Year Ended December 31, 2011 Table

The following table provides certain information concerning each grant of an award made to a named executive officer in fiscal 2011.

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Outstanding Equity Awards at 2011 Fiscal Year-End Table

The following table provides information concerning unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of fiscal 2011.