2013 ANNUAL REPORT
TO US THERE ARE NO FOREIGN MARKETS
TSX NYSE LSE AI
About Canaccord Financial Inc.
Through its principal subsidiaries, Canaccord Financial Inc. is a leading independent, full-service
fi nancial services fi rm, with operations in two principal segments of the securities industry:
wealth management and capital markets. Since its establishment in 1950, Canaccord has been
driven by an unwavering commitment to building lasting client relationships. We achieve this by
generating value for our individual, institutional and corporate clients through comprehensive
investment solutions, brokerage services and investment banking services. Canaccord has offi ces
in 13 countries worldwide, including wealth management offi ces located in Canada, Australia,
the UK and Europe. Canaccord Genuity, the Company’s international capital markets division, has
operations in Canada, the US, the UK, France, Germany, Ireland, Italy, Hong Kong, mainland China,
Singapore, Myanmar, Australia and Barbados.
Canaccord Financial Inc. is publicly listed on the Toronto Stock Exchange and the London Stock
Exchange (TSX:CF, LSE:CF.).
More information about Canaccord
Financial Inc., including the Company’s
2013 online annual report, can be found
at www.canaccordfi nancial.com.
CONTENTS
Reaching Our Objectives _____________________________ 02
Financial Highlights _________________________________ 03
Canaccord Financial at a Glance ______________________ 04
Letter to Shareholders ______________________________ 06
Canaccord Genuity __________________________________ 08
Canaccord Genuity Wealth Management _______________ 16
The Evolution of Our Business ________________________ 20
Corporate Values ___________________________________ 21
Shareholder Information _____________________________ 22
1
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
A global perspective matters.
at Canaccord we make it a priority to uncover and evaluate opportunities
from all regions of the world, because the best opportunities can often
be found outside local markets.
With operations in 13 countries worldwide, Canaccord is uniquely
positioned to provide our clients with the insight and information needed
to make informed decisions in today’s global market. Whether advising
corporate clients, raising capital, or evaluating investment opportunities
for institutions and individuals, we’re confident our unbiased global
perspective adds tremendous value to our client relationships.
To us there are no foreign markets.
london
CanaCCord FinanCial inC. 2013 annual report
1
M ASX HKeX SGX Reaching Our Objectives
Most of our initiatives during fiscal 2013 were focused on further integrating components of our
global platform, enhancing cross-border co-operation within our divisions and realizing the value
of the investments we’ve made to expand our business.
We invested time, effort and capital to achieve the following objectives during fiscal 2013:
1
Deliver our global platform to clients more effectively
• Implemented global leadership roles for investment banking and research practices to coordinate further
communication amongst regions
• Expanded our research distribution capabilities to ensure the full range of our product reaches all of our
clients in Canada, the uS, the uK, europe and australia
2
Deliver cost savings from the acquisition of Collins Stewart Hawkpoint plc (CSHP)
to shareholders
• Removed approximately $48 million of costs from the separate operating platforms of Canaccord and
CSHp by combining operations onto one platform
• Consolidated office space and rationalized real estate to capture cost savings
• Established optimal staffing levels across our business
3
4
5
Grow our global wealth management division through an aggregation strategy
• Acquired Eden Financial’s wealth management business on October 1, 2012
• Reached our stated goal of achieving over £10 billion in assets under management at our UK and Europe
wealth management business
Strengthen our Canadian wealth management business
• Grew Canadian recurring, fee-based revenue to 26.2% of total Canadian wealth management revenue
during fiscal 2013, up from 18.9% last year
• Refocused branch operations in major Canadian centres and reduced operating costs
• Advanced advisor training programs, leading to the highest levels of advisor participation ever seen
in our business
Launch a universal wealth management brand
• Successfully introduced Canaccord Genuity Wealth Management as our global wealth management brand
on May 1, after months of preparation
• Enhanced opportunities to build brand awareness and share company resources amongst geographies
CORE FISCAL 2014 OBJECTIVES:
1 Further leverage our global capabilities on behalf of clients
2 Return wealth management in Canada to being a positive contributor to earnings
3 Continue to grow the wealth management business in the UK through organic growth and acquisitions
4 Gain business scale in the US through strategic recruiting and areas of targeted growth
2
CanaCCord FinanCial inC. 2013 annual report
Financial Highlights
SELECTED FInAnCIAL InFORmATIOn(1)(2)
(C$ thousands, except per share and % amounts)
2013
2012
2013/2012 change
For the years ended March 31
Canaccord Financial Inc. (CFI)
revenue
Commissions and fees
investment banking
advisory fees
principal trading
interest
other
Total revenue
expenses
incentive compensation
Salaries and benefits
other overhead expenses(3)
restructuring costs(4)
acquisition-related costs
Total expenses
loss before income taxes
net loss
net loss attributable to CFI shareholders
non-controlling interests
(loss) earnings per common share (epS) – basic
(loss) earnings per common share (epS) – diluted
dividends per share
Book value per diluted common share(5)
Excluding significant items(6)
total expenses
income before income taxes
net income
net income attributable to CFi shareholders
epS – basic
epS – diluted
Balance sheet data
total assets
total liabilities
non-controlling interests
total shareholders’ equity
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
353,125
145,772
179,690
66,406
29,199
22,930
797,122
406,724
88,522
292,242
31,617
1,719
820,824
(23,702)
(18,775)
(16,819)
(1,956)
(0.31)
(0.31)
0.20
7.68
766,893
30,229
25,644
26,207
0.16
0.14
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
252,877
175,225
107,370
10,647
31,799
26,946
604,864
304,908
63,924
200,842
35,253
16,056
620,983
(16,119)
(21,346)
(20,307)
(1,039)
(0.33)
(0.33)
0.40
8.26
564,182
40,682
25,193
25,591
0.28
0.25
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
100,248
(29,453)
72,320
55,759
(2,600)
(4,016)
192,258
101,816
24,598
91,400
(3,636)
(14,337)
199,841
(7,583)
2,571
3,488
(917)
0.02
0.02
(0.20)
(0.58)
202,771
(10,453)
451
616
(0.12)
(0.11)
$ 4,603,502
3,538,170
16,169
1,049,163
$ 5,762,723
4,753,144
17,454
992,125
$ (1,159,221)
(1,214,974)
(1,285)
57,038
39.6%
(16.8)%
67.4%
n.m.
(8.2)%
(14.9)%
31.8%
33.4%
38.5%
45.5%
(10.3)%
(89.3)%
32.2%
(47.0)%
12.0%
17.2%
(88.3)%
6.1%
6.1%
(50.0)%
(7.1)%
35.9%
(25.7)%
1.8%
2.4%
(42.9)%
(44.0)%
(20.1)%
(25.6)%
(7.4)%
5.7%
(1) data is in accordance with iFrS except for book value per diluted common share, figures excluding significant items and number of employees.
(2) data includes the results from acquisitions made by Canaccord, and results from these acquisitions are included from the date each acquisition closed.
(3) Consists of trading costs, premises and equipment, communication and technology, interest, general and administrative, amortization of tangible and intangible assets, and development costs.
(4) Consists of staff restructuring costs and reorganization expenses related to the acquisition of CSHp, as well as restructuring costs related to the reorganization of certain Canadian trading and other operations.
(5) Book value per diluted common share is calculated as total common shareholders’ equity divided by the number of diluted common shares outstanding.
(6) net income and earnings per common share excluding significant items reflect tax-effected adjustments related to such items. See the Selected Financial information excluding Significant items
table on page 32 of the fiscal 2013 Md&a.
n.m.: not meaningful
REVENUE FOR FISCAL 2013
(C$ millions)
NET INCOME FOR FISCAL 2013
(C$ millions, excluding significant items)
DILUTED EARNINGS/LOSS PER SHARE
(Excluding significant items)
$803.6
$797.1
$114.1
$577.5
$604.9
$477.7
$1.40
$0.76
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
$42.0
$25.2
$25.6
$(1.4)
$(0.03)
$0.25
$0.14
CanaCCord FinanCial inC. 2013 annual report
3
Canaccord Financial at a Glance
Canaccord Financial inc. is the publicly traded parent company of
a group of financial services businesses that provide investment
banking, wealth management and correspondent services to
corporate, institutional and private clients. the two main operating
divisions of the Company are Canaccord Genuity and Canaccord
Genuity Wealth Management.
• Canaccord Financial Inc. is listed on the Toronto Stock Exchange (TSX) under the
symbol CF and on the london Stock exchange (lSe) under the symbol CF.
• Preferred shares listed on the TSX under the symbols CF.PR.A and CF.PR.C
• Publicly listed since 2004
Through its operating subsidiaries, Canaccord Financial has offices in 13 countries
3%
Asia-Pacific and Other
FISCAL 2013 REVENUE
BY GEOGRAPHY
20%
US
31%
UK and Europe
46%
Canada
CLIENT ASSETS – GLOBAL
(C$ millions)
FISCAL 2013 REVENUE
BY GEOGRAPHY
Canaccord operations
Strategic alliances
XX.X
X
.
X
X
XX.X
X
.
X
X
XX.X
XX.X
XX.X
EMPLOYEES BY GEOGRAPHY
(As at March 31, 2013)
X
.
X
X
X
.
X
X
3%
Asia-Pacific and Other
X
.
X
X
X
.
X
X
X
.
X
X
X
.
X
X
X
.
X
X
X
.
X
X
Canada
united States
Barbados
united Kingdom
ireland
France
Germany
June 30,
Switzerland
2011
italy
Mainland China
and Hong Kong
Dec. 31,
June 30,
Myanmar
2012
2012
Dec. 31,
2011
20%
5%
US
Asia-Pacific and Other
31%
12%
UK and Europe
US
46%
34%
Canada
Collins Stewart
UK and Europe
Wealth Management
Singapore
australia
49%
Canada
Canaccord Genuity
Wealth Management
Mar. 31,
2013
(Post CSHP
acquisition)
FISCAL 2013 REVENUE
BY GEOGRAPHY
FISCAL 2013 REVENUE
BY BUSINESS DIVISION
FISCAL 2013 REVENUE
BY GEOGRAPHY
FISCAL 2013 REVENUE
BY BUSINESS DIVISION
EMPLOYEES BY GEOGRAPHY
(As at March 31, 2013)
FISCAL 2013 REVENUE
BY BUSINESS DIVISION
EMPLOYEES BY GEOGRAPHY
(As at March 31, 2013)
EMPLOYEES BY DIVISION
(As at March 31, 2013)
3%
Asia-Pacific and Other
20%
US
31%
UK and Europe
46%
Canada
3%
Asia-Pacific and Other
3%
20%
Corporate and Other
US
5%
31%
30%
Asia-Pacific and Other
UK and Europe
Canaccord
12%
Genuity Wealth
46%
US
Management
Canada
34%
67%
UK and Europe
Canaccord Genuity
49%
Canada
3%
Corporate and Other
5%
Asia-Pacific and Other
30%
16%
12%
Canaccord
Corporate and Other
Genuity Wealth
US
Management
34%
37%
67%
UK and Europe
Canaccord
Genuity Wealth
Canaccord Genuity
49%
Management
Canada
47%
Canaccord Genuity
FISCAL 2013 REVENUE
BY BUSINESS DIVISION
EMPLOYEES BY DIVISION
(As at March 31, 2013)
EMPLOYEES BY DIVISION
(As at March 31, 2013)
3%
Corporate and Other
30%
Canaccord
Genuity Wealth
Management
67%
Canaccord Genuity
3%
Corporate and Other
30%
Canaccord
16%
Corporate and Other
Genuity Wealth
Management
37%
67%
Canaccord
Canaccord Genuity
Genuity Wealth
Management
47%
Canaccord Genuity
16%
Corporate and Other
37%
Canaccord
Genuity Wealth
Management
47%
Canaccord Genuity
GEOGRAPHIC DISTRIBUTION OF REVENUE
(Fiscal years, percent of total fiscal year revenue)
EMPLOYEES BY GEOGRAPHY
(As at March 31, 2013)
EMPLOYEES BY DIVISION
(As at March 31, 2013)
during fiscal 2013,
over 50% of revenue
was earned outside
of Canada.
15.3
16.3
14.3
17.4
67.1
67.3
11.5
13.8
74.5
8.8
13.7
75.7
31.3
5%
Asia-Pacific and Other
12%
US
34%
UK and Europe
19.5
45.9
UK and Europe
49%
Canada
US
Other
2009
2010
2011
2012
2013
Canada
4
CanaCCord FinanCial inC. 2013 annual report
16%
Corporate and Other
37%
Canaccord
Genuity Wealth
Management
47%
Canaccord Genuity
Canaccord Financial at a Glance
Canaccord Genuity is the global capital markets division
of Canaccord, and provides timely, actionable ideas to
corporate and institutional clients around the world.
• Global investment banking/corporate broking operations,
with capabilities to list companies on 10 stock exchanges
in six countries
• 23 offices worldwide
• Highly regarded M&A, advisory and restructuring practice
• Global sales and trading capabilities through trading
desks in five time zones
• Award-winning research team, with coverage
of approximately 1,000 companies
Canaccord Genuity Wealth Management is the division of
the business dedicated to providing individual investors,
charities and intermediaries with tailored investment
solutions, brokerage services and financial planning advice.
• Wealth management operations in Canada, the UK, Europe
and australia, catering to the specific needs of clients in
each of these markets
• C$26.8 billion of client assets, globally
• 178 Investment Advisory teams located across major
financial centres in Canada(1)
• 122 investment professionals located at six wealth
management offices in the uK and europe(1)
• 12 Investment Advisors located at two offices in Australia(1)
CANACCORD GENUITY –
GEOGRAPHIC REVENUE DISTRIBUTION
(Percent of total fiscal 2013 revenue generated
by Canaccord Genuity)
CANACCORD GENUITY WEALTH MANAGEMENT –
GEOGRAPHIC REVENUE DISTRIBUTION
(Percent of total fiscal 2013 revenue generated
by Canaccord Genuity Wealth Management)
4%
Asia-Pacific and Other
29%
US
29%
UK
38%
Canada
2%
Australia
39%
UK and Europe
59%
Canada
$537.6 million
in revenue during fiscal 2013
$179.2 million
of record advisory revenue
950+
employees
$26.8 billion
in assets under administration and management (1)
$235.1 million
of revenue
750+
employees
(1) as of March 31, 2013.
CanaCCord FinanCial inC. 2013 annual report
5
Fellow Shareholders:
in the last five years, we have grown Canaccord Financial to
become a leading global, mid-market investment bank. in the
process, we have developed a strong platform that delivers
exceptional service to our corporate, institutional and private
clients. We have also taken significant steps to diversify our
revenue streams both functionally and geographically. Most
importantly, we have differentiated ourselves competitively
by providing our clients with access to global markets,
perspectives and opportunities.
“ Over half of Canaccord Financial’s revenue now comes from
operations outside of Canada, significantly enhancing the diversity
and consistency of our revenue streams.”
COnSTRUCTInG A GLOBALLY InTEGRATED PLATFORm
our primary focus during fiscal 2013 was on achieving the
revenue synergies and cost savings identified during the
acquisition of Collins Stewart (CSHp), and ensuring our clients
receive the full benefit of our global services. integral to
achieving these goals were our efforts to enhance internal
communication and collaboration. introducing new global
leadership roles for our investment banking and research
divisions was essential to promoting this type of teamwork.
Clients across multiple geographies now have access to our
highly regarded research coverage of over 1,000 companies
globally. our agency market share in the uS and uK continues
to grow, as does our commission impact at the large voting
accounts. and most importantly, we are participating in
record levels of cross-border M&a and in a significantly
improved environment for underwriting activity in markets
outside of Canada.
DELIVERInG VALUE TO SHAREHOLDERS
During fiscal 2013, Canaccord earned $797 million in
revenue, an increase of 32% compared to the previous
year due largely to our expanded operations and revenue
growth outside of Canada. Meaningful growth in advisory and
commission revenue drove much of this increase.
During the year, we eliminated approximately $48 million of
operating costs from the combined platforms of Canaccord
and CSHp. While expenses grew proportionately with our
growing business, they were significantly lower than the
historical blended operating costs of both businesses prior
to integration and the implementation of our cost saving
initiatives. excluding acquisition-related costs, restructuring
costs and other significant items(1), total expenses for the year
were $767 million. We’re committed to continuing our cost
containment initiatives in the year ahead, as we see further
opportunities to increase the efficiency of our business.
excluding significant items(1), the Company earned $25.6 million
of net income, or $0.14 per diluted share, during fiscal 2013.
STROnG BALAnCE SHEET
With $491 million of cash and cash equivalents, and
$394 million of working capital, our balance sheet remains
strong and liquid, and well capitalized for growing business
levels. We distributed $0.20 in dividends per common
share to shareholders during the fiscal year – a testament
to our board’s confidence in the direction and outlook of
the Company.
6
CanaCCord FinanCial inC. 2013 annual report
letter to Shareholders
GLOBAL CAPITAL mARKETS CAPABILITIES
THE VIEW AHEAD
On a global basis, Canaccord Genuity generated $538 million
of revenue, an increase of 44% compared to the previous
year. this division continues to be a primary driver of our
business, earning more than 67% of the Company’s total
revenue. the success of this division was due largely to its
successful, and growing, M&a and advisory practice. at
$179 million, Canaccord Genuity recorded its third consecutive
year of record advisory revenue.
We believe the pressure on global commodity prices will
continue this year, particularly in precious metals. We also
expect that regulatory burdens will continue to increase in
all of our geographies. Most importantly, we have taken the
right steps to prepare our business to contend with its varied
challenges. Canaccord Genuity will continue to diversify its
business with an increased emphasis on global service and
global opportunities.
the impact of our expansion efforts was demonstrated this
year in a number of key geographies. in the uK, we led more
equity transactions during calendar 2012(2) than any other
investment bank. In Asia, we’ve established Canaccord Genuity
as the market-leading investment bank on the junior Singapore
stock exchange. and in the uS, we’re taking a lead-manager
mentality to grow our investment banking business, and have
significantly enhanced our trading volumes and commissions.
In Canada, Canaccord Genuity Wealth Management (CGWM)
will be focused on returning to profitability by improving fee-
based revenue streams through enhanced sales management
and training. CGWM in the UK and Channel Islands will
continue to pursue organic asset growth and will also be
opportunistic for accretive, bolt-on acquisitions. and we will
also look to markets like Singapore and australia for additional
expansion of our global wealth management presence.
While challenging markets continued to suppress resource
sector investment banking activity, our broader platform,
with its diversification into other sectors, continued to perform
well. During fiscal 2013, Canaccord Genuity led or co-led
111 transactions worldwide(3), raising over $3.7 billion for
corporate issuers. including these transactions, the Company
participated in 382 transactions, with gross proceeds of
$31.4 billion.
TO US THERE ARE nO FOREIGn mARKETS
as our new slogan says, “to us there are no foreign markets”.
this means that we are committed to providing each of
our clients, regardless of geography or business type, with a
global perspective and service orientation. it also demands
significant amounts of effort, co-operation and focus from
our people.
Fiscal 2013 saw us seamlessly integrate the largest
acquisition in our company’s history. the success of this
initiative would not be possible without the dedication and
hard work of our talented employees – most of whom are
fellow shareholders. i want to take this opportunity to thank
them for their efforts this year, and for the contributions they
continue to make in helping us establish Canaccord Financial
as the leading mid-market investment bank globally.
Kind regards,
Paul D. Reynolds
president & Chief executive officer
May 2013
STREnGTHEnInG OUR WEALTH mAnAGEmEnT DIVISIOn
Fiscal 2013 was a pivotal year for our global wealth
management division. We increased our assets under
management in the UK and Europe by 22% through organic
growth and the acquisition of eden Financial. We grew our
australian business through targeted recruitment and the
appointment of a new head of wealth management. But
most significantly, we implemented an important strategic
change within our Canadian wealth management business,
in order to strengthen our operations in this changing market
and better align our service offering with the shifting needs
of Canadian investors.
as part of our goal to better integrate aspects of our global
operations, we undertook a global rebranding of our wealth
management business subsequent to quarter end. on May 1,
2013, all wealth management operations were branded
Canaccord Genuity Wealth Management.
On a global basis, Canaccord Genuity Wealth Management
generated $235 million in revenue during fiscal 2013, a
meaningful increase from the year earlier due to the addition
of our uK platform at the end of last year. Worldwide,
Canaccord Genuity Wealth Management now manages and
administers over $26.8 billion of client assets.
(1) Figures excluding significant items are non-iFrS measures and include costs recognized in
relation to both prospective and completed acquisitions, amortization of intangible assets
and restructuring costs. See page 23 of the fiscal 2013 Md&a for detailed information.
(2) Transactions over $1.5 million. Company information.
(3) thomson reuters. Bookrunners: 1/1/2012–31/12/2012. includes all domestic and
international deals and rights issues. SDC code C4c1r.
CanaCCord FinanCial inC. 2013 annual report
7
Canaccord’s investment banking and capital markets division, Canaccord Genuity, was a
significant driver of performance during fiscal 2013. With record global advisory revenue,
record revenue from our uK and europe operations and record revenue from our uS
business, this year demonstrated the power of the platform Canaccord has built through
its expansion strategy over the last three years.
Today, Canaccord Genuity provides investment banking, advisory, sales and trading, research and fixed income services to
corporate and institutional clients in 12 countries worldwide. We pride ourselves on our ability to provide clients with a genuinely
global perspective on opportunities to grow the value of their businesses and investments. Most importantly, our professionals
foster long term client relationships through a deep understanding of client needs, while leveraging the expertise, relationships
and support that only a global platform provides.
CANACCORD GENUITY REVENUE
BY ACTIVITY – GLOBAL
CANACCORD GENUITY REVENUE – GLOBAL
(C$ millions, fiscal years)
Fiscal 2013
Fiscal 2012
2%
Interest and Other
12%
Principal Trading
23%
Investment
Banking
33%
Advisory
30%
Commission
2%
Interest and Other
3%
Principal Trading
36%
Investment
Banking
29%
Advisory
30%
Commission
$538.6
$537.6
$363.6
$373.5
$277.4
2009
2010
2011
2012
2013
8
CanaCCord FinanCial inC. 2013 annual report
Fiscal 2013
Interest and Other
X%
X%
Principal trading
XX%
Commission
XX%
Advisory
XX%
Investment banking
M ASX HKeX SGX TSX NYSE LSE AI With offices in 23 cities worldwide, Canaccord Genuity is
uniquely positioned to provide our corporate and institutional
clients with insightful ideas about opportunities in both
domestic and international markets.
paris
M ASX HKeX SGX TSX NYSE LSE AI Canaccord Genuity
Canaccord Genuity
Delivering the Value of Our Global Platform to Clients
in today’s economy, a deep understanding of global dynamics and opportunities is required to make
informed decisions about investments and corporate strategies. With over 950 investment banking
and capital markets professionals located in 12 countries, Canaccord Genuity is exceptionally well
positioned to provide our corporate and institutional clients with insightful and actionable ideas from
around the world. our globally integrated capital markets platform is a pillar of Canaccord’s success
and a key differentiator amongst our competition.
the targeted growth initiatives the Company undertook the
last several years to grow Canaccord Genuity’s capabilities
were demonstrated in the division’s results in fiscal 2013.
On a global basis, Canaccord Genuity earned $537.6 million
in revenue, an increase of 44% compared to the previous
fiscal year and a near record for the division. importantly,
we were able to achieve this in less than optimal market
conditions in many of our geographies.
during fiscal 2013, a focused effort was made to more
efficiently deliver the benefits of Canaccord Genuity’s global
platform to clients. through the appointment of new roles,
enhanced systems integration and the expansion of our
service distribution, we completed many initiatives to ensure
our clients receive the full value of our investment banking
and capital markets reach.
two new global roles were implemented during the year to
oversee enhanced communication and coordination between
regions: Phil Evershed was appointed Global Head of Investment
Banking and Steve Buell was appointed Canaccord Genuity’s
Global Head of Research. These important roles are designed
to facilitate ongoing collaboration between regional teams,
ensuring all perspectives and opportunities are discussed
for our clients’ benefit.
Canaccord Genuity also grew its research capabilities to offer
investment perspectives that draw on our expertise in key
industries throughout the world. today, we provide research
coverage on over 1,000 companies globally. importantly, during
fiscal 2013 we expanded our distribution capabilities to ensure
that the full range of our research products reaches all of our
clients in Canada, the uS, the uK, europe and australia.
the benefits of our cross-border coordination were most
noticeable in our advisory practice, where global sector teams
and international transactions led to the department generating
its third consecutive year of record revenue. At $179.2 million,
revenue from global advisory activities grew 67% compared
to the previous record set last year. this speaks to the
growing importance of our expanded M&a and restructuring
expertise, and the value our clients are recognizing through
our integrated investment banking approach.
With expertise in 18 key sectors of the global
economy and professionals located in 23 cities
worldwide, Canaccord Genuity delivers exceptional
value to clients through a deep understanding
of global issues and opportunities.
ANOTHER RECORD YEAR FOR
ADVISORY REVENUE – GLOBAL
(C$ millions, fiscal years)
$179.2
$107.3
$84.5
$51.5
$39.2
2009
2010
2011
2012
2013
209%
increase in revenue
from uK and europe
operations compared
to last year
93%
increase in revenue
from uS operations
compared to last year
62%
of Canaccord Genuity’s
revenue was generated
outside of Canada
during fiscal 2013
67%
increase in global
advisory revenue,
compared to the
previous record set
last year
10
CanaCCord FinanCial inC. 2013 annual report
During fiscal 2013, Canaccord Genuity’s
underwriting activity was ranked 25th
of all investment banks worldwide, based
on proceeds raised.
EQUITY UnDERWRITInG
Rank
Investment bank – bookrunner
transaction
proceeds + Market
share
(%)
over-allotment
(US$ millions)
1 Goldman Sachs & Co.
$ 57,740.2
12.3
2 Citi
3 Morgan Stanley
45,246.8
43,708.0
4 Bank of America Merrill Lynch
40,649.3
5 JP Morgan
6 Barclays
7 Deutsche Bank
8 UBS
9 Credit Suisse
10 Wells Fargo & Co.
11 RBC Capital Markets
12 HSBC Holdings PLC
13 Jefferies & Co. Inc.
14 BMO Capital Markets
15 TD Securities Inc.
16 Macquarie Group
17 Nomura
38,766.8
32,509.9
31,368.0
30,657.5
28,137.3
10,293.8
9,093.0
6,235.5
4,062.8
3,196.3
2,924.0
2,584.8
2,333.2
18 Raymond James Financial Inc.
2,263.4
19 CIMB Group Sdn Bhd
20 Banco BTG Pactual SA
2,257.9
2,205.1
21 Daiwa Securities Group Inc.
2,151.8
22 Allen & Co. Inc.
23 CIBC World Markets Inc.
1,961.7
1,738.9
24 Kohlberg Kravis Roberts & Co.
1,620.4
25 Canaccord Genuity
26 DBS Group Holdings
27
Investec
28 Scotiabank
29 Santander
30 Robert W. Baird & Co. Inc.
1,422.8
1,413.1
1,382.9
1,327.6
1,260.3
1,259.3
9.6
9.3
8.6
8.2
6.9
6.7
6.5
6.0
2.2
1.9
1.3
0.9
0.7
0.6
0.6
0.5
0.5
0.5
0.5
0.5
0.4
0.4
0.3
0.3
0.3
0.3
0.3
0.3
0.3
Source: Thomson Reuters – Global equity offering league table, 2012. Equal apportionment
to each bookrunner.
Canaccord Genuity
Canaccord Genuity
Frankfurt
COmPREHEnSIVE, DIVERSIFIED
SECTOR COVERAGE
Canaccord Genuity’s team of investment banking,
research, and sales and trading professionals are
dedicated to providing clients with actionable ideas
to leverage opportunities in 18 key sectors of the
global economy:
aerospace & defense
agriculture
Cleantech & Sustainability
Consumer & retail
energy
Financials
Healthcare & life Sciences
infrastructure
leisure
Media & telecommunications
Metals & Mining
paper & Forestry products
real estate & Hospitality
Support Services
technology
transportation & industrials
investment Companies
private equity
CanaCCord FinanCial inC. 2013 annual report 11
Canaccord Genuity
Canada
Canaccord Genuity’s traditional stronghold, Canada, faced challenging market conditions
during fiscal 2013, but despite this environment our Canadian operations continued to
contribute prominently to the division’s results – providing 38% of Canaccord Genuity’s
total revenue.
Vancouver
In Canada, Canaccord Genuity generated $204.3 million of
revenue during fiscal 2013. Much of our success in Canada
can be attributed to advisory activity this year. in fact, fiscal
2013 marked the third consecutive year the Canadian advisory
practice earned record revenue. At $90.0 million, advisory
revenue was 14% higher than the previous record set last
year. Several large, high-profile Canadian transactions led by
Canaccord Genuity this year highlight the value our clients
are recognizing from our deep expertise and global investment
banking reach:
• Viterra Inc. on its acquisition by Glencore International plc
RECORD ADVISORY REVENUE – CANADA
(C$ millions, fiscal years)
$90.0
$78.8
$62.9
$14.9
$5.6
• Yellow Media Ltd. on its C$2.8 billion recapitalization
2009
2010
2011
2012
2013
• Primaris on its hostile defence and sale to H&R REIT
and KingSett Capital
underwriting activity remained fairly subdued in Canada
for much of fiscal 2013. Despite this, Canaccord Genuity
led or co-led 59 transactions in Canada over $1.5 million,
raising over $1.4 billion for clients. Including transactions
we led, Canaccord Genuity participated in 288 transactions
in Canada, with total proceeds of $23.7 billion.
the quality of our Canadian research was also evident this
year, with the firm and numerous analysts winning industry
awards. Canaccord Genuity was recognized as Canada’s top
independent investment dealer by the 2012 Brendan Wood
international Canadian institutional equity report for
providing the top investment ideas, and ranked fifth of all
investment dealers. Individually, Canaccord Genuity’s
Canadian research analysts were awarded nine top-five
rankings for their research in specific sectors. in particular,
we were ranked first for our coverage of banks and first for
our coverage of insurance companies.
12
CanaCCord FinanCial inC. 2013 annual report
In Canada, Canaccord Genuity achieved its third
consecutive record year for advisory revenue,
generating $90.0 million of revenue.
m&A AnD ADVISORY RAnKInGS
(C$ millions, fiscal 2013. Transactions announced and completed
in Canada by Canadian investment banks)
rank advisor
total
deal size
average
deal size
deal
count
1 RBC Capital Markets
$ 67,289
$ 701
2 BMO Capital Markets
52,620
797
3 Scotiabank
4 TD Securities
5 CIBC
36,812
1,023
35,398
30,924
6 Canaccord Genuity Corp.
17,953
7 National Bank Financial Inc. 17,074
8 GMP Securities
9 FirstEnergy Capital Corp.
7,325
4,602
96
66
36
45
42
33
25
27
10
787
736
544
683
271
460
Canaccord Genuity
UK and Europe
Canaccord Genuity significantly strengthened its market position in the UK and Europe in the
last year, due largely to the expansion activities we undertook at the end of fiscal 2012. today,
Canaccord Genuity has the third most corporate clients in the UK of any investment bank and
is capturing more trading market share than ever before.
dublin
REVENUE GROWTH – UK AND EUROPE
(C$ millions, fiscal years)
$158.1
$82.5
$72.9
$92.7
$51.2
2009
2010
2011
2012
2013
ALL UK EQUITIES: BOOKRUnnERS
(Calendar 2012)
Rank Managing bank or group
no. of
issues
total
(US$ millions)
Share
(% value)
1 Canaccord Genuity
14 $ 552.34
2 JP Morgan
3 UBS
4
Investec
5 Oriel Securities
6 Barclays
7
Bank of America
Merrill Lynch
8 Citigroup
9 Goldman Sachs
10 Morgan Stanley
13
2,856.86
8
7
7
6
4
4
4
3
1,391.94
1,268.53
501.34
636.00
2,191.03
1,431.26
615.93
1,026.56
3.4
17.4
8.5
7.7
3.1
3.9
13.4
8.7
3.8
6.3
Total
193
16,376
Source: thomson reuters. Bookrunners: 1/1/2012–31/12/2012. includes all domestic and
international deals and rights issues. SDC code C4c1r.
the acquisition of Collins Stewart Hawkpoint in March 2012
bolstered the capabilities of Canaccord Genuity in the UK and
europe immensely, and this was demonstrated in our fiscal
2013 results. The division earned $158.1 million in revenue
in the region, more than doubling the revenue generated by
our uK operations in the previous year.
a key focus for management during fiscal 2013 was further
integrating aspects of our investment banking practice in
this important region. By unifying our corporate broking and
advisory teams into one combined full-service investment
banking practice, our corporate clients now benefit from a
dedicated, full-service investment banking team that caters
to the needs of companies in all of their growth and corporate
development activities.
Canaccord Genuity’s sales and trading team in the UK has
also significantly strengthened its market position by better
aligning our securities business with changing client demands
and the Company’s global institutional coverage. trading and
commission levels steadily improved throughout the year,
despite overall market volume declines in the region, which
represents a meaningful gain in market share.
We expect additional cost and revenue synergies can still
be obtained from the acquisition we completed last year,
and have made strong progress in capturing these for
shareholders. a continued emphasis on improving operating
efficiency in the uK and europe was evident during fiscal
2013, with projects focused on removing excess capacity
from the business, lowering supplier costs and extracting
further revenue synergies from the expanded uK platform.
Canaccord Genuity was the most active
investment bank in the uK for number of
transactions led or co-led during calendar 2012.
CanaCCord FinanCial inC. 2013 annual report 13
Canaccord Genuity
United States
in the past year, we have significantly strengthened our uS market position, refocused our
investment banking practice towards lead mandates and gained important operating efficiencies
through continued efforts to lower operating expenses. Canaccord Genuity’s expanded US platform
began to demonstrate its potential in fiscal 2013 with record revenue, due largely to trading
market share gains and our growing uS advisory practice.
In the United States, Canaccord Genuity generated
$153.4 million in revenue during fiscal 2013 – a 93%
increase compared to the previous year. the much improved
capital markets performance of our uS business was due
largely to the expansion initiatives Canaccord undertook last
year to grow the scale of our uS operations. a focused effort
on better aligning the services of this business with our global
capabilities helped the investment banking practice secure
more lead mandates throughout the year, and delivered the
support and global reach necessary to grow advisory revenue.
during fiscal 2013, revenue from advisory activities tripled
from the previous year, to $21.3 million.
Canaccord Genuity’s coverage of the US Healthcare and
life Sciences, technology, and Cleantech and Sustainability
sectors is particularly strong. 91% of the capital raising
transactions led or co-led by Canaccord Genuity in the
US during the year and 82% of investment banking revenues
earned during fiscal 2013 were from these sectors.
our sales and trading capabilities were also bolstered
materially through the acquisition of CSHp, substantially
growing our institutional market share and revenue from
trading activities throughout fiscal 2013. the addition
of the International Equities Group in March 2012, who
specialize in american depositary receipts (adr) and
electronic trading, also contributed significantly to
principal trading revenue.
a continued emphasis on improving operating efficiency
in the uS began to show progress in the last six months
of the fiscal year, with expense ratios improving materially
through efforts to consolidate real estate, renegotiate supplier
contracts and better align staffing levels. a focus on
improving operating margins in this business will continue
to be a priority in the year ahead.
Canaccord Genuity’s expanded US platform
generated $40.1 million of revenue through
principal trading activities – due largely to the
Company’s International Equities Group (IEG).
New York
200%
increase in advisory revenue compared
to the previous year
28.5%
of Canaccord Genuity’s global revenue
was generated in the uS
250+
employees
RECORD US REVENUE
(C$ millions, fiscal years)
$153.4
$106.2
$97.6
$74.8
$79.5
2009
2010
2011
2012
2013
14
CanaCCord FinanCial inC. 2013 annual report
Canaccord Genuity
Asia
Canaccord Genuity has developed a unique market position in Asia, as the market-leading
investment bank on Singapore’s junior exchange – the SGX Catalist. As well, our
experienced investment banking professionals in Hong Kong and mainland China
continue to deliver asia-based corporate development ideas to corporate clients globally.
our asia-based capital markets and investment banking
operations were more closely integrated during fiscal 2013,
ensuring clients in the region benefit from the full value of
our Asia platform. Today, Canaccord Genuity has 39 employees
located in Hong Kong, Beijing and Singapore.
in Hong Kong, our investment banking team focuses largely
on advisory services, and continues to find opportunities
for corporate clients both in the region and internationally.
Cross-border transactions continue to be a key focus for
this team, as they leverage their local expertise and contacts
with the support and network of their global investment
banking colleagues.
Our 14-person Singapore office has firmly established the
Company as the leading investment bank on Singapore’s
junior exchange, the SGX Catalist, sponsoring 22 companies
on this growth-oriented market. Having led more transactions
than any other investment bank on the SGX Catalist,
Canaccord Genuity has developed approximately 38% market
share on the exchange(1).
(1)
Transactions led by Canaccord Genuity compared to total transactions on Catalist, 2010–2012.
Australia
Singapore
38%
market share on Singapore’s junior
exchange, the SGX Catalist
In Australia, Canaccord Genuity’s focus on growth-oriented companies continues to build
momentum. during fiscal 2013, the business expanded its sector coverage to include
life Sciences and welcomed several highly experienced investment banking professionals.
With a full-service offering of investment banking, research
and sales and trading services, clients of Canaccord Genuity
in australia benefit from our local market expertise and the
support of our global platform. Today, Canaccord Genuity’s
10 investment banking professionals in Sydney and Melbourne
provide corporate clients with the ability to list on the ASX
or nine other exchanges globally through Canaccord’s global
platform. During fiscal 2013, Canaccord Genuity led or
co-led 19 capital raising transactions in Australia, raising
gross proceeds of AUD$213 million for clients. With proven
experience in the resource and industrial sectors, this capital
markets business expanded its sector coverage this year
through the addition of life Sciences coverage.
research coverage published by our nine analysts in australia
is now also available to Canaccord clients in other markets,
providing insightful analysis of over 75 companies in this
region. our sales and trading team here not only have strong
institutional relationships in australia and asia, but have also
developed important relationships with accounts in north
america through a dedicated sales team focused on delivering
australian product to north american clients. and with a
unique ability to leverage our worldwide distribution network,
our australian team has demonstrated success placing client
shares with investors in other foreign markets.
75+
australian companies covered by
Canaccord Genuity research analysts
CanaCCord FinanCial inC. 2013 annual report 15
Canaccord Genuity Wealth Management provides individual investors, institutions and charities
with investment and financial planning advice, from 24 offices worldwide. Clients benefit from
our personalized service tailored to the needs of investors in each region, combined with the
international reach and financial backing of a global financial institution.
Drawing on the Company’s global network, Canaccord Genuity Wealth Management professionals evaluate and interpret
investment opportunities from both local and international markets to deliver insightful solutions to clients in Canada, the
uK, europe and australia. We provide comprehensive investment and financial management services, catering to the specific
needs of investors in each of the geographies we operate in. on a global basis, Canaccord’s wealth management division now
manages and administers over $26 billion of client assets and offers investment advice through over 312 Investment Advisory
teams, investment professionals and fund managers.
Canaccord’s wealth management division was rebranded Canaccord Genuity Wealth Management on May 1, 2013. Prior to
this, Canaccord’s wealth management businesses were known as Canaccord Wealth Management (in Canada and Australia),
Collins Stewart Wealth Management (in the UK and offshore locations), and Eden Financial (in the UK).
GLOBAL WEALTH MANAGEMENT REVENUE
(C$ millions, fiscal years)
$233.0
$235.1
$201.3
$187.0
$172.5
2009
2010
2011
2012
2013
$26.8 billion
in assets under administration and management (1)
24
wealth management offices worldwide
769
employees in four geographies
(1) as at March 31, 2013.
16
CanaCCord FinanCial inC. 2013 annual report
M ASX HKeX SGX TSX NYSE LSE AI Canaccord Genuity Wealth Management provides clients with
the focused, personalized service they expect from a local
investment manager, along with the benefits and backing of
a global financial institution.
toronto
CanaCCord FinanCial inC. 2013 annual report 17
M ASX HKeX SGX TSX NYSE LSE AI Canaccord Genuity Wealth Management
UK and Europe
In the UK and Europe, Canaccord Genuity Wealth Management (CGWM) had a very successful year
and exceeded its stated goal of reaching £10 billion of assets under management through a
combination of acquisition activity and organic growth. In this highly competitive market, CGWM
continues to win awards for the quality of its services and the performance of its portfolios.
Canaccord Genuity Wealth Management generated $91.8 million
in revenue during fiscal 2013, and earned $13.3 million in net
income before tax, excluding acquisition-related expenses. this
is the 15th consecutive year this business has been
meaningfully profitable, and its recent growth of assets under
administration demonstrates the momentum we continue to
build in the uK and offshore wealth management markets.
Fee-based revenue grew to 61% during fiscal 2013 – an increase
of six percentage points from 55% last year. Fee-based activities
produce a steady, recurring revenue stream and are considered
to be an important contributor to this business’ performance.
Assets under management increased to $15.9 billion at the end
of the fiscal year, due in part to the acquisition of eden Financial’s
wealth management business in October 2012. CGWM gained
35 professionals through this expansion, and £835 million
of client assets on behalf of 2,500 high-net worth private and
family accounts. the integration of this business was completed
during the year. Today all CGWM clients benefit from access to
the same financial solutions, support and personalized approach
to wealth management.
We believe opportunities to further strengthen our uK wealth
management platform will occur over the next several years.
prospects to acquire new teams of investment professionals are
expected as regulatory changes implemented in the uK prompt
industry consolidation.
FEE-BASED REVENUE AS A PERCENT OF TOTAL REVENUE –
UK AND EUROPE
(Fiscal quarters)
62.0%
62.3%
61.9%
62.8%
55.5%
52.4%
51.6%
49.1%
57.9%
Linear trend
Recurring %
Q4/11
Q1/12
Q2/12
Q3/12
Q4/12
Q1/13
Q2/13
Q3/13 Q4/13
Canaccord Genuity Wealth Management provides
highly tailored wealth management, stockbroking
and portfolio management services to individual
investors, institutions and charities from six offices,
located in london, the Channel islands, the isle of
Man and Geneva.
RECEnT AWARDS
Portfolio management
Defaqto 5 Star Rating – discretionary portfolio Management Service 2013
Incisive media Gold Standard – discretionary portfolio Management – 2012 Winner
money marketing Financial Services Awards – Best discretionary adviser – 2012 Winner
CITY OF LONDON
Wealth Management Award
WINNER 2013
BEST ADVISORY SERVICE
CITY OF LONDON
Wealth Management Award
WINNER 2012
BEST ADVISORY SERVICE
© City of London Wealth Management Awards Limited 2013
© City of London Wealth Management Awards Limited 2012
Stockbroking
City of London Wealth management Awards – Best advisory Service – 2013 Winner
City of London Wealth management Awards – Best advisory Service – 2012 Winner
Wealth management
WealthBriefing Europe Awards 2013 – Best M&a deal – 2013 Winner
Finance monthly Deal maker of the Year Awards – 2012 Winner
Citywealth Offshore Awards – UK Offshore Investment Manager of the Year – 2013 Runner up
18
CanaCCord FinanCial inC. 2013 annual report
65
60
55
50
45
40
Canaccord Genuity Wealth Management
Canada
Fiscal 2013 was an important year for Canaccord’s Canadian wealth management business, as we
refocused our operations, enhanced our support systems, and expanded our training programs to
cater to the changing needs of Canadian investors. the business has made significant progress in
providing comprehensive financial planning solutions, and is well positioned to leverage
opportunities in the maturing Canadian market.
In order to strengthen Canaccord Genuity Wealth Management’s
national platform in Canada, the business refocused its
operations on 16 core locations and closed offices in smaller,
more challenging markets. as expected, the impacts of this
strategy decreased assets under administration during fiscal
2013; however, it was a calculated decision, made in order to
strengthen the overall platform and allow us to invest in areas
of the business we see significant opportunity in.
as part of our repositioning of the Canadian wealth management
business, a strong focus was directed towards delivering
comprehensive financial planning solutions, to complement
our existing strong brokerage services. as part of this effort,
revenue from fee-based services increased to an all-time record
high within our Canadian business, to 26.2% of total revenues,
enhancing the consistency of the business’ revenue stream.
Client interest in conservative portfolio management and etF
solutions also continued to increase during the year.
in addition, the business significantly bolstered its training
programs throughout fiscal 2013, and is committed to
providing ongoing, high quality education and support to all
advisors to assist them in providing the best advice and
solutions to clients. over 3,000 advisor training engagements
occurred through Canaccord university last year, with nearly
170 professional development events and webinars.
Fee-based revenue grew to 26.2% of total revenue
during fiscal 2013 – a record high for Canaccord’s
Canadian wealth management business.
ASSETS UNDER MANAGEMENT
(C$ millions, fiscal years)
$835.0
$677.0
$546.0
$445.0
$393.0
FEE-BASED REVENUE AS A PERCENT OF TOTAL REVENUE
(Fiscal years, percent of total CGWM Canada revenue)
26.2%
18.9%
16.9%
12.8%
13.0%
Linear trend
Recurring %
2009
2010
2011
2012
2013
2009
2010 2011 2012 2013
27.777787
25.555564
23.333340
21.111117
18.888894
16.666670
14.444447
12.222223
10.000000
CAnACCORD GEnUITY WEALTH mAnAGEmEnT –
AUSTRALIA
in australia, Canaccord’s growing wealth management
business now has 12 investment advisors located in
Melbourne and Sydney. the business continues to expand at
a meaningful rate, with assets under management increasing
by 48% during fiscal 2013, to $451 million.
Calgary
CanaCCord FinanCial inC. 2013 annual report 19
The Evolution of Our Business
today, companies, investors and institutions think globally, and we’ve built a platform to cater
to the growing expectations of our valued clients.
Canaccord has always made the client experience a top priority, and all of our growth initiatives over the last several years were
completed to ensure we remain relevant to the changing needs and expectations of our corporate, institutional and private
clients. our expansion initiatives have ensured our clients benefit from insightful and actionable ideas from around the globe.
2013
noVeMBer 2012 (uK)
Acquisition of Eden Financial’s wealth
management business
Changes to the uK wealth management industry have
provided larger wealth management firms with the
opportunity to gain scale. Canaccord’s acquisition of
eden Financial’s wealth management business expanded
the Company’s existing wealth management platform in
this important market.
noVeMBer 2011 (australia and Hong Kong)
Acquisition of a 50% interest in BGF Equities
Canaccord’s investment in australia provides the
Company with a strong foothold for further expansion in
this important market. With both capital markets and
wealth management offices in australia, we view our
australian operations as an important component of
Canaccord’s long term strategy.
april 2010 (Canada)
Acquisition of Genuity Capital markets
an acquisition that significantly strengthened our
investment banking practice in Canada, Genuity Capital
Markets enhanced Canaccord’s sector coverage and
advisory capabilities.
20
CanaCCord FinanCial inC. 2013 annual report
MarCH 2012 (uK, europe, uS and Singapore)
Acquisition of Collins Stewart Hawkpoint plc (CSHP)
Canaccord’s largest acquisition, the addition of CSHp’s platform
doubled the size of the Company’s uK and uS capital markets
and investment banking business, grew Canaccord’s wealth
management operations into the uK and europe, and expanded
our capital markets reach into Singapore.
JANUARY 2011 (China)
Acquisition of The Balloch Group
the Company’s expansion into asia began with the acquisition
of The Balloch Group – a boutique advisory firm based in
mainland China. this expansion initiative was an integral part
of growing our corporate relationships in this important market.
JANUARY 2006 (US)
Acquisition of Adams Harkness
the acquisition of this Boston-based investment dealer provided
Canaccord’s first foothold in the uS market, and significantly
grew Canaccord’s sector coverage with key expertise in the
technology, life Sciences and Consumer sectors.
2006
Corporate Values
Seven key values drive Canaccord employees and management in delivering results to our
shareholders, clients and community. they support our unwavering commitment to building
lasting client relationships, creating shareholder value and generating innovative ideas.
pursuing and living up to these values is a responsibility we take great pride in.
1
2
3
4
5
6
7
We put our clients first.
We develop deep trust with our clients through detailed consultation, appropriate investment
ideas and value-added services.
A good reputation is our most-valued currency.
integrity and respect for client confidentiality are the basis of all our relationships.
Ideas are the engine of our business.
our ability to generate original, quality ideas – for clients and for ourselves – positions us ahead
of the competition globally.
We are an entrepreneurial, hard-working culture.
We believe that highly qualified, motivated professionals working together in an entrepreneurial
environment results in superior client service and shareholder value.
We strive for client intimacy.
the more detailed our understanding of our clients’ needs and objectives, the better positioned
we are to meet them.
We are dedicated to creating exemplary shareholder value.
We are committed to aligning the interests of our people with fellow Canaccord shareholders
through share ownership. We believe that ownership motivates the ideas and efforts that lead
to value creation.
To us there are no foreign markets.
our clients benefit from our truly global perspective. We deliver insightful, actionable ideas from both
local and international markets through our continued pursuit and evaluation of global opportunities.
CanaCCord FinanCial inC. 2013 annual report
21
Shareholder Information
Corporate Headquarters
Shareholder Administration
Annual General Meeting
For information about stock transfers,
address changes, dividends, lost stock
certificates, tax forms and estate
transfers, contact:
COMPUTERSHARE
INVESTOR SERVICES INC.
100 University Avenue, 9th Floor
Toronto, ON M5J 2Y1
Telephone toll free (North America):
1.800.564.6253
International: 514.982.7555
Fax: 1.866.249.7775
Toll free fax (North America): or
International fax: 416.263.9524
Email: service@computershare.com
Website: www.computershare.com
Offers enrolment for self-service
account management for
registered shareholders through
the Investor Centre.
Eligible Dividend Designation:
Income Tax Act (Canada)
In Canada, the Federal Income Tax
Act, and most provincial income tax
legislation, provides lower levels of
taxation for Canadian individuals
who receive eligible dividends. All of
the common share dividends paid
by Canaccord Financial Inc. (or its
predecessor Canaccord Capital Inc.)
since 2006 are eligible, as are common
share dividends paid hereafter unless
otherwise indicated.
The Annual General Meeting
of shareholders will be held on
Wednesday, August 7, 2013 at
10:00 a.m. (Eastern time)
at the TMX Broadcast Centre
The Exchange Tower
130 King Street West
Toronto, ON, Canada
A live Internet webcast will also be
available for shareholders to view.
Please visit the webcast events page at
www.canaccordfinancial.com for more
information and a direct link.
To view Canaccord’s regulatory filings on
SEDAR, please visit www.sedar.com.
Financial Information
For present and archived financial
information, please visit
www.canaccordfinancial.com
Auditor
Ernst & Young LLP
Chartered Accountants
Vancouver, BC
Fees Paid to
Shareholders’ Auditors
For fees paid to shareholders’ auditors,
see page 47 of the fiscal 2013 Annual
Information Form.
Qualifi ed Foreign
Corporation
CFI is a “qualified foreign corporation”
for US tax purposes under the Jobs &
Growth Tax Reconciliation Act of 2003.
Editorial and Design
Services
The Works Design Communications Ltd.
STREET ADDRESS
Canaccord Financial Inc.
609 Granville Street, Suite 2200
Vancouver, BC, Canada
MAILING ADDRESS
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC V7Y 1H2, Canada
Website
www.canaccord.com
General Shareholder
Inquiries and Information
INVESTOR RELATIONS
161 Bay Street, Suite 3000
Toronto, ON, Canada
Telephone: 416.869.7293
Fax: 416.947.8343
Email: investor.relations@canaccord.com
Media Relations and
Inquiries from Institutional
Investors and Analysts
Scott Davidson
Executive Vice President, Global Head
of Corporate Development and Strategy
Telephone: 416.869.3875
Email: scott.davidson@canaccord.com
This Canaccord Financial 2013 Annual
Report is available on our website at
www.canaccordfinancial.com. For a
printed copy please contact the Investor
Relations department.
Stock Exchange Listing
TSX: CF
LSE: CF.
22
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Canaccord Financial Inc. is the publicly traded parent company
to Canaccord’s group of companies. Canaccord Financial Inc.
is listed on the TSX (as CF) and LSE (as CF.).
Canaccord Genuity provides global investment banking, M&A,
advisory, research, sales and trading services to Canaccord’s
institutional and corporate clients. Canaccord Genuity has offi ces
in Canada, the US, the UK, France, Germany, Ireland, Italy,
Hong Kong, mainland China, Singapore, Australia and Barbados.
Canaccord Genuity Wealth Management is a global provider
of wealth management solutions to private investors in Canada,
the UK, Europe and Australia.
Pinnacle provides correspondent services (administrative and
clearing solutions) to Canada’s wealth management industry by
leveraging Canaccord’s investment in leading-edge back-offi ce
infrastructure and technology.
Canaccord operations
Strategic alliances
Canada
Toronto
Vancouver
Burlington
Calgary
Edmonton
Gatineau
Halifax
Kelowna
Kitchener
Montréal
Ottawa
Prince George
Trail
Waterloo
USa
new York
Boston
Chicago
Houston
Minneapolis
San Francisco
UK & EUrOPE
aSIa
London
dublin
Frankfurt
Geneva
Guernsey
Isle of Man
Jersey
Milan
Paris
Beijing
Hong Kong
Singapore
aUSTraLIa
Melbourne
Sydney
www.canaccord.com
FISCAL 2013
ANNUAL MD&A AND FINANCIAL STATEMENTS
TO US THERE ARE NO FOREIGN MARKETS
S
Financial Review
23
23
23
25
26
29
29
30
31
35
37
40
53
54
54
55
55
56
Management’s Discussion and Analysis
Non-IFRS Measures
Business Overview
Market Data
Key Developments During Fiscal 2013
Market Environment During Fiscal 2013
Fiscal 2014 Outlook
Overview of Preceding Years – Fiscal 2012 vs. 2011
Financial Overview
Results by Geographic Segment
Quarterly Financial Information
Business Segment Results
Financial Condition
Off-Balance Sheet Arrangements
Liquidity and Capital Resources
Outstanding Common Share Data
Preferred Shares
Outstanding Preferred Share Data
56
57
57
58
58
61
61
62
Share-Based Payment Plans
International Financial Centre
Foreign Exchange
Related Party Transactions
Critical Accounting Policies and Estimates
Future Changes in Accounting Policies
and Estimates
Business Combinations
Disclosure Controls and Procedures and
Internal Control over Financial Reporting
Risk Management
Dividend Policy
Dividend Declaration
Additional Information
Independent Auditors’ Report
Consolidated Financial Statements and Notes
62
66
66
66
67
68
111 Supplemental Information
117 Glossary
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This document may contain “forward-looking statements” (as defined under applicable securities laws). These statements relate to
future events or future performance and reflect management’s expectations, beliefs, plans, estimates, intentions and similar statements
concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts, including business
and economic conditions and Canaccord’s growth, results of operations, performance and business prospects and opportunities. Such
forward-looking statements reflect management’s current beliefs and are based on information currently available to management. In
some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”,
“believe”, “estimate”, “predict”, “potential”, “continue”, “target”, “intend”, “could” or the negative of these terms or other comparable
terminology. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and a
number of factors could cause actual events or results to differ materially from the results discussed in the forward-looking statements.
In evaluating these statements, readers should specifically consider various factors that may cause actual results to differ materially
from any forward-looking statement. These factors include, but are not limited to, market and general economic conditions, the nature
of the financial services industry and the risks and uncertainties discussed from time to time in the Company’s interim condensed and
annual consolidated financial statements and its annual report and the AIF filed on www.sedar.com as well as the factors discussed in the
section entitled “Risk Management” in this MD&A, which includes market, liquidity, credit, operational, legal and regulatory risks. Material
factors or assumptions that were used by the Company to develop the forward-looking information contained in this document include,
but are not limited to, those set out in the Fiscal 201 4 Outlook section in the annual MD&A and those discussed from time to time in the
Company’s interim condensed and annual consolidated financial statements and its annual report and the AIF filed on www.sedar.com.
The preceding list is not exhaustive of all possible risk factors that may influence actual results. Readers are cautioned that the preceding
list of material factors or assumptions is not exhaustive.
Although the forward-looking information contained in this document is based upon what management believes are reasonable assumptions,
there can be no assurance that actual results will be consistent with these forward-looking statements. The forward-looking statements
contained in this document are made as of the date of this document and should not be relied upon as representing the Company’s views
as of any date subsequent to the date of this document. Certain statements included in this document may be considered “financial
outlook” for purposes of applicable Canadian securities laws, and such financial outlook may not be appropriate for purposes other than
this document. Except as may be required by applicable law, the Company does not undertake, and specifically disclaims, any obligation to
update or revise any forward-looking information, whether as a result of new information, further developments or otherwise.
Management’s Discussion and Analysis
Fiscal year 2013 ended March 31, 2013 – this document is dated May 21, 2013.
The following discussion of Canaccord Financial Inc.’s financial condition and results of operations is provided to enable a reader
to assess material changes in the financial condition and results of operations for the year ended March 31, 2013 compared to the
preceding fiscal year, with an emphasis on the most recent year. Unless otherwise indicated or the context otherwise requires,
the “Company” refers to Canaccord Financial Inc. and “Canaccord” refers to the Company and its direct and indirect subsidiaries.
“Canaccord Genuity” refers to the investment banking and capital markets segment of the Company. The Management’s
Discussion and Analysis (MD&A) should be read in conjunction with the audited consolidated financial statements for the year
ended March 31, 2013, beginning on page 67 of this report. Canaccord’s financial information is expressed in Canadian dollars
unless otherwise specified. The Company’s consolidated financial statements for the years ended March 31, 2012 and 2013 are
prepared in accordance with IFRS.
Non-IFRS Measures
Certain non-IFRS measures are utilized by Canaccord as measures of financial performance. Non-IFRS measures do not have any
standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other
companies. Non-IFRS measures presented include assets under administration, assets under management, book value per diluted
common share, return on common equity and figures that exclude significant items.
Canaccord’s capital is represented by common shareholders’ equity and, therefore, management uses return on common equity
(ROE) as a performance measure. Also used by the Company as a performance measure is book value per diluted common share,
which is calculated as total common shareholders’ equity divided by the number of diluted common shares outstanding.
Assets under administration (AUA) and assets under management (AUM) are non-IFRS measures of client assets that are common
to the wealth management business. AUA – Canada, AUM – UK and Europe, or AUM – Australia is the market value of client
assets managed and administered by Canaccord from which Canaccord earns commissions or fees. This measure includes funds
held in client accounts as well as the aggregate market value of long and short security positions. AUM – Canada includes all
assets managed on a discretionary basis under programs that are generally described as or known as the Complete Canaccord
Investment Counselling Program and the Complete Canaccord Private Investment Management Program. Services provided include
the selection of investments and the provision of investment advice. Canaccord’s method of calculating AUA – Canada, AUM –
Canada, AUM – UK and Europe or AUM – Australia may differ from the methods used by other companies and therefore may not be
comparable to other companies. Management uses these measures to assess operational performance of the Canaccord Genuity
Wealth Management business segment. AUM – Canada is also administered by Canaccord and is included in AUA – Canada.
Financial statement items that exclude significant items are non-IFRS measures. Significant items for these purposes are defined
as including restructuring costs, amortization of intangible assets and acquisition-related expense items, which include costs
recognized in relation to both prospective and completed acquisitions. See the Selected Financial Information Excluding Significant
Items table on page 32.
Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of Canaccord’s
business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures
that exclude significant items provide useful information by excluding certain items that may not be indicative of Canaccord’s
core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting for these
items does in fact reflect the underlying financial results of Canaccord’s business; thus, these effects should not be ignored
in evaluating and analyzing Canaccord’s financial results. Therefore, management believes that Canaccord’s IFRS measures of
financial performance and the respective non-IFRS measures should be considered together.
Business Overview
Through its principal subsidiaries, Canaccord Financial Inc. is a leading independent, full-service financial services firm, with
operations in two principal segments of the securities industry: wealth management and capital markets. Since its establishment
in 1950, Canaccord has been driven by an unwavering commitment to building lasting client relationships. We achieve this by
generating value for our individual, institutional and corporate clients through comprehensive investment solutions, brokerage
services and investment banking services. Canaccord has offices in 13 countries worldwide, including wealth management offices
located in Canada, Australia, the UK and Europe. Canaccord Genuity, the Company’s international capital markets division, has
operations in Canada, the US, the UK, France, Germany, Ireland, Italy, Hong Kong, mainland China, Singapore, Myanmar, Australia
and Barbados.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 23
Management’s Discussion and Analysis
Canaccord Financial Inc. is publicly traded under the symbol CF on the TSX and the symbol CF. on the London Stock
Exchange. Canaccord Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Series C
Preferred Shares are listed on the TSX under the symbol CF.PR.C.
Our business is affected by the overall condition of the worldwide equity and debt markets, including the seasonal variance in
these markets.
ABOUT CANACCORD’S OPERATIONS
Canaccord Financial Inc.’s operations are divided into two business segments: Canaccord Genuity (investment banking and capital
markets operations) and Canaccord Genuity Wealth Management. Together, these operations offer a wide range of complementary
investment banking services, investment products and brokerage services to Canaccord’s institutional, corporate and private
clients. Canaccord’s administrative segment is referred to as Corporate and Other.
Canaccord Genuity
Canaccord Genuity offers corporations and institutional investors around the world an integrated platform for equity research,
sales and trading, and investment banking services that is built on extensive operations in Canada, the UK, Europe, the US, China,
Singapore, Australia and Barbados.
Canaccord Genuity Wealth Management
Canaccord’s wealth management operations provide comprehensive wealth management solutions and brokerage services to
individual investors, private clients, charities and intermediaries, through a full suite of services tailored to the needs of clients in
each of the markets the division operates in. Canaccord’s growing wealth management division now has Investment Advisors (IAs)
and professionals in Canada, Australia, the UK, Switzerland and offshore locations (the Channel Islands and the Isle of Man).
Corporate and Other
Canaccord’s administrative segment, described as Corporate and Other, includes revenues and expenses associated with providing
correspondent brokerage services, bank and other interest, foreign exchange gains and losses, and activities not specifically
allocable to either the Canaccord Genuity or Canaccord Genuity Wealth Management divisions. Also included in this segment are
Canaccord’s operations and support services, which are responsible for front- and back-office information technology systems,
compliance and risk management, operations, legal, finance, and all administrative functions.
Corporate structure
Canaccord Financial Inc.
US
sub-group
50%
Canaccord
Genuity Corp.
(Canada)
Canaccord
Genuity Wealth
Management
(USA) Inc.
Canaccord
Genuity Inc.
(US)
Canaccord
Genuity Wealth
(International)
Limited
(Channel Islands)
Canaccord
Genuity
Wealth Limited
(UK)
Canaccord
Genuity
Limited
(UK)
Canaccord
Genuity Asia
(China and
Hong Kong)
Canaccord
Genuity
(Australia)
Limited
Canaccord
International
Ltd. (Barbados)
Canaccord
Genuity
Singapore
Pte Ltd.
24
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
BUSINESS ACTIVITY
Our business is subject to the overall condition of the worldwide debt and equity markets, including seasonal fluctuations.
Historically, North American capital markets are slower during the first half of Canaccord’s fiscal year, when Canaccord
typically generates less than 50% of its annual revenue. Fiscal 2013 was in line with past seasonality, with 56% of the
annual revenue generated in the second half of the fiscal year.
The timing of revenue recognition can also materially affect Canaccord’s quarterly results. The majority of revenue from underwriting
and advisory transactions is recorded when the transaction has closed, and as a result, quarterly results can also be affected by
the timing of our capital markets business.
Canaccord has taken efforts to reduce its exposure to variances in the equity markets and local economies by diversifying not
only its industry sector coverage but also its international scope. Historically, the Company’s diversification across major financial
centres has allowed it to benefit from strong equity markets.
Market Data
TOTAL FINANCING VALUE BY EXCHANGE
Q1/13
Q2/13
Q3/13
Q4/13
Fiscal 2013
Fiscal 2012
Fiscal 2013/
2012 change
TSX and TSX Venture (C$ billions)
AIM (£ billions)
NASDAQ (US$ billions)
10.8
0.8
9.5
10.4
0.5
13.7
14.8
0.9
10.4
9.8
0.6
15.9
45.8
2.8
49.5
54.6
3.6
44.2
(16.1)%
(22.2)%
12.0%
Source: TSX Statistics, LSE AIM Statistics, Equidesk
Market data
Total financing values on the TSX, TSX Venture and on AIM experienced declines compared to the previous year, while total
financing values on the NASDAQ experienced a 12% increase compared to the previous year.
IMPACT OF CHANGES IN CAPITAL MARKETS ACTIVITY
As a brokerage firm, Canaccord derives its revenue primarily from sales commissions, underwriting and advisory fees, and trading
activity. As a result, the Company’s business is materially affected by conditions in the financial marketplace and the economic
environment, primarily in North America and Europe. Canaccord’s long term international business development initiatives over the
past several years have laid a solid foundation for revenue diversification. Canaccord’s conservative capital strategy allows the
Company to remain competitive in today’s changing financial landscape.
During fiscal 2013, Canaccord’s capital markets activities were focused on the Company’s sectors: Mining and Metals, Energy,
Technology, Health Care and Life Sciences, Agriculture and Fertilizers, Media and Telecommunications, Financials, Consumer and
Retail, Real Estate and Hospitality, Infrastructure, Transportation and Industrial Products, Paper and Forestry Products, CleanTech
and Sustainability, Support Services, Aerospace and Defense, Leisure, and Private Equity. Coverage of these sectors included
investment banking, mergers and acquisitions (M&A) and advisory services, and institutional equity activities, such as sales,
trading and research.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 25
Management’s Discussion and Analysis
Key Developments During Fiscal 2013
CORPORATE
(cid:129) On April 10, 2012, $97.5 million of the net proceeds from Canaccord’s Series C Preferred Share offering was used to repay a
portion of the $150.0 million short term credit facility the Company secured for bridge financing related to the acquisition of
Collins Stewart Hawkpoint plc
(cid:129) The balance of the short term credit facility related to the acquisition of Collins Stewart Hawkpoint plc was repaid in full on
May 22, 2012
(cid:129) On June 7, 2012, Canaccord announced that Dan Daviau was appointed President of Canaccord Genuity Inc. (Canaccord’s
US capital markets operation)
(cid:129) On July 12, 2012, Canaccord Financial Inc. held its 2012 Annual General Meeting of shareholders, where all motions were
duly passed
(cid:129) On July 13, 2012, Canaccord Financial Inc. graduated its UK public listing from AIM to the LSE main market
(cid:129) On August 13, 2012, Canaccord Financial Inc. renewed its normal course issuer bid (NCIB) share buyback programme, which
provides the Company with the ability to purchase, at its discretion, up to 3,000,000 of its common shares through the facilities
of the TSX for cancellation
(cid:129) On September 4, 2012, the Company announced that Alexis de Rosnay joined the firm as CEO of Canaccord’s UK and
European operations
(cid:129) On September 16, 2012, Canaccord appointed Peter O’Malley as CEO of Canaccord Genuity Asia
(cid:129) On September 24, 2012, the Company announced the expansion of its UK wealth management business through the
acquisition of Eden Financial Ltd.’s (Eden Financial) wealth management business (completed on October 1, 2012)
(cid:129) On September 24, 2012, Canaccord announced a new strategy to streamline and refocus its Canadian wealth management
operations in larger Canadian centres
(cid:129) On October 1, 2012, Canaccord appointed Philip Evershed as the Global Head of Investment Banking
(cid:129) On November 6, 2012, Canaccord appointed Steve Buell as the Global Head of Research
(cid:129) On November 7, 2012, Canaccord Financial Inc. welcomed Dipesh Shah as an additional independent director on its Board
(cid:129) On February 1, 2013, Canaccord completed the integration of its UK wealth management business with the business of
Eden Financial Ltd.
(cid:129) On March 1, 2013, Canaccord completed the integration of its UK and European advisory practice, previously known as
Canaccord Genuity Hawkpoint, into its broader, global investment banking division
(cid:129) Subsequent to fiscal 2013, on May 1, 2013, all of Canaccord’s wealth management businesses were rebranded Canaccord
Genuity Wealth Management
CANACCORD GENUITY
(cid:129) Canaccord Genuity led 111 transactions globally, each over $1.5 million, to raise total proceeds of C$3.7 billion during fiscal
2013. Of this:
(cid:129) Canada led 59 transactions, which raised C$1.4 billion
(cid:129) The UK led 19 transactions, which raised C$1.5 billion
(cid:129) The US led 12 transactions, which raised C$487 million
(cid:129) Asia and Australia operations led 21 transactions, which raised C$331 million
26
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
(cid:129) During fiscal 2013, Canaccord Genuity participated in a total of 382 transactions globally, each over $1.5 million, to raise gross
Management’s Discussion and Analysis
proceeds of C$31.4 billion. Of this:
(cid:129) Canada participated in 288 transactions, which raised C$23.7 billion
(cid:129) The UK participated in 26 transactions, which raised C$2.7 billion
(cid:129) The US participated in 44 transactions, which raised C$4.7 billion
(cid:129) Asia and Australia participated in 24 transactions, which raised C$337 million
(cid:129) During fiscal 2013, Canaccord Genuity led or co-led the following transactions:
(cid:129) £ 695 million for esure on the LSE
(cid:129) Three transactions totalling £272.2 million for HICL Infrastructure Company Limited on the LSE
(cid:129) £118.0 million for Eland Oil & Gas plc on AIM
(cid:129) C$115.7 million for Artis Real Estate Investment Trust (REIT) on the TSX
(cid:129) C$115.0 million for Trez Capital Mortgage Investment Corporation (non-exchange listed)
(cid:129) C$110.0 million for HealthLease Properties REIT on the TSX
(cid:129) C$103.6 million for Amaya Gaming Group Inc. on the TSX Venture
(cid:129) C$100.1 million for American Hotel Income Properties REIT LP on the TSX
(cid:129) C$100.0 million for Canaccord Financial Inc. on the TSX
(cid:129) £100.0 million for Monitise plc on AIM
(cid:129) £100.0 million for Newlon Housing Trust (Private Placement)
(cid:129) £100.0 million for Raglan Finance plc through a privately placed wholesale bond issue
(cid:129) US$97.8 million for Insulet Corp. on the NASDAQ
(cid:129) SGD$94.0 million for Geo Energy Resources Ltd. on the SGX
(cid:129) C$89.1 million for Trez Capital Senior Mortgage Investment Corporation (non-exchange listed)
(cid:129) £80.0 million for Intermediate Capital Group plc through a new retail corporate bond issue
(cid:129) US$75.0 million for Emerald Oil, Inc. on the NYSE
(cid:129) C$69.7 million for Pure Industrial Real Estate Trust on the TSX
(cid:129) C$68.2 million for Sentry Select Primary Metals Corp. on the TSX
(cid:129) £65.0 million for CLS Holdings plc through a new retail corporate bond issue
(cid:129) During fiscal 2013, Canaccord Genuity participated in 107 fixed income transactions in Canada that raised $855.1 million
for clients
(cid:129) In Canada, Canaccord Genuity raised $748.0 million for government bond issuances and $107.1 million for corporate bond
issuances during fiscal 2013
(cid:129) Canaccord Genuity generated record advisory revenue of $179.7 million during fiscal 2013, 67% higher than the previous record
generated last year
(cid:129) This is the third consecutive year of record advisory revenue for Canaccord Genuity
(cid:129) During fiscal 2013, Canaccord Genuity advised on 66 transactions, including the following:
(cid:129) Viterra Inc. on its acquisition by Glencore International plc
(cid:129) Yellow Media Ltd. on its C$2.8 billion recapitalization
(cid:129) Primaris on its hostile defence and sale to H&R REIT and KingSett Capital
(cid:129) Fawkes Holdings Limited on its sale of 42 UK Marriott hotels
(cid:129) Sportingbet plc on its acquisition by William Hill and GVC Holdings assets
(cid:129) Wescast Industries on its acquisition by Sichuan Bohon Group
(cid:129) Score Media Inc. on its acquisition by Rogers Communications Corp.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 27
Management’s Discussion and Analysis
(cid:129) Research In Motion on the sale of NewBay Software to Synchronoss Technologies, Inc.
(cid:129) DHX Media Ltd. on its acquisition of Cookie Jar Entertainment
(cid:129) EndoChoice, Inc. on its merger with Peer Medical Ltd.
(cid:129) Geomagic, Inc. on its acquisition by 3D Systems Corp.
(cid:129) Omega Protein Corporation on its acquisition of Wisconsin Specialty Protein, LLC
(cid:129) GT Advanced Technologies on its acquisition of Twin Creek Technologies
(cid:129) Mateco Group (Odewald & Compagnie) on its acquisition by TVH Group
(cid:129) IFG Group plc on the disposal of International Division to AnaCap Financial Partners
Wealth Management (Global)
(cid:129) Globally, Canaccord Genuity Wealth Management generated $235.1 million in revenue during fiscal 2013
(cid:129) Total assets under administration in Canada and assets under management in the UK, Europe and Australia were $26.8 billion
at March 31, 2013
(cid:129) Canaccord Genuity Wealth Management had 23 offices worldwide as of March 31, 2013
Wealth Management (North America and Australia)
(cid:129) Canaccord Genuity Wealth Management generated $143.3 million in revenue during fiscal 2013
(cid:129) Assets under administration were $10.9 billion as of March 31, 2013, down 27% from $14.8 billion at the end of fiscal 2012
(cid:129) This decrease is due largely to the strategic repositioning of Canaccord Genuity Wealth Management in Canada, which
included the reduction of 16 branches from its Canadian platform during fiscal 2013
(cid:129) Assets under management were $835 million, up 23% from $677 million at the end of fiscal 2012
(cid:129) At March 31, 2013, Canaccord Genuity Wealth Management had 190 Advisors and Advisory Teams in Canada(1) and
Australia, including:
(cid:129) 178 Advisory Teams in Canada, a decrease of 102 Advisory Teams from March 31, 2012, due primarily to a strategic
repositioning of the business to focus on major Canadian centres
(cid:129) 12 Advisors in Australia
(cid:129) At March 31, 2013, Canaccord Genuity Wealth Management had 16 offices located across Canada, including eight Independent
Wealth Management (IWM) locations
(cid:129) At March 31, 2013, Canaccord Genuity Wealth Management had two offices in Australia
Wealth Management (UK and Europe)
(cid:129) Canaccord Genuity Wealth Management generated $91.8 million in revenue and, excluding significant items, recorded net
income of $13.3 million before taxes in fiscal 2013
(cid:129) Assets under management (discretionary and non-discretionary) were $15.9 billion (£10.3 billion)
(cid:129) At March 31, 2013, Canaccord Genuity Wealth Management had 122 investment professionals and fund managers in the
UK and Europe
(cid:129) At March 31, 2013, Canaccord Genuity Wealth Management had five offices, located in London, Guernsey, Jersey, the Isle of
Man and Switzerland
(1) Advisory Teams are normally comprised of one or more IAs and their assistants and associates, who together manage a shared set of client accounts. Advisory Teams that are led by, or only
include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to build an average-sized book
of business.
28
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Market Environment During Fiscal 2013
Fears of renewed European sovereign debt concerns and weakening global economic growth conditions characterized the beginning
of fiscal 2013. The Greek financial crisis once again took centre stage in the first half of calendar 2012 with elections and
protests over austerity measures unnerving financial markets. In terms of economic performance, fears of a Chinese hard landing
developed as China’s GDP dropped to 7.4% quarter-over-quarter in Q3/12, its lowest level for three years. In the US, sluggish
growth caused investors to fear an earnings recession with a meager 1.9% growth in S&P 500 earnings in Q3/12. Fortunately, this
proved to be the bottom in the US earnings cycle.
Economic and earnings-growth scares led to a sharp correction in equities from April to June 201 2. This correction pushed US
10-year Treasury bond yields to an all-time low of 1.43%. In order to mitigate impacts to equity markets, the solution from central
banks was forceful, in terms of both message and magnitude. First, the President of the European Central Bank (ECB) promised
to do “whatever it takes” to save the euro, coupled with a later pledge of potentially “unlimited” bond purchases. Second, the
Federal Reserve announced QE3 and QE4, pledging to buy a combined total of US$85 billion in mortgage backed securities and
treasuries per month. Overall, concerted central bank actions and liquidity injections allowed financial markets to recover in the
second half of calendar 2012.
The second half of fiscal 2013 was marked by a positive resolution of the US debt-ceiling negotiations following the re-election
of President Obama. Thanks to positive monetary conditions and record low borrowing costs, US earnings growth began to
reaccelerate in calendar Q4/12, consistent with the strong recovery in US housing and auto markets. Elsewhere, the Bank of
Japan and the newly elected Prime Minister Shinzo Abe engineered an ambitious plan to reflate the Japanese economy. As a result
of monetary reflation and central bank efforts, equity risk premiums started to decline and investors drove equity markets to new
all-time highs in calendar Q1/13.
In all, the S&P/TSX ended fiscal 2013 on a positive note (+3%) but lagged behind the S&P 500 (+11%) by a wide margin due
to the weak showing of commodity prices such as gold and base metals. These commodities were negatively affected by the
strength of the US dollar as well as renewed tightening measures in China to cool off the housing market. Global oil prices stayed
relatively flat, but the rejection of the Keystone pipeline project along with transportation bottlenecks kept Canadian oil products at
a substantial discount through fiscal 2013. Investors’ exit from commodities was particularly detrimental to small-cap resources
stocks with the S&P/TSX Venture exchange falling 30% in fiscal 2013.
Fiscal 2014 Outlook
While worldwide economic growth is expected to remain slow because of global austerity measures, growth should be more visible
and less vulnerable to tail-risk accidents compared to last year. Policymakers are acting as a backstop for banks and financial
markets, and relaxed monetary conditions should prevail until labour market conditions tighten and capital spending intentions
improve. Among factors to watch, it is expected the ECB will eventually follow other central banks and cut interest rates in order
to weaken its strong currency. This action is much needed to protect Europe’s export markets and re distribute growth among
distressed countries in the euro zone . Also, for commodity markets, further moderation in Chinese inflation must happen in order
for the People’s Bank of China to remove its tightening bias. Out of the 3.3% global GDP growth forecasted by the IMF for 2013,
the contribution from China is 35%. Therefore, anything less than the government target of 7.5% growth could renew fears of a
hard landing. Finally, should activities fail to steer a growth reacceleration of the world economy during calendar 2013, it will be
important for fiscal authorities to act promptly and ease austerity measures through reporting debt/deficit-to-GDP targets further
into the future. Overall, it is expected that monetary and fiscal policymakers will continue to provide downside protection to
economic growth. As such, capital markets should take their cues from a steady decline in the equity risk premium, which remains
far above historical averages.
As far as capital market activities are concerned, fiscal 2014 should reveal the benefits of the acquisitions made by Canaccord
over the past few years to expand its platform internationally, as performance will vary by geographic region. With most commodity
markets past their peak in consumption growth rates, investment banking and trading revenues related to this area are expected
to remain subdued. However, considering the depressed equity valuation of most resource companies, advisory activity should
remain healthy as companies try to capture value to shareholders. Most importantly, the majority of capital markets revenues are
expected to continue to come from markets outside Canada, where equity market performance is likely to be stronger. The S&P/
TSX trades in line with the MSCI World Index and at only a 6% forward price-to -earnings discount to the S&P 500. At historical
commodity market troughs, this discount oscillates between 10% and 20%. That noted, it is expected that the ongoing bear
market in commodities will be shorter than average owing to the unprecedented amount of stimulus delivered by world central
banks. While calendar 2013 should mark the synchronization in world monetary policies, calendar 2014 should give rise to a
synchronization in business cycles among economic regions, and therefore above-average global GDP growth.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 29
Management’s Discussion and Analysis
Overview of Preceding Years – Fiscal 2012 vs. 2011
Total revenue for the year ended March 31, 2012 (fiscal 2012) was $604.9 million, a decrease of $198.8 million or 24.7%
compared to the previous year. This decrease was primarily due to the challenging economic and market conditions during fiscal
2012 and a general decline in investor risk appetite. Most major indices also experienced declines during fiscal 2012 with the
TSX down 12%, the TSX Venture down 32%, and the FTSE 100 down 2%. However, the NASDAQ experienced an increase of 11%
compared to 2011.
Canaccord recorded a net loss of $21.3 million during fiscal 2012, which included $56.8 million of charges related to the
acquisition of Collins Stewart Hawkpoint plc, company-wide restructuring costs and the amortization of intangible assets.
Excluding these significant items, net income for fiscal 2012 was $25.2 million. Compared to Canaccord’s record performance
during fiscal 2011, Canaccord’s performance during fiscal 2012 was in line with a subdued environment for capital raising and
advisory activities.
30
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Financial Overview
SELECTED FINANCIAL INFORMATION(1)(2)
(C$ thousands, except per share and % amounts,
and number of employees)
Canaccord Financial Inc. (CFI)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Expenses
Incentive compensation
Salaries and benefi ts
Other overhead expenses(3)
Restructuring costs(4)
Acquisition-related costs
Total expenses
(Loss) income before income taxes
Net (loss) income
Net (loss) income attributable to CFI shareholders
Non-controlling interests
(Loss) earnings per common share (EPS) – basic
(Loss) earnings per common share (EPS) – diluted
Return on common equity (ROE)
Dividends per share
Book value per diluted common share(5)
Excluding signifi cant items(6)
Total expenses
Income before income taxes
Net income
Net income attributable to CFI shareholders
EPS – basic
EPS – diluted
Balance sheet data
Total assets
Total liabilities
Non-controlling interests
Total shareholders’ equity
Number of employees
For the years ended March 31
2013
2012
2011
2013/2012 change
$
353,125
$
252,877
$
294,650
$
100,248
145,772
179,690
66,406
29,199
22,930
175,225
107,370
10,647
31,799
26,946
327,499
84,914
43,644
24,040
28,884
(29,453)
72,320
55,759
(2,600)
(4,016)
797,122
604,864
803,631
192,258
40 6, 724
8 8,5 22
292,242
31,617
1,719
820,824
(23,702)
(18,775)
(16,819)
(1,956)
(0.31)
(0.31)
(3.3)%
0.20
7.68
766,893
30,229
25,644
26,207
0.16
0.14
$
$
$
$
$
$
$
$
$
$
$
$
$
304,908
63,924
200,842
35,253
16,056
620,983
(16,119)
(21,346)
(20,307)
(1,039)
(0.33)
(0.33)
(3.1)%
0.40
8.26
564,182
40,682
25,193
25,591
0.28
0.25
$
$
$
$
$
$
$
$
$
$
$
$
$
389,046
64,420
194,953
—
12,740
661,159
142,472
99,743
99,743
—
1.37
1.22
14.2%
0.275
8.79
643,293
160,338
114,126
114,126
1.56
1.40
10 1, 816
2 4, 598
91,400
(3,636)
(14,337)
199,841
(7,583)
2,571
3,488
(917)
0.02
0.02
(0.2) p.p.
(0.20)
(0.5 8)
202,771
(10,453)
451
616
(0.12)
(0.11)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$ 4,603,502
$ 5,762,723
$ 5,097,500
$ (1,159,221)
3,538,170
4,753,144
4,340,608
(1,214,974)
16,169
1,049,163
2,060
17,454
992,125
2,428
—
756,892
1,684
(1,285)
57,038
(368)
39.6%
(16.8)%
67.4%
n.m.
(8.2)%
(14.9)%
31.8%
33. 4%
38. 5%
45.5%
(10.3)%
(89.3)%
32.2%
(47.0)%
12.0%
17.2%
(88.3)%
6.1%
6.1%
(50.0)%
(7.1)%
35.9%
(25.7)%
1.8%
2.4%
(42.9)%
(44.0)%
(20.1)%
(25.6)%
(7.4)%
5.7%
(15.2)%
(1) Data is in accordance with IFRS except for ROE, book value per diluted common share, fi gures excluding signifi cant items and number of employees.
(2) Data includes the results of Genuity since it was acquired in April 2010, Canaccord Genuity Asia since its acquisition in January 2011 and the results for Canaccord Genuity and Canaccord Genuity
Wealth Management operations in Australia since these operations were acquired in November 2011. The operating results of the Australian operations have been fully consolidated and a 50%
non-controlling interest has been recognized. Results of former Collins Stewart Hawkpoint plc (CSHP) entities since March 22, 2012 and the wealth management business of Eden Financial Ltd.
since October 1, 2012 are also included.
(3) Consists of trading costs, premises and equipment, communication and technology, interest, general and administrative, amortization of tangible and intangible assets, and development costs.
(4) Consists of staff restructuring costs and reorganization expenses related to the acquisition of CSHP, as well as restructuring costs related to the reorganization of certain Canadian trading and
other operations.
(5) Book value per diluted common share is calculated as total common shareholders’ equity divided by the number of diluted common shares outstanding.
(6) Net income and earnings per common share excluding signifi cant items refl ect tax-effected adjustments related to such items. See the Selected Financial Information Excluding Signifi cant Items
table on the next page.
n.m.: not meaningful
p.p.: percentage points
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 31
Management’s Discussion and Analysis
SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)
For the years ended March 31
(C$ thousands, except per share and % amounts)
2013
2012
2011
2013/2012 change
Total revenue per IFRS
Total expenses per IFRS
$
797,122
$
604,864
$
803,631
$
192,258
820,824
620,983
661,159
199,841
Signifi cant items recorded in Canaccord Genuity
Restructuring costs
Acquisition-related costs
Amortization of intangible assets
Signifi cant items recorded in Canaccord Genuity
Wealth Management
Restructuring costs
Acquisition-related costs
Amortization of intangible assets
Signifi cant items recorded in Corporate and Other
Restructuring costs
Acquisition-related costs
Total signifi cant items
Total expenses excluding signifi cant items
Net income before tax – adjusted
Income taxes – adjusted
Net income – adjusted
EPS – basic, adjusted
EPS – diluted, adjusted
15,232
388
14,740
15,485
1,331
5,855
900
—
53,931
766,893
30,229
4,585
25,644
0.16
0.14
29,078
10,466
5,492
900
4,077
—
5,275
1,513
56,801
564,182
40,682
15,489
25,193
0.28
0.25
$
$
$
$
$
$
—
12,740
5,126
—
—
—
—
—
17,866
643,293
160,338
46,212
114,126
1.56
1.40
$
$
$
$
$
$
(13,846)
(10,078)
9,248
14,585
(2,746)
5,855
(4,375)
(1,513)
(2,870)
202,711
(10,453)
(10,904)
451
(0.12)
(0.11)
31.8%
32.2%
(47.6)%
(96.3)%
168.4%
n.m.
(67.4)%
n.m.
(82.9)%
(100.0)%
(5.1)%
35.9%
(25.7)%
(70.4)%
1.8%
(42.9)%
(44.0)%
(1) Figures excluding signifi cant items are non-IFRS measures. See Non-IFRS Measures on page 23.
n.m.: not meaningful
REVENUE
On a consolidated basis, revenue is generated through six activities: commissions and fees associated with agency trading and
private client wealth management activity, investment banking, advisory fees, principal trading, interest and other.
Revenue for fiscal 2013 was $797.1 million, an increase of 31.8% or $192.3 million from fiscal 2012. Overall, the growth in
revenue for the year ended March 31, 2013 was mainly due to the expanded operations achieved through the acquisitions of
Collins Stewart Hawkpoint plc (CSHP), a 50% interest in Canaccord Genuity (Australia) Limited (formerly Canaccord BGF) and the
wealth management business of Eden Financial Ltd. The Company implemented a number of strategies throughout the year to
further integrate our global capital markets and wealth management platforms, which led to the increase in revenue in fiscal 2013.
Commissions and fees revenue is primarily generated from private client trading activity and institutional sales and trading.
Revenue generated from commissions and fees revenue increased by $100.2 million or 39.6% from fiscal 2012 to $353.1 million
in fiscal 2013. Our Canaccord Genuity Wealth Management segment contributed $192.6 million while our Canaccord Genuity
segment contributed $160.5 million.
Investment banking revenue was $145.8 million in fiscal 2013, down $29.5 million or 16.8% from fiscal 2012. Revenue
generated from investment banking activities was lower due to a decline in financing activity in Canada.
The expansion in the UK and Europe resulted in the Company achieving another year of record advisory revenue of $179.7 million,
up $72.3 million from the $107.4 million in fiscal 2012. The operations in the US also achieved greater revenue in fiscal 2013,
from $83.1 million to $155.6 million. This record performance was also achieved through increased activity and large scale
transactions completed in Canada.
Revenue derived from principal trading increased $55.8 million to $66.4 million compared to fiscal 2012, primarily due to the
expansion of the UK and Europe, and US operations.
32
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Interest revenue is derived from interest realized from financial instruments and fixed income securities held by Canaccord, interest
earned on cash balances held at the bank and interest paid by clients on margin accounts. As a result of changes in interest rates
and additional interest revenue earned from activities in the Fixed Income group, interest revenue dropped by $2.6 million or 8.2%
from fiscal 2012 to $29.2 million for fiscal 2013.
Other revenue of $22.9 million was $4.0 million or 14.9% lower than in the prior year, largely as a result of lower foreign exchange
gains due to the fluctuation of the Canadian dollar, offset slightly by the gain on sale of our investment in Alternative Alpha Trading
System (Alpha).
EXPENSES
Expenses as a percentage of revenue
For the years ended March 31
Incentive compensation
Salaries and benefi ts
Other overhead expenses(1)
Acquisition-related costs(2)
Restructuring costs(2)(3)
Total
2013
5 1. 0%
11. 1%
36.7%
0.2%
4.0%
2012
50.4%
10.6%
33.2%
2.7%
5.8%
2013/2012
change
0. 6 p.p.
0. 5 p.p.
3.5 p.p.
(2.5) p.p.
(1.8) p.p.
103.0%
102.7%
0.3 p.p.
(1) Consists of trading costs, premises and equipment, communication and technology, interest, general and administrative, amortization of tangible and intangible assets and development costs.
(2) Refer to the Selected Financial Information Excluding Signifi cant Items table on page 32.
(3) Consists of staff restructuring costs and reorganization expenses related to the acquisition of CSHP, as well as restructuring costs related to the reorganization of certain Canadian trading and
other operations.
p.p.: percentage points
Expenses for fiscal 2013 were $820.8 million, an increase of 32.2% or $199.8 million compared to last year; however, total
expenses as a percentage of revenue increased slightly by 0.3 percentage points compared to the prior year. Higher expenses
were recorded to support the global expansion of the Company. Excluding significant items, total expenses were $766.9 million,
up $202.7 million or 35.9% from fiscal 2012.
Compensation expenses
Incentive compensation expense was $40 6.7 million, an increase of $10 1.8 million or 33. 4%, which was consistent with the
increase in incentive-based revenue. Incentive compensation expense as a percentage of total revenue increased by 0. 6 percentage
points from fiscal 2012, to 5 1. 0%, as a result of higher long-term incentive plan (LTIP) expense related to amortization of grants
that were awarded in prior periods. Salaries and benefits expense was $8 8. 5 million, an increase of 38. 5% from the prior
year. Salaries and benefits expense as a percentage of revenue was 11. 1% in fiscal 2013 compared to 10.6% in fiscal 2012.
The increase in salaries and benefits expense and percentage of revenue compared to fiscal 2012 is consistent with the higher
headcount, primarily in the UK and Europe, and the US, as a result of our global expansion.
The total compensation (incentive compensation plus salaries and benefits) expense as a percentage of consolidated revenue
was 62.1%, up 1.1 percentage point compared to 61.0% in fiscal 2012. As discussed above, this was mainly due to the higher
headcount in the current fiscal year.
TOTAL COMPENSATION AS A % OF REVENUE
2009
2010
2011
2012
2013
11.9%
46.5%
10.3%
51.8%
8.0%
48.4%
10.6%
50.4%
11.1%
51.0%
Salaries and benefits
Incentive compensation
58.4%
62.1%
56.4%
61.0%
62.1%
Total
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 33
Management’s Discussion and Analysis
Other overhead expenses
(C$ thousands, except % amounts)
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization(1)
Development costs
Total other overhead expenses
For the years ended March 31
2013
$
43,892
$
41,124
49,115
15,302
89,504
33,779
19,526
2012
30,313
27,546
28,343
9,816
69,523
14,108
21,193
$
292,242
$
200,842
2013/2012
change
44.8%
49.3%
73.3%
55.9%
28.7%
139.4%
(7.9)%
45.5%
(1) Includes $20.6 million and $5.5 million of amortization of intangible assets for the years ended March 31, 2013 and March 31, 2012, respectively. See the Selected Financial Information Excluding
Signifi cant Items table on page 32.
Other overhead expenses were $292.2 million or 45.5% higher in fiscal 2013, which as a percentage of revenue represented an
increase of 3.5 percentage points compared to fiscal 2012.
The overall growth in other overhead expenses was driven by the higher communication and technology, general and administrative,
amortization, trading, premises and equipment and interest expenses.
Our expanded operations in the US and in the UK and Europe from the acquisition of CSHP were the main contributors to the
increase in overhead expenses during fiscal 2013. Communication and technology expense increased by $20.8 million compared
to fiscal 2012 as a result of the additional headcount as well as the global expansion of technology platforms. Trading costs were
up $13.6 million in the current year compared to fiscal 2012, mainly due to the addition of certain principal trading operations in
the US from the acquisition of CSHP. The Company’s new wealth management operations in the UK and Europe and in Australia
also contributed to the higher trading costs. Premises and equipment expense increased by $13.6 million because of the additional
office space acquired from our global expansion. Interest expense increased by $5.5 million, partially due to an increase in stock
borrowing expense in our UK operations. In the US operations, the acquisition of CSHP expanded its existing business, and resulted
in the addition of the Fixed Income and International Equity Group (IEG), which led to higher interest expense of $1.7 million.
General and administrative expense, which includes promotion and travel expense, office expense, professional fees and other
expense, was up $20.0 million, mainly due to our expanded operations, as well as certain integration costs incurred to align the
various global business units. On October 25, 2012, our US capital markets division held a charity trading day and generated a
$0.9 million donation for Youth, I.N.C.
Amortization of intangible assets acquired through the purchase of a 50% interest in Canaccord Genuity (Australia) Limited
(formerly Canaccord BGF) and the acquisition of CSHP was the main reason for the $19.7 million increase in amortization expense.
During the year ended March 31, 2013, the Company took a number of steps to contain costs and refocus our Canadian operations.
This resulted in $15.0 million of restructuring costs in Canada. In the US, steps were taken to take advantage of cost saving
synergies between the recently acquired CSHP and the existing Canaccord Genuity US operations, which resulted in $6.8 million of
restructuring costs. Furthermore, $9.8 million of restructuring costs were incurred in the UK and Europe in connection with a review
of staff redundancies and the integration of Eden Financial Ltd.’s wealth management business, to grow the client asset base.
Acquisition-related costs of $1.7 million were also incurred for our acquisitions of the wealth management business of Eden Financial
and certain assets and liabilities from Kenosis Capital Partners (Kenosis Capital) in Asia, a merchant bank and advisory group.
Including significant items, non-compensation expense as a percentage of revenue dropped from 41.7% in fiscal 2012 to 40.8%
in fiscal 2013. Excluding significant items, non-compensation expense as a percentage of revenue increased by 1.8 percentage
points compared to the prior year, to 34.1% in fiscal 2013.
NET INCOME (LOSS)
Net loss for fiscal 2013 decreased from $21.3 million in fiscal 2012 to $18.8 million. Diluted loss per share was $0.31 in fiscal
2013 compared to $0.33 in the prior year. Excluding significant items, net income for fiscal 2013 was $25.6 million versus a
net income of $25.2 million in fiscal 2012, and diluted earnings per share was $0.14 compared to diluted earnings per share of
$0.25 in fiscal 2012.
Income tax recovery was $4.9 million for fiscal 2013, reflecting an effective tax recovery rate of 20.8% compared to an effective
tax recovery rate of (32.4)% in the prior year. The effective tax recovery rate for fiscal 2013 was mainly driven by temporary
differences not recognized for accounting purposes in certain operations outside of Canada and various permanent items. A
further discussion of our taxes is provided in the Critical Accounting Policies and Estimates section of the MD&A on page 58.
34
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Results by Geographic Segment
This section is an analysis of Canaccord’s results by geographic segment. Canaccord’s business operations are grouped into
four geographic segments: Canada, the United Kingdom (UK) and Europe, the United States (US), and Other Foreign Locations.
Revenue in Canada was derived from the Canaccord Genuity, Canaccord Genuity Wealth Management, and Corporate and Other
segments. Revenue from the UK and Europe was mainly derived from the Canaccord Genuity segment during fiscal 2013; however,
with the acquisition of CSHP, our UK and Europe operations also included revenue earned from wealth management activity.
Revenue in the US was mainly derived from the Canaccord Genuity segment, with approximately 1.4% of its revenue originating
from operations in the Canaccord Genuity Wealth Management segment during fiscal 2013. Revenue from Other Foreign Locations
was primarily made up of Canaccord Genuity activity, with a small portion generated by our Canaccord Genuity Wealth Management
business in Australia.
GEOGRAPHIC DISTRIBUTION OF REVENUE
(For the years ended March 31)
2013
2012
3%
Other Foreign Locations
20%
US
31%
UK and Europe
46%
Canada
2%
Other Foreign Locations
13%
US
9%
UK and Europe
76%
Canada
For the years ended March 31(1)
2013
Canada
UK and
Europe(2)
Other
Foreign
Locations(3)
US
Total
Canada
UK and
Europe(2)
Other
Foreign
Locations(3)
US
2012
Total
$ 366,439 $ 249,811 $ 155,585 $ 25,287 $ 797,122 $ 458,131 $ 53,180 $ 83,061 $ 10,492 $ 604,864
362,552
259,520
164,147
34,605
820,824
418,692
94,382
90,594
17,315
620,983
(C$ thousands,
except number
of employees)
Revenue
Expenses
Income (loss) before
income taxes
$
3,887 $
(9,709) $
(8,562) $
(9,318) $ (23,702) $ 39,439 $ (41,202) $
(7,533) $
(6,823) $ (16,119)
Excluding signifi cant
items(4)
Total expenses
343,402
237,708
157,334
28,449
766,893
395,689
65,959
86,991
15,543
564,182
Income (loss) before
income taxes
$ 23,037 $ 12,103 $
(1,749) $
(3,162) $ 30,229 $ 62,442 $ (12,779) $
(3,930) $
(5,051) $ 40,682
Number of
employees
1,015
694
253
98
2,060
1,309
737
302
80
2,428
(1) Data is in accordance with IFRS except for fi gures excluding signifi cant items and number of employees.
(2) Canaccord’s UK and Europe operations earned most of their revenue from capital markets activities during fi scal 2012. Results of CSHP entities and the wealth management business of Eden
Financial Ltd. are included in fi scal 2013 since their acquisition dates.
(3) Revenue derived from capital markets activities outside of Canada, the UK and Europe, and the US is reported as Other Foreign Locations, which includes operations for Canaccord International Ltd.,
Canaccord Genuity Asia, Canaccord Genuity (Australia) Limited, and Canaccord Genuity Singapore. Data in Other Foreign Locations includes results of Canaccord Genuity Asia since the acquisition
date of January 17, 2011, results of Canaccord Genuity (Australia) Limited since the closing date of November 1, 2011, and results of Canaccord Genuity Singapore since March 22, 2012.
(4) Refer to the Selected Financial Information Excluding Signifi cant Items table on page 32.
Revenue for the year ended March 31, 2013 was $797.1 million, an increase of 31.8% or $192.3 million compared to the prior
year, primarily due to the growing operations in the UK and Europe, and the US. Revenue in Canada declined to $366.4 million from
$458.1 million in fiscal 2012 as a result of lower capital markets activity attributable to the subdued pace of equity underwriting
in our focus sectors due to volatility in the market environment. In the UK and Europe, revenue was $249.8 million, which was
up considerably by $196.6 million, and revenue in the US was $155.6 million, up $72.5 million or 87.3% from the prior year. The
acquisition of CSHP also led to expanded operations in our Other Foreign Locations, where revenue increased by $14.8 million
to $25.3 million in fiscal 2013. Revenue from our Other Foreign Locations represented 3.2% of total revenue, up 1.5 percentage
points compared to fiscal 2012 as a result of the Company’s global expansion.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 35
Management’s Discussion and Analysis
Expenses in the Canadian operations
Expenses for fiscal 2013 in Canada were down $56.1 million or 13.4%. A decrease in incentive compensation expense of
$37.6 million or 17.3%, consistent with the decrease in incentive-based revenue, was the main contributor to the overall reduction
in expenses. Salaries and benefits expense was down $1.0 million due to staff reductions in our Canaccord Genuity Wealth
Management group and the Canadian back-office operations. Total compensation expense as a percentage of revenue was 62.7%
in fiscal 2013, an increase of 4.1 percentage points from fiscal 2012, mainly attributable to higher LTIP expense related to the
amortization of grants awarded in prior periods.
Excluding significant items, non-compensation expense was $113.6 million in fiscal 2013 compared to $127.3 million in
fiscal 2012, a decrease of $13.7 million. The main contributor to this drop in expense was a $9.4 million drop in general
and administrative expense and a $4.4 million decrease in trading costs. The overall decrease in expenses is a result of the
Company’s cost containment efforts in our Canadian operations.
Our Canadian capital markets operations incurred $2.8 million less in promotion and travel expense compared to fiscal 2012.
Professional fees were $1.4 million lower and other expenses were $2.0 million lower in the Corporate and Other segment
compared to the prior year, for the reasons stated above. Lower client settlement expense in fiscal 2013 also contributed
$2.1 million to the decrease in general and administrative expense. Trading costs were 20.1% or $4.4 million lower than the
prior year, consistent with lower trading volume.
The overall decrease in expenses was offset by a $2.3 million increase in amortization expense. As part of the Company’s
strategic efforts to refocus its Canadian wealth management business, underperforming branches were closed during the fiscal
year. As a result, the amortization of leasehold expenses related to closed branches was accelerated, which led to an increase in
amortization expense.
In fiscal 2013, significant items in the amount of $19.2 million were recorded in our Canadian operations. Significant items
included $15.0 million for restructuring expenses as well as $0.4 million for acquisition-related expense items. Excluding significant
items, total expenses in Canada were $343.4 million compared to $395.7 million during the previous year. Total non-compensation
expenses excluding significant items as a percentage of revenue increased from 27.8% in fiscal 2012 to 31.0% in fiscal 2013.
Expenses in the UK and Europe operations
Expenses in the UK and Europe were $259.5 million, $165.1 million or 175.0% higher than the prior year. Incentive compensation
expense increased by $9 3.8 million as a result of higher incentive-based revenue. Total compensation expense as a percentage of
revenue was down from 75.4% to 61.5% for fiscal 2013 due to the significant growth in revenue.
The expansion of the Company through its acquisition of CSHP was the main driver for the increase in general and administrative
expense, salaries and benefits expense, communication and technology expense, amortization expense, premises and equipment
expense, trading costs, interest expense and development costs. The higher expenses resulted from the expansion of our UK and
Europe operations through the acquisition of CSHP, as well as from certain integration costs incurred by the combined operations
that were inevitable during the current fiscal year.
Restructuring costs of $9.8 million were recorded to eliminate staffing redundancies and fully utilize synergies from the CSHP
acquisition. The Company enhanced its global wealth management platform by acquiring the wealth management business of
Eden Financial in the UK. Acquisition-related costs of $1.3 million were incurred in fiscal 2013 in relation to the acquisition.
Excluding these significant items, total expenses in the UK and Europe increased by $171.7 million or 260.4%, to $237.7 million.
Expenses in the US operations
Expenses in the US for the year were $164.1 million, up $73.6 million. Incentive compensation expense was $35.3 million or
73.5% higher due to the increase in incentive-based revenue. Total compensation expense as a percentage of revenue declined
by 3.3 percentage points to 60.0% for fiscal 2013.
Excluding significant items, non-compensation expense was $64.0 million in fiscal 2013, an increase of $29.6 million from
the prior year. The main contributors were a $13.5 million increase in trading costs, a $6.7 million increase in communication
and technology expense, a $4.2 million increase in general and administrative expense, a $3.4 million increase in premises
and equipment expense and a $1.7 million increase in interest expense. As with the operations in the UK and Europe, the
US operations experienced a significant increase in overall expenditures as a result of the growth in operations through the
Company’s acquisition of CSHP.
Restructuring costs of $6.8 million were related to the reorganization of the US operations to take advantage of cost saving
synergies between the CSHP and Canaccord Genuity operations.
36
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Expenses in the Other Foreign Locations operations
Expenses in Other Foreign Locations for the year were $34.6 million, up $17.3 million, mainly due to the expansion of our operations
into China, Australia and Singapore over the past fiscal year. The largest expenses include incentive compensation expense of
$15.7 million, amortization expense of $6.7 million, general and administrative expense of $5.3 million, and salaries and benefits
expense of $2.8 million. The $10.2 million increase in incentive compensation expense was due to the increase in revenue and
expansion of our Other Foreign Locations operations. The amortization of intangible assets acquired relating to the acquisitions
of CSHP and Canaccord Genuity (Australia) Limited was $6.2 million. Higher salaries and benefits and general and administrative
expenses were recorded to support the expansion of operations in these countries.
Quarterly Financial Information(1)(2)
The following table provides selected quarterly financial information for the eight most recently completed financial quarters
ended March 31, 2013. This information is unaudited, but reflects all adjustments of a recurring nature that are, in the opinion of
management, necessary to present a fair statement of the results of operations for the periods. Quarter-to-quarter comparisons
of financial results are not necessarily meaningful and should not be relied upon as an indication of future performance.
(C$ thousands,
except per share amounts)
Revenue
Q4
Q3
Q2
Fiscal 2013
Q1
Q4
Q3
Fiscal 2012
Q1
Q2
Commissions and fees
$ 87,438
$ 89,415
$ 87,525
$ 88,747
$ 74,170 $ 57,380 $ 60,299
$ 61,028
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Total expenses
Net income (loss)
before taxes
38,541
56,145
22,780
6,758
6,30 9
40,609
69,348
18,670
7,291
4,670
37,961
28,571
17,109
6,758
8,675
28,661
25,626
7,847
8,392
3,276
53,553
24,634
6,769
8,205
10,361
32,015
38,541
3,304
8,147
8,502
29,799
21,664
(1,379)
7,590
1,527
59,858
22,531
1,953
7,857
6,556
217,971
230,003
186,599
162,549
177,692
147,889
119,500
159,783
211,984
216,882
204,910
187,048
207,731
142,822
126,396
144,034
5,987
13,121
(18,311)
(24,499)
(30,039)
5,067
(6,896)
15,749
Net income (loss)
$
6,424
$ 10,264
$
(14,841) $
(20,622) $
(31,794) $
2,531
$
(5,278) $ 13,195
Earnings (loss) per share –
basic
Earnings (loss) per share –
diluted
Excluding signifi cant
items(3)
$
$
0.04
$
0.09
$
(0.19) $
(0.24) $
(0.42) $
0.02
$
(0.09) $
0.17
0.04
$
0.08
$
(0.19) $
(0.24) $
(0.42) $
0.01
$
(0.09) $
0.16
Net income (loss)
$ 15,579 $ 20,453 $
5,907 $
(16,295) $
2,089 $ 10,644 $
(1,665) $ 14,125
Earnings (loss) per share –
basic
Earnings (loss) per share –
diluted
$
$
0.14
$
0.19
$
0.03
$
(0.20) $
0.02
$
0.12
$
(0.05) $
0.19
0.12
$
0.17
$
0.03
$
(0.20) $
0.02
$
0.11
$
(0.05) $
0.17
(1) Data is in accordance with IFRS except for fi gures excluding signifi cant items.
(2) Data includes the results of Genuity since the closing date of April 23, 2010. Results of Canaccord Genuity Asia since the closing date of January 17, 2011 and the results of Canaccord Genuity
(Australia) Limited since the closing date of November 1, 2011 are also included. The operating results of Canaccord Genuity (Australia) Limited have been fully consolidated and a 50% non-
controlling interest has been recognized. Results of former CSHP entities since March 22, 2012 are also included.
(3) Figures excluding signifi cant items are non-IFRS measures. See the Quarterly Financial Information Excluding Signifi cant Items table on the next page.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 37
Management’s Discussion and Analysis
QUARTERLY FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)(2)
(C$ thousands,
except per share amounts)
Q4
Q3
Q2
Fiscal 2013
Q1
Q4
Q3
Fiscal 2012
Q1
Q2
Total revenue per IFRS
$ 217,971
$ 230,003
$ 186,599
$ 162,549
$ 177,692
$ 147,889
$ 119,500
$ 159,783
Total expenses per IFRS
211,984
216,882
204,910
187,048
207,731
142,822
126,396
144,034
Signifi cant items recorded
in Canaccord Genuity
Restructuring costs
5,561
5,276
4,395
—-
27,786
1,292
—-
Acquisition-related
costs
Amortization of
—-
—-
388
—-
6,323
2,700
1,443
—-
—-
intangible assets
3,458
3,473
3,436
4,373
1,865
1,767
930
930
Signifi cant items recorded
in Canaccord Genuity
Wealth Management
Restructuring costs
884
1,034
13,567
Acquisition-related
costs
Amortization of
—-
431
900
—-
—-
900
4,077
intangible assets
1,600
1,643
1,614
998
—-
—-
—-
—-
—-
—-
—-
Signifi cant items
recorded in Corporate
and Other
Restructuring costs
Acquisition-related
costs
—-
—-
—-
—-
900
—-
—-
—-
275
5,000
—-
—-
—-
1,513
3,886
Total signifi cant items
11,503
11,857
25,200
5,371
41,226
10,759
Total expenses excluding
signifi cant items
200,481
205,025
179,710
181,677
166,505
132,063
122,510
143,104
Net income (loss)
before tax – adjusted
17,490
24,978
6,889
(19,128)
11,187
15,826
(3,010)
16,679
Income taxes (recovery) –
adjusted
Net income (loss) –
1,911
4,525
982
(2,833)
9,098
5,182
(1,345)
2,554
adjusted
$ 15,579
$ 20,453
EPS – basic – adjusted
EPS – diluted – adjusted
$
$
0.14
0.12
$
$
0.19
0.17
$
$
$
5,907
$
(16,295) $
2,089
$ 10,644
0.03
0.03
$
$
(0.20) $
(0.20) $
0.02
0.02
$
$
0.12
0.11
$
$
$
(1,665) $ 14,125
(0.05) $
(0.05) $
0.19
0.17
(1) Figures excluding signifi cant items are non-IFRS measures.
(2) Data includes the results of Genuity since the closing date of April 23, 2010. Results of Canaccord Genuity Asia since the closing date of January 17, 2011 and results of Canaccord Genuity
(Australia) Limited since the closing date of November 1, 2011 are also included. The operating results of Canaccord Genuity (Australia) Limited have been consolidated and a 50% non-controlling
interest has been recognized. Results of former CSHP entities since March 22, 2012 and the wealth management business of Eden Financial Ltd. since October 1, 2012 are also included.
Quarterly trends and risks
Canaccord’s business is cyclical and can experience considerable variations in revenue and income from quarter to quarter and
year to year due to factors beyond Canaccord’s control and, accordingly, revenue and net income are expected to fluctuate as they
have historically. Our business is subject to the overall condition of the worldwide debt and equity markets, including the seasonal
variance in these markets. In general, North American capital markets are slower in the first half of our fiscal year, during which we
typically generate 40% to 50% of our annual revenue. During the second half of our fiscal year, when market activity picks up, the
Company typically generates more than half of the year’s revenue.
The timing of revenue recognition can also materially affect Canaccord’s quarterly results. The majority of revenue from
underwriting and advisory transactions is recorded only when the transaction has closed and, as a result, quarterly results can
also be affected by the timing of our capital markets business.
38
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
—-
—-
—-
—-
—-
930
Management’s Discussion and Analysis
Capital markets activity remained subdued during the first quarter of fiscal 2013. This was reflected by an 8.5% decrease in
revenue from Q4/12 to Q1/13. Q1/13 revenue was up slightly, by 1.7%, compared to the first quarter of fiscal 2012.
The second fiscal quarter is typically Canaccord’s least active, Canaccord began to see the momentum expected from the
acquisition of CSHP in Q2/13, with revenue increased approximately 14.8% compared to Q1/13.
The results of Canaccord’s fiscal third quarter were characterized by record M&A and advisory revenue, achieved by several very
large client transactions. This resulted in revenue of $230.0 million in Q3/13, which was 23.3% higher compared to Q2/13 and
55.5% higher than Q3/12, which was prior to the acquisition of CSHP. The fiscal third quarter was the strongest quarter of the year.
Canaccord recorded $218.0 million in revenue during its fiscal fourth quarter – a decrease of 5.2% from the prior quarter but an
increase of 22.7% compared to the same quarter in the previous year. The increase from Q4/12 was mostly due to increased advisory
revenue from the Company’s expanded advisory practice and contributions for wealth management operations in the UK and Europe.
Fourth quarter 2013 performance
Revenue for the fourth quarter was $218.0 million, an increase of $40.3 million or 22.7% compared to the same period in the
previous year, due to the significant growth in advisory fees, principal trading, and commissions and fees revenues, offset partially
by a drop in investment banking revenue. The global expansion in the UK and Europe and the US led to an increase in advisory
fees of $31.5 million. Our Canadian capital markets activity also contributed to the increase in advisory fees in Q4/13 compared
to Q4/12. Principal trading revenue also increased, by $16.0 million, and commissions and fees revenue by $13.3 million.
Investment banking revenue was $15.0 million lower compared to Q4/12, due to lower corporate finance activity. Both our operating
segments, Canaccord Genuity and Canaccord Genuity Wealth Management, experienced increases in revenue compared to Q4/12,
of $39.6 million and $5.7 million, respectively.
Expenses were $212.0 million, up $4.3 million or 2.0% from Q4/12. This increase was largely attributable to higher compensation
expense, amortization, trading costs, communication and technology expense, and premises and equipment expense in Q4/13.
Total expenses excluding significant items were $200.5 million, an increase of $34.0 million or 20.4% from Q4/12.
Incentive compensation expense was $1 7.6 million higher compared to Q4/12, which was consistent with the higher incentive-
based revenue. Total compensation expense as a percentage of revenue was down 1.3 percentage points to 62.4% in Q4/13,
attributable to slight decreases in incentive compensation in the UK and Europe and in the US. The increase in salaries and
benefits expense of $ 5.2 million to $2 2. 8 million in Q4/13 is consistent with the higher average headcount, primarily in the UK
and Europe and the US, as a result of our global expansion.
Our expanded operations in the US, and the UK and Europe from the acquisition of CSHP were the main contributors to the
increase in overhead expenses during Q4/13. Trading costs were up $4.5 million in Q4/13 compared to the same quarter of
the prior year, mainly due to the addition of certain principal trading operations in the US from the acquisition of CSHP. The
Company’s new wealth management operations in the UK and Europe and in Australia also contributed to the higher trading
costs. Communication and technology expense increased by $2.9 million compared to Q4/12 in connection with the expansion
of our global information technology infrastructure. Premises and equipment expense increased by $2.6 million because of the
additional office space acquired from our global expansion.
Amortization expense was up $5.1 million or 118.2% as the Company began amortizing the intangible assets acquired in
connection to CSHP commencing in Q1/13.
Net income for the fourth quarter of fiscal 2013 was $6.4 million, compared to net loss of $31.8 million in Q4/12. The increase in
net income was mainly related to additional revenue from the expanded operations as well as acquisition-related and restructuring
costs incurred in Q4/12. Diluted earnings per share in the current quarter was $0.04, compared to a diluted loss per share of
$0.42 in Q4/12. Book value per diluted common share decreased by 7.1%, down from $8.26 in Q4/12 to $7.68 in Q4/13.
There were $11.5 million and $41.2 million of significant items included in the fourth quarters of 2013 and 2012, respectively.
Excluding significant items, net income for Q4/13 was $15.6 million, compared to net income of $2.1 million in Q4/12, and
diluted EPS was $0.12, compared to diluted EPS of $0.02 in Q4/12.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 39
Management’s Discussion and Analysis
Business Segment Results(1)(2)
For the years ended March 31
Canaccord
Genuity
Wealth
Genuity Management
Canaccord
Corporate
and Other
2013
Total
Canaccord
Genuity
Wealth
Genuity Management
Canaccord
Corporate
and Other
2012
Total
$ 204,337
$ 137,625
$ 24,477
$ 366,439
$ 232,306
$ 195,728
$ 30,097
$ 458,131
158,054
153,355
91,757
2,230
21,814
3,473
—
—
—
249,811
155,585
51,193
79,486
1,987
3,575
25,287
10,492
—
—
—
—
53,180
83,061
10,492
537,560
235,085
24,477
797,122
373,477
201,290
30,097
604,864
529,677
229,507
61,640
820,380
375,144
166,465
79,374
620,983
(C$ thousands, except
number of employees)
Revenue
Canada
UK and Europe
US
Other Foreign
Locations
Total revenue
Expenses
Income (loss) before
income taxes
$
7,883
$
5,578
$
(37,163) $
(23,702) $
(1,667) $ 34,825
$
(49,277) $
(16,119)
Excluding signifi cant
items(3)
Expenses
499,317
206,836
60,740
766,893
330,108
161,488
72,586
564,182
Income (loss) before
income taxes
$ 38,243
$ 28,249
$
(36,263) $ 30,229
$ 43,369
$ 39,802
$
(42,489) $ 40,682
Number of employees
959
769
332
2,060
1,090
960
378
2,428
(1) Data is in accordance with IFRS except for fi gures excluding signifi cant items and number of employees. Detailed fi nancial results for the business segments are shown in Note 19 of the Audited
Consolidated Financial Statements on page 106.
(2) Canaccord Genuity data includes the results of Genuity since the closing date of April 23, 2010. Results of Canaccord Genuity Asia since the closing date of January 17, 2011 and results of
Canaccord Genuity (Australia) Limited since the closing date of November 1, 2011 are also included. The operating results of Canaccord Genuity (Australia) Limited have been consolidated and a
50% non-controlling interest has been recognized. Results of former CSHP entities since March 22, 2012 and the wealth management business of Eden Financial Ltd. since October 1, 2012 are
also included.
(3) See the Selected Financial Information Excluding Signifi cant Items table on page 32.
Canaccord’s operations are divided into three segments: Canaccord Genuity and Canaccord Genuity Wealth Management are the
main operating segments while Corporate and Other is mainly an administrative segment.
Canaccord Genuity provides investment banking, research, and sales and trading services to corporate, institutional and
government clients as well as conducting principal trading activities in Canada, the US, the UK and Europe, and Other Foreign
Locations. Canaccord Genuity’s revenue is generated from commissions and fees earned in connection with investment banking
transactions and institutional sales and trading activity, as well as trading gains and losses from Canaccord’s principal and
international trading operations. For fiscal 2013, total revenue was $537.6 million, up $164.1 million or 43.9% from fiscal 2012.
Fiscal 2013 expenses for Canaccord Genuity were $529.7 million, an increase of $154.5 million or 41.2% from fiscal 2012.
Excluding significant items, expenses were $499.3 million, 51.3% or $169.2 million higher than in fiscal 2012.
Canaccord Genuity Wealth Management provides brokerage services and investment advice to private clients in Canada and, to a
lesser degree, the US. As a result of the acquisitions of CSHP, Canaccord Genuity (Australia) Limited, and the wealth management
business of Eden Financial, our Canaccord Genuity Wealth Management operations also expanded into the UK and Europe
and Australia. Canaccord Genuity Wealth Management’s revenue is generated through traditional commission-based brokerage
services; the sale of fee-based products and services; client-related interest; and fees and commissions earned by Advisory Teams
for investment banking and venture capital transactions by private clients. In fiscal 2013, total revenue was $235.1 million, up
16.8% from the previous year. Total expenses for Canaccord Genuity Wealth Management for fiscal 2013 were $229.5 million,
up 37.9% compared to fiscal 2012.
The Corporate and Other segment includes correspondent brokerage services, interest, and foreign exchange revenue and
expenses not specifically allocable to the Canaccord Genuity and Canaccord Genuity Wealth Management divisions. Also included
in this segment are Canaccord’s operations and support services departments, which are responsible for front- and back-office
information technology systems, compliance and risk management, operations, finance and other administrative functions.
For fiscal 2013, revenue for the Corporate and Other segment was $24.5 million, a decrease of 18.7% from the previous year.
Expenses also decreased by 22.3% to $61.6 million for the current year compared to fiscal 2012.
40
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
CANACCORD GENUITY
Canaccord Genuity’s revenue is generated from commissions and fees earned in connection with investment banking transactions
and institutional sales and trading activity, as well as trading gains and losses from Canaccord’s principal and international trading
operations. Accordingly, this revenue is directly affected by the level of corporate and institutional activity and general economic,
market and business conditions in Canada, the UK and Europe, the US, Australia and Asia.
Revenue for this segment is generated from four geographic segments: Canada, the UK and Europe, the US and Other Foreign
Locations. Canaccord Genuity has 23 locations in 12 countries worldwide. Canaccord Genuity’s recent expansion efforts in the UK
have firmly positioned the Company as a leading independent investment bank in that market. As at March 31, 2013, Canaccord
Genuity had the third greatest number of corporate broking clients in the UK of all investment banks.(1) Canaccord Genuity has
also developed a prominent position in Canada for its M&A and advisory practice.
Capital markets activity remained relatively subdued in fiscal 2013 compared to previous years; however, M&A and advisory activity
was strong, due largely to challenging macroeconomic conditions and economic uncertainty during periods of the year. Despite
this market environment, Canaccord Genuity participated in 382 transactions globally for clients, which raised gross proceeds of
$31.4 billion(2). Of these, Canaccord Genuity led or co-led 111 transactions globally, raising total proceeds of $3.7 billion.
Canaccord Genuity sector diversification remains a core component of the Company’s strategy. Resource-related revenue was 21%
of Canaccord Genuity’s total investment banking revenue in fiscal 2013, versus 50% in fiscal 2012. Resource-related transactions
comprised 31% of the total number of Canaccord Genuity’s investment banking transactions in fiscal 2013, approximately equal
to 30% in fiscal 2012. Canaccord’s sector diversification was bolstered by the acquisition of CSHP in March 2012, providing
additional strength in non-resource sectors during fiscal 2013.
During fiscal 2013, Canaccord Genuity expanded its research coverage and investment banking activity to include more companies
in the following sectors:
(cid:129) Metals & Mining
(cid:129) Energy
(cid:129) Agriculture
(cid:129) Technology
(cid:129) CleanTech & Sustainability
(cid:129) Transportation & Industrials
(cid:129) Financials
(cid:129) Healthcare & Life Sciences
(cid:129) Real Estate & Hospitality
(cid:129) Consumer & Retail
(cid:129) Support Services
(cid:129) Media & Telecommunications
(cid:129) Paper & Forestry Products
(cid:129) Infrastructure
(cid:129) Investment Companies
(cid:129) Aerospace & Defense
(cid:129) Leisure
(cid:129) Private Equity
(1) Source: Corporate Advisers Rankings Guide – March 2013
(2) Transactions over $1.5 million
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 41
Management’s Discussion and Analysis
Industry profile
Canaccord Genuity is active in stocks listed or quoted on ten exchanges internationally – the TSX, TSX Venture, LSE, AIM, NASDAQ,
NYSE, AMEX, ASX, SGX and SGX Catalist. Our expertise in these markets allows us to lower costs of capital, broaden shareholder
bases and provide best execution and liquidity for our clients. For fiscal 2013, financing values were down on the TSX, TSX Venture
and AIM, but up on the NASDAQ compared to the prior year.
Smaller regional or local investment dealers are increasingly under pressure, and some international competitors have recently
retrenched to focus on local markets. We believe this changing competitive landscape provides significant opportunity for Canaccord
Genuity in the mid-market, as this space is currently relatively underserviced by other global investment banks. Canaccord Genuity’s
mid-market strategy focused on key sectors differentiates the firm amongst competition.
Outlook
Canaccord Genuity remains very well positioned in many of the Company’s key markets. In the year ahead, management intends to
focus on capturing operating efficiencies and generating revenue synergies through further integrating aspects of its global capital
markets platform and encouraging further cross-border coordination. During fiscal 2014, there will be a stronger emphasis on
globalizing key leadership positions and departments.
In the year ahead, the Company may pursue opportunities to add small teams to specific sector verticals or key service offerings
to further strengthen our operations in areas we believe we can capture additional market share in. Expanding our capabilities in
fixed income services is a focus of management.
We believe Canaccord Genuity’s global platforms provide a competitive advantage for the business compared to many of the
domestically focused firms we compete with. This is especially true in advisory services, where clients are recognizing the value
of cross-border transactions. Canaccord Genuity continues to have a very strong pipeline of M&A activity, and expects another
strong year of advisory performance. Equity underwriting is expected to remain subdued in many of our markets, including Canada;
however, signs of a rebound in underwriting activity are occurring in the US.
The continued shift towards electronic trading, and increased trading on alternative platforms, is expected to shift some trading
market share away from the main stock exchanges. Canaccord Genuity is active in offering trading services on many of the
alternative exchanges. The Company has also developed a strong presence in the US with its American Depositary Receipts (ADR)
and foreign equity trading capabilities from its International Equities Group.
It is not expected that Canaccord Genuity will be materially impacted by any regulatory changes in the next year; however,
the Company is closely monitoring the European parliaments’ proposed bank bonus legislation . This legislation may impact
Canaccord’s operations in the UK and Europe depending on how the proposed bonus restrictions and regulations are adopted.
The Company will continue to vigilantly monitor shifts in the capital markets regulatory environment. Canaccord Genuity remains
committed to operating as efficiently as possible in order to sustain its global platform during periods of slower capital markets
activity. A culture of cost containment continues to be reinforced throughout the Company, and strategies to lower operating costs
over the long term continue to be explored.
The management team believes the investments Canaccord has made over the last two years to increase the Company’s global
presence and broaden its service offering have positioned the business very well for the future .
42
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
FINANCIAL PERFORMANCE(1)(2)
For the years ended March 31
2013
Canada
UK and
Europe
Other
Foreign
Locations
US
Total
Canada
UK and
Europe
Other
Foreign
Locations
US
2012
Total
$ 204,337 $ 158,054 $ 153,355 $ 21,814 $ 537,560 $ 232,306 $ 51,193 $ 79,486 $ 10,492 $ 373,477
(C$ thousands,
except number
of employees)
Revenue
Expenses
Incentive
compensation
101,082
93,502
82,353
13,171
290,108
109,180
33,481
46,319
5,425
194,405
Salaries and
benefi ts
6,822
15,593
10,064
2,691
35,170
5,465
5,471
4,572
2,308
17,816
Other overhead
expenses
48,929
61,717
63,539
14,594
188,779
54,567
25,358
33,872
9,582
123,379
Acquisition-related
costs
Restructuring costs
388
575
—
—
7,852
6,805
—
—
388
4,143
5,886
437
15,232
7,452
18,460
3,166
—
—
10,466
29,078
Total expenses
157,796
178,664
162,761
30,456
529,677
180,807
88,656
88,366
17,315
375,144
Income (loss) before
income taxes(3)
Excluding signifi cant
items(4)
$ 46,541 $ (20,610) $
(9,406) $
(8,642) $
7,883 $ 51,499 $ (37,463) $
(8,880) $
(6,823) $
(1,667)
Total expenses
153,112
165,955
155,952
24,298
499,317
165,492
64,310
84,763
15,543
330,108
Income (loss) before
income taxes
(recovery)
$ 51,225 $
(7,901) $
(2,597) $
(2,484) $ 38,243 $ 66,814 $ (13,117) $
(5,277) $
(5,051) $ 43,369
Number of
employees
222
400
253
84
959
247
461
302
80
1,090
(1) Data is in accordance with IFRS except for fi gures excluding signifi cant items and number of employees.
(2) Data in Canada includes the results of Genuity since the closing date of April 23, 2010. Results of The Balloch Group Limited (TBG) since the closing date of January 17, 2011 are included in Other
Foreign Locations. The operating results of Canaccord Genuity (Australia) Limited have been consolidated and a 50% non-controlling interest has been recognized. Results of former CSHP entities
since March 22, 2012 are also included.
(3) See the Intersegment Allocated Costs section on page 52.
(4) Refer to the Selected Financial Information Excluding Signifi cant Items table on page 32.
REVENUE
Despite the uncertainties in the global economy that continued into fiscal 2013, the Company focused its efforts on the global
integration of our capital markets team. This led to an overall increase in revenue in our Canaccord Genuity segment. For fiscal
year 2013, revenue was $537.6 million, which was 43.9% or $164.1 million higher than in fiscal 2012.
Capital markets activities dropped in our Canadian operations during fiscal 2013, mainly as a result of the subdued pace of
equity underwriting due to volatility in the market environment, leading to a decrease in revenue of 12.0%. Revenue from our UK
and Europe and our US operations increased by 208.7% and 92.9%, respectively, due to the larger scale operations in these
geographic regions, achieved through the acquisition of CSHP. Revenue from our Other Foreign Locations represented 4.1% or
$21.8 million of total Canaccord Genuity revenue, up 1.3 percentage points compared to 2.8% or $10.5 million in fiscal 2012 as
a result of the Company’s expansion in Asia and Australia.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 43
Management’s Discussion and Analysis
Investment banking activity
During fiscal 2013, Canaccord participated in raising $ 31.4 billion in 382 equity offerings of $1.5 million and greater, excluding
venture capital. Canaccord Genuity’s sector mix in fiscal 2013 showed increasing diversity, with over 64% of the transactions
occurring in the Structured Products, Technology, Healthcare & Life Sciences, Financials, Real Estate & Hospitality, Diversified and
other sectors. The Metals & M ining and Energy sectors, traditionally Canaccord’s strength, made up nearly 31% of the investment
banking transactions the Company participated in, and brought in nearly 34% of investment banking revenue.
CANACCORD GENUITY – OVERALL
Investment banking transactions by sector
Investment banking revenue by sector
1%
Media &
Telecommunications
4%
Other
5%
Diversified
5%
Financials
7%
Technology
7%
Healthcare &
Life Sciences
5%
Other
21%
Structured Products
19%
Metals & Mining
19%
Real Estate
& Hospitality
12%
Energy
3%
Consumer & Retail
4%
Diversified
9%
Financials
9%
Investment Trusts
10%
Technology
CANACCORD GENUITY – CANADA
Investment banking transactions by sector
Investment banking revenue by sector
4%
Other
1%
Consumer & Retail
1%
Healthcare &
Life Sciences
3%
Diversified
4%
Financials
12%
Energy
6%
Other
33%
Structured Products
27%
Real Estate
& Hospitality
15%
Metals & Mining
2%
Consumer & Retail
4%
Diversified
4%
Structured Products
5%
Healthcare &
Life Sciences
5%
Media &
Telecommunications
6%
Financials
17%
Metals & Mining
17%
Energy
13%
Healthcare &
Life Sciences
13%
Real Estate
& Hospitality
29%
Real Estate
& Hospitality
29%
Metals & Mining
10%
Energy
44
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
CANACCORD GENUITY – UK AND EUROPE
Investment banking transactions by sector
Investment banking revenue by sector
10%
Support Services
16%
Energy
21%
Technology
32%
Metals & Mining
21%
Financials
1%
Other
4%
Metals & Mining
13%
Technology
19%
Financials
CANACCORD GENUITY – US
Investment banking transactions by sector
Investment banking revenue by sector
4%
CleanTech &
Sustainability
6%
Consumer & Retail
12%
Energy
1%
Other
1%
CleanTech &
Sustainability
6%
Consumer & Retail
11%
Energy
47%
Healthcare &
Life Sciences
31%
Technology
CANACCORD GENUITY – OTHER FOREIGN LOCATIONS
Investment banking transactions by sector
Investment banking revenue by sector
4%
Other
2%
Consumer & Retail
3%
Healthcare &
Life Sciences
4%
Media &
Telecommunications
5%
Real Estate
& Hospitality
8%
Financials
10%
Technology
2%
Other
3%
Consumer & Retail
6%
Real Estate
& Hospitality
7%
Technology
11%
Financials
39%
Metals & Mining
13%
Diversified
12%
Energy
33%
Investment Companies
30%
Energy
56%
Healthcare &
Life Sciences
25%
Technology
34%
Metals & Mining
20%
Diversified
17%
Energy
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 45
Management’s Discussion and Analysis
EQUITY OFFERINGS OF $1.5 MILLION AND GREATER PARTICIPATED IN BY CANACCORD
(C$ billions, except number of transactions)
Market
Canada
UK and Europe
US
Other Foreign Locations
Total
Sources: Financial Post Data Group and Company sources
EXPENSES
For the years ended March 31
2013
Aggregate
transaction
value
Number of
transactions
Number of
transactions
288
$
23.7
274
$
26
44
24
2.7
4.7
0.3
11
38
—
382
$
31.4
323
$
2012
Aggregate
transaction
value
2.4
0.7
3.7
—
6.8
Expenses for fiscal 2013 were $529.7 million, an increase of 41.2% year over year. The Canaccord Genuity segment recognized
$30.4 million of significant items including restructuring costs incurred to better utilize the synergies between CSHP and the
existing Canaccord Genuity operations and acquisition-related expense items in relation to its acquisition of Kenosis Capital
Partners. In the prior year, Canaccord Genuity recognized $45.0 million of significant items related to the purchase of CSHP
and a 50% interest in Canaccord Genuity (Australia) Limited (formerly Canaccord BGF). Excluding significant items, fiscal 2013
total expenses were $499.3 million, an increase of 51.3% or $169.2 million compared to fiscal 2012, mainly due to additional
expenses incurred for the expanded operations.
Incentive compensation and salaries and benefits
Incentive compensation expense for fiscal 2013 grew by $95.7 million or 49.2% compared to fiscal 2012 as a result of the
growth in incentive-based revenue. Incentive compensation expense as a percentage of revenue was 54.0%, up 1.9 percentage
points from fiscal 2012 due to higher LTIP expense in the current year related to the amortization of grants awarded in prior
periods. Salaries and benefits expense for fiscal 2013 was up $17.4 million or 97.4% compared to fiscal 2012 due to our global
expansion in the UK and Europe, and the US. Total compensation expense as a percentage of revenue was 3.7 percentage points
higher at 60.5%.
TOTAL COMPENSATION AS A % OF
CANACCORD GENUITY REVENUE – OVERALL
TOTAL COMPENSATION AS A % OF
CANACCORD GENUITY REVENUE – CANADA
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
5.4%
51.1%
4.2%
53.7%
3.0%
46.7%
4.7%
52.1%
6.5%
54.0%
Salaries and benefits
Incentive compensation
3.4%
54.6%
2.5%
52.4%
1.7%
43.1%
2.4%
47.0%
3.3%
49.5%
Salaries and benefits
Incentive compensation
56.5%
57.9%
49.7%
56.8%
60.5%
Total
58.0%
54.9%
44.8%
49.4%
52.8%
Total
46
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
TOTAL COMPENSATION AS A % OF
CANACCORD GENUITY REVENUE – UK AND EUROPE
TOTAL COMPENSATION AS A % OF
CANACCORD GENUITY REVENUE – US
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
2.1%
7.7%
47.2%
1.9%
7.8%
53.9%
1.8%
5.4%
50.0%
5.3%
10.7%
60.0%
2.8%
9.9%
56.3%
National Health Insurance Tax
Salaries and benefits
Incentive compensation
6.9%
46.3%
4.5%
55.1%
4.6%
54.0%
5.8%
58.2%
6.6%
53.6%
Salaries and benefits
Incentive compensation
53.2%
59.6%
58.6%
64.0%
60.2%
Total
57.0%
63.6%
57.2%
76.0%
69.0%
Total
TOTAL COMPENSATION AS A % OF CANACCORD GENUITY
REVENUE – OTHER FOREIGN LOCATIONS
2009
2010
2011
2012
2013
0.8%
58.0%
0.6%
38.5%
53.2%
8.9%
22.0%
51.7%
12.3%
60.4%
Salaries and benefits
Incentive compensation
58.8%
39.1%
62.1%
73.7%
72.7%
Total
Other overhead expenses
Other overhead expenses excluding significant items were $174.0 million, an increase of $56.2 million. The largest fluctuation
in other overhead expenses was a $15.0 million increase in general and administrative expense. The remainder of the change in
other overhead expenses is mostly due to the following: a $14.8 million increase in communication and technology expense, a
$12.1 million increase in premises and equipment expense, a $10.7 million increase in trading costs, a $10.6 million increase in
amortization expense and a $5.2 million increase in interest expense.
Overhead expenses increased significantly, as was necessary to support the growth and integration of the acquired businesses
in our Canaccord Genuity segment in the US, the UK and Europe, and Other Foreign Locations. Communication and technology
expense increased by $14.8 million compared to fiscal 2012 due to the higher average headcount in fiscal 2013 as well as the
global expansion of technology platforms. Premises and equipment expense increased by $12.1 million due to additional office
space acquired. Trading costs were up $10.7 million in fiscal 2013 compared to the prior year, mainly due to the addition of
certain principal trading operations in the US. Interest expense increased by $5.2 million due to increased stock borrowings in our
UK operations. General and administrative expense, which includes promotion and travel expense, office expense, professional
fees and donation expense, was up $15.0 million, mainly due to our expanded operations, as well as certain integration costs
incurred to align the various global business units.
Amortization of intangible assets acquired through the purchase of a 50% interest in Canaccord Genuity (Australia) Limited and
the acquisition of CSHP was the main reason for the $10.6 million increase in amortization expense.
Significant items include restructuring costs, acquisition-related costs, and amortization of intangible assets related to the
acquisitions of Genuity, a 50% interest in Canaccord Genuity (Australia) Limited, and CSHP. In fiscal 2013, Canaccord Genuity
incurred $15.2 million of restructuring costs related to the reorganization of operations in the US, the UK and Europe, and Canada
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 47
Management’s Discussion and Analysis
to better integrate the acquired operations and generate stronger future performance. Acquisition-related costs of $0.4 million
were also recorded in relation to the acquisition of Kenosis Capital. In addition, our Canaccord Genuity segment recognized
$14.7 million of amortization of intangible assets, up $9.2 million or 168.4% from the prior year.
INCOME BEFORE INCOME TAXES AND INTERSEGMENT ALLOCATED COSTS
Income before income taxes and intersegment allocated costs in fiscal 2013 was $7.9 million compared to loss before income
taxes and intersegment allocated costs of $1.7 million in fiscal 2012. Excluding significant items, income before income taxes
and intersegment allocated costs was $38.2 million compared to $43.4 million in fiscal 2012. The challenging market conditions
that carried into fiscal 2013 coupled with higher integration costs for our newly acquired operations resulted in lower income
excluding significant items in fiscal 2013.
CANACCORD GENUITY WEALTH MANAGEMENT
Overview
Canaccord’s wealth management division provides a broad range of financial services and investment products to individual
investors (private clients), institutions and intermediaries, and charities. Revenue from wealth management is generated through
traditional commission-based brokerage services; the sale of fee-based products and services; client-related interest; and fees
and commissions earned by IAs for investment banking and venture capital transactions. Canaccord now has wealth management
operations in Canada, the UK and Europe, and Australia.
Over the last two years, Canaccord has strategically expanded its wealth management platform into new geographies through
acquisition activity to enhance the consistency of its revenue streams through market diversification and the addition of largely
fee-based wealth management operations.
In the UK and Europe, Canaccord Genuity Wealth Management has six locations, including offices in the UK, the Channel Islands,
the Isle of Man and Switzerland. Revenue earned by this business is largely generated through fee-based accounts and portfolio
management activities. With 61% of the revenue from this business generated from fee-based activity, it has a significantly higher
proportion of fee-based revenue than Canaccord’s Canadian wealth management business. The business caters to both onshore
(UK) and offshore client accounts and provides clients with investing options from both third party and proprietary financial
products, including 11 funds managed by Canaccord Genuity Wealth Management portfolio managers.
During fiscal 2013, Canaccord implemented a strategic refocusing of its Canadian wealth management division, targeting its
operations in core Canadian centres. The Company believes this strategy will help to strengthen its Canadian wealth management
platform by centering its investments and support services in markets where it has developed a significant presence and markets
that show prospects for market share growth.
Over the last three years, Canaccord has focused on repositioning its Canadian wealth management business to cater to the
changing needs and preferences of Canadian investors. Pairing advisors with different business approaches and enhancing
the support provided to advisors with holistic wealth management approaches are examples of initiatives the Company has
implemented to ensure we meet the needs of a more conservative, aging client base with comprehensive financial planning needs.
In addition to this, Canaccord Genuity Wealth Management has significantly enhanced its advisor training programs over the last
several years to ensure Advisory Teams have the broad-based expertise required to provide holistic wealth management advice.
During fiscal 2013, the Company had the highest participation in training programs ever recorded, with over 3,020 separate
training engagements from the Company’s Canadian advisor force.
In Australia, Canaccord Genuity Wealth Management continued to grow its presence during fiscal 2013. During the year, the
business welcomed Trent McCamley as Head of Wealth Management (Australia) and welcomed several new advisors. As at
March 31, 2013, the Company had 11 Investment Advisors in Australia. Collectively, they grew assets under management by
almost 50% to $451 million in this geography.
On May 1, 2013, subsequent to fiscal 2013, all of Canaccord’s wealth management businesses were rebranded as Canaccord
Genuity Wealth Management. Prior to this, the businesses were known as:
(cid:129) Canaccord Wealth Management (Canada and Australia)
(cid:129) Collins Stewart Wealth Management (UK and Europe)
(cid:129) Eden Financial (UK)
48
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Industry profile
Consolidation of wealth management businesses continues to be an industry theme in both Canada and the UK. In Canada, where
operating scale and underwriting activity is a key determinant of success for smaller brokerages, the industry has seen many
participants exit the market, shift to new client service models or become acquired. In the UK, increasing regulatory burden is
expected to create some challenges for many smaller, sub-scale wealth management firms. As a result, M&A activity is expected
to grow in the industry over the next few years, as the largely fragmented UK wealth management industry consolidates in order to
operate successfully amid growing compliance requirements.
The recruiting environment for high quality Investment Advisors in Canada continues to be very competitive – with some market
participants making historically high offers to recruit advisors in order to gain scale or expand their distribution channels for
proprietary fund products. Margins for Canadian wealth management firms continue to be compressed as market volumes remain
low compared to previous years.
Outlook
Management’s priorities for Canaccord Genuity Wealth Management will be focused on strengthening the performance of its
Canadian business, growing assets under administration and management, and growing fee-based revenues.
With over 60% of its revenue derived from recurring, fee-based activities, the revenue streams generated through Canaccord’s UK
and European wealth management business should help to improve the stability of the division’s overall performance. Canaccord
expects opportunities to grow the asset and client base of its UK wealth management business will emerge over the next several
years, as increasing regulatory requirements in the UK wealth management industry impose uneconomical demands on smaller
industry participants. The Company’s acquisition of Eden Financial’s wealth management business during fiscal 2013 was its
first acquisition to demonstrate this opportunity. An overall consolidation of the UK wealth management industry is expected, with
fewer and larger wealth management firms ultimately competing to provide services in this market.
In Canada, Canaccord’s focus will remain on operating a high quality, comprehensive wealth management platform. While the
recruiting environment remains challenging, we expect to have some recruiting success in select local markets.
The Company also intends to invest further in training programs for new and existing Investment Advisors to continue developing
the skills of our Advisory Teams. These training activities are already gaining traction, and are expected to support the growth
of fee-based services offered through the Canadian business. As well, efforts to grow fee-based activities in Canada are
underway by pairing advisors who take a traditional brokerage business approach with advisors who focus on comprehensive
wealth management services.
With changing client preferences, Canaccord Genuity Wealth Management is also evaluating opportunities in all geographies to
enhance its digital platform, provide greater online access and/or leverage social media platforms to communicate with clients.
In Australia, the Company still has a relatively small wealth management operation; however, expansion is expected to occur
through targeted recruiting, and through the build-out of wealth management services and products in this market.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 49
Management’s Discussion and Analysis
FINANCIAL PERFORMANCE(1)(2)
(C$ thousands, except AUM and AUA (in C$ millions),
number of employees, Advisory Teams, advisors, investment
professionals and fund managers, and % amounts)
Revenue
Expenses
Incentive compensation
Salaries and benefi ts
Other overhead expenses
Restructuring costs
Acquisition-related costs
Total expenses
Income before income taxes(3)
AUM – Canada (discretionary)(4)
AUA – Canada(5)
AUM – UK and Europe(6)
AUM – Australia(7)
Total
Number of Advisory Teams – Canada
Number of investment professionals and fund managers – UK and Europe
Number of advisors – Australia
Number of employees
Excluding signifi cant items
Total expenses
Income (loss) before income taxes
For the years ended March 31
2013
2012
2013/2012 change
$
235,085
$
201,290
$
33,795
16.8%
11 1,5 83
101,364
2 3,6 51
77,457
15,485
1,331
15,437
44,687
900
4,077
229,507
166,465
10, 219
8, 214
32,770
14,585
(2,746)
63,042
$
5,579
$
34,825
$
(29,246)
835
10,429
15,936
451
26,816
178
122
12
769
677
14,828
13,087
—
27,915
280
106
—
960
158
(4,399)
2,849
451
(1,099)
(102)
16
12
(191)
206,836
28,249
161,488
39,802
45,348
(11,553)
10.1%
53. 2%
73.3%
n.m.
(67.4)%
37.9%
(84.0)%
23.3%
(29.7)%
21.8%
n.m.
(3.9)%
(36.4)%
15.1%
n.m.
(19.9)%
28.1%
(29.0)%
(1) Data is in accordance with IFRS except for fi gures excluding signifi cant items, AUA, AUM, number of Advisory Teams, number of investment professionals and fund managers, and number of employees.
(2) Includes Canaccord Genuity Wealth Management operations in Canada, the US, Australia and the UK and Europe. Operating results from former Collins Stewart Wealth Management entities since
March 22, 2012 and the wealth management business of Eden Financial Ltd. since October 1, 2012 are also included.
(3) See the Intersegment Allocated Costs section on page 52.
(4) AUM in Canada are assets managed on a discretionary basis under our programs generally described as or known as the Complete Canaccord Investment Counselling Program and the Complete
Canaccord Private Investment Management Program .
(5) AUA in Canada is the market value of client assets administered by Canaccord, for which Canaccord earns commissions or fees.
(6) AUM in the UK and Europe is the market value of client assets managed and administered by Canaccord, for which Canaccord earns commissions or fees. This measure includes both discretionary
and non-discretionary accounts.
(7) AUM in Australia is the market value of client assets administered by Canaccord, from which Canaccord earns commissions and fees. This measure includes both discretionary and
non-discretionary accounts.
n.m.: not meaningful
Fiscal 2013 revenue from Canaccord Genuity Wealth Management was $235.1 million, an increase of 16.8% or $33.8 million
from fiscal 2012. The expansion of our wealth management operations into the UK and Europe led to the overall increase in
revenues, offset by a decrease in revenue in our Canadian wealth management operations. Revenue generated by our UK and
Europe operations is largely produced through fee-based accounts and portfolio management activities, and, as such, is less
sensitive to volatilities in market conditions.
During fiscal 2013, the Company closed 16 underperforming branches across Canada to refocus the Canadian wealth
management business.
AUA in Canada dropped by 29.7% to $10.4 billion at March 31, 2013, primarily due to poor market performance and branch
closures as a result of the restructuring of the Canadian wealth management operations. AUM in Canada increased by 23.3%
compared to fiscal 2012 due to the Company’s strategic emphasis on increasing this less volatile revenue stream. There were
178 Advisory Teams in Canada, down by 102 from a year ago.
Through the acquisition of the wealth management business of Eden Financial, Canaccord Genuity Wealth Management further
expanded its wealth management business segment in the UK and Europe. AUM in the UK and Europe as of March 31, 2013 was
$15.9 billion, up $2.8 billion or 21.8% from March 31, 2012. The fee-based revenue in our UK and Europe operations accounted
for 61.1% of total revenue in this geography. As discussed above, this business has a higher proportion of fee-based revenue
compared to our Canadian wealth management business.
Expenses for fiscal 2013 were $229.5 million, an increase of 37.9% or $63.0 million from fiscal 2012. Total compensation
expense increased due to a $ 10.2 million increase in incentive compensation expense and an $ 8. 2 million increase in salaries
and benefits expense as a result of the expansion of our wealth management operations in the UK and Europe.
50
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
TOTAL COMPENSATION AS A % OF CANACCORD GENUITY WEALTH MANAGEMENT REVENUE
Management’s Discussion and Analysis
2009
2010
2011
2012
2013
8.6%
43.1%
9.8%
47.4%
7.6%
49.9%
7.6%
50.4%
10.0%
47.5%
Salaries and benefits
Incentive compensation
51.7%
57.2%
57.5%
58.0%
57.5%
Total
Excluding significant items, non-compensation expense was $71.6 million, up $26.9 million compared to $44.7 million in the prior
year. This was mainly due to an increase of $11.9 million in general and administrative expense because of an increase in client
settlement expense. The expansion of operations achieved through our acquisition of CSHP resulted in a $10.2 million increase in
general and administrative expense, a $5.7 million increase in communication and technology expense, a $6.7 million increase
in amortization expense, a $4.3 million increase in trading costs, and a $2.9 million increase in development costs.
Significant items incurred during fiscal 2013 included acquisition-related costs of $1.3 million in connection with the purchase of the
wealth management business of Eden Financial and restructuring costs of $15.5 million related to the closure of underperforming
Canadian branches discussed above, as well as the integration of the UK and Europe wealth management businesses.
Income before income taxes and intersegment allocated costs for Canaccord Genuity Wealth Management during fiscal 2013
and 2012 was $5.6 million and $34.8 million, respectively. Lower revenue in our Canadian operations combined with significant
restructuring costs was the primary contributor to the decrease in income before income taxes and intersegment allocated costs
during fiscal 2013.
CORPORATE AND OTHER SEGMENT
The Corporate and Other segment includes Pinnacle Correspondent Services (Canaccord’s correspondent brokerage services
division), interest, foreign exchange revenue, and expenses not specifically allocable to Canaccord Genuity or Canaccord Genuity
Wealth Management. Pinnacle provides trade execution, clearing, settlement, custody, and front- and back-office services to other
introducing brokerage firms. The Pinnacle business unit was developed as an extension and application of Canaccord’s substantial
investment in its information technology and operating infrastructure.
Also included in this segment are Canaccord’s operations and support services departments, which are responsible for front- and
back-office information technology systems, compliance and risk management, operations, legal, finance, and other administrative
functions. Canaccord has approximately 332 employees in the Corporate and Other segment. The majority of Canaccord’s
corporate support functions are based in Vancouver and Toronto, Canada.
The operations group is responsible for all activity in connection with processing securities transactions, including trade execution,
settlement of securities transactions and custody of client securities. The finance department is responsible for internal financial
accounting and controls, and external financial and regulatory reporting, while the compliance department is responsible for client
credit and account monitoring in relation to certain legal and financial regulatory requirements. Canaccord’s risk management and
compliance activities include procedures to identify, control, measure and monitor Canaccord’s risk exposure at all times.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 51
Management’s Discussion and Analysis
FINANCIAL PERFORMANCE(1)
For the years ended March 31
(C$ thousands, except number of employees and % amounts)
2013
2012
2013/2012 change
Revenue
Expenses
Incentive compensation
Salaries and benefi ts
Other overhead expenses
Restructuring costs
Acquisition-related costs
Total expenses
Loss before income taxes(2)
Number of employees
Excluding signifi cant items
Total expenses
Loss before income taxes
$
24,477
$
30,097
$
(5,620)
(18.7)%
5,033
29,701
26,006
900
—
61,640
9,139
30,671
32,776
5,275
1,513
79,374
(4,106)
(970)
(6,770)
(4,375)
(1,513)
(17,734)
$
(37,163)
$
(49,277)
$
12,114
332
378
(46)
60,740
72,586
(11,846)
$
(36,263)
$
(42,489)
$
6,226
(44.9)%
(3.2)%
(20.7)%
(82.9)%
(100.0)%
(22.3)%
24.6%
(12.2)%
(16.3)%
14.7%
(1) Data is in accordance with IFRS except for fi gures excluding signifi cant items and number of employees.
(2) See the Intersegment Allocated Costs section below.
Revenue for fiscal 2013 was $24.5 million, a decrease of $5.6 million or 18.7% from fiscal 2012. The change was mainly due to
a $2.6 million decrease in other revenue and a $2.9 million decrease in interest expense. Other revenue decreased as a result
of a reduction in foreign exchange gains related to the fluctuations in the Canadian dollar, and interest revenue decreased due to
lower interest rates and lower balances held in interest-earning accounts.
Fiscal 2013 expenses were $61.6 million, a decrease of $17.7 million or 22.3%. The $4.1 million decrease in incentive
compensation expense resulted from the lower profitability of the consolidated group of companies. General and administrative
expense decreased by $6.9 million or 43.1% due to cost containment efforts in this segment. During the year ended March 31,
2013, the Company incurred restructuring charges of $0.9 million related to back-office staff reductions.
Loss before income taxes and intersegment allocated costs was $37.2 million for fiscal 2013 compared to a loss of $49.3 million
for the prior year.
OPERATIONAL HIGHLIGHTS
During fiscal 2013, the back-office team at Canaccord focused on further IT and systems integration between geographies to
ensure efficient information sharing; identifying cost saving opportunities within the Company’s operating platform; brand and
communication strategies; and supporting operational changes in the Company’s wealth management division. Staffing levels
were also evaluated and adjusted in some support departments during the year, to better align support levels with changing
demands from the business.
Canaccord’s Pinnacle Correspondent Services is also reported within the Corporate and Other segment. This division enables
us to leverage our infrastructure investments and technology capabilities. Through its proprietary web portal, Pinnacle provides
access to state-of-the-art front- and back-office services to its correspondent clients. Canaccord has made a substantial
long term commitment to this line of business, and continues to view it as an important component of our business-to-business
service offerings.
INTERSEGMENT ALLOCATED COSTS
Included in the Corporate and Other segment are certain trade processing, support services, research and other expenses that
have been incurred to support the activities within the Canaccord Genuity and Canaccord Genuity Wealth Management segments.
Excluding executive incentive compensation and certain administrative support, foreign exchange gains and losses, and net
interest, management has determined that allocable costs from Corporate and Other to Canaccord Genuity Wealth Management
were $35.5 million for the year ended March 31, 2013, and to Canaccord Genuity were $10.3 million.
52
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Financial Condition
Below are selected balance sheet items for the past five years:(1)
(C$ thousands)
Assets
Balance sheet summary as at March 31
2013
IFRS
2012
IFRS
2011
IFRS
2010
CGAAP
2009
CGAAP
Cash and cash equivalents
$
491,012
$
814,238
$
954,068
$
731,852
$
701,173
Securities owned
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Investment in asset-backed commercial paper (ABCP)
Equipment and leasehold improvements
Goodwill and other intangible assets
924,337
1,171,988
947,185
362,755
133,691
2,513,958
3,081,640
2,828,812
1,972,924
1,061,161
—
12,552
3,695
—
42,979
614,969
8,301
3,959
9,493
—
51,084
622,020
—
1,503
5,934
—
40,818
319,180
—
13,190
5,000
—
38,127
—
23,771
15,680
5,000
35,312
46,311
—
Total assets
$ 4,603,502
$ 5,762,723
$ 5,097,500
$ 3,123,848
$ 2,022,099
Liabilities and shareholders’ equity
Bank indebtedness
Short term credit facility
Securities sold short
$
66,138
$
75,141
$
13,580
$
29,435
$
75,600
—
689,020
150,000
914,649
—
—
722,613
364,137
—
79,426
Accounts payable and accrued liabilities
2,746,790
3,590,266
3,557,275
2,308,146
1,469,369
Income taxes payable
Contingent consideration
Deferred tax liabilities
Subordinated debt
Shareholders’ equity
Non-controlling interests
4,428
14,218
2,576
15,000
1,049,163
16,619
—
—
8,088
15,000
992,125
17,454
23,977
—
8,163
15,000
756,892
—
5,385
—
—
15,000
401,745
—
—
—
—
25,000
372,704
—
Total liabilities and shareholders’ equity
$ 4,603,502
$ 5,762,723
$ 5,097,500
$ 3,123,848
$ 2,022,099
(1) The Company adopted IFRS beginning April 1, 2011. Consequently, data for the comparative periods ended March 31, 2012 and March 31, 2011 are in compliance with IFRS. Figures for periods
prior to March 31, 2011 are in accordance with CGAAP.
ASSETS
Cash and cash equivalents were $491.0 million on March 31, 2013 compared to $814.2 million on March 31, 2012. Refer to the
Liquidity and Capital Resources section for more details.
Securities owned were $0.9 billion compared to $1.2 billion on March 31, 2012, mainly attributable to a decrease in both
corporate and government debt, and equities and convertible debentures.
Accounts receivable were $2.5 billion on March 31, 2013 compared to $3.1 billion on March 31, 2012, as a result of a decrease
in receivables from clients and RRSP cash balances held in trust. Goodwill was $48 4.7 million and intangible assets were
$130.3 million, representing the goodwill and intangible assets acquired from the acquisitions of Genuity, The Balloch Group (TBG),
50% interest in Canaccord Genuity (Australia) Limited, CSHP, Kenosis Capital Partners, and Eden Financial Ltd.
Other assets in aggregate were $59.2 million at March 31, 2013 compared to $72.8 million at March 31, 2012. The decrease
was mainly due to decreases in income taxes recoverable, investments, and equipment and leasehold improvements, offset by an
increase in deferred tax assets. Equipment and leasehold improvements decreased mainly as a result of the normal amortization
of these assets. Income taxes recoverable decreased due to large refunds expected in Canada and the UK in the prior year.
Deferred tax assets increased due to balances acquired from CSHP and Canaccord Genuity (Australia) Limited, and investments
decreased due to the sale of our investment in Alpha.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 53
Management’s Discussion and Analysis
LIABILITIES AND SHAREHOLDERS’ EQUITY
Bank overdrafts and call loan facilities utilized by Canaccord may vary significantly on a day-to-day basis and depend on securities
trading activity. On March 31, 2013, Canaccord had available credit facilities with banks in Canada, and the UK and Europe in
the aggregate amount of $705.5 million [March 31, 2012 – $650.4 million]. These credit facilities, consisting of call loans, letters
of credit and daylight overdraft facilities, are collateralized by unpaid client securities and/or securities owned by the Company.
On March 31, 2013, there was bank indebtedness of $66.1 million, compared to $75.1 million on March 31, 2012.
In addition to the credit facilities discussed above, in fiscal 2012, the Company entered into a $150.0 million senior secured
credit agreement to finance a portion of the cash consideration for its acquisition of CSHP. The credit facility was repaid in full
during the 2013 fiscal year.
Accounts payable and provisions were $2.7 billion, a decrease from $3.6 billion on March 31, 2012, mainly due to a decrease in
both payables to clients and payables to brokers and investment dealers.
Securities sold short were $689.0 million, a decrease of $225.6 million compared to $914.6 million at March 31, 2012. This
decrease was a result of a decrease in holdings of short positions in both corporate and government debt, and equities and
convertible debentures.
Other liabilities, including subordinated debt, contingent consideration, deferred tax liabilities, and income taxes payable, were
$36.2 million at March 31, 2013 and $23.1 million at March 31, 2012. The Company accrued a contingent consideration of
$6.0 million in relation to the purchase of assets and liabilities from Kenosis Capital, and $8.2 million in relation to the purchase
of the wealth management business of Eden Financial. The increase was also due to higher income taxes payable.
Non-controlling interests were $16.2 million at March 31, 2013 compared to $17.5 million on March 31, 2012, which represents
50% of the net assets of our operations in Australia.
Off-Balance Sheet Arrangements
A subsidiary of the Company has entered into secured irrevocable standby letters of credit from a financial institution totalling
$3.3 million (US$3.2 million) [March 31, 2012 – $1.9 million (US$1.9 million)] as rent guarantees for its leased premises in
Boston and New York.
The following table summarizes Canaccord’s long term contractual obligations on March 31, 2013.
Contractual obligations payments due by period
(C$ thousands)
Total
Fiscal 2014
Fiscal 2015–
Fiscal 2016
Fiscal 2017–
Fiscal 2018
Thereafter
Premises and equipment operating leases
$ 233,800
$
33,626
$
63,915
$
48,162
$
88,097
Liquidity and Capital Resources
Canaccord has a capital structure comprised of preferred shares, common shares, contributed surplus, retained earnings and
accumulated other comprehensive losses, which is further complemented by subordinated debt.
On March 31, 2013, cash and cash equivalents were $491.0 million, a decrease of $323.2 million from $814.2 million as of
March 31, 2012. During the fiscal year ended March 31, 2013, financing activities used cash in the amount of $130. 4 million,
which was primarily due to the drawdown of the $150 million short term credit facility, net against by the $94.8 million of net
proceeds from the Series C Preferred Shares issuance. The Company also paid $37.7 million of dividends on the preferred and
common shares and acquired $14.9 million of common shares for the long-term incentive plan. Investing activities used cash in
the amount of $13. 1 million, primarily related to the purchase of equipment and leasehold improvements, and the acquisition of
Eden Financial and Kenosis Capital. Operating activities used cash in the amount of $176. 6 million, which was due to net loss
recognized during the year and changes in working capital. A decrease in cash of $3.2 million was attributable to the effect of
foreign exchange on cash balances.
Canaccord’s business requires capital for operating and regulatory purposes. The majority of current assets reflected on Canaccord’s
balance sheet are highly liquid. The majority of the positions held as securities owned are readily marketable and all are recorded
at their fair value. The fair value of these securities fluctuates daily as factors such as changes in market conditions, economic
conditions and investor outlook affect market prices. Client receivables are secured by readily marketable securities and
are reviewed daily for impairment in value and collectibility. Receivables and payables from brokers and dealers represent the
54
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
following: current open transactions that generally settle within the normal three-day settlement cycle; collateralized securities
borrowed and/or loaned in transactions that can be closed within a few days on demand; and balances on behalf of introducing
brokers representing net balances in connection with their client accounts.
Outstanding Common Share Data
Issued shares outstanding excluding unvested shares(1)
Issued shares outstanding(2)
Issued shares outstanding – diluted(3)
Average shares outstanding – basic
Average shares outstanding – diluted(4)
Outstanding common shares
as of March 31
2013
2012
93,061,796
94,025,877
102,896,172
101,688,721
109,879,724
106,883,242
92,217,726
76,715,248
102,402,082
84,682,497
(1) Excludes 4,872,547 outstanding unvested shares related to share purchase loans for recruitment and 4,961,829 unvested shares purchased by the employee benefi t trust for the LTIP.
(2) Includes 4,872,547 unvested shares related to share purchase loans for recruitment and 4,961,829 unvested shares purchased by the employee benefi t trust for the LTIP.
(3) Includes 6,983,552 of share issuance commitments.
(4) This is the diluted share number used to calculate diluted EPS.
In August 2012, the Company filed a notice for a normal course issuer bid (NCIB) to provide for the ability to purchase, at the
Company’s discretion, up to 3,000,000 of its common shares through the facilities of the TSX from August 13, 2012 to August 12,
2013. The purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares for cancellation.
The shares that may be repurchased represent 2.93% of the Company’s common shares outstanding at the time of the notice.
There were no shares repurchased through the NCIB between August 31, 2012 and March 31, 2013.
As of May 2 1, 2013, the Company has 102,822,669 common shares issued and outstanding.
ISSUANCE AND CANCELLATION OF COMMON SHARE CAPITAL
Total common shares issued and outstanding as of March 31, 2012
Shares issued in connection with the LTIP
Shares issued in connection with the Corazon Capital Group Limited Share Plan
Shares issued in connection with retention plan
Shares issued in connection with replacement plans
Shares cancelled
Total common shares issued and outstanding as of March 31, 2013
Preferred Shares
SERIES A PREFERRED SHARES
Fiscal 2013
101,688,721
844,766
170,562
109,979
198,872
(116,728)
102,896,172
On June 23, 2011, the Company issued 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A (Series A
Preferred Shares) at a purchase price of $25.00 per share for gross proceeds of $100 million. On July 7, 2011, the Company
closed the over-allotment option and issued an additional 540,000 Series A Preferred Shares at $25.00 per share for gross
proceeds of $13.5 million.
The aggregate net amount recognized after deducting issue costs, net of deferred taxes of $1.0 million, was $110.8 million.
Quarterly cumulative cash dividends, if declared, will be paid at an annual rate of 5.5% for the initial five-year period ending on
September 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year Government of
Canada bond yield plus 3.21%.
Holders of Series A Preferred Shares have the right, at their option, to convert any or all of their shares into an equal number
of Cumulative Floating Rate First Preferred Shares, Series B (Series B Preferred Shares), subject to certain conditions, on
September 30, 2016 and on September 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled
to receive floating rate, cumulative, preferential dividends payable quarterly, if declared, at a rate equal to the three-month
Government of Canada Treasury Bill yield plus 3.21%.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 55
Management’s Discussion and Analysis
The Company has the option to redeem the Series A Preferred Shares on September 30, 2016 and on September 30 every
five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends. The Series B Preferred
Shares are redeemable at the Company’s option on September 30, 2021 and on September 30 every five years thereafter, in
whole or in part, at $25.00 per share together with all declared and unpaid dividends.
SERIES C PREFERRED SHARES
On March 22, 2012, the Company announced that it has agreed to issue 4,000,000 Cumulative 5-Year Rate Reset First Preferred
Shares, Series C (Series C Preferred Shares) at a purchase price of $25.00 per share, for gross proceeds of $100 million.
Quarterly cumulative cash dividends, if declared, will be paid at an annual rate of 5.75% for the initial five-year period ending on
September 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year Government of
Canada bond yield plus 4.03%.
Holders of Series C Preferred Shares have the right, at their option, to convert any or all of their shares into an equal number of
Cumulative Floating Rate First Preferred Shares, Series D (Series D Preferred Shares), subject to certain conditions, on June 30,
2017 and on June 30 every five years thereafter. Holders of the Series D Preferred Shares will be entitled to receive floating rate,
cumulative, preferential dividends payable quarterly, if declared, at a rate equal to the three-month Government of Canada Treasury
Bill yield plus 4.03%.
The Company has the option to redeem the Series C Preferred Shares on June 30, 2017 and on June 30 every five years thereafter,
in whole or in part, at $25.00 per share together with all declared and unpaid dividends. The Series D Preferred Shares are
redeemable at the Company’s option on June 30, 2022 and on June 30 every five years thereafter, in whole or in part, at $25.00
per share together with all declared and unpaid dividends.
The offering closed on April 10, 2012. The net amount recognized after deducting issue costs, net of deferred taxes of
$1.0 million, was $97.5 million.
Outstanding Preferred Share Data
ISSUANCE OF PREFERRED SHARE CAPITAL
Preferred shares issued and outstanding as of March 31, 2012
Preferred shares issuance
Shares held in treasury
Series A
Series C
4,540,000
—
—
—
4,000,000
(106,794)
Total preferred shares issued and outstanding as of March 31, 2013
4,540,000
3,893,206
Share-Based Payment Plans
LONG-TERM INCENTIVE PLAN
Under the LTIP, eligible participants are awarded restricted share units (RSUs), which generally vest over three years. For employees
in Canada, an employee benefit trust (the Trust) has been established, and either (a) the Company will fund the Trust with cash,
which will be used by the trustee to purchase on the open market common shares of the Company that will be held in trust by
the trustee until the RSUs vest or (b) the Company will issue common shares from treasury to participants following vesting of the
RSUs. For employees in the US and the UK, the Company will allot common shares at the time of each RSU award, and these
shares will be issued from treasury at the time they vest for each participant.
COMMON SHARE PURCHASE LOANS
The Company provides forgivable common share purchase loans to employees in order to purchase common shares. These loans
are forgiven over a vesting period. No interest is charged related to the share purchase loans. The common share purchase loans
include the employee stock incentive plan, the bonus compensation plan, and the partnership program.
REPLACEMENT PLANS
As a result of the acquisition of CSHP, the Company introduced the Replacement Annual Bonus Equity Deferral (ABED) plan, which
replaced the ABED plans that existed at CSHP as of the acquisition date. Eligible employees who participated in the CSHP ABED
plan were granted awards under the Replacement ABED plan. In addition, the Company introduced the Replacement Long-term
Incentive Plan (LTIP), which replaced the existing LTIPs at CSHP as of the acquisition date for eligible employees.
56
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
CORAZON CAPITAL GROUP LIMITED SHARE PLAN
In connection with the acquisition of CSHP, the Company assumed the outstanding obligation under the Corazon Capital Group
Limited Share Plan (the Corazon Share Plan). The Corazon Share Plan was entered into by CSHP in relation to its acquisition
of Corazon Capital Group Limited, an independent, Guernsey-based investment management firm. The obligation was paid
by the issuance of 170,562 Canaccord common shares, which vested in March 2013, and cash consideration of $2.2 million
(£1.4 million). Canaccord will not award any future grants under the Corazon Share Plan.
SHARE OPTIONS
The Company grants share options to purchase common shares of the Company to independent directors and senior
management. The independent directors and senior management have been granted options to purchase up to an aggregate
of 2,384,910 common shares of the Company. The stock options vest over a four- to five-year period and expire seven years
after the grant date. The weighted average exercise price of the share options is $9.84 per common share.
RETENTION PLAN
In connection with the acquisition of The Balloch Group (TBG), the Company established a retention plan that provides for the
issuance of 1,187,847 common shares of the Company to key employees of Canaccord Genuity Asia over a five-year graded
vesting period based on future Asia-linked revenue. In addition, the applicable number of retention shares is included in diluted
common shares outstanding. As of March 31, 2013, due to the departure of several key employees, this plan was settled. This
resulted in the forfeiture of 917,212 shares, and accelerated vesting of 270,635 shares.
DEFERRED SHARE UNITS
Beginning April 1, 2011, the Company adopted a deferred share unit (DSU) plan for its independent directors. The independent
directors can elect to have fees payable to them paid in the form of DSUs or in cash. Directors must elect annually as to how
they wish their directors’ fees to be paid and can specify the allocation of their directors’ fees between DSUs and cash. When
a director leaves the Board of Directors, outstanding DSUs are paid out in cash, with the amount equal to the number of DSUs
granted multiplied by the closing share price as of the end of the fiscal quarter immediately following such terminations. Under the
plan, the directors are not entitled to receive any common shares in the Company, and under no circumstances will DSUs confer
on any participant any of the rights or privileges of a holder of common shares.
OTHER RETENTION AND INCENTIVE PLANS
During the course of the fiscal year, there were other retention and incentive plans, including the employee stock purchase plan,
with individual employees, for which the amount incurred was not significant in aggregate.
International Financial Centre
Canaccord is a member of the AdvantageBC International Business Centre Society (formerly known as the International Financial
Centre British Columbia Society) and the Montréal International Financial Centre, both of which provide certain tax and financial
benefits pursuant to the International Business Activity Act of British Columbia and the Act Respecting International Financial
Centres of Québec. Accordingly, Canaccord’s overall income tax rate is less than the rate that would otherwise be applicable.
Foreign Exchange
Canaccord manages its foreign exchange risk by periodically hedging pending settlements in foreign currencies. Realized and
unrealized gains and losses related to these transactions are recognized in income during the period. On March 31, 2013, forward
contracts outstanding to sell US dollars had a notional amount of US$14.8 million, an increase of US$1.5 million from a year ago.
Forward contracts outstanding to buy US dollars had a notional amount of US$3.8 million, a decrease of US$5.5 million compared
to a year ago. Canaccord’s operations in the US, the UK and Europe, Australia, Hong Kong and China are conducted in the local
currency; however, any foreign exchange risk in respect of these transactions is generally limited as pending settlements on both
sides of the transaction are typically in the local currency.
The Company’s Canaccord Genuity Wealth Management segment in the UK and Europe deals foreign exchange forward contracts
on behalf of its clients, and establishes matching contracts with the counterparties. The Company has no net exposure, assuming
no counterparty default.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 57
Management’s Discussion and Analysis
Related Party Transactions
The Company’s related parties include the following persons and/or entities: (a) entities that are controlled or significantly
influenced by the Company, and (b) key management personnel, who are comprised of the directors of the Company, as well as
executives involved in strategic decision-making for the Company.
Security trades executed for employees, officers and directors of Canaccord are transacted in accordance with terms and
conditions applicable to all clients. Commission income on such transactions in the aggregate is not material in relation to the
overall operations of Canaccord.
The Company offers various share-based payment plans to its key management personnel, including common share purchase
loans, a long-term incentive plan and share options. Directors have also been granted share options and have the right to
acquire DSUs. Please see Note 18 of the Audited Consolidated Financial Statements for the year ended March 31, 2013 for
further information on the compensation of and transactions with key management personnel. Note 18 of the March 31, 2013
Consolidated Financial Statements also includes the accounts receivable and accounts payable and accrued liabilities balance
with key management personnel.
Critical Accounting Policies and Estimates
The following is a summary of Canaccord’s critical accounting estimates. Canaccord’s accounting policies are in accordance with
IFRS and are described in Note 4 to the Audited Consolidated Financial Statements for the year ended March 31, 2013.
The preparation of the March 31, 2013 Consolidated Financial Statements in conformity with IFRS requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. Therefore, actual results may differ from those estimates and assumptions. The
significant estimates include share-based payments, income taxes, tax losses available for carryforward, impairment of goodwill,
indefinite life intangible assets and other long-lived assets, allowance for credit losses, fair value of financial instruments, and
provisions. Significant accounting policies used and policies requiring management’s judgment and estimates are disclosed in
Notes 2 and 4 of the Audited Consolidated Financial Statements for the year ended March 31, 2013.
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the fair value of assets given, liabilities incurred or assumed, and equity instruments issued by the Company, measured at
acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the
Company elects whether it measures the non-controlling interest in the acquiree at fair value or at the proportionate share of
the fair value of the acquiree’s identifiable net assets. The proportionate share method was selected for the acquisition of the
50% interest in Canaccord Genuity (Australia) Limited. Acquisition costs are expensed as incurred.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3,
“Business Combinations” (IFRS 3), are recognized at their fair value at the acquisition date except for non-current assets (or
disposal groups) that are classified as held for sale in accordance with IFRS 5, “Non-current Assets Held for Sale and Discontinued
Operations”, which are recognized and measured at fair value less cost to sell.
Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date at the best
estimate of such amount. Subsequent changes in the fair value of the contingent consideration that are deemed to be a liability
will be recognized in the statements of operations.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the consideration
transferred over the fair value of the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the
fair value of the net assets of the subsidiary acquired, the difference is recognized in the consolidated statements of operations.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in each of the business combinations is, from the acquisition date, allocated to each of the Company’s
cash-generating units that are expected to benefit from the corresponding combinations, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
58
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
INTANGIBLE ASSETS
Identifiable intangible assets acquired separately are measured on initial recognition at cost. The cost of identifiable intangible
assets acquired in a business combination is equal to their fair value as at the date of acquisition.
Following initial recognition, identifiable intangible assets are carried at cost less any accumulated amortization and any
accumulated impairment losses.
The useful lives of identifiable intangible assets are assessed to be either finite or indefinite. Identifiable intangible assets with
finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the
identifiable intangible asset may be impaired. The amortization period and the amortization method for an identifiable intangible
asset are reviewed at least annually, at each financial year end. Identifiable intangible assets with indefinite useful lives are not
amortized, but are tested for impairment annually.
IMPAIRMENT OF NON-FINANCIAL ASSETS
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash generating unit’s (CGU) fair value less costs to sell and its
value-in-use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written down to its recoverable amount, and recognized in the
income statement.
In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. The Company bases its
impairment calculation on annual budget calculations, which are prepared separately for each of the Company’s CGUs to which the
individual assets are allocated. These budget calculations generally cover a period of five years. For longer periods, a long term
growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognized in the consolidated statements of operations in expense categories
consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the
asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in
the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal
is limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the income statement unless the asset is carried at a revalued amount, in which case the reversal is
treated as a revaluation increase.
The following assets have specific characteristics for impairment testing:
Goodwill
Goodwill is tested for impairment annually as at March 31 and when circumstances indicate that the carrying value may
be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which goodwill
relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment
losses relating to goodwill cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually as at March 31 at the CGU level and when
circumstances indicate that the carrying value may be impaired.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 59
Management’s Discussion and Analysis
REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can
be reliably measured. The Company assesses its revenue arrangements in order to determine if it is acting as principal or agent.
Commission revenue consists of revenue generated through commission-based brokerage services, recognized on a trade date
basis, and the sale of fee-based products and services, recognized on an accrual basis. Realized and unrealized gains and losses
on securities purchased for client-related transactions are reported as net facilitation losses and recorded as a reduction of
commission revenues.
Investment banking revenue consists of underwriting fees and commissions earned on corporate finance activities. Revenue from
underwritings and other corporate finance activities is recorded when the underlying transaction is substantially completed under
the engagement terms and the related revenue is reasonably determinable.
Advisory fees consist of management and advisory fees that are recognized on an accrual basis. Also included in advisory fees is
revenue from mergers and acquisitions activities, which is recognized when the underlying transaction is substantially completed
under the engagement terms and the related revenue is reasonably determinable.
Principal trading revenue consists of income earned in connection with principal trading operations and is recognized on a trade
date basis.
Interest revenue consists of interest earned on client margin accounts, interest earned on the Company’s cash and cash equivalents
balances, interest earned on cash delivered in support of securities borrowing activity, and dividends earned on securities owned.
Interest revenue is recognized on an effective interest rate basis. Dividend income is recognized when the right to receive payment
is established.
Other revenue includes foreign exchange gains or losses, revenue earned from our correspondent brokerage services and
administrative fees revenues.
INCOME TAXES
Current income tax
Income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively
enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred taxes are accounted for using the liability method. This method requires that deferred taxes reflect the expected deferred
tax effect of temporary differences at the reporting date between the carrying amounts of assets and liabilities for financial
statement purposes and their tax bases.
Deferred tax liabilities are recognized for all taxable temporary differences, except for taxable temporary differences associated
with investments in subsidiaries where the timing of the reversal of the temporary difference can be controlled and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences
and the carryforward of unused tax credits and unused tax losses can be utilized. The carrying amounts of deferred tax assets
are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are assessed at each
reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period. Deferred tax is charged or credited in the statements of operations except where it relates to items that may
be credited directly to equity, in which case the deferred tax is recognized directly against equity.
60
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
SHARE-BASED PAYMENTS
Employees (including senior executives and directors) of the Company receive remuneration in the form of share-based payment
transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). Independent
directors also receive DSUs as part of their remuneration, which can only be settled in cash (cash-settled transactions). The dilutive
effect of outstanding options and share-based payments is reflected as additional share dilution in the computation of diluted
earnings per common share.
Equity-settled transactions
For equity-settled transactions, the Company measures the fair value of share-based awards as of the grant date and recognizes
the cost as an expense over the applicable vesting period with a corresponding increase in contributed surplus. The cost is
recognized on a graded basis.
The Company estimates the number of equity instruments that will ultimately vest when calculating the amortization expense.
No expense is recognized for awards that do not ultimately vest.
When share-based awards vest, contributed surplus is reduced by the applicable amount and share capital is increased by the
same amount.
Cash-settled transactions
Cash-settled transactions are measured initially at fair value at the grant date. The fair values of DSUs are expensed upon
grant, as there are no vesting conditions. The liability is remeasured to fair value at each reporting date up to and including the
settlement date, with changes in fair value recognized through the statements of operations.
PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation. The expense relating to any provision is presented in the statements of operations net of any
reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as an interest expense.
Future Changes in Accounting Policies and Estimates
The Company monitors the potential changes proposed by the International Accounting Standards Board on an ongoing basis and
analyzes the effect that changes in the standards may have on the Company’s operations.
Please see Note 3 of the Audited Consolidated Financial Statements for the year ended March 31, 2013 for further information.
Business Combinations
[i] Eden Financial Ltd.
On October 1, 2012, the Company acquired 100% of the wealth management business of Eden Financial Ltd., an owner-managed
private client investment management business, for purchase consideration of $20.3 million (£12.8 million), of which
$12.2 million (£7.7 million) was paid on closing and $8.1 million (£5.1 million) is payable after 12 months, contingent on
achieving certain performance targets related to revenue. Further incentives of up to $6.3 million (£4.0 million) will be paid to
certain continuing Eden Financial employees subject to certain performance conditions and will be recognized as an expense
over a four-year period as the amounts are earned. An additional incentive payment of $3.3 million (£2.0 million) has also been
awarded to certain Eden Financial employees of which one-half will be recognized as an expense over a one-year vesting period
and one-half will be recognized over a two-year vesting period. The Company recorded goodwill of $10.2 million and intangible
assets with finite useful lives of $2.4 million related to this acquisition.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 61
Management’s Discussion and Analysis
[ii] Kenosis Capital Partners
On September 14, 2012, the Company signed an agreement with Kenosis Capital Partners (Kenosis Capital), a merchant bank
and advisory group, to acquire certain assets and liabilities for cash consideration of $1.2 million and additional contingent cash
consideration based upon the achievement of certain performance criteria. This transaction qualifies as a business combination
under IFRS 3, “Business Combinations” (IFRS 3), and has been accounted for under the acquisition method. The transaction was
completed on September 16, 2012. The Company recorded goodwill of $7.2 million related to this acquisition.
Disclosure Controls and Procedures and Internal Control over Financial Reporting
DISCLOSURE CONTROLS AND PROCEDURES
As of March 31, 2013, an evaluation was carried out, under the supervision of and with the participation of management,
including the President & CEO and the Executive Vice President & CFO, of the effectiveness of our disclosure controls and
procedures as defined under National Instrument 52-109. Based on that evaluation, the President & CEO and the Executive Vice
President & CFO concluded that the design and operation of these disclosure controls and procedures were effective as of and
during the fiscal year ended March 31, 2013.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management, including the President & CEO and the Executive Vice President & CFO, has designed internal control over financial
reporting as defined under National Instrument 52-109 to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS. Based on that evaluation, the
President & CEO and the Executive Vice President & CFO concluded that the Company’s internal control over financial reporting
was designed and operating effectively as of and during the year ended March 31, 2013 and that there were no material
weaknesses in our internal control over financial reporting.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in internal control over financial reporting that occurred during the year ended March 31, 2013 that have
materially affected, or are reasonably likely to materially affect, Canaccord’s internal control over financial reporting.
Risk Management
OVERVIEW
Uncertainty and risk are inherent in any financial markets activity. As an active participant in the Canadian and international
capital markets, Canaccord is exposed to risks that could result in financial losses. Canaccord has identified its principal risks as:
market risk, credit risk, operational risk and other risks. Accordingly, risk management and control of the balance between risk and
return are critical elements in maintaining Canaccord’s financial stability and profitability. Therefore, an effective risk management
framework is integral to the success of Canaccord.
62
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
RISK MANAGEMENT STRUCTURE AND GOVERNANCE
Canaccord’s disciplined risk management process encompasses a number of functional areas and requires frequent
communication, judgment and knowledge of the business, products and markets. The Company’s senior management is actively
involved in the risk management process and has developed policies and reports that require specific administrative procedures
and actions to assess and control risks. These policies and procedures are subject to ongoing review and modification as
activities, markets and circumstances change.
As part of Canaccord’s risk philosophy, the first line of responsibility for managing risk lies with branch managers, department
heads and trading desk managers (within prescribed limits). The monitoring and control of Canaccord’s risk exposure is conducted
through a variety of separate, but complementary, financial, credit, operational, compliance and legal reporting systems.
Canaccord’s governance structure includes the following elements:
Audit Committee
Board of Directors
Canaccord Financial Inc.
Corporate Governance and
Compensation Committee
Risk Management
Committee
Canaccord Genuity Global
Executive Committee
Canaccord Genuity Wealth
Management Executive Committee
Infrastructure
Executive Committee
The Board of Directors (the Board) has oversight of the company-wide risk management framework. These responsibilities are
delegated to the Audit and Risk Management Committees. The Audit Committee’s mandate was updated in fiscal 2013 to better
reflect the committee’s oversight of the Company’s risk management function. See Canaccord’s 2013 Annual Information Form
(AIF) for more details.
The Audit Committee assists the Board in fulfilling its oversight responsibility by monitoring the effectiveness of internal controls
and the control environment. It also receives and reviews various quarterly and annual updates, and reports on key risk metrics and
the overall risk management program.
The Risk Management Committee assists the Board in fulfilling its responsibilities for monitoring risk exposures against the defined
risk appetite and for general oversight of the risk management process. The Risk Management Committee is led by the CFO, and
committee members include the CEO and senior management representation from the key revenue-producing businesses and
functional areas of Canaccord. The Committee identifies, measures and monitors the principal risks facing the business through
review and approval of Canaccord’s risk appetite, policies, procedures, and limits/thresholds.
The segregation of duties and management oversight are important aspects of Canaccord’s risk management process. Canaccord
has a number of functions that are independent of the revenue-producing businesses that perform risk management activities,
including the monitoring, evaluating and analyzing of risk. These functions include Enterprise Risk Management, Compliance,
Operations, Internal Controls and Financial Analysis, Treasury, Finance and Legal.
MARKET RISK
Market risk is the risk that a change in market prices and/or any of the underlying market factors will result in losses. Each
business area is responsible for ensuring that their market risk exposures are prudent. In addition, Canaccord has established
procedures to ensure that risks are measured, closely monitored, controlled and visible to senior levels of management.
Canaccord is exposed to equity price risk, liquidity risk and volatility risk as a result of its principal trading activities in equity
securities. Canaccord is also exposed to specific interest rate risk, credit spread risk and liquidity risk in respect of its principal
trading in fixed income securities. In addition to active supervision and review of trading activities by senior management,
Canaccord mitigates its risk exposure through a variety of limits to control concentration, capital allocation and usage, as well
as through trading policies and guidelines. Canaccord manages and monitors its risks in this area using both qualitative and
quantitative measures, on a company-wide basis, and also by trading desk and by individual trader. Canaccord operates a firm-
wide Value-at-Risk (VaR) risk measurement system for its equity and fixed income inventories. Management also reviews and
monitors inventory levels and positions, trading results, aging and concentration levels. Consequently, Canaccord can ensure
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 63
Management’s Discussion and Analysis
that it is adequately diversified with respect to market risk factors and that trading activity is within the risk tolerance levels
established by senior management. For a detailed description of Canaccord’s VaR methodology, see the Market Risk section in
Canaccord’s fiscal 2013 AIF .
CREDIT RISK
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The primary source for
credit risk to Canaccord is in connection with trading activity by clients in the Canaccord Genuity Wealth Management business
segment and private client margin accounts. In order to minimize financial exposure in this area, Canaccord applies certain credit
standards and conducts financial reviews with respect to clients and new accounts.
Canaccord provides financing to clients by way of margin lending. In a margin-based transaction, Canaccord extends credit for a
portion of the market value of a securities transaction in a client’s account, up to certain limits. Margin loans are collateralized by
securities in the client’s account. In connection with this lending activity, Canaccord faces a risk of financial loss in the event that
a client fails to meet a margin call if market prices for securities held as collateral decline and if Canaccord is unable to recover
sufficient value from the collateral held. For margin lending purposes, Canaccord has established limits that are generally more
restrictive than those required by applicable regulatory policies.
Canaccord also faces a risk of financial loss with respect to trading activity by clients if such trading results in overdue or unpaid
amounts in under-secured cash accounts. Canaccord has developed a number of controls within its automated trade order
management system to ensure that trading by individual account and advisor is done in accordance with customized limits and
risk parameters.
Canaccord is engaged in various trading and brokerage activities whose counterparties primarily include broker dealers,
banks, clearing agents, exchanges, financial intermediaries and other financial institutions. These activities include agency
trading, securities borrowing and lending, and entering into repurchase agreements and reverse repurchase agreements. In the
event that counterparties do not fulfill their obligations, Canaccord may be exposed to risk. The risk of default depends on
the creditworthiness of the counterparty and/or the issuer of the instrument. Canaccord manages this risk by imposing and
monitoring individual and aggregate position limits within each business segment, for each counterparty, conducting regular
credit reviews of financial counterparties, reviewing security and loan concentrations, holding and marking to market collateral
on certain transactions, and conducting business through clearing organizations that guarantee performance.
Canaccord records a provision for bad debts in general and administrative expenses. Any actual losses arising from or associated
with client trading activity as described above are charged to this provision. Historically, this provision has been sufficient to cover
actual losses.
OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or failed internal processes, fraud, people and systems, or from
external events such as the occurrence of disasters or security threats. Operational risk exists in all of Canaccord’s activities,
including processes, systems and controls used to manage other risks. Failure to manage operational risk can result in financial
loss, reputational damage, regulatory fines and failure to manage market or credit risks.
Canaccord operates in different markets and relies on its employees and systems to process a high number of transactions.
In order to mitigate this risk, Canaccord has developed a system of internal controls and checks and balances at appropriate
levels, which includes overnight trade reconciliation, control procedures related to clearing and settlement, cash controls, physical
security, independent review procedures, documentation standards, billing and collection procedures, and authorization and
processing controls for transactions and accounts. In addition, Canaccord has implemented an operational risk program that helps
Canaccord measure, manage, report and monitor operational risk issues (see RCSA below). Canaccord also has disaster recovery
procedures in place, business continuity plans and built-in redundancies in the event of a systems or technological failure. In
addition, Canaccord utilizes third party service agreements and security audits where appropriate.
64
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Management’s Discussion and Analysis
Risk and Control Self-Assessment (RCSA)
The purpose of RCSAs is to:
(cid:129) Identify and assess key risks inherent to the business
(cid:129) Rate the effectiveness of the control environment associated with the key risks
(cid:129) Mitigate the risks through the identification of action plans to improve the control environment where appropriate
(cid:129) Provide management with a consistent approach to articulate and communicate the risk profiles of their areas of responsibility
(cid:129) Meet regulatory requirements and industry standards
Canaccord has established a process to determine what the strategic objectives of each group/unit/department are and
identify, assess and quantify operational risks that hinder the Company’s ability to achieve those objectives. The RCSA results
are specifically used to calculate the operational risk regulatory capital requirements for Canaccord in the UK and operational
risk exposure in all geographies. The RCSAs are periodically updated and results are reported to the Risk Management and
Audit Committees.
OTHER RISKS
Other risks encompass those risks that can have an adverse material affect on the business but do not belong to market, credit
or operational risk categories.
Regulatory and legal risk
Regulatory risk results from non-compliance with regulatory requirements, which could lead to fines and/or sanctions. Canaccord
has established procedures to ensure compliance with all applicable statutory and regulatory requirements in each jurisdiction.
These procedures address issues such as regulatory capital requirements, disclosure requirements, internal controls over financial
reporting, sales and trading practices, use of and safekeeping of client funds, credit granting, collection activity, anti-money
laundering, insider trading, conflicts of interest and recordkeeping.
Legal risk results from potential criminal, civil or regulatory litigation against Canaccord that could materially affect Canaccord’s
business, operations or financial condition. Canaccord has in-house legal counsel, as well as access to external legal counsel, to
assist the Company in addressing legal matters related to operations and to defend Canaccord’s interests in various legal actions.
Losses or costs associated with routine regulatory and legal matters are included in general and administrative expenses in
Canaccord’s Audited Consolidated Financial Statements.
Reputational risk
Reputational risk is the risk that an activity undertaken by an organization or its representatives will impair its image in the
community or lower public confidence in it, resulting in a loss of business, legal action or increased regulatory oversight. Possible
sources of reputational risk could come from operational failures, non-compliance with laws and regulations, or leading an
unsuccessful financing. Reputational risk can also be reflected within customer satisfaction and external ratings, such as equity
analyst reports. In addition to its various risk management policies, controls and procedures, Canaccord has a formal Code of
Business Conduct and Ethics and an integrated program of marketing, branding, communications and investor relations to help
manage and support Canaccord’s reputation.
RISK FACTORS
For a detailed list of the risk factors that are relevant to Canaccord’s business and the industry in which it operates, see the Risk
Factors section in Canaccord’s fiscal 2013 AIF. Risks include, but are not necessarily limited to, those listed in the AIF. Investors
should carefully consider the information about risks, together with the other information in this document, before making
investment decisions. It should be noted that this list is not exhaustive, but contains risks that Canaccord considers to be of
particular relevance. Other risk factors may apply.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 65
Management’s Discussion and Analysis
CONTROL RISK
As of March 31, 2013, senior officers and directors of Canaccord collectively owned approximately 6.1% of the issued and
outstanding common shares of Canaccord Financial Inc. If a sufficient number of these shareholders act or vote together, they
will have the power to exercise significant influence over all matters requiring shareholder approval, including the election of the
Company’s directors, amendments to its articles, amalgamations and plans of arrangement under Canadian law and mergers or
sales of substantially all of its assets. This could prevent Canaccord from entering into transactions that could be beneficial to the
Company or its other shareholders. Also, third parties could be discouraged from making a tender offer or takeover bid to acquire
any or all of the outstanding common shares of the Company.
In addition, as at March 31, 2013, the single largest shareholder that management was aware of was Franklin Templeton
Investments Corp. by one or more of its mutual funds or other managed accounts. The most recent filing that confirms their total
holdings was filed on December 15, 2011, which indicated the company owned 5,464,873 shares of Canaccord Financial Inc.
Canaccord has not been made aware of any shareholding changes since this filing. Their ownership outlined in this filing
represents 5.3% of common shares issued and outstanding as at March 31, 2013.
Any significant change in these shareholdings through sale or other disposition, or significant acquisitions by others of the
common shares in the public market or by way of private transactions, could result in a change of control and changes in business
focus or practices that could affect the profitability of Canaccord’s business.
Restrictions on ownership and transfer of common shares
Restrictions on ownership and transfer of common shares in the articles of Canaccord to prevent unauthorized change in control
without regulatory approval could, in certain cases, affect the marketability and liquidity of the common shares.
Dividend Policy
Although dividends are expected to be declared and paid quarterly, the Board of Directors, in its sole discretion, will determine
the amount and timing of any dividends. All dividend payments will depend on general business conditions, Canaccord’s financial
condition, results of operations, capital requirements and such other factors as the Board determines to be relevant.
Dividend Declaration
On May 2 1, 2013, the Board of Directors approved a quarterly dividend of $ 0.05 per common share payable on June 1 0, 2013, with
a record date of May 31, 2013. The Board of Directors also approved a cash dividend of $0.34375 per Series A Preferred Share
payable on July 2, 2013, with a record date of June 21, 2013; as well as a cash dividend of $0.359375 per Series C Preferred
Share payable on July 2, 2013 and with a record date of June 21, 2013.
Additional Information
Additional information relating to Canaccord, including Canaccord’s Annual Information Form, can be found on SEDAR’s website at
www.sedar.com.
66
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Independent Auditors’ Report
To the Shareholders of
Canaccord Financial Inc.
We have audited the accompanying consolidated financial statements of Canaccord Financial Inc., which comprise the consolidated
statements of financial position as at March 31, 2013 and 2012, and the consolidated statements of operations, comprehensive
loss, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other
explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our
audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Canaccord
Financial Inc. as at March 31, 2013 and 2012, and its financial performance and its cash flows for the years ended March 31,
2013 and 2012 in accordance with International Financial Reporting Standards.
Chartered Accountants
Vancouver, Canada
May 21, 2013
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 67
Consolidated Statements of Financial Position
As at (in thousands of Canadian dollars)
Notes
March 31,
2013
March 31,
2012
ASSETS
Current
Cash and cash equivalents
Securities owned
Accounts receivable
Income taxes receivable
Total current assets
Deferred tax assets
Investments
Equipment and leasehold improvements
Intangible assets
Goodwill
LIABILITIES AND EQUITY
Current
Bank indebtedness
Short term credit facility
Securities sold short
$
491,012
$
814,238
5
924,337
1,171,988
7, 18
2,513,958
3,081,640
—
8,301
3,929,307
5,076,167
12
8
9
11
11
6
6
5
12,552
3,695
42,979
130,283
484,686
3,959
9,493
51,084
149,510
472,510
$ 4,603,502
$ 5,762,723
$
66,138
$
75,141
—
689,020
150,000
914,649
Accounts payable and accrued liabilities
7, 18
2,726,735
3,550,600
Provisions
Income taxes payable
Contingent consideration
Subordinated debt
Total current liabilities
Deferred tax liabilities
Equity
Preferred shares
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive (loss) income
Total shareholders’ equity
Non-controlling interests
Total equity
See accompanying notes
On behalf of the Board:
22
10
13
12
14
15
20,055
4,428
14,218
15,000
39,666
—
—
15,000
3,535,594
4,745,056
2,576
8,088
3,538,170
4,753,144
205,641
638,456
85,981
126,203
(7,118)
1,049,163
16,169
110,818
623,739
68,336
180,748
8,484
992,125
17,454
1,065,332
1,009,579
$ 4,603,502
$ 5,762,723
PAUL D. REYNOLDS
Director
TERRENCE A. LYONS
Director
68
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Consolidated Statements of Operations
For the years ended (in thousands of Canadian dollars, except per share amounts)
Notes
REVENUE
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
EXPENSES
Incentive compensation
Salaries and benefi ts
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Restructuring costs
Acquisition-related costs
Loss before income taxes
Income tax expense (recovery)
Current
Deferred
Net loss for the year
Net loss attributable to:
CFI shareholders
Non-controlling interests
Weighted average number of common shares outstanding (thousands)
Basic
Diluted
Net loss per common share
Basic
Diluted
Dividends per common share
See accompanying notes
March 31,
2013
March 31,
2012
$
353,12 5
$
252,877
145,772
179,690
66,406
29,199
22,9 30
175,225
107,370
10,647
31,799
26,946
797,122
604,864
40 6, 724
304,908
8 8,5 22
43,892
41,124
49,115
15,302
89,504
33,779
19,526
31,617
1,719
63,924
30,313
27,546
28,343
9,816
69,523
14,108
21,193
35,253
16,056
820,824
620,983
(23,702)
(16,119)
8,202
(13,129)
(4,927)
11,043
(5,816)
5,227
$
(18,775)
$
(21,346)
$
$
(16,819)
(1,956)
$
$
(20,307)
(1,039)
92,218
102,402
76,715
84,682
10, 22
10
12
15iv
15iv
$
$
$
(0.31)
(0.31)
0.20
$
$
$
(0.33)
(0.33)
0.40
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 69
Consolidated Statements of Comprehensive Loss
For the years ended (in thousands of Canadian dollars)
Net loss for the year
Other comprehensive income (loss) (OCI)
Net change in valuation of available for sale investments, net of tax
Transfer of net realized gain on disposal of available for sale asset (net of tax: $234)
Net change in unrealized (losses) gains on translation of foreign operations
Comprehensive loss for the year
Comprehensive loss attributable to:
CFI shareholders
Non-controlling interests
See accompanying notes
March 31,
2013
March 31,
2012
$
(18,775)
$
(21,346)
449
(700)
—
—
(15,033)
9,205
$
(34,059)
$
(12,141)
$
$
(32,421)
(1,638)
$
$
(10,851)
(1,290)
70
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Consolidated Statements of Changes in Equity
As at and for the years ended (in thousands of Canadian dollars)
Preferred shares, opening
Shares issued, net of share issuance costs
Shares cancelled
Preferred shares, closing
Common shares, opening
Shares issued in connection with the acquisition of Collins Stewart Hawkpoint plc (CSHP)
Shares issued in connection with the acquisition of 50% interest in BGF Capital Group Pty Ltd. (BGF)
Shares issued in connection with share-based payments
Shares issued in connection with Corazon Capital Group Limited (Corazon)
Acquisition of common shares for long-term incentive plan (LTIP)
Release of vested common shares from employee benefi t trust
Shares cancelled
Net unvested share purchase loans
Cancellation of shares in connection with the acquisition of Genuity Capital Markets (Genuity)
Common shares, closing
Contributed surplus, opening
Replacement stock plan awards related to the acquisition of CSHP
Share-based payments
Cancellation of shares in connection with the acquisition of Genuity
Shares issued in connection with Corazon
Excess on cancellation of common shares
Unvested share purchase loans
Contributed surplus, closing
Retained earnings, opening
Net loss attributable to CFI shareholders
Common shares dividends
Preferred shares dividends
Retained earnings, closing
Notes
14
10
10
16
16
Accumulated other comprehensive income (loss), opening
Other comprehensive (loss) income attributable to CFI shareholders
Accumulated other comprehensive (loss) income, closing
Total shareholders’ equity
Non-controlling interests, opening
Non-controlling interests arising on acquisition of 50% interest in Canaccord Genuity Australia
10
Foreign exchange on non-controlling interests
Comprehensive loss attributable to non-controlling interests
Non-controlling interests, closing
Total equity
See accompanying notes
March 31,
2013
March 31,
2012
$
110,818
$
—
97,450
(2,627)
205,641
623,739
—
—
11,926
1,503
(14,872)
17,834
(814)
(860)
—
110,818
—
110,818
467,050
164,462
5,739
7,081
—
(35,857)
18,263
(5,259)
2,866
(606)
638,456
623,739
68,336
6,399
11,445
—
(1,503)
(146)
1,450
52,167
6,456
10,876
606
—
(1,414)
(355)
85,981
68,336
180,748
238,647
(16,819)
(26,006)
(11,720)
(20,307)
(32,778)
(4,814)
126,203
180,748
8,484
(15,602)
(7,118)
(972)
9,456
8,484
1,049,163
992,125
17,454
—
353
(1,638)
16,169
—
19,019
(275)
(1,290)
17,454
$ 1,065,332
$ 1,009,579
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 71
Consolidated Statements of Cash Flows
For the years ended (in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net loss for the year
Items not affecting cash
Amortization
Deferred income tax recovery
Share-based compensation expense
Impairment of property, plant and equipment
Changes in non-cash working capital
Decrease (increase) in securities owned
Decrease in accounts receivable
Decrease (increase) in income taxes receivable, net
(Decrease) increase in securities sold short
Decrease in accounts payable, accrued liabilities, and provisions
Cash used by operating activities
FINANCING ACTIVITIES
Drawdown (repayment) of short term credit facility
Issuance of preferred shares, net of share issuance costs
Acquisition of common shares for long-term incentive plan
Cash dividends paid on common shares
Cash dividends paid on preferred shares
Issuance of shares in connection with share-based payments
Decrease in net vesting of share purchase loans
Redemption of share capital
(Decrease) increase in bank indebtedness
Cash (used) provided by fi nancing activities
INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements
Acquisition of Eden Financial Ltd. (Eden Financial), net of cash acquired
Acquisition of Kenosis Capital Partners
Acquisition of CSHP, net of cash acquired
Acquisition of BGF, net of cash acquired
Cash used in investing activities
Effect of foreign exchange on cash balances
Decrease in cash position
Cash position, beginning of year
Cash position, end of year
Supplemental cash fl ow information
Interest received
Interest paid
Income taxes paid
See accompanying notes
Notes
March 31,
2013
March 31,
2012
$
(18,775)
$
(21,346)
17
22
11
11
33,779
(13,129)
60,359
2,627
245,873
590,090
2,963
(224,590)
(855,728)
14,108
(5,816)
51,124
—
(62,053)
675,358
(26,218)
93,787
(896,194)
(176,531)
(177,250)
(150,000)
94,823
(14,872)
(26,004)
(11,720)
—
(13,583)
—
(9,003)
150,000
110,818
(35,857)
(31,980)
(4,814)
555
(12,579)
(5,673)
61,561
(130,359)
232,031
(6,972)
(4,953)
(1,182)
—
—
(10,610)
—
—
(176,289)
(9,848)
(13,107)
(196,747)
(3,229)
2,136
(323,226)
814,238
(139,830)
954,068
$
491,012
$
814,238
$
$
$
32,689
14,425
10,320
$
$
$
28,805
9,280
51,036
72
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
As at March 31, 2013, March 31, 2012
and for the years ended March 31, 2013 and 2012
(in thousands of dollars, except per share amounts)
NOTE 01
Corporate Information
Through its principal subsidiaries, Canaccord Financial Inc. (the Company) is a leading independent, full-service investment dealer
in Canada with capital markets operations in the United Kingdom (UK) and Europe, the United States of America (US), Australia,
China, Singapore and Barbados. Upon acquisition of CSHP, the Company has also expanded its wealth management operations
into the UK and Europe. The Company has operations in each of the two principal segments of the securities industry: capital
markets and wealth management. Together, these operations offer a wide range of complementary investment products, brokerage
services and investment banking services to the Company’s private, institutional and corporate clients.
Canaccord Financial Inc. was incorporated on February 14, 1997 by the filing of a memorandum and articles with the Registrar of
Companies for British Columbia under the Company Act (British Columbia) and continues in existence under the Business Corporations
Act (British Columbia). The Company’s head office is located at Suite 2200 – 609 Granville Street, Vancouver, British Columbia,
V7Y 1H2. The Company’s registered office is located at Suite 1000 – 840 Howe Street, Vancouver, British Columbia, V6Z 2M1.
The Company’s common shares are publicly traded under the symbol CF on the Toronto Stock Exchange (TSX) and the symbol CF.
on the London Stock Exchange. The Company’s Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. The
Company’s Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C [Note 24].
The Company’s business is cyclical and experiences considerable variations in revenue and income from quarter to quarter and
year to year due to factors beyond the Company’s control. The Company’s business is affected by the overall condition of the
worldwide equity and debt markets, including the seasonal variance in these markets.
NOTE 02
Basis of Preparation
STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements have been prepared on an accrual basis and are based on the historical cost basis except
for selected current and non-current assets and financial instruments, which have been measured at fair value as set out in the
relevant accounting policies.
The consolidated financial statements are presented in Canadian dollars and all values are in thousands of dollars, except when
otherwise indicated.
These audited consolidated financial statements were authorized for issuance by the Company’s Board of Directors on
May 21, 2013.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the financial statements of the Company, its subsidiaries and special purpose
entities (SPEs) where the Company controls these entities. Subsidiaries are all entities over which the consolidated entity has
the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the
voting rights.
In accordance with IAS 27, “Consolidated and Separate Financial Statements” (IAS 27), the operating results of a subsidiary
should be consolidated if the Company acquires control. Control is presumed to exist when an entity owns greater than 50% of
the voting shares. In cases where the parent does not own a majority of the voting rights, control still exists when there is power
over more than half of the voting rights by virtue of an agreement with other investors, power to govern the financial and operating
policies of the entity under a statute or an agreement, power to appoint or remove the majority of the members of the board of
directors, or power to cast the majority of votes at meetings of the board of directors.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 73
Notes to Consolidated Financial Statements
Although the Company does not own more than 50% of the voting shares of Canaccord Genuity (Australia) Ltd. (formerly
Canaccord BGF or BGF ), the Company completed an evaluation of its relationship with the other shareholders and the power it
has over the financial and operating policies of BGF and determined it should consolidate under IAS 27. Therefore, the financial
position, financial performance, and cash flows of BGF have been consolidated. The Company has also recognized a 50%
non-controlling interest, which represents the portion of BGF net identifiable assets not owned by the Company. At the date of
acquisition, the non-controlling interest was determined using the proportionate method. Net income (loss) and each component
of other comprehensive income (loss) are attributed to the non-controlling interest and to the owners of the parent.
The Company consolidates SPEs in accordance with the guidance provided by the Standing Interpretations Committee
Interpretation 12, “Consolidation – Special Purpose Entities” (SIC-12). An SPE is consolidated when the substance of the
relationship between the entity and the SPE indicates that the SPE is controlled by that entity.
The Company has established an employee benefit trust [Note 17] to fulfill obligations to employees arising from the Company’s
share-based payment plans. The employee benefit trust has been consolidated in accordance with SIC-12 since its activities are
conducted on behalf of the Company, and the Company retains the majority of the benefits and risks of the employee benefit trust.
The results of subsidiaries acquired or disposed of during the year are included in the statements of operations from the effective
date of the acquisition or up to the effective date of the disposal, as appropriate.
All intercompany transactions and balances have been eliminated. In cases where an accounting policy of a subsidiary differs from
the Company’s accounting policies, the Company has made the appropriate adjustments to ensure conformity for purposes of the
preparation of these consolidated financial statements. The financial statements of the subsidiaries are prepared for the same
reporting period as the parent company.
USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions
that affect the reported amounts of assets and liabilities, accompanying note disclosures, and the disclosure of contingent assets
and liabilities at the reporting date. Therefore, actual results may differ from those estimates and assumptions. The significant
estimates include share-based payments, income taxes, the valuation of deferred tax assets, impairment of goodwill, indefinite life
intangible assets and other long-lived assets, allowance for credit losses, fair value of financial instruments, and provisions.
Share-based payments
The Company measures the cost of equity-settled and cash-settled transactions with employees and directors based on the
fair value of the awards granted. The fair value is determined based on the observable share prices or by using an appropriate
valuation model. The use of option pricing models to determine the fair value requires the input of highly subjective assumptions
including the expected price volatility, expected forfeitures, expected life of the award and dividend yield. Changes in the subjective
assumptions can materially affect the fair value estimates. The assumptions and models used for estimating the fair value of
share-based payments are disclosed in Note 17.
Income taxes
Accruals for income tax liabilities require management to make estimates and judgments with respect to the ultimate outcome
of tax filings and assessments. Actual results could vary from these estimates. The Company operates within different tax
jurisdictions and is subject to individual assessments by these jurisdictions. Tax filings can involve complex issues, which may
require an extended period of time to resolve in the event of a dispute or re-assessment by tax authorities. Deferred taxes
are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the
losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be
recognized based upon the likely timing and the level of future taxable profit.
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the amount and timing
of future taxable income. The Company establishes tax provisions, based on reasonable estimates, for possible consequences of
audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various
factors, such as the Company’s experience of previous tax audits.
74
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
Impairment of goodwill and indefinite life intangible assets
Goodwill and indefinite life intangible assets are tested for impairment at least annually, or whenever an event or change in
circumstance may indicate potential impairment, to ensure that the recoverable amount of the cash-generating unit to which
goodwill and indefinite life intangible assets are attributed is greater than or equal to their carrying values.
In determining the recoverable amount, which is the higher of fair value less costs to sell (FVLCS) and value-in-use, management
uses valuation models that consider such factors as projected earnings, price-to-earnings multiples and discount rates.
Management must apply judgment in the selection of the approach to determining the recoverable amount and in making any
necessary assumptions. These judgments may affect the recoverable amount and any resulting impairment write-down. The key
assumptions used to determine recoverable amounts for the different cash-generating units are disclosed in Note 11.
Impairment of other long-lived assets
The Company assesses its amortizable long-lived assets at each reporting date to determine whether there is an indication that
an asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount using management’s
best estimates and available information.
Allowance for credit losses
The Company records allowances for credit losses associated with clients’ receivables, loans, advances and other receivables. The
Company establishes an allowance for credit losses based on management’s estimate of probable unrecoverable amounts.
Judgment is required as to the timing of establishing an allowance for credit losses and the amount of the required specific
allowance, taking into consideration counterparty creditworthiness, current economic trends and past experience. Clients’ receivable
balances are generally collateralized by securities; therefore, any provision is generally measured after considering the market
value of the collateral, if any.
Valuation of financial instruments
The Company measures its financial instruments at fair value or amortized cost. Fair value is determined on the basis of market
prices from independent sources, if available. If there is no available market price, then the fair value is determined by using
valuation models. The inputs to these models, such as expected volatility and liquidity discounts, are derived from observable
market data where possible, but where observable data is not available, judgment is required to select or determine inputs to a
fair value model.
There is inherent uncertainty and imprecision in estimating the factors that can affect fair value, and in estimating fair values
generally, when observable data is not available. Changes in assumptions and inputs used in valuing financial instruments could
affect the reported fair values.
Provisions
The Company records provisions related to pending or outstanding legal matters and regulatory investigations. Provisions
in connection with legal matters are determined on the basis of management’s judgment in consultation with legal counsel,
considering such factors as the amount of the claim, the possibility of wrongdoing by an employee of the Company and
precedents. Contingent litigation loss provisions are recorded by the Company when it is probable that the Company will incur
a loss as a result of a past event and the amount of the loss can be reliably estimated. The Company also records provisions
related to restructuring costs when the recognition criteria for provisions are fulfilled.
NOTE 03
Adoption of New and Revised Standards and Interpretations
FINANCIAL INSTRUMENTS
IFRS 9, “Financial Instruments” (IFRS 9), as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39,
“Financial Instruments: Recognition and Measurement” (IAS 39) and applies to classification and measurement of financial assets
and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after January 1,
2013, but “Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures”, issued in December 2011,
moved the mandatory effective date to January 1, 2015. Other phases of the project address hedge accounting and impairment
of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the
Company’s financial assets, but will not have an impact on classification and measurements of financial liabilities. The Company
will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 75
Notes to Consolidated Financial Statements
PRESENTATION OF FINANCIAL STATEMENTS
IAS 1, “Presentation of Financial Statements” (IAS 1), was amended by the IASB in June 2011. Items in other comprehensive
income will be required to be presented in two categories: items that might be reclassified into profit or loss and those that will
not be reclassified. The flexibility to present a statement of comprehensive income as one statement or two separate statements
of profit and loss and other comprehensive income remains unchanged. The amendments to IAS 1 are effective for annual periods
beginning on or after July 1, 2012. The Company has not yet determined the impact of the amendments on its consolidated
financial statements.
CONSOLIDATION STANDARDS
The IASB issued the following standards in May 2011. These standards are effective for the annual periods beginning on or after
January 1, 2013 with early adoption permitted.
IFRS 10 – “Consolidated Financial Statements” (IFRS 10)
IFRS 10 replaces IAS 27, “Consolidated and Separate Financial Statements” (IAS 27), and SIC-12, “Consolidation – Special Purpose
Entities”. This standard introduces a single consolidation model for all entities based on control, which is defined as whether
an investor has (1) power over the investee, (2) exposure, or rights, to variable returns from its involvement with the investee, and
(3) the ability to use its power over the investee to affect the amount of returns.
IFRS 11 – “Joint Arrangements” (IFRS 11)
IFRS 11 replaces IAS 31, “Interests in Joint Ventures”, and SIC-13, “Jointly Controlled Entities”. Under this standard, joint arrangements
will be differentiated between joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties
that have joint control have rights to the assets and obligations for the liabilities. For a joint operation, the venturer will recognize
its share of the assets, liabilities, revenue and expenses of the joint operation. A joint venture is a joint arrangement whereby the
parties that have joint control have rights to the net assets and will be accounted for using the equity method.
IFRS 12 – “Disclosure of Interests in Other Entities” (IFRS 12)
IFRS 12 establishes disclosure requirements for interest in other entities, such as joint arrangements, associates, special
purpose vehicles and off-balance sheet vehicles.
The Company is currently assessing the impact of the above new pronouncements relating to consolidation standards.
In October 2012, the IASB issued amendments to IFRS 10, IFRS 12 and IAS 27, “Investment Entities”, which introduced an
exception to the principle that all subsidiaries should be consolidated. The amendments require a parent that is an investment
entity to measure its investments in particular subsidiaries at fair value through profit or loss instead of consolidating all subsidiaries
in its consolidated and separate financial statements. The amendments are effective from January 1, 2014 with early adoption
permitted. The Company has not yet assessed the impact of the amendments on its consolidated financial statements.
OTHER STANDARDS
IFRS 13 – “Fair Value Measurement” (IFRS 13)
IFRS 13 is a comprehensive standard that defines fair value, sets out a single IFRS framework for measuring fair value, and
requires disclosures about fair value measurements. This new standard clarifies that fair value is the price that would be received
to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date.
The standard is effective for annual periods beginning on or after January 1, 2013. The Company does not expect the adoption of
IFRS 13 to have a material impact on the Company’s consolidated financial statements.
IAS 32 – “Offsetting Financial Assets and Financial Liabilities” (IAS 32)
The IASB issued amendments to IAS 32, clarifying the requirements for offsetting financial instruments and addressing inconsistencies
in current practice when applying the offsetting criteria in IAS 32, “Financial Instruments: Presentation”. The amendments are
effective for annual periods beginning on or after January 1, 2014 with early adoption permitted, and are required to be applied
retrospectively. The Company has not yet determined the impact of the amendments on the Company’s financial statements.
IAS 19 (Revised) – “Employee Benefits” (IAS 19 Revised)
In June 2011, the IASB amended IAS 19, “Employee Benefits”. The amendments, which result in IAS 19 (Revised), “Employee
Benefits”, contain a number of changes to the accounting for employment benefit plans including recognition and disclosure of
76
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
defined benefit pension plans and clarification on the recognition of post-employment and termination benefits. This standard is
effective for annual periods beginning on or after January 1, 2013. The Company has not yet assessed the impact of this standard
on its consolidated financial statements.
NOTE 04
Summary of Significant Accounting Policies
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the
acquiree. For each business combination, the Company elects whether to measure the non-controlling interest in the acquiree at
fair value or at the proportionate share of the fair value of the acquiree’s identifiable net assets. The proportionate share method
was selected for the acquisition of the 50% interest in BGF. Acquisition costs are expensed as incurred.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3,
“Business Combinations”, are recognized at their fair value at the acquisition date except for non-current assets (or disposal groups)
that are classified as held for sale in accordance with IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations”, which
are recognized and measured at FVLCS .
Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date at the best
estimate of such amount. Subsequent changes in the fair value of the contingent consideration that are deemed to be a liability
are recognized in the statements of operations.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the consideration
transferred over the fair value of the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets
acquired is in excess of the aggregate consideration transferred, the difference is recognized in the statements of operations.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in each of the business combinations is, from the acquisition date, allocated to each of the Company’s
cash-generating units that are expected to benefit from the corresponding combinations, irrespective of whether other assets or
liabilities of the acquiree are assigned to those units.
TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS AND FOREIGN SUBSIDIARIES
The Company’s consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional
currency. Each subsidiary of the Company determines its own functional currency, and items included in the financial statements
of each subsidiary are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company and its subsidiaries at their respective functional
currencies using exchange rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated by the Company and its subsidiaries into
their respective functional currencies at the exchange rate in effect at the reporting date. All differences upon translation are
recognized in the consolidated statements of operations.
Non-monetary assets and liabilities denominated in foreign currencies are translated by the Company and its subsidiaries into
their respective functional currencies at historical rates. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates in effect at the date when the fair value is determined.
Translation of foreign subsidiaries
Assets and liabilities of foreign subsidiaries with a functional currency other than the Canadian dollar are translated into Canadian
dollars at rates prevailing at the reporting date, and income and expenses are translated at average exchange rates prevailing
during the period. Unrealized gains or losses arising as a result of the translation of the foreign subsidiaries are recorded in
accumulated other comprehensive income (loss). On disposal of a foreign operation, the component of other comprehensive
income relating to that particular foreign operation is recognized in the consolidated statements of operations.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 77
Notes to Consolidated Financial Statements
INTANGIBLE ASSETS
Identifiable intangible assets acquired separately are measured on initial recognition at cost. The cost of identifiable intangible
assets acquired in a business combination is equal to their fair value as at the date of acquisition. Following initial recognition,
identifiable intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
The amortization of intangible assets is recognized in the consolidated statements of operations as part of amortization expense.
The useful lives of identifiable intangible assets are assessed to be either finite or indefinite. Identifiable intangible assets with
finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the
identifiable intangible asset may be impaired. The amortization period and the amortization method for an identifiable intangible
asset are reviewed at least annually, at each financial year end.
Identifiable intangible assets purchased through the acquisitions of Genuity, the 50% interest in Canaccord Genuity (Australia) Ltd.
(Canaccord Genuity Australia), Collins Stewart Hawkpoint plc (CSHP), and Eden Financial are brand names, customer relationships,
sales backlogs, technology, trading licences and non-competition agreements, which have finite lives and are amortized on a
straight-line basis over their estimated useful lives. The estimated amortization periods of these amortizable intangible assets are
as follows:
Brand names
Customer relationships
Sales backlogs
Non-competition
Trading licences
Technology
indefi nite
11 years
0.4 years
5 years
n/a
n/a
Canaccord Genuity
Australia
Genuity
CSHP
1 year
1 year
5 years
8 to 24 years
1 year
4.5 years
indefi nite
1 year
n/a
n/a
n/a
3 years
Eden
Financial
n/a
8 years
n/a
n/a
n/a
n/a
Trading licences acquired through the acquisition of the 50% interest in BGF are considered to have an indefinite life as they are
expected to provide benefit to the Company over a continuous period. Branding acquired through the acquisition of Genuity is
considered to have an indefinite life, as it will provide benefit to the Company over a continuous period.
Identifiable intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually.
IMPAIRMENT OF NON-FINANCIAL ASSETS
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of the FVLCS and the value-in-use of a particular asset or cash- generating unit (CGU).
The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount, and recognized in the income statement.
In assessing FVLCS , the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. The Company bases its
impairment calculation on annual budget calculations, which are prepared separately for each of the Company’s CGUs to which the
individual assets are allocated. These budget calculations generally cover a period of five years. For longer periods, a long term
growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognized in the consolidated statements of operations.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates
the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in
the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal
is limited so that the carrying amount of the asset does not exceed its recoverable amount, or exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such
reversal is recognized in the consolidated statement of operations.
78
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
The following assets have specific characteristics for impairment testing:
Goodwill
Goodwill is tested for impairment annually as at March 31 and when circumstances indicate that the carrying value may
be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which goodwill
relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment
losses relating to goodwill cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually as at March 31 at the CGU level and when
circumstances indicate that the carrying value may be impaired.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit, commercial paper and bankers’ acceptances with a term to maturity of
less than three months from the date of purchase.
FINANCIAL INSTRUMENTS
The Company classifies financial instruments into one of the following categories according to IAS 39, “Financial Instruments –
Recognition and Measurement” (IAS 39): fair value through profit and loss, held to maturity, loans and receivables, available for
sale assets and other financial liabilities. The Company determines its classification of financial instruments at initial recognition.
[i] Financial assets
Initial recognition and measurement
Financial assets are recognized when the entity becomes a party to the contractual provisions of the instrument. For financial
assets, trade date accounting is applied, the trade date being the date at which the company commits itself to either the purchase
or sale of the asset.
Financial assets held for trading are initially measured at fair value. Transaction costs related to financial instruments classified
as held for trading are recognized through earnings when incurred. Transaction costs for all financial instruments other than those
classified as held for trading are included in the costs of the assets.
Classification and subsequent measurement
Financial assets classified as fair value through profit or loss
Financial assets classified as fair value through profit or loss include financial assets held for trading and financial assets
designated upon initial recognition as fair value through profit or loss. Financial assets purchased for trading activities are
classified as held for trading and are measured at fair value, with unrealized gains (losses) recognized in net income. In addition,
provided that the fair value can be reliably determined, IAS 39 permits an entity to designate any financial instrument as fair value
through profit and loss on initial recognition or adoption of this standard even if that instrument would not otherwise meet the
definition of fair value through profit and loss as specified in IAS 39. The Company did not designate any financial assets upon
initial recognition as fair value through profit and loss. The Company’s financial assets classified as held for trading include cash
and cash equivalents, and securities owned, including derivative financial instruments.
The Company periodically evaluates the classification of its financial assets as held for trading based on whether the intent to
sell the financial assets in the near term is still appropriate. If the Company is unable to trade these financial assets due to
inactive markets or if management’s intent to sell them in the foreseeable future significantly changes, the Company may elect to
reclassify these financial assets in rare circumstances.
Financial assets classified as available for sale
Available for sale assets are generally measured at fair value, with subsequent changes in fair value recorded in other comprehensive
income, net of tax, until the assets are sold or impaired, at which time the difference is recognized in net income for the year.
Investments in equity instruments classified as available for sale that do not have a quoted market price in an active market
are measured at fair value unless fair value is not reliably measurable. The Company’s investment in Euroclear is classified as
available for sale and measured at its estimated fair value. The Company sold its investment in Alternative Alpha Trading System
during the year ended March 31, 2013, which was classified as available for sale.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 79
Notes to Consolidated Financial Statements
Financial assets classified as loans and receivables and held to maturity
Financial assets classified as loans and receivables and held to maturity are measured at amortized cost. Amortized cost
is calculated as the amount at which the financial asset is measured at initial recognition less principal repayment and
impairment, and includes amortization of any discount or premium on acquisition. The Company classifies accounts receivable
as loans and receivables.
Impairment of financial assets
The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or group of financial assets is deemed to be impaired if there is objective evidence of
impairment as a result of one or more events that have occurred since the initial recognition of the asset and those loss events
have had an impact on the estimated future cash flows of the asset that can be reliably estimated.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is recognized in the statements of
operations and is measured as the difference between the carrying value and the fair value.
[ii] Financial liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value less, in the case of other financial liabilities, directly attributable
transaction costs, and classified as either fair value through profit and loss or other financial liabilities.
Classification and subsequent measurement
Financial liabilities classified as fair value through profit and loss
Financial liabilities classified as fair value through profit and loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as fair value through profit and loss. Financial liabilities are classified as held for trading if
they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are recognized in the
statements of operations. The Company has not designated any financial liabilities as fair value through profit and loss that would
not otherwise meet the definition of fair value through profit and loss upon initial recognition. Bank indebtedness, securities sold
short and derivative financial instruments are classified as held for trading and recognized at fair value.
Financial liabilities classified as other financial liabilities
After initial recognition, financial liabilities classified as other financial liabilities are subsequently measured at amortized cost
using the effective interest rate method. Gains and losses are recognized in the statements of operations through the effective
interest rate method of amortization. Other financial liabilities include accounts payable and accrued liabilities, short term credit
facility, and subordinated debt. The carrying value of other financial liabilities approximates their fair value.
[iii] Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statements of financial
position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
[iv] Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined by referencing quoted
market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for
transaction costs.
For financial instruments not traded in an active market, the fair value is determined using appropriate and reliable valuation
techniques. Such techniques may include recent arm’s length market transactions; reference to the current fair value of another
instrument that is substantially the same; discounted cash flow analysis or other valuation models. Valuation techniques may
require the use of estimates or management assumptions if observable market data is not available. When the fair value cannot
be reliably measured using a valuation technique, then the financial instrument is measured at cost.
[v] Derivative financial instruments
Derivative financial instruments are financial contracts, the value of which is derived from the value of the underlying assets,
interest rates, indices or currency exchange rates.
80
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
The Company uses derivative financial instruments to manage foreign exchange risk on pending security settlements in foreign
currencies. The fair value of these contracts is nominal due to their short term to maturity. Realized and unrealized gains and
losses related to these contracts are recognized in net income during the reporting period.
The Company trades in futures contracts, which are agreements to buy or sell standardized amounts of government bonds at a
predetermined future date and price, in accordance with terms specified by a regulated futures exchange, and subject to daily
cash margining. The Company trades in futures in an attempt to mitigate interest rate risk, yield curve risk and liquidity risk.
SECURITIES OWNED AND SOLD SHORT
Securities owned and sold short are recorded at fair value based on quoted market prices in an active market or a valuation
model if no market prices are available. Unrealized gains and losses are reflected in income. Certain securities owned have been
pledged as collateral for securities borrowing transactions. Securities owned and sold short are classified as held-for-trading
financial instruments.
SECURITIES LENDING AND BORROWING
The Company employs securities lending and borrowing activities to primarily facilitate the securities settlement process. These
arrangements are typically short term in nature, with interest being received when cash is delivered and interest being paid when
cash is received. Securities borrowed and securities loaned are carried at the amounts of cash collateral delivered and received
in connection with the transactions. Securities borrowed transactions require the Company to deposit cash, letters of credit or
other collateral with the lender. For securities loaned, the Company receives collateral in the form of cash or other collateral in an
amount generally in excess of the market value of the securities loaned. The Company monitors the fair value of the securities
loaned and borrowed against the cash collateral on a daily basis and, when appropriate, the Company may require counterparties
to deposit additional collateral or it may return collateral pledged to ensure such transactions are adequately secured.
Securities purchased under agreements to resell and securities sold under agreements to repurchase represent collateralized
financing transactions. The Company receives securities purchased under agreements to resell, makes delivery of securities sold
under agreements to repurchase, monitors the market value of these securities on a daily basis and delivers or obtains additional
collateral as appropriate.
The Company manages its credit exposure by establishing and monitoring aggregate limits by customer for these transactions.
Interest earned on cash collateral is based on a floating rate.
REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can
be reliably measured. The Company assesses its revenue arrangements in order to determine if it is acting as principal or agent.
Commission revenue consists of revenue generated through commission-based brokerage services, recognized on a trade date
basis, and the sale of fee-based products and services, recognized on an accrual basis. Realized and unrealized gains and losses
on securities purchased for client-related transactions are reported as net facilitation losses and recorded as a reduction of
commission revenues. Facilitation losses for the year ended March 31, 2013 were $15.4 million [March 31, 2012 – $28.1 million].
Investment banking revenue consists of underwriting fees and commissions earned on corporate finance activities. Revenue
from underwritings and other corporate finance activities is recorded when the underlying transaction is completed under the
engagement terms and the related revenue is reasonably determinable.
Advisory fees consist of management and advisory fees that are recognized on an accrual basis. Also included in advisory fees
is revenue from mergers and acquisitions activities, which is recognized when the underlying transaction is completed under the
engagement terms and the related revenue is reasonably determinable.
Principal trading revenue consists of income earned in connection with principal trading operations and is recognized on a trade
date basis.
Interest revenue consists of interest earned on client margin accounts, interest earned on the Company’s cash and cash equivalents
balances, interest earned on cash delivered in support of securities borrowing activity, and dividends earned on securities owned.
Interest revenue is recognized on an effective interest rate basis. Dividend income is recognized when the right to receive payment
is established.
Other revenue includes foreign exchange gains or losses, revenue earned from our correspondent brokerage services and
administrative fees revenues.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 81
Notes to Consolidated Financial Statements
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment, building and leasehold improvements are recorded at cost less accumulated amortization. Amortization is being
recorded as follows:
Computer equipment
Furniture and equipment
Leasehold improvements
33% declining balance basis
10% to 20% declining balance basis
Straight-line over the shorter of useful life and respective term of the leases
An item of property, plant and equipment, and any specific part initially recognized, is derecognized upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
consolidated statements of operations when the asset is derecognized.
The assets’ residual values, useful lives and method of amortization are reviewed at each financial year end, and are adjusted
prospectively where appropriate.
INCOME TAXES
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively
enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations
are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred taxes are accounted for using the liability method. This method requires that deferred taxes reflect the expected deferred
tax effect of temporary differences at the reporting date between the carrying amounts of assets and liabilities for financial
statement purposes and their tax bases.
Deferred tax liabilities are recognized for all taxable temporary differences, except for taxable temporary differences associated
with investments in subsidiaries where the timing of the reversal of the temporary difference can be controlled and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences,
and the carryforward of unused tax credits and unused tax losses, can be utilized. The carrying amounts of deferred tax assets
are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are assessed at each
reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period. Deferred tax is charged or credited in the statements of operations except where it relates to items that may
be credited directly to equity, in which case the deferred tax is recognized directly against equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation
authority on the same taxable entity.
Sales tax
Revenues, expenses and assets are recognized net of the amount of sales tax, except where the amount of sales tax incurred
is not recoverable from the tax authority. In these circumstances, sales tax is recognized as part of the cost of acquisition of the
asset or as part of an item of the expense. The net amount of sales tax recoverable from, or payable to, the taxation authority is
included as part of accounts receivable or accounts payable in the statements of financial position.
82
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
TREASURY SHARES
The Company’s own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. This
includes shares held in our long-term incentive plan and unvested share purchase loans and preferred shares. No gain or loss is
recognized in the statements of operations in the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Any difference between the carrying amount and the consideration, if reissued, is recognized in contributed surplus. Voting rights
related to treasury shares are nullified for the Company and no dividends are allocated to them.
EARNINGS PER COMMON SHARE
Basic earnings per common share is computed by dividing the net income available to common shareholders for the period by
the weighted average number of common shares outstanding. Diluted earnings per common share reflects the dilutive effect of
unvested share purchase loans, share issuance commitments in connection with share-based payment plans, unvested shares
purchased by the employee benefit trust and share issuance commitments in connection with the long-term incentive plan based
on the treasury stock method. The treasury stock method determines the number of incremental common shares by assuming
that the number of shares the Company has granted to employees has been issued.
SHARE-BASED PAYMENTS
Employees (including senior executives and directors) of the Company receive remuneration in the form of share-based payment
transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). Independent
directors also receive deferred share units (DSUs) as part of their remuneration, which can only be settled in cash (cash-settled
transactions). The dilutive effect, if any, of outstanding options and share-based payments is reflected as additional share dilution
in the computation of diluted earnings per common share.
Equity-settled transactions
For equity-settled transactions, the Company measures the fair value of share-based awards as of the grant date and recognizes
the cost as an expense over the applicable vesting period with a corresponding increase in contributed surplus. The cost is
recognized on a graded basis.
The Company estimates the number of equity instruments that will ultimately vest when calculating the amortization expense.
No expense is recognized for awards that do not ultimately vest.
When share-based awards vest, contributed surplus is reduced by the applicable amount and share capital is increased by the
same amount.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date. The fair values of DSUs are expensed
upon grant, as there are no vesting conditions [Note 17]. The liability is remeasured to fair value at each reporting date up to and
including the settlement date, with changes in fair value recognized through the statements of operations.
PROVISIONS
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of
the amount of the obligation. The expense relating to any provision is presented in the statements of operations net of any
reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as an interest expense.
Legal provisions
Legal provisions are recognized when it is probable that the Company will be liable for the future obligation as a result of a past
event related to legal settlements or litigations.
Restructuring provisions
Restructuring provisions are only recognized when the recognition criteria for provisions are fulfilled. In order for the recognition
criteria to be met, the Company needs to have in place a detailed formal plan about the business or part of the business
concerned, the location and number of employees affected, a detailed estimate of associated costs and an appropriate timeline.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 83
Notes to Consolidated Financial Statements
In addition, either the personnel affected must have a valid expectation that the restructuring is being carried out or the
implementation must have been initiated. The restructuring provision recognized includes staff restructuring costs, reorganization
expenses, onerous lease provisions and impairment of equipment and leasehold improvements.
LEASES
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the
inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement
conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. The Company has assessed its
lease arrangements and concluded that the Company only has leases that have the characteristics of an operating lease. An
operating lease is a lease that does not transfer substantially all of the risks and benefits and ownership of an asset to the
lessee. Operating lease payments are recognized as an expense in the statements of operations on a straight-line basis over the
lease term.
BORROWING COSTS
The Company incurs borrowing costs in relation to its investments and broker dealer and client payable balances, the short term
credit facility related to the acquisition of CSHP and its subordinated debt. Borrowing costs directly attributable to the acquisition
of an asset that takes a substantial period of time to get ready for use are capitalized as part of the cost of the asset.
CLIENT MONEY
The Company’s UK and Europe operations hold money on behalf of its clients in accordance with the client money rules of the
Financial Conduct Authority in the United Kingdom. Such money and the corresponding liabilities to clients are not included in the
statements of financial position as the Company is not beneficially entitled thereto. The amounts held on behalf of clients at the
reporting date are included in Note 21.
SEGMENT REPORTING
The Company’s segment reporting is based on the following operating segments: Canaccord Genuity, Canaccord Genuity Wealth
Management and Corporate and Other. The Company’s business operations are grouped into the following geographic regions:
Canada, the UK and Europe, Other Foreign Locations, and the US.
NOTE 05
Securities Owned and Securities Sold Short
Corporate and government debt
Equities and convertible debentures
March 31, 2013
March 31, 2012
Securities
owned
Securities
sold short
Securities
owned
Securities
sold short
$
753,256 $
617,841
$
949,517
$
824,466
171,081
71,179
222,471
90,183
$
924,337 $
689,020
$ 1,171,988
$
914,649
As at March 31, 2013, corporate and government debt maturities range from 2013 to 2097 [March 31, 2012 – 2012 to 2096]
and bear interest ranging from 0.00% to 15.00% [March 31, 2012 – 0.00% to 13.00%].
84
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
NOTE 06
Financial Instruments
In the normal course of business the Company is exposed to credit risk, liquidity risk and market risk, which includes fair value
risk, interest rate risk and foreign exchange risk.
CREDIT RISK
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. Credit risk arises from cash
and cash equivalents, net receivables from clients and brokers and investment dealers, and other accounts receivable. The maximum
exposure of the Company to credit risk before taking into account any collateral held or other credit enhancements is the carrying
amount of the financial instruments as disclosed in the consolidated financial statements as at March 31, 2013 and 2012.
The primary source of credit risk to the Company is in connection with trading activity by private clients and private client margin
accounts. To minimize its exposure, the Company applies certain credit standards, applies limits to transactions and requires
settlement of securities transactions on a cash basis or delivery against payment. Margin transactions are collateralized by
securities in the clients’ accounts in accordance with limits established by the applicable regulatory authorities and are subject to
the Company’s credit review and daily monitoring procedures. Management monitors the collectibility of receivables and estimates
an allowance for doubtful accounts. The accounts receivable outstanding are expected to be collectible within one year. The
Company has recorded an allowance for doubtful accounts of $14.0 million [March 31, 2012 – $13.4 million] [Note 7].
The Company is also exposed to the risk that counterparties to transactions will not fulfill their obligations. Counterparties
primarily include investment dealers, clearing agencies, banks and other financial institutions. The Company does not rely entirely
on ratings assigned by credit rating agencies in evaluating counterparty risk. The Company mitigates credit risk by performing its
own due diligence assessments on the counterparties, obtaining and analyzing information regarding the structure of the financial
instruments, and keeping current with new innovations in the market. The Company also manages this risk by conducting regular
credit reviews to assess creditworthiness, reviewing security and loan concentrations, holding and marking to market collateral on
certain transactions and conducting business through clearing organizations with performance guarantees.
As at March 31, 2013 and 2012, the Company’s most significant counterparty concentrations were with financial institutions
and institutional clients. Management believes that they are in the normal course of business and does not anticipate loss
for non-performance.
LIQUIDITY RISK
Liquidity risk is the risk that the Company cannot meet a demand for cash or fund its obligations as they become due. The
Company’s management is responsible for reviewing liquidity resources to ensure funds are readily available to meet its financial
obligations as they become due, as well as ensuring adequate funds exist to support business strategies and operational growth.
The Company’s business requires capital for operating and regulatory purposes. The current assets reflected on the statements
of financial position are highly liquid. The majority of the positions held as securities owned are readily marketable and all are
recorded at their fair value. Client receivables are generally collateralized by readily marketable securities and are reviewed daily
for impairment in value and collectibility. Receivables and payables from brokers and dealers represent the following: current open
transactions that generally settle within the normal three-day settlement cycle; collateralized securities borrowed and/or loaned
in transactions that can be closed within a few days on demand; and balances on behalf of introducing brokers representing net
balances in connection with their client accounts. Additional information regarding the Company’s capital structure and capital
management objectives is discussed in Note 20.
The following table presents the contractual terms to maturity of the financial liabilities owed by the Company as at March 31, 2013:
Financial liability
Bank indebtedness
Accounts payable and accrued liabilities
Securities sold short
Subordinated debt
Contingent consideration
(1) Subject to Investment Industry Regulatory Organization of Canada’s approval.
Carrying amount
Contractual term to maturity
$
66,138
2,726,735
689,020
15,000
14,218
Due within one year
Due within one year
Due within one year
Due on demand(1)
Due within one year
The fair values for the above financial liabilities approximate their carrying values and will be paid within 12 months.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 85
Notes to Consolidated Financial Statements
MARKET RISK
Market risk is the risk that the fair value of financial instruments will fluctuate because of changes in market prices. The Company
separates market risk into three categories: fair value risk, interest rate risk and foreign exchange risk.
Fair value risk
When participating in underwriting activities, the Company may incur losses if it is unable to resell the securities it is committed to
purchase or if it is forced to liquidate its commitment at less than the agreed upon purchase price. The Company is also exposed
to fair value risk as a result of its principal trading activities in equity securities, fixed income securities, and derivative financial
instruments. Securities at fair value are valued based on quoted market prices where available and, as such, changes in fair value
affect earnings as they occur. Fair value risk also arises from the possibility that changes in market prices will affect the value
of the securities the Company holds as collateral for client margin accounts. The Company mitigates its fair value risk exposure
through controls to limit concentration levels and capital usage within its inventory trading accounts, as well as through monitoring
procedures of the margin accounts.
The following table summarizes the effect on earnings as a result of a fair value change in financial instruments as at March 31,
2013. This analysis assumes all other variables remain constant. The methodology used to calculate the fair value sensitivity is
consistent with the prior year.
Carrying value
Financial instrument
Asset (Liability)
Equities and convertible
March 31, 2013
March 31, 2012
Effect of a
10% increase
in fair value on
net income
Effect of a
10% decrease
in fair value on
net income
Carrying value
Asset (Liability)
Effect of a
10% increase
in fair value on
net income
Effect of a
10% decrease
in fair value on
net income
debentures owned
$
171,081
$
5,425
$
(5,425) $
222,471
$
6,541
$
(6,541)
Equities and convertible
debentures sold short
(71,179)
(2,257)
2,257
(90,183)
(2,651)
2,651
The following table summarizes the effect on OCI as a result of a fair value change in the financial instruments classified as
available for sale. This analysis assumes all other variables remain constant. The methodology used to calculate the fair value
sensitivity is consistent with the prior year.
Financial instrument
Carrying value
March 31, 2013
March 31, 2012
Effect of a
10% increase
in fair value
on other
comprehensive
income
Effect of a
10% decrease
in fair value
on other
comprehensive
income
Effect of a
10% increase
in fair value
on other
comprehensive
income
Effect of a
10% decrease
in fair value
on other
comprehensive
income
Carrying value
Investments
$
3,695
$
195
$
(195) $
9,493
$
507
$
(507)
86
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
A fair value hierarchy is presented below that distinguishes the significance of the inputs used in determining the fair value
measurements of various financial instruments. The hierarchy contains the following levels: Level 1 uses quoted (unadjusted)
prices in active markets for identical assets and liabilities, Level 2 uses other techniques for which all inputs that have a
significant effect on the recorded fair value are observable, either directly or indirectly, and Level 3 uses techniques with inputs
that have a significant effect on the recorded fair value and that are not based on observable market data.
Securities owned
Corporate and government debt
Equities and convertible debentures
Securities sold short
Corporate and government debt
Equities and convertible debentures
Investments
Contingent consideration
March 31, 2013
Estimated fair value
March 31, 2013
Level 2
Level 1
$
753,256
$
258,188
$
495,068
$
171,081
141,06 2
14,759
(617,841)
(71,179)
3,695
(14,218)(1)
(221,125)
(70,651)
(396,716)
(528)
—
—
—
—
(1) Contingent consideration is settled in cash and is therefore classifi ed as a fi nancial liability measured at fair value, with any subsequent gains or losses recognized in earnings.
March 31, 2012
Estimated fair value
March 31, 2012
Level 2
Level 1
$
949,517
$
425,655
$
520,070
$
222,471
206,584
6,107
(824,466)
(535,117)
(289,349)
(90,183)
9,493
(89,135)
—
(1,048)
—
Securities owned
Corporate and government debt
Equities and convertible debentures
Securities sold short
Corporate and government debt
Equities and convertible debentures
Investments
Movement in net Level 3 financial assets
March 31, 2012
Purchases of Level 3 assets during the year
Addition of contingent consideration
Net unrealized loss during the year
Net disposals during the year
March 31, 2013
Interest rate risk
Level 3
—
15,260
—
—
3,695
(14,218)
Level 3
3,792
9,780
—
—
9,493
$
23,065
5,693
(14,218)
(216)
(9,587)
$
4,737
Interest rate risk arises from the possibility that changes in interest rates will affect the fair value or future cash flows of
financial instruments held by the Company. The Company incurs interest rate risk on its cash and cash equivalent balances, bank
indebtedness, short term credit facility, fixed income portion of securities owned and securities sold short, net clients’ balances,
and net brokers’ and investment dealers’ balances, as well as its subordinated debt. The Company attempts to minimize and
monitor its exposure to interest rate risk through quantitative analysis of its net positions of fixed income securities, clients’
balances, securities lending and borrowing activities, and short term borrowings. The Company also trades in futures in an
attempt to mitigate interest rate risk. Futures are included in marketable securities owned, net of marketable securities sold
short, for the purpose of calculating interest rate sensitivity.
All cash and cash equivalents mature within three months. Net clients’ receivable (payable) balances charge (incur) interest based
on floating interest rates. Subordinated debt bears interest at a rate of prime plus 4%, payable monthly. The short term credit
facility bears interest based on a prime-linked rate payable monthly.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 87
Notes to Consolidated Financial Statements
The following table provides the effect on net income (loss) for the years ended March 31, 2013 and 2012 if interest rates
had increased or decreased by 100 basis points applied to balances as of March 31, 2013 and 2012. Fluctuations in interest
rates do not have an effect on OCI. This sensitivity analysis assumes all other variables are constant. The methodology used to
calculate the interest rate sensitivity is consistent with the prior year.
Cash and cash equivalents,
Carrying value
March 31, 2013
March 31, 2012
Net income
effect of a
100 bps
increase in
interest rates
Net income
effect of a
100 bps
decrease in
interest rates(1)
Carrying value
Net income
effect of a
100 bps
increase in
interest rates
Net income
effect of a
100 bps
decrease in
interest rates(1)
net of bank indebtedness
$
424,874 $
2,430
$
(2, 582) $
739,097
$
3,953
$
(4,038)
Marketable securities owned, net of
marketable securities sold short
Clients’ payable, net
RRSP cash balances held in trust
Brokers’ and investment dealers’
balance, net
Subordinated debt
(1) Subject to a fl oor of zero.
Foreign exchange risk
235,317
(6 95, 733)
327,173
2 99, 985
(15,000)
(2,154)
( 4, 043)
1,886
(300)
(87)
2,654
(1, 205)
(1,886)
257,339
(688,954)
535,486
15
87
(124,413)
(15,000)
(132)
(3,515)
2,864
(1,224)
(80)
691
(2,417)
(2,864)
7
80
Foreign exchange risk arises from the possibility that changes in the price of foreign currencies will result in losses. The Company’s
primary foreign exchange risk results from its investment in its US, Australia, and UK and Europe subsidiaries. These subsidiaries
are translated using the foreign exchange rate at the reporting date. Any fluctuation in the Canadian dollar against the US dollar,
the pound sterling, or the Australian dollar will result in a change in the unrealized gains (losses) on translation of foreign
operations recognized in accumulated other comprehensive income (loss).
All of the subsidiaries may also hold financial instruments in currencies other than their functional currency; therefore, any
fluctuations in foreign exchange rates will impact foreign exchange gains or losses.
The following table summarizes the effects on net income (loss) and OCI as a result of a 10% change in the value of the foreign
currencies where there is significant exposure. The analysis assumes all other variables remain constant. The methodology used
to calculate the foreign exchange rate sensitivity is consistent with the prior year.
As at March 31, 2013:
Currency
US dollar
Pound sterling
Australian dollar
As at March 31, 2012:
Currency
US dollar
Pound sterling
Australian dollar
88
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Effect of a
5% appreciation
in foreign
exchange rate
on net income
Effect of a
5% depreciation
in foreign
exchange rate
on net income
Effect of a
5% appreciation
in foreign
exchange rate
on OCI
Effect of a
5% depreciation
in foreign
exchange rate
on OCI
$
(1,023) $
1,023
$
5,526
$
(5,526)
(2,238)
nil
2,238
nil
31,756
4,361
(31,756)
(4,361)
Effect of a
5% appreciation
in foreign
exchange rate
on net income
Effect of a
5% depreciation
in foreign
exchange rate
on net income
Effect of a
5% appreciation
in foreign
exchange rate
on OCI
Effect of a
5% depreciation
in foreign
exchange rate
on OCI
$
(1,199) $
1,199
$
4,229
$
(4,229)
(2,461)
nil
2,461
nil
33,310
4,660
(33,310)
(4,660)
Notes to Consolidated Financial Statements
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are financial contracts, the value of which is derived from the value of the underlying assets,
interest rates, indices or currency exchange rates. All derivative financial instruments are expected to be settled within six months
subsequent to fiscal year end.
Foreign exchange forward contracts
The Company uses derivative financial instruments to manage foreign exchange risk on pending security settlements in foreign
currencies. The fair value of these contracts is nominal due to their short term to maturity. Realized and unrealized gains and
losses related to these contracts are recognized in net income (loss) during the reporting period.
Forward contracts outstanding at March 31, 2013:
To sell US dollars
To buy US dollars
Forward contracts outstanding at March 31, 2012:
Notional amounts
(millions of USD)
Average price
(CAD/USD)
Maturity
Fair value
$
14.8 $
3.8
1.02
1.02
April 1, 2013
April 1, 2013
(4)
6
To sell US dollars
To buy US dollars
Notional amounts
(millions of USD)
Average price
(CAD/USD)
Maturity
Fair value
$
13.3 $
9.3
1.00
1.00
April 4, 2012
April 4, 2012
nil
nil
The Company’s Canaccord Genuity Wealth Management segment in the UK and Europe deals foreign exchange forward contracts
on behalf of its clients, and establishes matching contracts with the counterparties. The Company has no net exposure, assuming
no counterparty default. The principal currencies of the forward contracts are: the UK pound, the US dollar, or the euro. The
weighted average term to maturity is 75 days. The table below shows the fair value of the forward contract assets and liabilities,
and the notional value of these forward contracts as at March 31, 2013.
Foreign exchange forward contracts
$
4,483
$
(4,483)
$
352,205
Assets
Liabilities
Notional amount
Bond futures
The Company is involved in trading bond futures contracts, which are agreements to buy or sell a standardized amount of an
underlying Government of Canada bond, at a predetermined future date and price, in accordance with terms specified by a regulated
futures exchange, and are subject to daily cash margining. The Company trades in bond futures in order to mitigate interest rate
risk, yield curve risk, and liquidity risk. At March 31, 2013, the Company had no bond futures contracts outstanding [March 31,
2012 – notional amount of $7.2 million].
Credit risk on bond futures is minimal as the counterparty to every futures trade is a clearing corporation, which acts as a third
party that matches trade and collects and maintains margin.
SECURITIES LENDING AND BORROWING
The Company employs securities lending and borrowing primarily to facilitate the securities settlement process. These arrangements
are typically short term in nature, with interest being received when cash is delivered and interest being paid when cash is
received. These transactions are fully collateralized and are subject to daily margin calls for any deficiency between the market
value of the security given and the amount of collateral received. These transactions are collateralized by either cash or securities,
including government treasury bills and government bonds, and are reflected within accounts receivable and accounts payable.
Interest earned on cash collateral is based on a floating rate. At March 31, 2013, the floating rates ranged from 0.00% to 0.63%
[March 31, 2012 – 0.00% to 0.68%].
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 89
Notes to Consolidated Financial Statements
March 31, 2013
March 31, 2012
BANK INDEBTEDNESS
Cash
Securities
Loaned or
delivered as
collateral
Borrowed or
received as
collateral
Loaned or
delivered as
collateral
Borrowed or
received as
collateral
$
168,371
$
36,710
$
36,047
$
199,956
120,781
63,856
66,102
122,184
The Company enters into call loans or overdraft positions primarily to facilitate the securities settlement process for both client
and Company securities transactions. The bank indebtedness is collateralized by either unpaid client securities and/or securities
owned by the Company. As at March 31, 2013, the Company had $66.1 million of bank indebtedness balance outstanding
[March 31, 2012 – $75.1 million at a floating rate of 0.64%].
SHORT TERM CREDIT FACILITY
The Company entered into a $150.0 million senior secured credit agreement to finance a portion of the cash consideration for
its acquisition of CSHP. This credit facility was collateralized by guarantees, securities pledge agreements and mortgages in the
UK over the shares of the Company’s material subsidiaries. The balance outstanding as of March 31, 2012 was $150.0 million.
This short term credit facility bore an interest rate of 3.75% per annum. The balance of the short term credit facility was repaid in
full on May 22, 2012.
OTHER CREDIT FACILITIES
Subsidiaries of the Company also have other credit facilities with banks in Canada and the UK for an aggregate amount of
$705.5 million. These credit facilities, consisting of call loans, letters of credit and daylight overdraft facilities, are collateralized
by unpaid client securities and/or securities owned by the Company. As of March 31, 2013, there were nil balances outstanding
under these other credit facilities.
A subsidiary of the Company has also entered into secured irrevocable standby letters of credit from a financial institution totalling
$3.3 million (US$3.2 million) as rent guarantees for its leased premises in Boston and New York. As of March 31, 2013 and
2012, there were no outstanding balances under these standby letters of credit.
NOTE 07
Accounts Receivable and Accounts Payable and Accrued Liabilities
ACCOUNTS RECEIVABLE
Brokers and investment dealers
Clients
RRSP cash balances held in trust
Other
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Brokers and investment dealers
Clients
Other
March 31,
2013
March 31,
2012
$ 1,77 3, 043
$ 1,839,332
3 20, 564
327,173
93,178
616,300
535,486
90,522
$ 2,513,958
$ 3,081,640
March 31,
2013
March 31,
2012
$ 1, 473, 058
$ 1,963,745
1, 016, 297
1,305,254
237,380
281,601
$ 2,726,735
$ 3,550,600
Amounts due from and to brokers and investment dealers include balances from resale and repurchase agreements, securities
loaned and borrowed, as well as brokers’ and dealers’ counterparty balances.
90
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
Client security purchases are entered into on either a cash or a margin basis. In the case of a margin account, the Company
extends a loan to a client for the purchase of securities, using securities purchased and/or other securities in the client’s account
as collateral. Amounts loaned to any client are limited by the margin regulations of the Investment Industry Regulatory Organization
of Canada (IIROC) and other regulatory authorities and are subject to the Company’s credit review and daily monitoring procedures.
Amounts due from and to clients are due by the settlement date of the trade transaction. Margin loans are due on demand and
are collateralized by the assets in the clients’ accounts. Interest on margin loans and on amounts due to clients is based on a
floating rate [March 31, 2013 – 6.00% to 6.25% and 0.00% to 0.05%, respectively; March 31, 2012 – 6.00% to 6.25% and 0.00%
to 0.05%, respectively].
As at March 31, 2013, the allowance for doubtful accounts was $14.0 million [March 31, 2012 – $13.4 million]. See below for
the movements in the allowance for doubtful accounts:
At March 31, 2012
Charge for the year
Recoveries
Write-offs
At March 31, 2013
NOTE 08
Investments
Available for sale
$
Total
13,435
1 1, 635
( 4, 792)
( 6, 292)
$
13,986
March 31,
2013
March 31,
2012
$
3,695
$
9,493
The Company invested $5.0 million in a limited partnership as part of its initiative to operate an Alternative Alpha Trading System.
During the year ended March 31, 2013, the Company sold this investment for a net realized gain of $0.9 million as recognized in
other revenue.
As a result of the acquisition of CSHP, the Company holds an investment in Euroclear, one of the principal clearing houses for
securities traded in the Euromarket. These investments are carried at fair value, determined using a market approach.
NOTE 09
Equipment and Leasehold Improvements
March 31, 2013
Computer equipment
Furniture and equipment
Leasehold improvements
March 31, 2012
Computer equipment
Furniture and equipment
Leasehold improvements
Cost
Accumulated
amortization
Net book
value
$
10,231
$
3,821
$
21,073
75,685
15,478
44,711
6,410
5,595
30,974
$
106,989
$
64,010
$
42,979
$
9,840
$
3,855
$
5,985
28,506
68,322
16,813
34,916
11,693
33,406
$
106,668
$
55,584
$
51,084
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 91
Notes to Consolidated Financial Statements
Cost
Balance, March 31, 2012
Additions
Transfers
Disposals
Foreign exchange
Balance, March 31, 2013
Accumulated amortization
Balance, March 31, 2012
Additions
Impairment
Transfers
Disposals
Foreign exchange
Balance, March 31, 2013
Computer
equipment
Furniture and
equipment
Leasehold
improvements
Total
$
9,840 $
28,506
$
68,322
$
106,668
2,487
1,531
(2,937)
(690)
995
(5,818)
(2,220)
(390)
3,490
4,287
(96)
(318)
6,972
—
(5,253)
(1,398)
$
10,231
$
21,073
$
75,685
$
106,989
Computer
equipment
Furniture and
equipment
Leasehold
improvements
Total
$
3,855
$
16,813
$
34,916
$
55,584
2,592
—
1,100
(2,921)
(805)
2,592
411
(2,946)
(1,054)
(338)
8,000
—
1,846
—
(51)
13,184
411
—
(3,975)
(1,194)
$
3,821
$
15,478
$
44,711
$
64,010
The amount of borrowing costs capitalized during the year ended March 31, 2013 was nil [March 31, 2012 – nil].
NOTE 10
Business Combinations
[i] EDEN FINANCIAL LTD.
On October 1, 2012, the Company acquired 100% of the wealth management business of Eden Financial Ltd., an owner-
managed private client investment management business, for purchase consideration of $20.3 million (£12.8 million), of which
$12.2 million (£7.7 million) was paid on closing and an estimated $8.1 million (£5.1 million) is payable after 12 months,
contingent on achieving certain performance targets related to revenue. Further incentives of up to $6.3 million (£4.0 million)
will be paid to certain continuing Eden Financial employees subject to certain performance conditions and will be recognized as
an expense over a four-year period as the amounts are earned. An additional incentive payment of $3.3 million (£2.0 million)
has also been awarded to certain Eden Financial employees of which one-half is being recognized as an expense over a one-year
vesting period and one-half is being recognized over a two-year vesting period.
This transaction has been accounted for in accordance with IFRS 3, “Business Combinations” (IFRS 3), using the acquisition
method. At acquisition date, Eden Financial had $7.2 million of cash on its balance sheet. The Company has recognized as an
expense $1.3 million of acquisition-related costs incurred by the Company in connection with the Eden Financial acquisition.
These costs are mainly comprised of professional and consulting fees.
The purchase price, determined by the fair value of the consideration given at the date of acquisition and the fair value of the net
assets acquired on the date of acquisition, was as follows:
Consideration
Cash
Contingent consideration
$
12,179
8,119
$
20,298
92
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Net assets acquired
Cash
Accounts receivable
Other tangible assets
Liabilities
Identifi able intangible assets
Goodwill
Notes to Consolidated Financial Statements
$
7,247
2,662
707
(2,633)
2,899
9,416
$
20,298
The fair value of Eden Financial’s net tangible assets was $8. 0 million, which included accounts receivable of $2.7 million.
Identifiable intangible assets of $2.9 million were recognized relating to customer relationships [Note 11]. The goodwill of
$9.4 million represents the value of expected synergies arising from the acquisition. Goodwill is not deductible for tax purposes.
Management has estimated the fair value of the contingent consideration related to this acquisition to be $8.1 million as of
March 31, 2013. The contingent consideration has to be settled in cash and meets the definition of a financial liability, and
subsequent changes to the fair value of the contingent consideration will be recognized in the statement of operations. The
determination of the fair value is based upon discounted cash flows. The key assumption affecting the fair value is the probability
that the revenue target will be met.
The above amounts are estimates, which were made by management at the time of preparation of these consolidated financial
statements based on available information. Amendments may be made to these amounts while values subject to estimates are
finalized for a period of up to 12 months subsequent to the close of the acquisition.
Since the date of acquisition, Eden Financial contributed $ 6.2 million to the consolidated revenue. The Company does not have
the information available to determine the pro-forma consolidated results had Eden Financial been purchased on April 1, 2012;
therefore, this amount has not been disclosed as per IFRS 3.
[ii] KENOSIS CAPITAL PARTNERS
On September 14, 2012, the Company signed an agreement with Kenosis Capital Partners (Kenosis Capital), a merchant bank
and advisory group, to acquire certain assets and liabilities for cash consideration of $1.2 million and additional contingent cash
consideration based upon the achievement of certain performance criteria. This transaction qualifies as a business combination
under IFRS 3, and has been accounted for under the acquisition method. The transaction was completed on September 16, 2012.
The estimated fair value of the liability for contingent consideration is $6.0 million. The contingent consideration has to be settled
in cash and meets the definition of a financial liability, and subsequent changes to the fair value of the contingent consideration
will be recognized in the statements of operations. The determination of the fair value is based upon discounted cash flows. The
key assumption affecting the fair value is the probability that the performance target will be met.
The Company recorded goodwill of $7.2 million related to this acquisition. The allocation and the estimate of the contingent
consideration referred to above are estimates, which were made by management at the time of the preparation of the audited
annual consolidated financial statements based on available information. Amendments may be made to these amounts while
values subject to estimates are finalized for a period of up to 12 months subsequent to the close of the acquisition.
The revenue and net income recognized in connection with the assets acquired from Kenosis Capital since the acquisition on
September 16, 2012 are not considered material. The Company has recognized as an expense $0.4 million of acquisition-related
costs incurred by the Company in connection with the Kenosis Capital acquisition.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 93
Notes to Consolidated Financial Statements
[iii] ACQUISITIONS IN 2012
On March 21, 2012, the Company acquired 100% of CSHP. The purchase price allocation included in Note 11 to the March 31,
2012 consolidated financial statements was disclosed as preliminary. The purchase price allocation was finalized in the first
quarter of fiscal 2013; there were no subsequent amendments to the fair values of consideration paid or net assets acquired.
The purchase price allocation did not include an element of contingent consideration. The preliminary allocation of goodwill to the
various cash-generating units was finalized during the first quarter of fiscal 2013, with no subsequent amendments.
No subsequent amendments were made to the purchase price allocation related to the Company’s acquisition of BGF Capital
Group Pty Ltd. included in Note 11 to the March 31, 2012 consolidated financial statements.
NOTE 11
Goodwill and Other Intangible Assets
Goodwill Brand names
relationships Sales backlog
Technology
Customer
Non-
competition
Trading
licences
Total
Identifi able intangible assets
Gross amount
Balance, March 31, 2012
$ 472,510
$ 46,618
$ 85,251
$
7,624
$
5,975
$ 14,437
$
197
$ 160,102
Addition – Kenosis Capital
Addition – Eden Financial
Foreign exchange
7,182
9,416
(4,422)
—
—
9
—
2,899
(1,634)
—
—
74
—
—
(204)
—
—
172
—
—
5
—
2,899
(1,578)
Balance, March 31, 2013
484,686
46,627
86,516
7,698
5,771
14,609
202
161,423
Accumulated amortization
Balance, March 31, 2012
—
(205)
(5,039)
(1,921)
—
(3,427)
—
(10,592)
For the year ended
March 31, 2013
Amortization
Foreign exchange
Balance, March 31, 2013
Net book value
March 31, 2012
March 31, 2013
—
—
—
(1,471)
(8,340)
(5,718)
(1,978)
(3,083)
(21)
123
(59)
55
(56)
(1,697)
(13,256)
(7,698)
(1,923)
(6,566)
—
—
—
(20,590)
42
(31,140)
472,510
484,686
46,413
44,930
80,212
73,260
5,703
—
5,975
3,848
11,010
8,043
197
202
149,510
130,283
IMPAIRMENT TESTING OF GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS WITH INDEFINITE LIVES
The carrying amounts of goodwill and indefinite life intangible assets acquired through business combinations have been allocated
to the cash-generating units as follows:
Intangible assets with indefi nite lives
Goodwill
Total
March 31, 2013 March 31, 2012 March 31, 2013 March 31, 2012 March 31, 2013 March 31, 2012
Canaccord Genuity
Canada
UK and Europe
US
Other Foreign Locations (China)
Other Foreign Locations (Australia)
Other Foreign Locations (Singapore)
Canaccord Genuity
Wealth Management
UK and Europe (Channel Islands)
UK and Europe (Eden Financial)
$
44,930 $
44,930 $
242,074 $
242,074
$
287,004
$
287,004
—
—
—
202
—
—
—
—
—
—
197
—
—
—
80,136
7,313
10,365
23,309
29,208
82,969
7,169
3,183
22,752
28,288
80,136
7,313
10,365
23,511
29,208
82,969
7,169
3,183
22,949
28,288
83,138
9,143
86,075
—
83,138
9,143
86,075
—
$
45,132 $
45,127 $
484,686 $
472,510
$
529,818
$
517,637
94
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
Goodwill and intangible assets with indefinite lives are tested for impairment annually at March 31, and when circumstances
indicate the carrying value may potentially be impaired. If any indication of impairment exists, the Company estimates the
recoverable amount of the cash-generating unit to which goodwill and indefinite life intangible assets are allocated. Where the
carrying amount of a cash-generating unit exceeds its recoverable amount an impairment loss is recognized. Any impairment loss
first reduces the carrying amount of any goodwill allocated to the cash-generating unit and then if any impairment loss remains,
the other assets of the unit are reduced on a pro rata basis. Impairment losses relating to goodwill cannot be reversed in future
periods. The Company considers the relationship between its market capitalization and the book value of its equity, among other
factors, when reviewing for indicators of impairment. Consequently, interim goodwill impairment testing was carried out for all
applicable CGUs at September 30 and December 31, 2012.
In accordance with IAS 36, “Impairment of Assets” (IAS 36), the recoverable amounts of the CGU’s net assets have been determined
using FVLCS calculations, which are based on cash flow assumptions approved by senior management. There is a material degree
of uncertainty with respect to the estimates of the recoverable amounts of the cash-generating units’ net assets given that these
estimates involve making key assumptions about the future. In making such assumptions, management has used its best estimate
of future economic and market conditions within the context of the Company’s capital markets and wealth management activities.
The FVLCS calculations are based on assumptions, as described above, made in connection with future cash flows, terminal
growth rates and discount rates. In order to estimate the FVLCS for each cash-generating unit, cash flows are forecast over a
five-year period, a terminal growth rate is applied and then such cash flows are discounted to their present value. The discount
rate is based on the specific circumstances of each CGU and is derived from the estimated weighted average cost of capital of the
Company. The discount rate utilized for each CGU for the purposes of these calculations was 12.5% in respect of Canada and
the UK and Europe [March 31, 2012, Canada – 12.5%], 14.0% in respect of Australia, Singapore and the US [March 31, 2012,
Australia – 14.0%], and 20.0% in respect of China [March 31, 2012 – 20.0%]. Cash flow estimates for each CGU are based on
management assumptions as described above and utilize compound annual revenue growth rates commencing with the forecast for
the next fiscal year ranging from 9% to 16% [March 31, 2012 – 15% to 32%] as well as estimates in respect of operating margins.
The compound annual revenue growth rates utilized were: (a) Canaccord Genuity (i) Canada – 10%, (ii) UK and Europe – 10%,
(iii) US – 10%, (i v) Other Foreign Locations – 10% to 16%; and (b) Canaccord Genuity Wealth Management, UK and Europe – 9%.
Management estimates in respect of increases in revenue from fiscal 2013 to the next fiscal year, used as the commencement
date for the forecasts referred to above, are in the range from (5%) to 14% for each CGU except for Other Foreign Locations. CGUs
in Other Foreign Locations are in earlier stages of development and, as such, with fiscal 2013 revenue at relatively low base
levels, revenue estimates for the next fiscal year for those CGUs range from 1.4 times to 5.8 times revenue recorded in fiscal
2013. The terminal growth rate used for CGUs located in Canada and the UK and Europe was 3% [March 31, 2012, Canada – 3%]
and for CGUs located in all other locations was 5% [March 31, 2012 – 5%].
Sensitivity testing was conducted as a part of the March 31, 2013 annual impairment test of goodwill and indefinite life intangible
assets. The sensitivity testing includes assessing the impact that reasonably possible declines in growth rates and increases in
the discount rate would have on the recoverable amount of the CGUs, with other assumptions being held constant.
The Company’s impairment testing has determined that the recoverable amount for certain of the Other Foreign Location CGUs,
Australia and China, exceeds their carrying amounts by $5.0 million and $2.8 million, respectively, and consequently, a reasonably
possible decline in the growth rates or increases in the discount rates may result in an impairment charge in respect of the goodwill
and indefinite life intangible assets allocated to either of these CGUs. An increase of 0.5 percentage points in the discount rate
for Australia (from 14.0% to 14.5%), an increase of 4.3 percentage points in the discount rate for China (from 20.0% to 24.3%), a
reduction in the compound annual growth rate of 2 percentage points for Australia (from 16% to 14%), a reduction in the compound
annual growth rate of 9 percentage points for China (from 16% to 7%), or a decrease in the revenue estimates for fiscal 2014 used
as the starting point for the forecast period would result in the recoverable amount being equal to the carrying value.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 95
Notes to Consolidated Financial Statements
NOTE 12
Income Taxes
The major components of income tax expense are:
Consolidated statements of operations
Current income tax expense
Current income tax expense
Adjustments in respect of prior years
Deferred income tax expense (recovery)
Origination and reversal of temporary differences
Impact of change in tax rates
Benefi t arising from a previously unrecognized tax loss
March 31,
2013
March 31,
2012
$
9,668
$
(1,466)
8,202
9,607
1,436
11,043
(12,313)
(6,176)
(484)
(332)
360
—
(13,129)
(5,816)
Income tax expense (recovery) reported in the statements of operations
$
(4,927)
$
5,227
The Company’s income tax expense differs from the amount that would be computed by applying the combined federal and
provincial income tax rates as a result of the following:
(Loss) income before income taxes
Income taxes at the estimated statutory rate of 25.0% (2012: 25.8%)
Difference in tax rates in foreign jurisdictions
Non-deductible items affecting the determination of taxable income
Change in accounting and tax base estimate
Change in deferred tax asset – reversal period of temporary difference
Tax losses and other temporary differences not recognized
March 31,
2013
March 31,
2012
$
(23,702)
$
(16,119)
(5,926)
(4,705)
1,853
(1,737)
(1 2 9)
5,717
(4,165)
(1,944)
5,690
2,654
(1,393)
4,385
Income tax expense (recovery) reported in the statements of operations
$
(4,927)
$
5,227
The following were the deferred tax liabilities and assets recognized by the Company and movements thereon during the year:
Consolidated Statements
of Financial Position
Consolidated Statements
of Operations
March 31,
2013
March 31,
2012
March 31,
2013
March 31,
2012
Unrealized gain on securities owned
$
(1,676) $
(1,150)
$
526
$
(1,727)
Legal provisions
Unpaid remunerations
Unamortized capital cost of equipment and leasehold improvements
over their net book value
Unamortized common share purchase loans
Loss carryforwards
Common and preferred shares issuance costs
Long-term incentive plan
Other intangible assets
Investment in limited partnership
Other
2,047
11
1,929
6,010
10,456
1,697
13,510
1,585
883
997
3,362
8,130
1,039
9,486
(25,726)
(28,921)
—
1,718
(675)
1,135
(463)
872
(807)
(2,648)
(886)
557
(4,022)
(4,817)
(675)
(766)
(97)
512
(603)
(57)
(3,921)
49
1,945
(1,829)
(3)
(85)
$
9,976 $
(4,129)
$
(13,129)
$
(5,816)
96
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
Deferred tax assets and liabilities as reflected in the consolidated statements of financial position are as follows:
Deferred tax assets
Deferred tax liabilities
The movement for the year in the net deferred tax position was as follows:
Opening balance as of April 1
Tax (expense) recovery during the period recognized in statements of operations
Net deferred taxes acquired in business combinations
Tax (expense) recovery during the period recognized in shareholders’ equity
March 31,
2013
March 31,
2012
$
12,552
$
(2,576)
3,959
(8,088)
$
9,976
$
(4,129)
March 31,
2013
March 31,
2012
$
(4,130)
$
(6,660)
1 3, 129
324
653
5,816
(4,257)
972
$
9, 9 76
$
(4,129)
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
current tax liabilities and if the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same
taxation authority on the same taxable entity.
Tax loss carryforwards of $ 35.8 million [2012 – $29.7 million] in the UK and Europe and $ 3.3 million [2012 – $0.6 million] in
Other Foreign Locations (Australia) have been recognized as a deferred tax asset. The losses in both jurisdictions can be carried
forward indefinitely.
At the balance sheet date, the Company has tax loss carryforwards approximating $ 42.8 million [2012 – $27.1 million] for
which a deferred tax asset has not been recognized. These losses relate to subsidiaries outside of Canada that have a history
of losses and may also be subject to legislative limitations on use and may not be used to offset taxable income elsewhere in
the consolidated group of companies. The subsidiaries have no taxable temporary differences or any tax planning opportunities
available that could partly support the recognition of these losses as deferred tax assets, as the likelihood of future economic
benefit is not sufficiently assured. These losses begin expiring in 20 29.
Other temporary differences not recognized as deferred tax assets in relation to subsidiaries outside of Canada amount to
$ 19.6 million at March 31, 2013 [2012 – $20.5 million]. Since the subsidiaries outside of Canada have a history of losses and
the deductible temporary differences may not be used to offset taxable income elsewhere in the consolidated group of companies,
no asset has been recognized as the likelihood of future economic benefit is not sufficiently assured.
At March 31, 2013, there was no recognized deferred tax liability for taxes that would be payable on the unremitted earnings
of certain of the Company’s subsidiaries. The Company has determined that undistributed profits of its subsidiaries will not be
distributed in the foreseeable future. The temporary differences associated with investments in subsidiaries for which a deferred
tax liability has not been recognized are $nil (2012 – $nil).
NOTE 13
Subordinated Debt
Loan payable, interest payable monthly at prime + 4% per annum, due on demand
$
15,000
$
15,000
The loan payable is subject to a subordination agreement and may only be repaid with the prior approval of the IIROC. As at
March 31, 2013 and 2012, the interest rates for the subordinated debt were 7.0% and 7.0% , respectively. The carrying value of
this subordinated debt approximates its fair value due to the short-term nature of this liability.
March 31,
2013
March 31,
2012
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 97
Notes to Consolidated Financial Statements
NOTE 14
Preferred Shares
March 31, 2013
March 31, 2012
Amount
Number of
shares
Amount
Number of
shares
Series A Preferred Shares issued and outstanding
$
110,818
4,540,000
$
110,818
4,540,000
Series C Preferred Shares issued and outstanding
Series C Preferred Shares held in treasury
97,450
(2,627)
4,000,000
(106,794)
94,823
3,893,206
—
—
—
—
—
—
$
205,641
8,433,206
$
110,818
4,540,000
On April 15, 2011, the Company’s shareholders approved amendments to its articles to alter the authorized capital of the Company
by creating an additional class of preferred shares. The Company has an unlimited number of authorized preferred shares without
nominal or par value.
[i] SERIES A PREFERRED SHARES
On June 23, 2011, the Company issued 4,000,000 Cumulative 5-Year Rate Reset First Preferred Shares, Series A (Series A
Preferred Shares) at a purchase price of $25.00 per share, for gross proceeds of $100 million. On July 7, 2011, the Company
closed the over-allotment option and issued an additional 540,000 Series A Preferred Shares at $25.00 per share for gross
proceeds of $13.5 million.
The aggregate net amount recognized after deducting issue costs, net of deferred taxes of $1.0 million, was $110.8 million.
Quarterly cumulative cash dividends, if declared, will be paid at an annual rate of 5.5% for the initial five-year period ending on
September 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year Government of
Canada bond yield plus 3.21%.
Holders of Series A Preferred Shares have the right, at their option, to convert any or all of their shares into an equal number
of Cumulative Floating Rate First Preferred Shares, Series B (Series B Preferred Shares), subject to certain conditions, on
September 30, 2016 and on September 30 every five years thereafter. Holders of the Series B Preferred Shares will be entitled
to receive floating rate, cumulative, preferential dividends payable quarterly, if declared, at a rate equal to the three-month
Government of Canada Treasury Bill yield plus 3.21%.
The Company has the option to redeem the Series A Preferred Shares on September 30, 2016 and on September 30 every five
years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends. The Series B Preferred
Shares are redeemable at the Company’s option on September 30, 2021 and on September 30 every five years thereafter, in
whole or in part, at $25.00 per share together with all declared and unpaid dividends.
[ii] SERIES C PREFERRED SHARES
On March 22, 2012, the Company announced that it had agreed to issue 4,000,000 Cumulative 5-Year Rate Reset First Preferred
Shares, Series C (Series C Preferred Shares) at a purchase price of $25.00 per share for gross proceeds of $100 million.
Quarterly cumulative cash dividends, if declared, will be paid at an annual rate of 5.75% for the initial five-year period ending on
September 30, 2016. Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year Government of
Canada bond yield plus 4.03%.
Holders of Series C Preferred Shares have the right, at their option, to convert any or all of their shares into an equal number of
Cumulative Floating Rate First Preferred Shares, Series D (Series D Preferred Shares), subject to certain conditions, on June 30,
2017 and on June 30 every five years thereafter. Holders of the Series D Preferred Shares will be entitled to receive floating rate,
cumulative, preferential dividends payable quarterly, if declared, at a rate equal to the three-month Government of Canada Treasury
Bill yield plus 4.03%.
The Company has the option to redeem the Series C Preferred Shares on June 30, 2017 and on June 30 every five years
thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends. The Series D Preferred Shares
are redeemable at the Company’s option on June 30, 2022 and on June 30 every five years thereafter, in whole or in part, at
$25.00 per share together with all declared and unpaid dividends.
98
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
The offering closed on April 10, 2012. The net amount recognized after deducting issue costs, net of deferred taxes of $1.0 million,
was $97.5 million.
NOTE 15
Common Shares
Issued and fully paid
Unvested share purchase loans
Held for LTIP
[i] AUTHORIZED
Unlimited common shares without par value
[ii] ISSUED AND FULLY PAID
March 31, 2013
March 31, 2012
Amount
Number of
shares
Amount
Number of
shares
$
717,908
102,896,172
$
705,293
101,688,721
(34,012)
(45,440)
(4,872,547)
(4,961,829)
(33,152)
(48,402)
(3,209,336)
(4,453,508)
$
638,456
93,061,796
$
623,739
94,025,877
Balance, March 31, 2012
Shares issued in connection with the LTIP [note 17]
Shares issued in connection with the Corazon Capital Group Limited Share Plan [note 17]
Shares issued in connection with retention plan [note 17]
Shares issued in connection with replacement plans [note 17]
Shares cancelled
Balance, March 31, 2013
Number of shares
Amount
101,688,721
$
705,293
844,766
170,562
109,979
198,872
(116,728)
8,996
1,503
1,402
1,528
(814)
102,896,172
$
717,908
In August 2012, the Company filed a notice for a normal course issuer bid (NCIB) to provide for the ability to purchase, at the
Company’s discretion, up to 3,000,000 of its common shares through the facilities of the TSX from August 13, 2012 to August 12,
2013. The purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares for cancellation.
The shares that may be repurchased represent 2.93% of the Company’s common shares outstanding at the time of the notice.
There were no shares repurchased through the NCIB between August 31, 2012 and March 31, 2013.
[iii] COMMON SHARE PURCHASE LOANS
The Company provides forgivable common share purchase loans to employees in order to purchase common shares. The unvested
balance of forgivable common share purchase loans is presented as a deduction from share capital. The forgivable common share
purchase loans are amortized over the vesting period. The difference between the unvested and unamortized values is included in
contributed surplus.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 99
Notes to Consolidated Financial Statements
[iv] LOSS PER COMMON SHARE
For the years ended
Basic loss per common share
Net loss attributable to CFI shareholders
Preferred shares dividends
Net loss attributable to common shareholders
Weighted average number of common shares (number)
Basic loss per share
Diluted loss per common share
Net loss attributable to common shareholders
Weighted average number of common shares (number)
Dilutive effect of unvested shares (number)
Dilutive effect of share options (number)
March 31,
2013
March 31,
2012
$
(16,819)
$
(20,307)
(11,720)
(4,815)
(28,539)
(25,122)
92,217,726
76,715,248
$
(0.31)
$
(0.33)
(28,539)
(25,122)
92,217,726
76,715,248
4,872,547
3,209,336
—
253,075
Dilutive effect of unvested shares purchased by the employee benefi t trust (number) [note 17]
5,209,693
3,906,179
Dilutive effect of share issuance commitment in connection with the LTIP (number) [note 17]
Dilutive effect of share issuance commitment in connection with replacement plans (number) [note 17]
Adjusted weighted average number of common shares (number)
Diluted loss per common share
102,116
—
382,997
215,662
102,402,082
84,682,497
$
(0.31)
$
(0.33)
NOTE 16
Dividends
COMMON SHARES DIVIDENDS
The Company declared the following common shares dividends during the year ended March 31, 2013:
Record date
June 1, 2012
August 24, 2012
November 30, 2012
March 1, 2013
Payment date
June 15, 2012
September 10, 2012
December 10, 2012
March 15, 2013
Cash dividend per
common share
Total common
dividend amount
$
$
$
$
0.10
0.05
0.05
0.05
$
$
$
$
10,202
5,116
5,125
5,136
On May 21, 2013, the Board of Directors approved a cash dividend of $0. 05 per common share payable on June 10, 2013 to
common shareholders of record as at May 31, 2013 [Note 24].
PREFERRED SHARES DIVIDENDS
Record date
June 15, 2012
September 14, 2012
December 14, 2012
March 15, 2013
Payment date
July 3, 2012
October 1, 2012
December 31, 2012
April 1, 2013
Cash dividend per
Series A
Preferred Share
Cash dividend per
Series C
Preferred Share
Total preferred
dividend amount
$
$
$
$
0.34375
0.34375
0.34375
0.34375
$
0.31900
$ 0.359375
$ 0.359375
$ 0.359375
$
$
$
$
2,837
2,998
2,998
2,998
On May 21, 2013, the Board also approved a cash dividend of $0.34375 per Series A Preferred Share payable on July 2, 2013 to
Series A Preferred shareholders of record as at June 21, 2013 [Note 24].
On May 21, 2013, the Board also approved a cash dividend of $0.359375 per Series C Preferred Share payable on July 2, 2013
to Series C Preferred shareholders of record as at June 21, 2013 [Note 24].
100 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
NOTE 17
Share-based Payment Plans
[i] LONG-TERM INCENTIVE PLAN
Under the LTIP, eligible participants are awarded restricted share units (RSUs), which generally vest over three years. For employees
in Canada, an employee benefit trust (the Trust) has been established and either (a) the Company will fund the Trust with cash,
which will be used by the trustee to purchase on the open market common shares of the Company that will be held in trust by
the trustee until the RSUs vest or (b) the Company will issue common shares from treasury to participants following vesting of the
RSUs. For employees in the US and the UK, the Company will allot common shares at the time of each RSU award, and these
shares will be issued from treasury at the time they vest for each participant.
There were 5,396,103 RSUs [year ended March 31, 2012 – 4,275,476 RSUs] granted in lieu of cash compensation to employees
during the year ended March 31, 2013. The Trust purchased 2,408,168 [year ended March 31, 2012 – 3,168,265] common
shares for the year ended March 31, 2013.
The fair value of the RSUs at the measurement date is based on the volume weighted average price at the grant date and is
amortized on a graded basis over the vesting period of three years. The weighted average fair value of RSUs granted during the
year ended March 31, 2013 was $6.20 [year ended March 31, 2012 – $11.07].
Awards outstanding, March 31, 2012
Grants
Vested
Forfeited
Awards outstanding, March 31, 2013
Common shares held by the Trust, March 31, 2012
Acquired
Released on vesting
Common shares held by the Trust, March 31, 2013
[ii] FORGIVABLE COMMON SHARE PURCHASE LOANS
Number
7,068,317
5,396,103
(2,744,613)
(591,638)
9,128,169
Number
4,453,508
2,408,168
(1,899,847)
4,961,829
The Company provides loans to certain employees for the purpose of partially funding the purchase of shares of the Company and
increasing share ownership by the employees. These loans are generally forgiven over a three- to five-year period from the initial
advance of the loan or at the end of that three- to five-year period [Note 15 [iii]].
[iii] REPLACEMENT PLANS
As a result of the acquisition of CSHP, the following share-based payment plans were introduced to replace the share-based
payment plans that existed at CSHP at the acquisition date:
Canaccord Financial Inc. Collins Stewart Hawkpoint Replacement Annual Bonus Equity Deferral (ABED) Plan
On March 21, 2012, the Company introduced the Replacement ABED Plan, which replaced the ABED plans that existed at
CSHP as of the acquisition date. Eligible employees who participated in the CSHP ABED plans were granted awards under the
Replacement ABED Plan. The shares granted vest between one and three years from the acquisition date of CSHP. In accordance
with IFRS 3, “Business Combinations”, a portion of the awards granted was included as part of the purchase consideration for
the acquisition of CSHP and a portion is being deferred and amortized to incentive compensation expense over the vesting period.
The Company recognized $1.1 million through acquisition-related expense for the year ended March 31, 2012 as per IFRS 3.
Awards outstanding, March 31, 2012
Vested
Forfeited
Awards outstanding, March 31, 2013
Number
573,538
(91,191)
(15,702)
466,645
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 101
Notes to Consolidated Financial Statements
Canaccord Financial Inc. Collins Stewart Hawkpoint Replacement Long-Term Incentive Plan Award
On March 21, 2012, the Company introduced the Replacement LTIP, which replaced the existing LTIPs at CSHP on the acquisition
date. Eligible employees who participated in the CSHP LTIPs were granted awards under the Replacement LTIP. The shares granted
vest annually on a graded basis over a three-year period. In accordance with IFRS 3, a portion of awards granted was included
as part of the purchase consideration for the acquisition of CSHP and a portion is being deferred and amortized to incentive
compensation expense over the vesting period.
Awards outstanding, March 31, 2012
Vested
Forfeited
Awards outstanding, March 31, 2013
Corazon Capital Group Limited Share Plan
Number
842,032
(107,681)
(22,651)
711,700
In connection with the acquisition of CSHP, the Company assumed the outstanding obligation under the Corazon Capital Group
Limited Share Plan (the Corazon Share Plan). The Corazon Share Plan was entered into by CSHP in relation to its acquisition of
Corazon Capital Group Limited, an independent, Guernsey-based investment management firm.
The obligation was paid by issuance of 170,562 number of Canaccord common shares, which vested in March 2013, and cash
consideration of $2.2 million (£1.4 million). In accordance with IFRS 3, a portion of the awards granted was included as part of
the purchase consideration for the acquisition of CSHP and a portion is being deferred and amortized to incentive compensation
expense over the vesting period. As the awards vested in March 2013 the entire award not accounted for as purchase
consideration has been expensed. The cash consideration was included as part of the determination of the fair value of CSHP’s
net assets when calculating the purchase price allocation.
[iv] CSH INDUCEMENT PLAN
In connection with the acquisition of CSHP, the Company agreed to establish a retention plan for key CSHP staff. In
September 2012, the Company finalized the terms of this plan and communicated the plan arrangements to the relevant
employees. During the year ended March 31, 2013, the Company awarded 2,418,861 RSUs, which vest over a five-year period.
In accordance with the plan, one-third of the total RSUs (806,302 RSUs) will vest on the third anniversary under the terms of the
existing LTIP. The remaining two-thirds of the total RSUs (1,612,559 RSUs) will vest under the terms of the new CSH Inducement
Plan, with one-half of the 1,612,559 RSUs vesting on the fourth anniversary and the remaining half on the fifth anniversary.
During the year ended March 31, 2013, 55,544 RSUs were forfeited. On each vesting date, the RSUs entitle the awardee to
receive cash or common shares of the Company. If at the vesting date the share price is less than $8.50 per share, then the
Company, at its election, will either (a) pay cash to the employee equal to $8.50 multiplied by the number of RSUs vesting on such
date, or (b) pay cash to the employee equal to the difference between $8.50 and the vesting date share price, multiplied by the
number of RSUs vesting on that date plus that number of shares equal to the number of RSUs vesting on such date.
The awards under this plan require either full or partial cash settlement if the share price at vesting is less than $8.50 per share.
To the extent that it is considered probable that cash settlement will be required, a portion of these awards is treated as cash
settled, and recorded on the statement of financial position as a liability.
The fair value of the RSUs at the grant date and at March 31, 2013 was $8.50, for a total plan value of $20.2 million, which is
being amortized on a graded basis.
102 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
[v] SHARE OPTIONS
The Company grants share options to purchase common shares of the Company to directors and senior management. Share
options to independent directors vest over a four-year period and expire seven years after the grant date or 30 days after the
participant ceases to be a director. Share options to senior management vest over a five-year period and expire on the earliest
of: (a) seven years from the grant date; (b) three years after death or any other event of termination of employment; (c) after
any unvested optioned shares held by the optionee are cancelled for any reason (other than early retirement but including
resignation without entering into a formal exit agreement and termination for cause); and (d) in the case of early retirement,
after a determination that the optionee has competed with the Company or violated any non-competition, non-solicitation or non-
disclosure obligations. The exercise price is based on the fair market value of the common shares at grant date. The weighted
average exercise price of the share options was $9.84 at March 31, 2013.
The following is a summary of the Company’s share options as at March 31, 2013 and changes during the periods then ended:
Balance, March 31, 2012
Granted
Forfeited
Exercised
Balance, March 31, 2013
Weighted average
Number of options exercise price ($)
2,482,675
$
—
(97,765)
—
2,384,910
$
9.83
—
(9.47)
—
9.84
The following table summarizes the share options outstanding as at March 31, 2013:
Range of exercise price ($)
23.13
7.21–9.48
7.21–23.13
Options outstanding
Options exercisable
Number of
common shares
Weighted average
remaining
contractual life
Weighted
average exercise
price ($)
Number of
options
exercisable
Weighted
average exercise
price ($)
100,000
2,284,910
2,384,910
1.12
$
3.39
23.13
8.12
100,000
$
569,761
3.29
$
9.84
669,761
$
23.13
8.69
11.19
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Volatility is based
on the historical trend of the share prices of the Company. Changes in the subjective assumptions can materially affect the fair
value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the
Company’s share options.
[vi] RETENTION PLAN
In connection with the acquisition of The Balloch Group (TBG), the Company established a retention plan that provides for the
issuance of 1,187,847 common shares of the Company to key employees of Canaccord Genuity Asia over a five-year graded
vesting period based on future Asia-linked revenue. As of March 31, 2013, due to the departure of several key employees, this
plan was settled. This resulted in the forfeiture of 917,212 shares, and accelerated vesting of 270, 635 shares.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 103
Notes to Consolidated Financial Statements
[vii] DEFERRED SHARE UNITS
Beginning April 1, 2011, the Company adopted a DSU plan for its independent directors. Independent directors must elect annually
as to how they wish their directors’ fees to be paid and can specify the allocation of their directors’ fees between DSUs and cash.
When a director leaves the Board of Directors, outstanding DSUs are paid out in cash, with the amount equal to the number of
DSUs granted multiplied by the closing share price as of the end of the fiscal quarter immediately following such terminations.
Under the plan, the directors are not entitled to receive any common shares in the Company, and under no circumstances will
DSUs confer on any participant any of the rights or privileges of a holder of common shares.
During the year ended March 31, 2013, the Company granted 50,839 DSUs [2012 – 33,769 DSUs]. The carrying amount of the
liability relating to DSUs at March 31, 2013 was $0.5 million [2012 – $0.3 million].
[viii] SHARE-BASED COMPENSATION EXPENSE
For the years ended
Long-term incentive plan
Forgivable common share purchase loans
Replacement plans
Share-based payment expense related to acquisition of CSHP
Share options
Retention plan
Deferred share units
Accelerated share-based payment expense included as restructuring expense
March 31,
2013
March 31,
2012
$
31,820
$
14,286
6,978
2,893
1,345
1,107
(4)
1,934
29,610
12,946
—
1,621
1,622
2,340
280
2,705
Total share-based compensation expense
$
60,359
$
51,124
104 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
NOTE 18
Related Party Transactions
[i] CONSOLIDATED SUBSIDIARIES
The financial statements include the financial statements of the Company and the Company’s principal trading subsidiaries and
principal intermediate holding companies listed in the following table:
Canaccord Genuity Corp.
Canaccord Genuity Hawkpoint Limited (formerly Hawkpoint Partners Limited and
Collins Stewart Hawkpoint Limited)
Canaccord Genuity SAS (formerly Canaccord Genuity Hawkpoint SAS)
Canaccord Genuity Wealth (International) Limited (formerly Collins Stewart (CI) Limited)
Canaccord Genuity Wealth (International) Holdings Limited
(formerly Collins Stewart (CI) Holdings Limited)
Canaccord Genuity 360 Limited (formerly Collins Stewart 360 Limited)
Canaccord Genuity Investment Management Limited
% equity interest
Country of
Incorporation
March 31,
2013
March 31,
2012
Canada
100%
100%
United Kingdom
France
Guernsey
Guernsey
United Kingdom
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(formerly Collins Stewart Investment Management Limited)
United Kingdom
100%
100%
Canaccord Genuity Wealth Limited (formerly Collins Stewart
Wealth Management Limited and formerly Eden Financial Limited)
United Kingdom
100%
Canaccord Genuity Financial Advisors Limited (formerly Collins Stewart
Financial Advisers Limited and formerly Eden Financial Advisers Limited)
United Kingdom
100%
Canaccord Genuity Wealth Group Limited (formerly Collins Stewart
Wealth Management Group Limited and formerly Eden Group Limited)
Canaccord Genuity Singapore Pte Ltd.
Canaccord Genuity Limited
Canaccord Genuity Inc.
Canaccord Genuity Wealth Management (USA) Inc.
(formerly Canaccord Wealth Management (USA) Inc.)
Canaccord Estate Planning Services Ltd.
Canaccord Asset Management Inc.
Canaccord Adams Financial Group Inc.
Collins Stewart Inc.
Canaccord Adams (Delaware) Inc.
Canaccord Adams Financial Group ULC
Canaccord Genuity Securities LLC
Stockwave Equities Ltd.
CLD Financial Opportunities Limited
Canaccord Genuity (Hong Kong) Limited
Canaccord Financial Group (Australia) Pty Ltd.
Canaccord Genuity (Australia) Limited
United Kingdom
Singapore
United Kingdom
United States
United States
Canada
Canada
United States
United States
United States
Canada
United States
Canada
Canada
Hong Kong
Australia
Australia
(cid:2008)(cid:27798)(cid:26601)(cid:17990)(cid:51147)(cid:2187)(cid:484)(cid:51148)(cid:8771)(cid:26640)(cid:31193)(cid:30146)(cid:10557)(cid:30260)(cid:1545)(cid:2541) (the English name “Canaccord Genuity Asia Limited”
is used but it has no legal effect in the People’s Republic of China; the English name
formerly used was Beijing Parkview Balloch Investment Advisory Co., Limited)
(to be renamed Canaccord Genuity Asia (Beijing) Limited)
The Balloch Group Limited
Canaccord Genuity Asia (Hong Kong) Limited
Canaccord International Ltd.
China
British Virgin Islands
Hong Kong
Barbados
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
100%
100%
100%
100%
n/a
n/a
n/a
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
100%
100%
100%
100%
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 105
Notes to Consolidated Financial Statements
[ii] COMPENSATION OF KEY MANAGEMENT PERSONNEL OF THE COMPANY
Disclosed in the table below are the amounts recognized as expenses related to individuals who are key management personnel
as at March 31, 2013 and 2012:
Short term employee benefi ts
Share-based payments
Total compensation paid to key management personnel
March 31,
2013
March 31,
2012
$
$
5,922
$
1,823
6,628
2,113
7,745
$
8,741
[iii] OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Accounts payable and accrued liabilities include the following balances with key management personnel:
Accounts payable and accrued liabilities
March 31,
2013
March 31,
2012
$
1,206
$
2,506
[iv] TERMS AND CONDITIONS OF TRANSACTIONS WITH RELATED PARTIES
Security trades executed by the Company for officers and directors are transacted in accordance with the terms and conditions
applicable to all clients. Commission income on such transactions in the aggregate is not material in relation to the overall
operations of the Company.
NOTE 19
Segmented Information
The Company operates in two industry segments as follows:
Canaccord Genuity – includes investment banking, research and trading activities on behalf of corporate, institutional and
government clients as well as principal trading activities in Canada, the UK and Europe, Other Foreign Locations and the US.
Other Foreign Locations include operations for Canaccord International Ltd., Canaccord Genuity Asia and the 50% interest in
Canaccord Genuity Australia.
Canaccord Genuity Wealth Management – provides brokerage services and investment advice to retail or institutional clients in
Canada, the US, the UK and Europe, and Other Foreign Locations.
Corporate and Other includes correspondent brokerage services, interest and foreign exchange revenue and expenses not
specifically allocable to Canaccord Genuity or Canaccord Genuity Wealth Management.
The Company’s industry segments are managed separately because each business offers different services and requires different
personnel and marketing strategies. The Company evaluates the performance of each business based on operating results,
without regard to non-controlling interests.
The Company does not allocate total assets, liabilities or equipment and leasehold improvements to the segments. Amortization
of tangible assets is allocated to the segments based on the square footage occupied. Amortization of identifiable intangible
assets is allocated to the Canaccord Genuity segment, as it relates to the acquisition of Genuity, and the 50% interest in BGF.
Amortization of the identifiable intangible assets acquired through the purchase of CSHP is allocated to Canaccord Genuity and
Canaccord Genuity Wealth Management segments in the UK and Europe (Channel Islands). Amortization of identifiable intangible
assets acquired through the acquisition of Eden Financial is allocated to Canaccord Genuity Wealth Management segments in
the UK and Europe (Eden Financial). The accounting policies of the segments are the same as those described in Note 4. There
are no significant intersegment revenues. Income taxes are managed on a Company basis and are not allocated to operating
segments. All revenue and operating profit is derived from external customers.
106 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
For the years ended
March 31, 2013
March 31, 2012
Canaccord
Genuity
Wealth
Genuity Management
Canaccord
Corporate
and Other
Total
Canaccord
Genuity
Wealth
Genuity Management
Canaccord
Corporate
and Other
Total
Revenues, excluding
interest revenue
$ 528,033
$ 222,528
$ 17,36 2
$ 767,92 3
$ 365,123
$ 187,849
$ 20,093
$ 573,065
Interest revenue
Expenses, excluding
undernoted
Amortization
Development costs
Interest expense
Acquisition-related costs
9,52 7
12,557
7,11 5
29,199
8,354
13,441
10,004
31,799
472,018
191,887
54,976
718,881
306,362
150,752
67,443
524,557
20,904
7,945
13,190
388
10,905
9,593
306
1,331
1,970
1,988
1,806
—
900
33,779
19,526
15,302
1,719
31,617
10,264
10,989
7,985
10,466
29,078
2,221
8,220
295
4,077
900
1,623
1,984
1,536
1,513
5,275
14,108
21,193
9,816
16,056
35,253
Restructuring costs
15,232
15,485
Income (loss) before
income taxes
$
7,883
$
5,578
$
(37,163) $
(23,702) $
(1,667) $ 34,825
$
(49,277) $
(16,119)
For geographic reporting purposes, the Company’s business operations are grouped into Canada, the UK and Europe, the United
States, and Other Foreign Locations. The following table presents the revenue of the Company by geographic location:
For the years ended
Canada
United Kingdom and Europe
United States
Other Foreign Locations
March 31,
2013
March 31,
2012
$
366,439
$
458,131
249,811
155,585
25,287
53,180
83,061
10,492
$
797,122
$
604,864
The following table presents selected figures pertaining to the financial position of each geographic location:
Canada
UK and
Europe
United
States
Other Foreign
Locations
Total
As at March 31, 2013
Equipment and leasehold improvements
$
21,172
$
9,757
$
9,751
$
2,299
$
42,979
Goodwill
Intangible assets
Non-current assets
As at March 31, 2012
Equipment and leasehold improvements
Goodwill
Intangible assets
Non-current assets
242,074
66,483
336,484
28,627
242,074
70,205
348,793
172,417
51,473
243,506
10,249
169,044
61,117
242,876
7,313
47
16,728
10,018
7,169
80
16,737
62,882
12,280
77,477
2,190
54,223
18,108
78,150
484,686
130,283
674,195
51,084
472,510
149,510
686,556
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 107
Notes to Consolidated Financial Statements
NOTE 20
Capital Management
The Company’s business requires capital for operating and regulatory purposes, including funding current and future operations.
The Company’s capital structure is underpinned by shareholders’ equity, which is comprised of preferred shares, common shares,
contributed surplus, retained earnings and accumulated other comprehensive income (loss), and is further complemented by the
subordinated debt. The following table summarizes our capital as at March 31, 2013 and 2012:
Type of capital
Preferred shares
Common shares
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
Shareholders’ equity
Subordinated debt
March 31,
2013
March 31,
2012
$
205,641
$
110,818
638,456
85,981
126,203
(7,118)
1,049,163
15,000
623,739
68,336
180,748
8,484
992,125
15,000
$ 1,064,163
$ 1,007,125
The Company’s capital management framework is designed to maintain the level of capital that will:
(cid:129) Meet the Company’s regulated subsidiaries’ target ratios as set out by the respective regulators
(cid:129) Fund current and future operations
(cid:129) Ensure that the Company is able to meet its financial obligations as they become due
(cid:129) Support the creation of shareholder value
The following subsidiaries are subject to regulatory capital requirements in the respective jurisdictions by the listed regulators:
(cid:129) Canaccord Genuity Corp. is subject to regulation in Canada primarily by the IIROC
(cid:129) Canaccord Genuity Limited, Canaccord Genuity Wealth Limited, Canaccord Genuity 360 Limited, Canaccord Genuity
Financial Advisors Limited, and Canaccord Genuity Investment Management Limited are regulated in the UK by the Financial
Conduct Authority
(cid:129) Canaccord Genuity Wealth (International) Limited is licensed and regulated by the Guernsey Financial Services Commission,
the Isle of Man Financial Supervision Commission and the Jersey Financial Services Commission
(cid:129) Canaccord Genuity Singapore Pte Ltd. is subject to regulation by the Monetary Authority of Singapore
(cid:129) Canaccord Genuity (Australia) Limited is regulated by the Australian Securities and Investments Commission
(cid:129) Canaccord Genuity (Hong Kong) Limited is regulated in Hong Kong by the Securities and Futures Commission
(cid:129) Canaccord Genuity Inc. and Canaccord Genuity Securities LLC are registered as broker dealers in the US and are subject to
regulation primarily by the Financial Industry Regulatory Authority, Inc.
(cid:129) Canaccord Genuity Wealth Management (USA) Inc. is registered as a broker dealer in the US and is subject to regulation
primarily by the Financial Industry Regulatory Authority, Inc.
(cid:129) Canaccord International Ltd. is regulated in Barbados by the Central Bank of Barbados
(cid:129) Canaccord Asset Management Inc. is subject to regulation in Canada by the Ontario Securities Commission
Margin requirements in respect of outstanding trades, underwriting deal requirements and/or working capital requirements cause
regulatory capital requirements to fluctuate on a daily basis. Compliance with these requirements may require the Company to
keep sufficient cash and other liquid assets on hand to maintain regulatory capital requirements rather than using these liquid
assets in connection with its business or paying them out in the form of cash disbursements. There were no significant changes
in the Company’s capital management policy during the current year. The Company’s subsidiaries were in compliance with all of the
minimum regulatory capital requirements during the year ended March 31, 2013.
108 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Notes to Consolidated Financial Statements
NOTE 21
Client Money
At March 31, 2013, the UK and Europe operations held client money in segregated accounts of $1, 606. 2 million (£1,0 42. 0 million)
[2012 – $1,221.4 million; £765.3 million]. This is comprised of $2.3 million (£1.5 million) [2012 – $9.9 million; £6.2 million] of
balances held on behalf of clients to settle outstanding trades and $1, 603. 9 million (£1,0 40. 5 million) [2012 – $1,211.5 million;
£759.1 million] of segregated deposits, held on behalf of clients, which are not reflected on the balance sheet. Movement in
settlement balances is reflected in operating cash flows.
NOTE 22
Provisions and Contingencies
PROVISIONS
Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, when it
is probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can
be made. Restructuring provisions incurred in the year ended March 31, 2013 relate primarily to termination benefits and also
include the acceleration of share-based payments and onerous leases and related asset impairments incurred as part of the
Company’s reorganization. At each reporting date, the Company assesses the adequacy of its pre-existing provisions and adjusts
the amounts as necessary. The following is a summary of the changes during the years ended March 31, 2013 and 2012:
Legal
provisions
Restructuring
provisions
Total
provisions
Balance, March 31, 2012
$
12,943
$
26,723
$
Additions
Utilized
Recoveries
5,356
(5,515)
(2,605)
31,617
(48,464)
—
39,666
36,973
(53,979)
(2,605)
Balance, March 31, 2013
$
10,179
$
9,87 6
$
20,055
During the year ended March 31, 2013, the Company took a number of steps to contain costs and refocus its Canadian operations.
This resulted in $15.0 million of restructuring costs in Canada. In the US, in connection with the integration of the US operations
of the recently acquired CSHP and the existing Canaccord Genuity US operations, an additional $6.8 million of restructuring
costs were recorded. This amount includes $4.0 million of expense related to redundant leasehold properties, consisting of a
$2.6 million write-down of leasehold improvements and an estimated $1.4 million onerous lease provision. In the UK, the Company
has also accrued $9.8 million of restructuring costs in connection with the reorganization of the UK operations as a result of its
recent acquisitions of Eden Financial and CSHP. By segment, the Company recognized $15.2 million in Canaccord Genuity,
$15.5 million in the Canaccord Genuity Wealth Management segment, and $0.9 million in the Corporate and Other segment.
Commitments, litigation proceedings and contingent liabilities
In the normal course of business as an investment dealer, the Company is involved in litigation, and as of March 31, 2013, it was
a defendant in various legal actions. The Company has established accruals for matters where payments are probable and can be
reasonably estimated. While the outcome of these actions is subject to future resolution, management’s evaluation and analysis
of these actions indicate that, individually and in the aggregate, the probable ultimate resolution of these actions will not have a
material effect on the financial position of the Company. The actions described below have been commenced against the Company
and, although the Company has denied the allegations and intends to vigorously defend itself in each case, the outcome of each
action cannot be predicted with certainty. The amounts claimed in respect of these actions, or which could potentially be claimed,
are material and, accordingly, these actions are described in these consolidated financial statements.
i) In 2002, two actions were commenced in the Superior Court of Québec against Canaccord Genuity Corp. and other defendants
including another investment dealer. Both are class action proceedings in which the plaintiffs make allegations of certain
wrongful trading and disclosure practices by the Company and another defendant and that the Company was negligent in
respect of a private placement in 2000. These actions are set for trial starting in September 2014. Canaccord intends to
vigorously defend itself against these claims.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 109
Notes to Consolidated Financial Statements
ii) Genuity was named as co-defendant in an action initiated by CIBC World Markets Inc. in 2005 in the Ontario Superior Court
of Justice alleging improper solicitation of the plaintiffs’ employees, conspiracy, inducing breach of contract, interference
with commercial relations, breach of fiduciary duties, misuse of confidential information and misappropriation of corporate
opportunities. The claim against Genuity was for general damages to be determined by the court and an accounting of benefits
received by all the parties as a result of these alleged activities. There was also a claim against all the parties for $10.0 million
for punitive and exemplary damages. As Canaccord Genuity Corp. assumed all the assets and liabilities of Genuity, it may have
been subject to any judgment that may be made against Genuity in connection with this litigation. The Company believes it has
no potential exposure in connection with this claim.
iii) The Company and CSHP and its US subsidiary, Collins Stewart LLC, among others, were defendants in an action commenced by
Morgan Joseph TriArtisan Group Inc. and Morgan Joseph TriArtisan LLC in state court in New York City alleging that a proposed
joint venture in New York between Collins Stewart LLC and Morgan Joseph TriArtisan LLC was fundamentally inconsistent with
the acquisition of CSHP by the Company. The claims against the Company were for tortious interference with contract, tortious
interference with prospective business advantage, and aiding and abetting breach of fiduciary duty. Remedies requested by the
plaintiff against the Company were for compensatory damages in an amount not less than $35 million and punitive damages
in an amount of three times the compensatory damages or approximately $100 million. These proceedings have been settled,
for an amount which was less than the provision that had been recorded. The excess liability has been derecognized and
recorded as a reduction in general and administrative expense in the second quarter of fiscal 2013.
NOTE 23
Commitments
Subsidiaries of the Company are committed to approximate minimum lease payments for premises and equipment over the next
five years and thereafter as follows:
2014
2015
2016
2017
2018
Thereafter
$
33,6 26
3 3, 264
30,651
25,514
22,648
8 8, 097
$
23 3, 800
Some leases include extension options and provide for stepped rents, which mainly relate to lease of office space.
NOTE 24
Subsequent Event
DIVIDENDS
On May 21, 2013, the Board of Directors approved the following cash dividends: $0. 05 per common share payable on June 10,
2013 to common shareholders with a record date of May 31, 2013; $0.34375 per Series A Preferred Share payable on July 2, 2013
and with a record date of June 21, 2013; and $0.359375 per Series C Preferred Share payable on July 2, 2013 and with a record
date of June 21, 2013.
110 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Supplemental Information
Advisory note: This supplemental information is not audited and should be read in conjunction with the audited financial statements contained
herein. The Company adopted IFRS beginning April 1, 2011. Consequently, data for the comparative years ended March 31, 2012 and March 31,
2011 is in compliance with IFRS. Figures for periods prior to the year ended March 31, 2011 are in accordance with CGAAP.
Financial Highlights(1)
(C$ thousands, except for AUM, AUA, common and preferred
share information, fi nancial measures and percentages)
Financial results
Revenue
Expenses
Income taxes
Net (loss) income
Net (loss) income attributable to CFI shareholders
Net (loss) income available to common shareholders
Business segment
Income (loss) before intersegment allocations
and income taxes
Canaccord Genuity(2)
Canaccord Genuity Wealth Management
Corporate and Other
Geographic segment
Income (loss) before income taxes
Canada(3)
UK and Europe(4)
US(5)
Other Foreign Locations(6)
Client assets information ($ millions)
AUM – Canada (discretionary)
AUA – Canada
AUM – UK and Europe
AUM – Australia
Total
Common share information
Per common share ($)
Basic earnings (loss)
Diluted earnings (loss)
Book value per diluted common share(7)
Common share price ($)
High
Low
Close
Common shares outstanding (thousands)
Issued shares excluding unvested shares
Issued and outstanding
Diluted shares
Average basic
Average diluted
Market capitalization (thousands)
Preferred share information (thousands)
Shares issued and outstanding
Financial measures
Dividends per common share
Common dividend yield (closing common share price)
Common dividend payout ratio
Total shareholder return(8)
ROE(9)
Price to earnings multiple(10)
Price to book ratio(11)
$
$
$
$
$
$
$
2013
IFRS
797,122
820,824
(4,927)
(18,775)
(16,819)
(28,539)
7,883
5,578
(37,163)
3,887
(9,709)
(8,562)
(9,318)
835
10,429
15,936
451
26,816
(0.31)
(0.31)
7.68
8.30
4.03
6.82
93,062
102,896
109,880
92,218
102,402
749,380
For the years ended and as at March 31
$
$
$
2012
IFRS
604,864 $
620,983
5,227
(21,346)
(20,307)
(25,122)
2011
IFRS
803,631
661,159
42,729
99,743
99,743
99,743
(1,667) $
34,825
(49,277)
147,562
48,736
(53,826)
39,439 $
(41,202)
(7,533)
(6,823)
111,905
14,129
16,755
(317)
$
677 $
14,828
13,087
—
27,915
$
(0.33) $
(0.33)
8.26
$
15.31 $
6.94
8.30
94,026
101,689
106,883
76,715
84,682
887,131
8,540
4,540
$
0.20
2.9%
(71.8)%
(15.4)%
(3.3)%
(22.0)
0.9
0.40 $
4.8%
(139.9)%
(37.9)%
(3.1)%
(24.4)
1.0
546
16,985
—
—
16,985
1.37
1.22
8.79
16.41
7.95
14.00
75,404
82,810
85,655
72,990
81,717
1,199,170
—
0.275
2.0%
22.8%
28.6%
14.2%
11.8
1.6
$
$
$
$
$
$
$
$
$
$
$
$
$
2010
CGAAP
577,537
525,896
13,144
38,497
38,497
38,497
70,962
27,783
(47,104)
30,036
9,533
8,631
3,441
445
12,922
—
—
12,922
0.79
0.69
6.96
11.87
5.30
11.10
48,868
55,571
57,767
48,698
55,662
640,259
2009
CGAAP
477,721
524,920
452
(47,651)
(47,651)
(47,651)
(21,129)
22,707
(48,777)
(9,799)
2,031
(42,000)
2,569
393
9,184
—
—
9,184
(0.97)
(0.97)
6.51
11.75
2.87
5.40
49,343
55,093
57,251
48,929
54,189
309,155
—
—
$
0.15
0.3%
22.4%
108.3%
9.8%
16.1
1.6
0.125
2.3%
(15.1)%
(44.2)%
(12.4)%
5.7
0.8
(1) Certain non-IFRS measures are utilized by the Company as measures of fi nancial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: return on average common equity (ROE), book value per diluted common share,
common dividend yield, common dividend payout ratio, total shareholder return, price to earnings multiple (P/E), price to book ratio (P/B), assets under management (AUM) and assets under
administration (AUA).
(2) Includes the global capital markets division in Canada, the UK and Europe, the US, Australia, China, Barbados and Singapore.
(3) Canaccord’s Canada geographic segment includes operations for Canaccord Genuity, Canaccord Genuity Wealth Management and Corporate and Other business segments.
(4) Canaccord’s UK and Europe geographic segment engages in capital markets and wealth management activities. Results of former CSHP entities located in the UK and Europe since March 22, 2012
and the wealth management operations of Eden Financial Ltd. since October 1, 2012 are also included.
(5) Canaccord’s US geographic segment includes US capital markets and wealth management operations. Results of former CSHP entities located in the US are included since March 22, 2012.
(6) Revenue derived from capital markets activity outside of Canada, the US and the UK and Europe is reported as Other Foreign Locations, which includes operations in Australia, China, Barbados and
Singapore. Results of Australian operations are included since November 1, 2011, and Singaporean operations are included since March 22, 2012.
(7) Book value per diluted common share, a non-IFRS measure, is calculated as total shareholders’ equity divided by the number of diluted common shares outstanding at the end of the period.
(8) Total shareholder return is calculated as the change in share price plus dividends paid to common shares and special distributions paid in the current period as a percentage of the prior period’s
closing common share price, assuming reinvestment of all dividends.
(9) ROE is calculated by dividing the annual net income available to common shareholders over the average common shareholders’ equity.
(10) The price to earnings multiple is calculated based on the end of period share price and 12-month trailing diluted EPS.
(11) The price to book ratio is calculated based on the end of period common share price and book value per diluted common share.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 111
Supplemental Information
Condensed Consolidated Statements of Operations and Retained Earnings(1)
(C$ thousands, except
per share amounts and percentages)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses
Incentive compensation(2)
Salaries and benefi ts
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Restructuring costs
Acquisition-related costs
ABCP fair value adjustment
Canaccord relief program
Impairment of goodwill and intangible assets
(Loss) income before income taxes
Income taxes
Net (loss) income for the year
Non-controlling interests
Net (loss) income attributable to CFI shareholders
Retained earnings, beginning of year
Opening IFRS adjustments
Common shares dividends
Preferred shares dividends
For the years ended March 31
$
$
2013
IFRS
353,125
145,772
179,690
66,406
29,199
22,930
797,122
40 6, 724
8 8, 522
43,892
41,124
49,115
15,302
89,504
33,779
19,526
31,617
1,719
—
—
—
820,824
(23,702)
(4,927)
(18,775)
(1,956)
(16,819)
180,748
—
(26,006)
(11,720)
$
2012
IFRS
252,877 $
175,225
107,370
10,647
31,799
26,946
604,864
304,908
63,924
30,313
27,546
28,343
9,816
69,523
14,108
21,193
35,253
16,056
—
—
—
620,983
(16,119)
5,227
$
(21,346) $
(1,039)
(20,307)
238,647
—
(32,778)
(4,814)
$
$
2011
IFRS
294,650
327,499
84,914
43,644
24,040
28,884
803,631
389,046
64,420
31,507
27,158
25,466
7,811
67,882
12,742
22,387
—
12,740
—
—
—
661,159
142,472
42,729
99,743
—
99,743
194,007
(35,869)
(19,234)
—
$
$
2010
CGAAP
235,606
215,237
39,200
45,982
12,965
28,547
577,537
299,084
59,415
28,884
24,402
21,868
2,581
52,153
7,609
24,900
—
5,000
—
—
—
525,896
51,641
13,144
38,497
—
38,497
160,868
—
(5,358)
—
2009
CGAAP
233,104
117,916
51,453
18,319
38,287
18,642
477,721
222,006
56,771
26,311
24,695
25,228
11,220
69,689
8,994
28,773
7,662
—
6,700
5,347
31,524
524,920
(47,199)
452
(47,651)
—
(47,651)
222,597
—
(14,078)
—
Retained earnings, end of year
$
126,203
$
180,748 $
238,647
$
194,007
$
160,868
Incentive compensation expenses as a % of revenue
Total compensation expenses as a % of revenue(3)
Non-compensation expenses as a % of revenue
Total expenses as a % of revenue
Pre-tax profi t margin
Effective tax rate
Net profi t margin
Basic (loss) earnings per share
Diluted (loss) earnings per share
Book value per diluted common share(4)
Supplemental segmented revenue information
Canaccord Genuity
Canaccord Genuity Wealth Management
Corporate and Other
$
$
$
$
5 1. 0%
62.1%
40.8%
103.0%
(3.0)%
20.8%
(2.4)%
(0.31)
(0.31)
7.68
53 7, 560
235,085
24,477
$
$
$
$
50.4%
61.0%
41.7%
102.7%
(2.7)%
(32.4)%
(3.5)%
(0.33) $
(0.33) $
8.26 $
48.4%
56.4%
25.8%
82.3%
17.7%
30.0%
12.4%
1.37
1.22
8.79
373,477 $
201,290
30,097
538,644
233,049
31,938
51.8%
62.1%
29.0%
91.1%
8.9%
25.5%
6.7%
0.79
0.69
6.96
363,558
187,046
26,933
$
$
$
$
46.5%
58.4%
51.5%
109.9%
(9.9)%
(1.0)%
(10.0)%
(0.97)
(0.97)
6.51
277,351
172,484
27,886
$
$
$
$
$
797, 122
$
604,864 $
803,631
$
577,537
$
477,721
(1) Certain non-IFRS measures are utilized by the Company as measures of fi nancial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: incentive compensation expenses as a % of revenue, total compensation expenses
as a % of revenue, non-compensation expenses as a % of revenue, total expenses as a % of revenue, and book value per diluted common share.
(2) Incentive compensation expenses include the National Health Insurance Tax applicable to the UK and Europe.
(3) Total compensation expenses include incentive compensation and salaries and benefi ts, but exclude hiring incentives, which are included in development costs. Beginning in fi scal 2011,
development group salaries and benefi ts have been included as compensation expense, whereas they were classifi ed as development costs prior to fi scal 2011.
(4) Book value per diluted common share, a non-IFRS measure, is calculated as total shareholders’ equity divided by the number of diluted common shares outstanding at the end of the period.
112 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Condensed Consolidated Statements of Financial Position
Supplemental Information
As at March 31 (C$ thousands)
Assets
Cash and cash equivalents
Securities owned, at market
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Investment in asset-backed commercial paper
Equipment and leasehold improvements
Goodwill and other intangibles
Liabilities and shareholders’ equity
Bank indebtedness
Short term credit facility
Securities sold short, at market
Accounts payable and accrued liabilities
Income taxes payable
Contingent consideration
Deferred tax liabilities
Subordinated debt
Non-controlling interests
Shareholders’ equity
2013
IFRS
2012
IFRS
2011
IFRS
2010
CGAAP
2009
CGAAP
$
491,012
924,337
2,513,958
—
12,552
3,695
—
42,979
614,969
$ 4,603,502
$
66,138
—
689,020
2,746,790
4,428
14,218
2,576
15,000
16,169
1,049,163
$ 4,603,502
$
814,238 $
954,068
947,185
2,828,812
—
1,503
5,934
—
40,818
319,180
$ 5,762,723 $ 5,097,500
1,171,988
3,081,640
8,301
3,959
9,493
—
51,084
622,020
$
75,141 $
13,580
—
722,613
3,557,275
23,977
—
8,163
15,000
—
756,892
$ 5,762,723 $ 5,097,500
150,000
914,649
3,590,266
—
—
8,088
15,000
17,454
992,125
$
731,852
362,755
1,972,924
—
13,190
5,000
—
38,127
—
$ 3,123,848
$
29,435
—
364,137
2,308,146
5,385
—
—
15,000
—
401,745
$ 3,123,848
$
701,173
133,691
1,061,161
23,771
15,680
5,000
35,312
46,311
—
$ 2,022,099
$
75,600
—
79,426
1,469,369
—
—
—
25,000
—
372,704
$ 2,022,099
Miscellaneous Operational Statistics(1)
As at March 31
Number of employees in Canada
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth Management
Number in Corporate and Other
Total Canada
Number of employees in the UK and Europe
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth Management
Number of employees in the US
Number in Canaccord Genuity
Number of employees in Other Foreign Locations
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth Management
Number of employees company-wide
Number of Advisory Teams in Canada(2)
Number of licensed professionals in Canada
Number of investment professionals and
fund managers in the UK and Europe(3)
Number of Advisors – Australia
AUM – Canada (discretionary) (C$ millions)
AUA – Canada (C$ millions)
AUM – UK and Europe (C$ millions)
AUM – Australia
Total (C$ millions)
Number of companies with Canaccord Genuity
Limited as broker
London Stock Exchange (LSE)
Alternative Investment Market (AIM)
Total broker
Number of companies with Canaccord Genuity
Limited as Nomad(4)
LSE
AIM
Total Nomad
$
$
$
$
$
2013
222
461
332
1,015
400
294
253
84
14
2,060
178
494
122
12
835
10,429
15,936
451
26,816
55
56
111
—
45
45
2012
2011
2010
247
684
378
1,309
461
276
302
80
—
2,428
280
604
106
—
$
$
$
$
$
677 $
14,828 $
13,087 $
— $
27,915 $
52
77
129
—
62
62
268
684
373
1,325
143
—
175
41
—
1,684
271
645
—
—
546
16,985
—
—
16,985
26
39
65
1
30
31
$
$
$
$
$
203
680
364
1,247
138
—
163
1
—
1,549
303
718
—
—
445
12,922
—
—
12,922
23
43
66
1
35
36
$
$
$
$
$
2009
209
700
356
1,265
105
—
151
9
—
1,530
338
790
—
—
393
9,184
—
—
9,184
9
51
60
—
42
42
(1) These miscellaneous operational statistics are non-IFRS measures.
(2) Advisory Teams in Canada are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory
Teams that are led by, or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to
build an average-sized book.
(3) Investment professionals include all staff with direct sales responsibilities, which includes brokers and assistants with direct client contacts. Fund managers include all staff who manage client assets.
(4) A company listed on AIM is required to retain a Nominated Adviser (commonly referred to as a Nomad) during the company’s life on the market. Among other duties, Nomads are responsible for
warranting that a company is appropriate for joining AIM. A Nomad is similar to a Financial Advisor on the LSE, but is specifi c to AIM.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 113
Supplemental Information
Quarterly Financial Highlights(1)
(C$ thousands, except for AUM, AUA,
common and preferred share information,
fi nancial measures and percentages)
Fiscal 2013
Fiscal 2012
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Financial results
Revenue
Expenses
Income taxes (recovery)
Net income (loss)
Net income (loss) attributable to
CFI shareholders
Net income (loss) available to
common shareholders
Business segment
Income (loss) before intersegment
allocations and income taxes
Canaccord Genuity(2)
Canaccord Genuity Wealth
Management
Corporate and Other
Geographic segment
Income (loss) before income taxes
Canada(3)
UK and Europe(4)
US(5)
Other Foreign Locations(6)
Client assets ($ millions)
AUM – Canada (discretionary)
AUA – Canada
AUM – UK and Europe
AUM – Australia
Total
Common share information
Per common share ($)
Basic earnings (loss)
Diluted earnings (loss)
Book value per diluted common share(7)
Common share price ($)
High
Low
Close
Common shares outstanding (thousands)
Issued shares excluding
unvested shares
Issued and outstanding
Diluted shares
Average basic
Average diluted
Market capitalization (thousands)
Preferred shares outstanding (thousands)
Shares issued and outstanding
Financial measures
Dividends per common share
Common dividend yield (closing
share price)
Common dividend payout ratio
Total shareholder return(8)
Annualized ROE(9)
Price to earnings multiple(10)
Price to book ratio(11)
$ 217,971 $ 230,003 $ 186,599 $ 162,549 $ 177,692 $ 147,889 $ 119,500 $ 159,783
144,034
211,984
2,554
13,195
207,731
1,755
(31,794)
142,822
2,536
2,531
216,882
2,857
10,264
(3,877)
(20,622)
(3,470)
(14,841)
(1,618)
(5,278)
126,396
204,910
187,048
(437)
6,424
6,830
10,880
(14,562)
(19,967)
(31,250)
3,026
(5,278)
13,195
3,943
7,882
(17,560)
(22,804)
(32,357)
1,208
(7,078)
13,105
$ 12,335 $ 21,421 $
(6,272) $ (19,601) $ (25,934) $ 10,421 $
(2,560) $ 16,406
6,468
(12,816)
3,972
(12,272)
(8,982)
(3,057)
4,120
(9,018)
6,147
(10,252)
7,327
(12,681)
10,085
(14,421)
11,266
(11,923)
$
4,207 $ 17,968 $ (15,245) $
354
4,245
(2,819)
(1,264)
(998)
(2,585)
928
(2,661)
(1,333)
(3,043) $ 11,484 $
(9,727)
(9,148)
(2,581)
(31,409)
(7,602)
(2,512)
8,169 $
(1,003)
(1,470)
(629)
710 $ 19,076
(4,834)
3,293
(1,786)
(3,956)
(1,754)
(1,896)
$
835 $
791 $
784 $
709 $
677 $
607 $
574 $
10,429
15,936
451
26,816
11,403
15,2 28
408
27,039
13,344
13,122
354
26,820
13,137
12,583
305
26,025
14,828
13,087
—
27,915
14,367
—
—
14,367
14,635
—
—
14,635
$
$
0.04 $
0.04
7.68
7.93 $
6.44
6.82
0.09 $
0.08
7.62
6.77 $
4.70
6.70
(0.19) $
(0.19)
7.61
(0.24) $
(0.24)
7.90
(0.42) $
(0.42)
8.26
0.02 $
0.01
8.54
(0.09) $
(0.09)
8.75
6.45 $
4.03
5.68
8.30 $
4.91
5.50
9.44 $
7.61
8.30
9.74 $
6.94
7.80
13.05 $
9.32
9.55
575
15,676
—
—
15,676
0.17
0.16
8.71
15.31
11.65
12.36
93,062
102,896
109,882
92,663
103,045
749,399
92,522
102,513
110,969
92,268
102,454
743,492
93,991
102,381
108,789
93,716
102,235
617,922
93,566
102,031
107,854
94,145
101,990
593,196
94,026
101,689
106,656
77,830
85,568
885,245
74,999
83,412
86,787
75,221
83,822
676,940
76,232
83,322
85,979
76,073
83,922
75,597
83,097
86,236
75,087
84,283
821,101 1,065,877
8,540
8,540
8,540
8,540
4,540
4,540
4,540
4,000
$
0.05 $
0.05 $
0.05 $
0.05 $
0.10 $
0.10 $
0.10 $
0.10
2.9%
130.5%
2.5%
1.9%
(22.0)
0.9
3.0%
65.0%
18.8%
3.7%
(8.7)
0.9
3.5%
(29.2)%
4.2%
(8.3)%
(6.8)
0.7
3.6%
(22.4)%
(33.1)%
(10.6)%
(7.4)
0.7
4.8%
(31.4)%
7.7%
(16.2)%
(24.4)
1.0
5.1%
690.5%
(17.3)%
0.6%
13.7
0.9
4.2%
(117.7)%
(21.9)%
(2.8)%
8.9
1.1
3.2%
63.4%
(11.0)%
7.0%
9.7
1.4
(1) Certain non-IFRS measures are utilized by the Company as measures of fi nancial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely
to be comparable to similar measures presented by other companies. Non-IFRS measures included are: return on average common equity (ROE), book value per diluted common share, common
dividend yield, common dividend payout ratio, total shareholder return, price to earnings multiple (P/E), price to book ratio (P/B), assets under management (AUM) and assets under administration (AUA).
(2) Includes the global capital markets division in Canada, the UK and Europe, the US, Australia, China, Barbados and Singapore.
(3) Canaccord’s Canada geographic segment includes operations for Canaccord Genuity, Canaccord Genuity Wealth Management and Corporate and Other business segments.
(4) Canaccord’s UK and Europe geographic segment engages in capital markets and wealth management activities. Results of former CSHP entities located in the UK and Europe since March 22, 2012
and the wealth management operations of Eden Financial Ltd. since October 1, 2012 are also included.
(5) Canaccord’s US geographic segment includes US capital markets and wealth management operations. Results of former CSHP entities located in the US are included since March 22, 2012.
(6) Revenue derived from capital markets activity outside of Canada, the US and the UK and Europe is reported as Other Foreign Locations, which includes operations in Australia, China, Barbados and
Singapore. Results of Australian operations are included since November 1, 2011, and Singaporean operations are included since March 22, 2012.
(7) Book value per diluted common share, a non-IFRS measure, is calculated as total common shareholders’ equity divided by the number of diluted common shares outstanding at the end of the period.
(8) Total shareholder return is calculated as the change in share price plus dividends paid to common shares and special distributions paid in the current period as a percentage of the prior period’s
closing common share price, assuming reinvestment of all dividends.
(9) ROE is presented on an annualized basis. Quarterly annualized ROE is calculated by dividing the annualized net income available to common shareholders for the three-month period over the average
common shareholders’ equity.
(10) The price to earnings multiple is calculated based on the end of period share price and 12-month trailing diluted EPS.
(11) The price to book ratio is calculated based on the end of period common share price and book value per diluted common share.
114 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Supplemental Information
Condensed Consolidated Statements of Operations(1)
(C$ thousands, except per share
amounts and percentages)
Fiscal 2013
Fiscal 2012
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses
Incentive compensation(2)
Salaries and benefi ts
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Acquisition-related costs
Restructuring costs
Income (loss) before income taxes
Income taxes (recovery)
Net income (loss) for the period
$ 87,438 $ 8 9,4 15 $ 87, 525 $ 88, 747 $ 74,170 $ 57,380 $ 60,299 $ 61,028
59,858
22,531
1,953
7,857
6,556
159,783
29,799
21,664
(1,379)
7,590
1,527
119,500
53,553
24,634
6,769
8,205
10,361
177,692
32,015
38,541
3,304
8,147
8,502
147,889
28,6 61
25,626
7,847
8,392
3, 276
162,549
40, 609
69,348
18,670
7,291
4, 670
230,003
37, 961
28,571
17,109
6,758
8, 675
186,599
38,541
56,145
22,780
6,758
6,309
217,971
11 3, 297
2 2, 825
10,697
9,924
11,390
3,479
20,722
9,490
3,715
—
6,445
211,984
5,987
(437)
114,137
21,082
10,419
9,504
12,140
3,981
23,809
8,398
6,671
431
6,310
216,882
13,121
2,857
94,514
21,417
10,189
10,842
11,280
3,291
20,957
7,755
4,515
1,288
18,862
204,910
(18,311)
(3,470)
84,776
23,198
12,587
10,854
14,305
4,551
24,016
8,136
4,625
—
—
187,048
(24,499)
(3,877)
95,641
17,635
6,190
7,354
8,458
3,080
20,795
4,350
4,867
10,400
28,961
207,731
(30,039)
1,755
$
6,424 $ 10,264 $ (14,841) $ (20,622) $ (31,794) $
69,815
15,009
7,416
6,633
6,744
2,361
16,191
3,906
5,755
2,700
6,292
142,822
5,067
2,536
2,531 $
77,614
61,838
17,117
14,163
8,965
7,742
6,832
6,727
6,389
6,752
2,408
1,967
16,274
16,263
2,905
2,947
5,530
5,041
—
2,956
—
—
144,034
126,396
15,749
(6,896)
(1,618)
2,554
(5,278) $ 13,195
Non-controlling interests
Net income (loss) attributable
to CFI shareholders
Incentive compensation expenses
as a % of revenue
Total compensation expenses
as a % of revenue(3)
Non-compensation expenses
as a % of revenue
Total expenses as a % of revenue
Pre-tax profi t margin
Effective tax rate
Net profi t margin
$
Basic earnings (loss) per share
Diluted earnings (loss) per share
$
Book value per diluted common share(4) $
(406)
(616)
(279)
(655)
(544)
(495)
—
—
6,830
10,880
(14,562)
(19,967)
(31,250)
3,026
(5,278)
13,195
5 2. 0%
49.6%
50.7%
52.2%
53.8%
47.2%
51.7%
48.6%
62.4%
58.8%
62.2%
66.5%
63.7%
57.4%
63.6%
59.3%
34.9%
97.3%
2.7%
(7.3)%
2.9%
0.04 $
0.04 $
7.68 $
35.5%
94.3%
5.7%
21.8%
4.5%
0.09 $
0.08 $
7.62 $
47.7%
109.8%
(9.8)%
19.0%
(8.0)%
(0.19) $
(0.19) $
7.61 $
48.6%
115.1%
(15.1)%
15.8%
(12.7)%
53.2%
116.9%
(16.9)%
(5.8)%
(17.9)%
(0.24) $
(0.24) $
7.90 $
(0.42) $
(0.42) $
8.26 $
39.2%
96.6%
3.4%
50.0%
1.7%
0.02 $
0.01 $
8.54 $
42.2%
105.8%
(5.8)%
23.5%
(4.4)%
(0.09) $
(0.09) $
8.75 $
30.9%
90.1%
9.9%
16.2%
8.3%
0.17
0.16
8.71
Supplemental segmented revenue
information
Canaccord Genuity
Canaccord Genuity
Wealth Management
Corporate and Other
$ 152,699 $ 165,447 $ 118,957 $ 100,457 $ 113,067 $ 93,581 $ 69,452 $ 97,377
60,227
5,045
54,783
7,623
$ 217,971 $ 230,003 $ 186,599 $ 162,549 $ 177,692 $ 147,889 $ 119,500 $ 159,783
54,524
10,101
44,571
9,737
47,412
2,636
57,198
4,894
57,639
10,003
60,021
4,535
(1) Certain non-IFRS measures are utilized by the Company as measures of fi nancial performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. Non-IFRS measures included are: incentive compensation expenses as a % of revenue, total compensation expenses
as a % of revenue, non-compensation expenses as a % of revenue, total expenses as a % of revenue, and book value per diluted common share.
(2) Incentive compensation expenses include the National Health Insurance Tax applicable to the UK.
(3) Total compensation expenses include incentive compensation and salaries and benefi ts, but exclude hiring incentives, which are included in development costs.
(4) Book value per diluted common share, a non-IFRS measure, is calculated as total common shareholders’ equity divided by the number of diluted common shares outstanding at the end of the period.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 115
Supplemental Information
Condensed Consolidated Statements of Financial Position
(C$ thousands)
Assets
Cash and cash equivalents
Securities owned, at market
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Equipment and leasehold
improvements
Goodwill and other intangibles
Liabilities and shareholders’ equity
Bank indebtedness
Short term credit facility
Securities sold short, at market
Accounts payable and
accrued liabilities
Income taxes payable
Contingent consideration
Deferred tax liabilities
Subordinated debt
Non-controlling interests
Shareholders’ equity
Q4
Fiscal 2013
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Fiscal 2012
924,337 1,453,470 1,087,334 1,214,424 1,171,988 1,100,470 1,316,755
$ 491,012 $ 555,960 $ 575,367 $ 644,027 $ 814,238 $ 700,914 $ 691,114 $ 710,734
849,679
2,513,958 2,280,064 2,750,879 2,548,117 3,081,640 2,215,448 3,270,356 2,488,826
10,317
2,076
5,934
15,565
2,419
5,934
18,776
1,791
5,934
—
12,552
3,695
15,866
6,735
9,488
15,120
6,077
3,247
8,301
3,959
9,493
—
8,550
3,276
42,979
614,969
43,289
318,250
$4,603,502 $ 4,977,201 $ 5,102,481 $ 5,105,838 $ 5,762,723 $ 4,439,877 $ 5,665,166 $ 4,429,105
51,084
622,020
44,550
354,577
43,120
317,320
49,678
617,503
48,013
616,444
46,613
629,268
$ 66,138 $
— $ 29,475 $ 84,536 $ 75,141 $
—
689,020 1,193,043
—
847,665 1,036,535
150,000
914,649
—
—
— $
—
— $ 24,125
—
—
731,730
952,750 1,117,268
4,428
14,218
2,576
15,000
16,169
2,746,790 2,681,775 3,150,580 2,887,434 3,590,266 2,592,774 3,663,323 2,802,669
—
—
7,340
15,000
—
848,241
$4,429,105
—
—
—
—
6,082
7,482
15,000
15,000
—
16,882
1,049,163 1,051,183 1,033,842 1,057,969
863,493
$ 4,603,502 $ 4,977,201 $ 5,102,481 $ 5,105,838 $ 5,762,723 $ 4,439,877 $ 5,665,166
—
—
8,840
15,000
18,218
852,295
—
—
8,088
15,000
17,454
992,125
2,494
14,218
3,575
15,000
15,913
—
6,000
3,872
15,000
16,047
Miscellaneous Operational Statistics(1)
Number of employees in Canada
Number in Canaccord Genuity
Number in Canaccord Genuity
Wealth Management
Number in Corporate and Other
Total Canada
Number of employees in the
UK and Europe
Number in Canaccord Genuity
Number in Canaccord Genuity
Wealth Management
Number of employees in the US
Number in Canaccord Genuity
Number of employees in
Other Foreign Locations
Number in Canaccord Genuity
Number in Canaccord Genuity
Wealth Management
Number of employees company-wide
Number of Advisory Teams in Canada(2)
Number of licensed professionals
in Canada
Number of investment professionals and
fund managers in the UK and Europe(3)
Number of Advisors – Australia
AUM – Canada (discretionary)
(C$ millions)
AUA – Canada (C$ millions)
AUM – UK and Europe (C$ millions)
AUM – Australia (C$ millions)
Total (C$ millions)
Number of companies with Canaccord
Genuity Limited as broker
London Stock Exchange (LSE)
Alternative Investment Market (AIM)
Total broker
Number of companies with Canaccord
Genuity Limited as Nomad(4)
LSE
AIM
Total Nomad
Fiscal 2013
Fiscal 2012
Q4
Q3
Q2
Q1
Q4
Q3
Q2
222
224
225
239
247
262
266
461
332
1,015
493
332
1,049
617
343
1,185
662
376
1,277
684
378
1,309
699
386
1,347
686
384
1,336
400
294
253
424
298
259
420
262
252
427
267
304
461
276
302
143
—
176
152
—
186
Q1
265
666
382
1,313
155
—
180
84
85
81
82
80
69
36
36
14
2,060
178
494
122
12
14
2,129
184
483
119
11
15
2,215
231
553
96
11
11
2,368
269
604
98
10
—
2,428
280
604
106
—
—
1,735
278
—
1,710
271
631
626
—
—
—
—
—
1,684
263
628
—
—
835 $
791 $
$
575
709 $
$ 10,429 $ 11,403 $ 13,344 $ 13,137 $ 14,828 $ 14,367 $ 14,635 $ 15,676
—
$ 15,936 $ 15,228 $ 13,122 $ 12,583 $ 13,087 $
$
—
— $
305 $
$ 26,816 $ 27,039 $ 26,820 $ 26,025 $ 27,915 $ 14,367 $ 14,635 $ 15,676
— $
— $
— $
— $
574 $
607 $
677 $
354 $
451 $
784 $
408 $
55
56
111
—
45
45
61
62
123
—
50
50
71
65
136
—
52
52
75
68
143
—
53
53
52
77
129
—
62
62
31
48
79
2
35
37
29
41
70
2
32
34
29
41
70
1
31
32
(1) These miscellaneous operational statistics are non-IFRS measures.
(2) Advisory Teams are normally comprised of one or more Investment Advisors (IAs) and their assistants and associates, who together manage a shared set of client accounts. Advisory Teams that are led by,
or only include, an IA who has been licensed for less than three years are not included in our Advisory Team count, as it typically takes a new IA approximately three years to build an average-sized book.
(3) Investment professionals include all staff with direct sales responsibilities, which includes brokers and assistants with direct client contacts. Fund managers include all staff who manage client assets.
(4) A company listed on AIM is required to retain a Nominated Adviser (commonly referred to as a Nomad) during the company’s life on the market. Among other duties, Nomads are responsible for
warranting that a company is appropriate for joining AIM. A Nomad is similar to a Financial Advisor on the LSE, but is specifi c to AIM.
116 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Glossary
Acquisition-related expense items
Acquisition-related expense items include costs incurred to
acquire Genuity Capital Markets, The Balloch Group Limited,
50% interest in BGF Capital Pty Ltd., Collins Stewart Hawkpoint
plc, and the wealth management business of Eden Financial
Ltd., as well as the amortization of intangible assets related
to these acquisitions. Acquisition-related expense items
also include costs incurred for prospective acquisitions not
pursued. Figures that exclude acquisition-related items
are considered non-IFRS measures.
AdvantageBC International Business Centre Society
(formerly known as International Financial Centre
British Columbia Society)
Membership provides certain tax and financial benefits,
reducing the overall corporate tax rate, pursuant to
British Columbia legislation.
Advisory fees
Revenue related to the fees Canaccord charges for corporate
advisory, mergers and acquisitions or corporate restructuring
services is recorded as advisory fees.
Advisory Teams (IA Teams)
Advisory Teams are normally comprised of one or more IAs
and their assistants and associates, who together manage
a shared set of client accounts. Advisory Teams that are
led by, or only include, an IA who has been licensed for less
than three years are not included in our Advisory Team count,
as it typically takes a new IA approximately three years to
build an average-sized book. As Independent Wealth
Management branches are led by one advisor (with a team),
each IWM branch is counted as a single Advisory Team.
Alternative Investment Market (AIM)
The junior arm of the London Stock Exchange (LSE), AIM
provides a global market for smaller, growing companies.
Assets under administration (AUA) Canada
AUA is the market value of client assets administered by
Canaccord, for which Canaccord earns commissions or
fees. This measure includes funds held in client accounts,
as well as the aggregate market value of long and short
security positions. Management uses this measure to assess
operational performance of the Canaccord Genuity Wealth
Management business segment. This measure is non-IFRS.
Assets under management (AUM) Canada
AUM consists of assets that are beneficially owned by clients
and discretionarily managed by Canaccord as part of the
Complete Canaccord Investment Counselling Program and
Complete Canaccord Private Investment Management Program.
Services provided include the selection of investments and the
provision of investment advice. AUM is also administered by
Canaccord and is therefore included in AUA. This measure is
non-IFRS.
Assets under management (AUM) UK and Europe
AUM is the market value of client assets managed and
administered by Canaccord, for which Canaccord earns
commissions or fees. This measure includes both discretionary
and non-discretionary accounts. This measure is non-IFRS.
Book value per diluted common share
A measure of common equity per share calculated by
subtracting liabilities from assets and dividing by the number
of diluted shares outstanding. This measure is non-IFRS.
Canaccord BGF
Canaccord BGF was the brand used for Canaccord Genuity’s
operations in Australia and Hong Kong. These operations
have been rebranded to reflect our global capital markets and
wealth management branding.
Canaccord Genuity
Canaccord’s capital markets division was rebranded from
Canaccord Adams to Canaccord Genuity in May 2010,
following the acquisition of Genuity Capital Markets.
Canaccord Genuity refers to the Company’s global capital
markets division.
Canaccord Genuity Asia
Canaccord Genuity Asia was the brand used for Canaccord
Genuity’s operations in the Asia-Pacific region. These
operations have been rebranded to reflect our global capital
markets branding.
Canaccord Genuity Hawkpoint
Canaccord Genuity Hawkpoint was the brand used to represent
part of Canaccord Genuity’s global corporate advisory
operations based in the UK and Europe. This division has
been rebranded to reflect our global capital markets branding.
Canaccord Genuity Wealth Management (CGWM)
Canaccord’s wealth management businesses were rebranded
Canaccord Genuity Wealth Management on May 1, 2013 to
reflect Canaccord’s global wealth management presence.
CGWM has operations in Canada, the UK, Europe, and Australia.
Collins Stewart Hawkpoint plc (CSHP)
Canaccord acquired Collins Stewart Hawkpoint plc (CSHP) on
March 21, 2012. CSHP was a leading independent financial
advisory group with operations in the UK, the US, Europe
and Singapore. Subsequent to the acquisition, CSHP was
rebranded Canaccord Genuity.
Collins Stewart Wealth Management (CSWM)
Collins Stewart Wealth Management was the private client
division of the former CSHP, servicing over 10,000 clients
from offices in the UK, the Channel Islands, the Isle of Man
and Switzerland. CSWM was rebranded Canaccord Genuity
Wealth Management on May 1, 2013.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 117
Glossary
Common equity
Also referred to as common shares, which are, as the name
implies, the most usual and commonly held form of stock
in a corporation. Dividends paid to the stockholders must
be paid to preferred shares before being paid to common
stock shareholders.
Correspondent brokerage services
The provision of secure administrative, trade execution
and research services to other brokerage firms through the
Company’s existing technology and operations infrastructure
(Pinnacle Correspondent Services).
CSH Inducement Plan
A retention plan for key CSHP staff in connection with the
acquisition of CSHP.
Dilution
The change in earnings and book value per share resulting
from the exercise of all warrants and options and conversion
of convertible securities.
Dividend yield
A financial ratio that shows how much a company pays out in
dividends each year relative to its share price. It is calculated
as total annual dividends per share divided by the company
share price.
Earnings (loss) per share (EPS), diluted
Net income (loss) divided by the weighted average number of
shares outstanding adjusted for the dilutive effects of stock
options and other share-based compensation.
Genuity Capital Markets
Canaccord acquired Genuity Capital Markets and certain of
its affiliates (also referred to as “Genuity”) on April 23, 2010.
Genuity was an independent Canadian investment bank with
strong mergers and acquisitions and advisory practices.
Subsequent to the acquisition, Canaccord renamed its capital
markets division Canaccord Genuity.
Incentive-based revenue
A percentage of incentive-based revenue earned is directly
paid out as incentive compensation expense. At Canaccord,
this includes commission, investment banking, advisory fees,
and principal trading revenue.
Independent Wealth Management (IWM)
An independent operating platform of Canaccord Genuity
Wealth Management, under which Investment Advisors operate
as independent agents of the Company. Each IWM branch is
classified as one Advisory Team, which is comprised of one or
more Investment Advisors and their assistants and associates,
who together manage a shared set of client accounts.
Institutional sales and trading
A capital markets business segment providing market
information and research, advice and trade execution to
institutional clients.
International Equity Group (IEG)
The International Equity Group is a premium, low cost order
routing destination for both US listed securities and foreign
listed ordinary shares for local market execution in the
US operations.
Efficiency ratio
A financial ratio to measure efficiency calculated by dividing
total expense over total revenue.
International trading
Executing trades in Canadian securities on behalf of US
brokerage firms.
Employee Stock Purchase Plan (ESPP)
Voluntary plan that provides eligible employees with the
ability to purchase shares in the Company through payroll
deductions, with an additional contribution by the Company.
Escrowed securities
Common shares in the Company that are subject to specific
terms of release.
Fair value adjustment
An estimate of the fair value of an asset (or liability) for
which a market price cannot be determined, usually because
there is no established market for the asset. At Canaccord,
adjustments were made to reflect our estimate of the value of
the restructured ABCP notes based on discounting expected
future cash flows on a probability-weighted basis, considering
best available data at the time of valuation.
Fixed income trading
Trading in new issues, government and corporate bonds,
treasury bills, commercial paper, strip bonds, high-yield debt
and convertible debentures.
Investment banking
Assisting public and private businesses and governments to
obtain financing in the capital markets through the issuance of
debt, equity and derivative securities on either an underwritten
or an agency basis.
Investment professionals and fund managers
Investment professionals include all staff with direct sales
responsibilities, which include brokers and assistants with
direct contacts. Fund managers include all staff who manage
client assets.
Liquidity
The total of cash and cash equivalents available to the
Company as capital for operating and regulatory purposes.
London Stock Exchange (LSE)
One of the world’s largest stock exchanges, the LSE has
been in existence for more than 300 years and has over
3,000 listed companies. The exchange has four main sectors:
the Main Market; the AIM Market; the Professional Securities
Market; and the Specialist Fund Market.
118 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Glossary
Long-term incentive plan (LTIP)
A reward system designed to align employee and external
shareholder interests. Under Canaccord’s LTIP, a portion of
an eligible employee’s annual compensation is held back to
purchase restricted share units (RSUs) of the Company. The
RSUs are topped up by the firm and vest over three years.
Montréal International Financial Centre
Membership provides certain tax and financial benefits,
reducing the overall corporate tax rate, pursuant to
Québec legislation.
National Health Insurance (NHI) tax
Payroll tax applicable to UK employees based on a percentage
of incentive compensation payout.
Nominated Adviser (Nomad)
A company approved by the LSE to act as an adviser for
companies who wish to be admitted to AIM. A Nomad warrants
to the LSE that the company is appropriate for admission
and assists the listed company on an ongoing basis with
disclosure and other market-related matters.
Non-cash charges
Charges booked by a company that do not impact its cash
balance or working capital.
Non-IFRS measures
Non-IFRS measures do not have any standardized meaning
prescribed by International Financial Reporting Standards
(IFRS) and are therefore unlikely to be comparable to similar
measures presented by other companies. See page 23 of this
annual report.
Replacement plans
Share-based payment plans introduced to replace the
share-based payment plans that existed at CSHP at the date
of acquisition.
Return on average common equity (ROE)
Net income expressed as a percentage of average common
equity. This measure is non-IFRS.
Risk
Financial institutions face a number of risks that may
expose them to losses, including market, credit, operational,
regulatory and legal risk.
Separately managed accounts (SMAs)
Investment portfolios available to clients that are managed
by a senior portfolio manager. In SMAs, clients own the
individual securities within the portfolio, rather than a portion
of a pooled fund.
Significant items
Charges not considered to be recurring or indicative of
operating earnings. For Canaccord this includes acquisition-
related expense items, amortization of intangible assets,
impairment of goodwill and intangibles, restructuring costs,
ABCP fair value adjustments and accrual for the Company’s
client relief program. Figures excluding significant items are
considered to be non-IFRS measures.
Syndicate participation
A group of investment banking firms coordinating the
marketing, distribution, pricing and stabilization of equity
financing transactions.
Offshore operations
For Canaccord’s purposes, offshore operations refer to wealth
management offices in the Channel Islands, the Isle of Man
and Switzerland. These offices were rebranded Canaccord
Genuity Wealth Management on May 1, 2013.
The Balloch Group (TBG)
The Balloch Group was a leading boutique investment
bank in China that Canaccord acquired in January 2011.
Canaccord’s operations in China were subsequently
rebranded Canaccord Genuity.
Preferred shares
A class of ownership in a corporation that has a higher claim
on the assets and earnings than common stock. Preferred
shares generally do not have voting rights; however, preferred
shareholders receive a dividend that must be paid out before
dividends are paid to common stockholders.
Principal trading
Trading in equity securities in principal and inventory accounts.
Revenue is generated through inventory trading gains
and losses.
Registered trading
Trading in equity securities in principal and inventory accounts
by registered traders who operate by taking positions,
trading and making markets in equity securities including
securities of companies with small to medium-sized market
capitalizations. Revenue is generated through inventory
trading gains and losses.
Trading services
Quotation services, trade reconciliation, execution
management, order book management and trade reporting.
Underwriter – investment banking
Purchases securities or other instruments from a corporate
issuer for resale to investors.
Value-at-Risk (VaR)
VaR is a generally accepted risk measurement concept that
is defined as the predicted minimum loss in market value of
a portfolio at a specific confidence level (e.g., 95%) over a
certain period of time (e.g., daily).
Wrap accounts
A type of brokerage account in which a single or flat
fee covers all administrative, research, advisory and
management expenses.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 119
Corporate Governance
The Board of Directors (Board) assumes responsibility for the stewardship of the Company, acting as a whole and through its
committees, and has approved a formal Board Governance Manual (Mandate) including terms of reference for the Board and
setting forth the Board’s stewardship responsibilities and other specific duties and responsibilities. The Board’s responsibilities
are also governed by:
(cid:129) The Business Corporations Act (British Columbia)
(cid:129) The Company’s articles
(cid:129) The charters of its committees
(cid:129) Other corporate policies and applicable laws
Communication with Independent Members of the Board
Terrence Lyons has been appointed by the Board of Directors of Canaccord Financial Inc. as its Lead Director. One of his
responsibilities is to receive and determine appropriate action on any communications from interested parties that are
addressed to the independent directors of the Board. Such communications can be sent to Mr. Lyons in writing by mail to
2039 West 35th Avenue, Vancouver, BC, Canada, V6M 1J1.
Strategic Planning Process
The Board’s Mandate provides that the Board is responsible for ensuring that the Company has an effective strategic planning
process. As such, the Board reviews, approves, monitors and provides guidance on the Company’s strategic plan.
Identifi cation and Management of Risks
The Board’s Mandate includes:
(cid:129) Assisting management to identify the principal business risks of the Company
(cid:129) Taking reasonable steps to ensure the implementation of appropriate systems to manage and monitor those risks
(cid:129) Reviewing plans for evaluating and testing the Company’s internal financial controls
(cid:129) Overseeing the external auditors, including the approval of the external auditors’ terms of reference
Succession Planning and Evaluation
The Board’s Mandate includes keeping in place adequate and effective succession plans for the Chief Executive Officer (CEO) and
senior management.
(cid:129) The Corporate Governance and Compensation Committee (CGCC) receives periodic updates on the Company’s succession
plan at the senior officer level and monitors the succession planning process
(cid:129) The succession plan is reviewed, at least annually, by the CGCC
(cid:129) On the recommendation of the President & CEO, the Board appoints the senior officers of the Company
120 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Corporate Governance
Communications and Public Disclosure
The Company’s Disclosure Controls Policy (DCP) addresses the accurate and timely communication of all important information
relating to the Company and its interaction with shareholders, investment analysts, other stakeholders and the public generally.
(cid:129) The DCP is reviewed annually by the Board
(cid:129) The DCP, public securities regulatory filings, press releases and investor presentations are posted on the Company’s website
(cid:129) The Board reviews all quarterly and annual consolidated financial statements and related management discussion
and analysis, the Company’s earnings releases, management information circulars, annual information forms (AIFs) and
financing documents
Internal Controls
The Board requires management to maintain effective internal controls and information systems. The Board, with the assistance
of the Audit Committee, oversees the integrity of the Company’s internal control and information systems.
(cid:129) The Audit Committee meets no less than four times a year with the Company’s Chief Financial Officer (CFO) and senior
finance staff to review internal controls over financial reporting and related information systems
(cid:129) External auditors provide recommendations to the Audit Committee on an annual basis in relation to the Company’s internal
controls and information systems
As of March 31, 2013, an evaluation was carried out, under the supervision of and with the participation of management, including
the President & CEO and the Executive Vice President & CFO, of the effectiveness of our disclosure controls and procedures as
defined under Multilateral Instrument 52-109. Based on that evaluation, the President & CEO and the Executive Vice President &
CFO concluded that the design and operation of these disclosure controls and procedures were effective as of March 31, 2013.
Governance
The Board recognizes the current trend towards having a majority of independent directors. As the Company continues to be
largely employee owned, it is of the view that the number of its members that are independent directors adequately reflects the
perspectives and interests of the minority shareholders.
(cid:129) The Board is currently composed of nine directors, six of whom are independent of management as determined under
applicable securities legislation
(cid:129) The CGCC is responsible for periodically reviewing the composition of the Board and its committees
(cid:129) A formal annual assessment process has been established to include feedback by all the directors to the full Board, including
the completion of a confidential survey
(cid:129) New directors are provided with substantial reference material on the Company’s strategic focus, financial and operating
history, corporate governance practices and corporate vision
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 121
Corporate Governance
Summary of Charters and Committees
The Board has delegated certain of its responsibilities to two committees, each of which has specific roles and responsibilities as
defined by the Board. Both of these Board committees are made up of independent directors.
AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities by monitoring the Company’s financial
reporting practices and financial disclosure. It comprises three unrelated directors. All members of the Audit Committee are
financially literate; that is, they are able to read and understand a set of financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably
be expected to be raised by the Company’s financial statements. The current members of the Audit Committee are Messrs. Lyons
(Chair), Eeuwes and Carello.
The Audit Committee has adopted a charter which specifically defines the roles and responsibilities of the Audit Committee. The
Audit Committee Charter can be found in the Company’s AIF filed on SEDAR. The Audit Committee has direct communication
channels with the external auditors and CFO and senior finance staff and discusses and reviews issues with each of them on a
regular basis. The Audit Committee’s mandate was updated in fiscal 2013 to better reflect the Audit Committee’s oversight of the
Company’s risk management function.
The Audit Committee is responsible for ensuring management has designed and implemented an effective system of internal
control. The external auditors are hired by and report directly to the Audit Committee. After consultation with management, the
Audit Committee is responsible for setting the external auditors’ compensation. The external auditors attend each meeting of
the Audit Committee, and a portion of each meeting is held without the presence of management. The Audit Committee annually
reviews and approves the external auditors’ audit plan and must approve any audit and non-audit work performed by the external
auditors. The CFO and senior finance staff attend each meeting of the Audit Committee other than the portion of the meeting
which is held without management present to allow more open discussion. The Audit Committee annually reviews and approves
the internal audit plan.
CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE
The Corporate Governance and Compensation Committee is responsible for developing the Company’s approach to governance
issues, reviewing the Company’s overall governance principles and recommending changes to those principles from time to time.
It comprises three unrelated directors: Messrs. Harris (Chair), Eeuwes and Lyons. The committee has full access to staff and
resources. At all regular committee meetings during the year, a portion of each meeting is held without management present to
allow more open discussion.
122 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Board of Directors
Charles Bralver (2010)
Charles N. Bralver is a Corporate Director and Advisor. He was
a founding partner and Vice Chairman of Oliver, Wyman & Co.
and led its Capital Markets, European, and North American
practices. He has also served as Senior Associate Dean for
International Business and Finance at the Fletcher School of
Tufts University, and as a Strategic Advisor to Warburg Pincus
LLC. Mr. Bralver serves as a Director of Canaccord Financial
and Newstar Financial, is a member of the Senior Advisory
Boards of Oliver Wyman and Bema Capital Partners, and
sits on the boards of the Fletcher School of Tufts University
and the Dickey Center for International Understanding at
Dartmouth College. He has an AB from Dartmouth College and
an MA and MALD from the Fletcher School.
Peter M. Brown, O.B.C., LL.D., Litt D. (1997)
Peter M. Brown was born in 1941 in Vancouver where he lives
today. After attending the University of British Columbia,
he entered the investment business with Greenshields Inc. in
1962. Today he remains Founder and Honorary Chairman of
Canaccord Financial Inc., which he founded in 1968 and is
now a global firm with offices in 13 countries including
Canada, the U S, the UK, France, Germany, Ireland, Italy, China,
Hong Kong, Singapore, Australia and Barbados.
Peter Brown is currently serving as Chairman of the Board
for the Fraser Institute and Vice Chairman of the Investment
Industry Association. Mr. Brown is British Columbia’s
representative on the Advisory Committee to the Canadian
Securities Transition Office to lead the transition to a single
Canadian securities regulator. He is a Member of the Economic
Advisory Council to the Federal Minister of Finance. Recently,
the Business Council of British Columbia appointed Mr. Brown
to their Board of Governors. Peter Brown is the Chair of the
Vancouver Police Foundation and Honorary Chairman of the
fund drive for the Emily Carr University of Art & Design.
He has served on the boards of numerous private sector and
crown corporations over the years. He served as a federally
appointed Lead Director and Member of the Finance Committee
for the Vancouver 2010 Olympic & Paralympics Games which
successfully brought the Vancouver 2010 Olympics to Canada.
Formerly, he was a Director of the Vancouver Convention
Centre Expansion Project Limited & Pavilion Corp. (both Crown
Corporations). Among his attainments, he was the past
Chairman of the University of British Columbia, The Vancouver
Stock Exchange, BC Place Corporation and BC Enterprise
Corporation (both Crown Corporations). He was also the Vice
Chairman of Expo 86 Corporation.
Mr. Brown is a recipient of the BC Chamber of Commerce
Businessman of the Year award; the BC & Yukon Chamber
of Mines Financier Award and the Pacific Entrepreneur of the
Year Award for 2001. In 2002, he received the Distinguished
Service Award by the Prospectors and Developers Association
of Canada. In January 2003, Mr. Brown received a
Commemorative Medal for the Golden Jubilee of Her Majesty
Queen Elizabeth. In June 2003, he was awarded the Order
of British Columbia. The Brotherhood Inter-Faith Society
recognized Peter Brown as their Person of the Year in
February 2004. In the spring of 2005, Mr. Brown received an
honorary degree (Doctor of Laws) from the University of British
Columbia. In 2007, he received the Distinguished Graduate
Award from St. George’s School and the Ted Ticknor Award
for Exceptional Contribution from Big Brothers of Greater
Vancouver. In 2009, Mr. Brown received the Fraser Institute’s
T. Patrick Boyle Founder’s Award. In 2010, Peter Brown was
inducted into the Canadian Mining Hall of Fame recognizing
his entrepreneurial spirit and contribution to Canada’s
mining industry. He also became an Honorary Member of the
Vancouver Police Pipe Band in 2009 and received the first-ever
civilian commendation from the Vancouver City Police. Ernst &
Young recognized him with the Lifetime Achievement Award
in 2010 and in May 2011 he was inducted into the Business
Laureates of BC Hall of Fame.
In 2012, Peter Brown received the Vancouver Board of Trade
Rix Award for Engaged Community Citizenship and an honorary
degree (Doctor of Letters) from the Emily Carr University of
Art & Design. In September 2012, the Investment Industry
Association recognized Peter with its Diamond Jubilee Medal
for his contribution to the investment industry. In January 2013
he received an honorary degree from The Justice Institute of
British Columbia.
Massimo Carello (2008)
Audit Committee
Mr. Carello is a corporate director and a private investor in
public companies. Mr. Carello was the Chairman and Chief
Executive Officer of Diners Club UK Ltd. from 2001 to 2004
and was the Chairman and Chief Executive Officer of Fiat
UK Ltd. from 1990 to 2001. Mr. Carello served as a member
of the Confederation of British Industry (CBI) President’s
Committee from 1998 to 2003 and was a member of the
CBI European Committee. He was Vice President of the Italian
Chamber of Commerce in the UK from 1998 to 2005. In
addition to Canaccord Financial Inc., Mr. Carello is a director
and a member of the Audit Committees of the following public
companies: Canadian Overseas Petroleum Ltd. and Orsu
Metals Corporation. Until December 2010, he was also a
director and a member of the Audit Committee of Uranium
One Inc.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 123
Board of Directors
William J. Eeuwes (2002)
Audit Committee
Corporate Governance and Compensation Committee
Mr. Eeuwes is Senior Vice President, Global Head Private
Equity, Manulife Financial. He has executive responsibility
for Regional Power Inc., NAL Resource (oil and gas), and two
private equity teams : Manulife Capital in Canada and Hancock
Capital Management in the US.
Before joining Manulife in 1999, Mr. Eeuwes was a career
banker with 25 years of experience in underwriting and the
management of a broad range of financing including LBOs,
corporate lending and project finance. Mr. Eeuwes is a graduate
of the Richard Ivey School of Business at the University of
Western Ontario. In addition to Canaccord Financial Inc.,
Mr. Eeuwes is a director of several private companies in Canada,
and is a member of the Institute of Corporate Directors.
Michael D. Harris, ICD.D. (2004)
Corporate Governance and Compensation Committee
Michael Harris, ICD.D, is a senior business advisor with the
law firm of Cassels Brock & Blackwell LLP in Toronto, and the
President of his own consulting firm, Steane Consulting Ltd.,
and, in this capacity, acts as a consultant to various Canadian
companies. Prior to joining Cassels Brock in March 2010, he
was a senior business advisor with the law firm of Goodmans
LLP in Toronto.
Mr. Harris was born in Toronto in 1945, and was raised in
Callander and North Bay, Ontario. Before his election to the
Ontario Legislature in 1981, Mike Harris was a schoolteacher,
a school board trustee and chair and an entrepreneur in the
Nipissing area. On June 8, 1995, Mr. Harris became the 22nd
Premier of Ontario following a landslide election victory. In 1999,
he was re-elected – making him the first Ontario Premier in over
30 years to form a second consecutive majority government.
In addition to sitting on several boards of Canadian
corporations, he also serves as a director of the Tim Horton
Children’s Foundation. He is the Honorary Chair of the North
Bay District Hospital Capital Campaign and the Nipissing
University and Canadore College Capital Campaign. Mr. Harris
is also a Senior Fellow of The Fraser Institute. He has received
his ICD.D certification from the Institute of Corporate Directors.
In addition to Canaccord Financial Inc., Mr. Harris is a director
of the following public companies: Chartwell Retirement
Residences (Chair), FirstService Corporation, Routel Inc. (Chair),
and Element Financial.
David Kassie (2010)
David Kassie became Group Chairman and a director of
Canaccord Financial Inc. on the closing of the acquisition
of Genuity Capital Markets, a Canadian investment bank, on
April 23, 2010, and became Chairman on April 1, 2012. He
was the Principal, Chairman and Chief Executive Officer of
Genuity Capital Markets from 2004 until May 9, 2010, when
the integration of the businesses of Genuity Capital Markets
and Canaccord Financial Ltd. was completed under the name
Canaccord Genuity. Before 2004, he was Chairman and
Chief Executive Officer of CIBC World Markets and the Vice
Chairman of CIBC.
Mr. Kassie has extensive experience as an advisor, underwriter
and principal. He sits on a number of corporate boards.
Mr. Kassie is actively involved in community and charitable
organizations and is on the boards of the Ivey School of
Business and the Toronto International Film Festival Group, and
was formerly on the Board of the Hospital for Sick Children.
Mr. Kassie holds a B.Comm. (Honours) in Economics from
McGill University, 1977 and an MBA from the University of
Western Ontario, 1979.
Terrence A. Lyons (2004)
Audit Committee
Corporate Governance and Compensation Committee
Terry Lyons is past Chairman, Northgate Minerals Corporation,
which was recently acquired by Aurico Gold, creating a new
mid-cap gold company with a value of over $3 billion. He is a
director of several public and private corporations including
Sprott Resource Corp.; Polaris Minerals Corporation; EACOM
Timber Corporation; BC Pavilion Corporation (PavCo) and
currently serves as the Lead Director and Chairman of the
Audit Committee of Canaccord Financial Inc.
Terry is a Civil Engineer (UBC) with an MBA from the University
of Western Ontario. He sits on the Advisory Board of the
Richard Ivey School of Business and is active in sports
and charitable activities, is a past Governor of the Olympic
Foundation of Canada, past Chairman of the Mining Association
of BC and in 2007 was awarded the INCO Medal by the
Canadian Institute of Mining and Metallurgy for distinguished
service to the mining industry.
124 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Board of Directors
Mr. Shah was formerly the Chief Executive of the UK Atomic
Energy Authority and of various large businesses in the
BP Group, where he was a member of the Group Leadership
for more than a decade. Mr. Shah was Chairman, inter alia,
of Viridian Group plc, HgCapital Renewable Power Partners
LLP and the European Photovoltaic Industry Association. In
addition, he has been a Director of several major organizations,
including Babcock International Group Plc and Lloyd’s of
London. He was also a member of the UK government’s
Renewable Energy Advisory Committee from 1994 to 2002.
Earlier, Mr. Shah was the Chief Economist for BP Oil UK.
Born in India, and brought up in Uganda, Mr. Shah is a
graduate of the University of London, the University of Warwick,
and the Harvard Business School management program. He
was appointed an Officer of the Order of the British Empire
(OBE) in the 2007 New Year Honours List, and is a Life Fellow
of the Royal Society of Arts.
Paul D. Reynolds (2005)
Paul Reynolds was named President of Canaccord Financial
Inc. in August 2006 and CEO in August 2007, and leads the
firm from Canaccord’s Toronto office. Between 1999 and
2007, he managed Canaccord’s London, England office as
President and COO of European operations and was named
Global Head of Canaccord Genuity in April 2005.
Mr. Reynolds has over 28 years of experience in the securities
industry beginning as an equities trader. In 1985, he joined
Canaccord Financial, working as an Investment Advisor
before moving into a senior role in institutional sales. In
the late 1990s, Mr. Reynolds assumed a leadership role in
investment banking where he specialized in financing emerging
and developing companies in the resource, technology and
biotechnology sectors.
Mr. Reynolds also serves on the boards of the International
Crisis Group and the Hospital for Sick Children in Toronto.
Dipesh Shah (2012)
Dipesh Shah is a director on the boards of Thames Water
and the Kemble Water Group of companies, JKX Oil & Gas
Plc (where he is Senior Independent Director and Chairman
of the Remuneration Committee), The Crown Estate, the EU
Marguerite Fund (where he is Chairman of the Investment
Committee), and Equus Petroleum Plc (where he is the Senior
Independent Director and Chairman of the Nominations
Committee). He is also a Trustee of the British Youth Opera
and a Governor of Merchant Taylors’ School.
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 125
Locations
Capital Markets
CANACCORD GENUITY
Canada
United States
UK and Europe
Toronto
Brookfield Place
161 Bay Street, Suite 3000
P.O. Box 516
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
Toll free (Canada): 1.800.382.9280
Toll free (US): 1.800.896.1058
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.643.7300
Toll free (Canada): 1.800.663.1899
Toll free (US): 1.800.663.8061
Calgary
TransCanada Tower
450 1st Street SW, Suite 2200
Calgary, AB
Canada T2P 5P8
Telephone: 403.508.3800
Toll free: 1.800.818.4119
Montréal
1250 René-Lévesque Boulevard West
Suite 2930
Montréal, QC
Canada H3B 4W8
Telephone: 514.844.5443
Toll free: 1.800.361.4805
Barbados
The Business Centre
Upton
St. Michael, Barbados BB 11103
Telephone: 246.434.2035
New York
350 Madison Avenue
New York, NY
USA 10017
Telephone: 212.389.8000
Toll free: 1.800.538.7003
Boston
99 High Street, Suite 1200
Boston, MA
USA 02110
Telephone: 617.371.3900
Toll free: 1.800.225.6104
San Francisco
101 Montgomery Street, Suite 2000
San Francisco, CA
USA 94104
Telephone: 415.229.7171
Toll free: 1.800.225.6104
Houston
Wells Fargo Plaza
1000 Louisiana Street, 71st Floor
Houston, TX
USA 77002
Telephone: 713.331.9901
Chicago
1880 Oak Avenue, Suite 135
Evanston, IL
USA 60201
Telephone: 847.864.1137
Minneapolis
45 7th Street South, Suite 2640
Minneapolis, MN
USA 55402
Telephone: 612.332.2208
London
88 Wood Street
London, UK
EC2V 7QR
Telephone: 44.20.7523.8000
London
41 Lothbury
London, UK
EC2R 7AE
Telephone: 44.20.7665.4500
Dublin
First Floor, South Dock House
Hanover Quay
Dublin 2
Ireland
Telephone: 353.1.635.0210
Frankfurt
OpernTurm
Bockenheimer Landstrasse 2-4
60306 Frankfurt am Main
Germany
Telephone: 49.69.67.776.5000
Paris
Washington Plaza
29 rue de Berri
75008 Paris
France
Telephone: 33.1.56.69.66.66
Milan
Filiale Italiana
Galleria Passarella 1
20122 Milan
Italy
Telephone: 39.02.0062.1800
126 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Locations
Hong Kong
5th Floor, 8 Queen’s Road Central
Central Hong Kong
Telephone: 852.3919.2505
Fax: 852.3919.2599
Melbourne
Level 4, 60 Collins Street
Melbourne, VIC, 3000, Australia
Telephone: 61.3.8688.9100
Sydney
Level 26, 9 Castlereagh Street
Sydney, NSW, 2000, Australia
Telephone: 61.2.9263.2700
Waterloo
80 King Street South, Suite 101
Waterloo, ON
Canada N2J 1P5
Telephone: 519.886.1060
Toll free: 1.800.495.8071
Alberta
Calgary
TransCanada Tower
450 – 1st Street SW, Suite 2200
Calgary, AB
Canada T2P 5P8
Telephone: 403.508.3800
Toll free: 1.800.818.4119
Edmonton
Manulife Place
10180 – 101st Street, Suite 2700
Edmonton, AB
Canada T5J 3S4
Telephone: 780.408.1500
Toll free: 1.877.313.3035
Québec
Montréal
1250 René-Lévesque Boulevard West
Suite 2930
Montréal, QC
Canada H3B 4W8
Telephone: 514.844.5443
Toll free: 1.800.361.4805
Nova Scotia
Halifax
Purdy’s Wharf Tower II
Suite 2004
1969 Upper Water Street
Halifax, NS
Canada B3J 3R7
Telephone: 902.442.3162
Toll free: 1.866.371.2262
Asia-Pacific
Beijing
Suite C700, 50 Liangmaqiao Road
Beijing 100125
China
Telephone: 8610.8451.5559
Fax: 8610.8454.0489
Singapore
77 Robinson Road
#21-02
Singapore 068896
Telephone: 65.6854.6150
Wealth Management
CANACCORD GENUITY WEALTH
MANAGEMENT
Canada
British Columbia
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.643.7300
Toll free (Canada): 1.800.663.1899
Toll free (US): 1.800.663.8061
Kelowna
1708 Dolphin Avenue, Suite 602
Kelowna, BC
Canada V1Y 9S4
Telephone: 250.712.1100
Toll free: 1.888.389.3331
Ontario
Toronto
Brookfield Place
161 Bay Street, Suite 2900
P.O. Box 516
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
Toll free (Canada): 1.800.382.9280
Toll free (US): 1.800.896.1058
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 127
OTHER LOCATIONS
Pinnacle Correspondent Services
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.643.7300
Toronto
Brookfield Place
161 Bay Street, Suite 3000
P.O. Box 516
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
Locations
Canaccord Genuity Wealth Management
(USA), Inc.
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.684.5992
Independent Wealth Management
Branches
Ontario
Burlington
5500 North Service Road, Suite 805
Burlington, ON
Canada L7L 6W6
Telephone: 905.335.5223
Toll free: 1.855.392.5626
Ottawa
2 Gurdwara Road, Suite 510
Ottawa, ON
Canada K2E 1A2
Telephone: 613.274.2662
Toll free: 1.877.721.1189
Kitchener
4281 King Street East, Unit E
Kitchener, ON
Canada N2P 2E9
Telephone: 519.219.6611
Toll free: 1.866.232.1894
British Columbia
Prince George
1840 Third Avenue, Suite 101
Prince George, BC
Canada V2M 1G4
Telephone: 250.614.0888
Toll free: 1.866.614.0888
Trail
1277 Cedar Avenue
Trail, BC
Canada V1R 4B9
Telephone: 250.368.3838
Toll free: 1.855.368.3838
Alberta
Calgary
322, 11th Avenue SW, Suite 207
Calgary, AB
Canada T2R 0C5
Telephone: 403.531.2444
Toll free: 1.866.531.2444
Calgary
1409, 2nd Street SW
Calgary, AB
Canada T2R 0W7
Telephone: 403.263.7999
Toll free: 1.877.263.7999
Québec
Gatineau
12, rue Sainte Marie
Gatineau, QC
Canada J8Y 2A3
Telephone: 819.772.4737
Toll free: 1.877.496.1685
UK and Europe
London
8th Floor
88 Wood Street
London, UK
EC2V 7QR
Telephone: 44.20.7523.4600
Jersey
37 The Esplanade
St Helier
Jersey JE4 0XQ
Telephone: 44.1534.708090
Guernsey
2 Grange Place
The Grange
St Peter Port
Guernsey GY1 4AX
Telephone: 44.1481.712889
Guernsey
Landes du Marche Chambers
P.O. Box 328
Vale
Guernsey GY1 3TY
Telephone: 44.1481.251515
Isle of Man
Anglo International House
Bank Hill
Douglas
Isle of Man IM1 4LN
Telephone: 44.1624.690100
Geneva
7, avenue Pictet-de-Rochemont
1207 Geneva
Switzerland
Telephone: 41.22.707.0080
128 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Shareholder Information
Corporate Headquarters
Website
STREET ADDRESS
Canaccord Financial Inc.
609 Granville Street, Suite 2200
Vancouver, BC, Canada
MAILING ADDRESS
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC V7Y 1H2, Canada
Stock Exchange Listing
TSX: CF
LSE: CF.
www.canaccord .com
General Shareholder
Inquiries and Information
INVESTOR RELATIONS
161 Bay Street, Suite 3000
Toronto, ON, Canada
Telephone: 416.869.7293
Fax: 416.947.8343
Email: investor.relations@canaccord.com
Media Relations and
Inquiries from Institutional
Investors and Analysts
Scott Davidson
Executive Vice President, Global Head
of Corporate Development and Strategy
Telephone: 416 .869 .3875
Email: scott.davidson@canaccord.com
This Canaccord Financial 2013 Annual
Report is available on our website at
www.canaccordfinancial.com. For a
printed copy please contact the Investor
Relations department.
Common Share Trading Information (Fiscal 2013)
Stock exchange
Toronto TSX
London LSE
Diluted shares
outstanding at
Year-end price
Ticker March 31, 2013 March 31, 2013
CF
CF.
109,879,724 $
109,879,724 £
6.82 $
4.55 £
High
8.30
5.30
$
£
Low
4.03
2.75
Total volume of
shares traded
53,441,952
1,689,143
Fiscal 2013 Preferred Dividend Dates and Amounts
Quarter end date
June 30, 2012
September 30, 2012
December 31, 2012
March 31, 2013
Preferred
dividend
record date
Preferred
dividend
payment date
September 14, 2012
October 1, 2012
December 14, 2012
December 31, 2012
March 15, 2013
June 21, 2013
April 1, 2013
July 2, 2013
Series A
preferred
dividend
0.34375
0.34375
0.34375
0.34375
1.375
$
$
$
$
$
Series C
preferred
dividend
0.359375
0.359375
0.359375
0.359375
1.4375
$
$
$
$
$
Fiscal 2013 Common Dividend Dates and Amounts
Quarter end date
June 30, 2012
September 30, 2012
December 31, 2012
March 31, 2013
Common dividend
record date
Common dividend
payment date
August 24, 2012
September 10, 2012
November 30, 2012
December 10, 2012
March 1, 2013
March 15, 2013
May 31, 2013
June 10, 2013
Total
preferred
dividend
0.703125
0.703125
0.703125
0.703125
2.8125
Common
dividend
0.05
0.05
0.05
0. 05
0. 20
$
$
$
$
$
$
$
$
$
$
CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT 129
Shareholder Information
Fiscal 2014 Expected Dividend(1) and Earnings Release Dates
Q1/14
Q2/14
Q3/14
Q4/14
Expected earnings
release date
Preferred dividend
record date
Preferred dividend
payment date
Common dividend
record date
Common dividend
payment date
August 6, 2013 September 13, 2013 September 30, 2013
August 30, 2013 September 10, 2013
November 6, 2013
December 20, 2013
December 31, 2013
November 22, 2013
December 10, 2013
February 5, 2014
March 14, 2014
March 31, 2014
February 21, 2014
March 10, 2014
May 20, 2014
June 13, 2014
June 30, 2014
May 30, 2014
June 10, 2014
(1) Dividends are subject to Board of Directors approval. All dividend payments will depend on general business conditions and the Company’s fi nancial conditions, results of operations, capital
requirements and such other factors as the Board determines to be relevant.
Annual General Meeting
Financial Information
The Annual General Meeting
of shareholders will be held on
Wednesday, August 7, 2013 at
10:00 a.m. (Eastern time)
at the TMX Broadcast Centre
The Exchange Tower
130 King Street West
Toronto, ON, Canada
A live Internet webcast will also be
available for shareholders to view.
Please visit the webcast events page at
www.canaccordfinancial.com for more
information and a direct link.
To view Canaccord’s regulatory filings on
SEDAR, please visit www.sedar.com.
For present and archived financial
information, please visit
www.canaccordfinancial.com
Auditor
Ernst & Young LLP
Chartered Accountants
Vancouver, BC
Fees Paid to
Shareholders’ Auditors
For fees paid to shareholders’ auditors,
see page 47 of the fiscal 2013 Annual
Information Form.
Qualifi ed Foreign
Corporation
CFI is a “qualified foreign corporation”
for US tax purposes under the Jobs &
Growth Tax Reconciliation Act of 2003.
Editorial and Design
Services
The Works Design Communications Ltd.
Eligible Dividend Designation :
Income Tax Act (Canada )
In Canada, the Federal Income Tax
Act, and most provincial income tax
legislation, provides lower levels of
taxation for Canadian individuals
who receive eligible dividends. All of
the common share dividends paid
by Canaccord Financial Inc. (or its
predecessor Canaccord Capital Inc.)
since 2006 are eligible, as are common
share dividends paid hereafter unless
otherwise indicated.
Shareholder Administration
For information about stock transfers,
address changes, dividends, lost stock
certificates, tax forms and estate
transfers, contact:
COMPUTERSHARE
INVESTOR SERVICES INC.
100 University Avenue, 9th Floor
Toronto, ON M5J 2Y1
Telephone toll free (North America):
1.800.564.6253
International: 514.982.7555
Fax: 1.866.249.7775
Toll free fax (North America): or
International fax: 416.263.9524
Email: service@computershare.com
Website: www.computershare.com
Offers enrolment for self-service
account management for
registered shareholders through
the Investor Centre.
130 CANACCORD FINANCIAL INC. 2013 ANNUAL REPORT
Canaccord Financial Inc. is the publicly traded parent company
to Canaccord’s group of companies. Canaccord Financial Inc.
is listed on the TSX (as CF) and LSE (as CF.).
Canaccord Genuity provides global investment banking, M&A,
advisory, research, sales and trading services to Canaccord’s
institutional and corporate clients. Canaccord Genuity has offi ces
in Canada, the US, the UK, France, Germany, Ireland, Italy,
Hong Kong, mainland China, Singapore, Australia and Barbados.
Canaccord Genuity Wealth Management is a global provider
of wealth management solutions to private investors in Canada,
the UK, Europe and Australia.
Pinnacle provides correspondent services (administrative and
clearing solutions) to Canada’s wealth management industry by
leveraging Canaccord’s investment in leading-edge back-offi ce
infrastructure and technology.
Canaccord operations
Strategic alliances
Canada
Toronto
Vancouver
Burlington
Calgary
Edmonton
Gatineau
Halifax
Kelowna
Kitchener
Montréal
Ottawa
Prince George
Trail
Waterloo
USa
new York
Boston
Chicago
Houston
Minneapolis
San Francisco
UK & EUrOPE
aSIa
London
dublin
Frankfurt
Geneva
Guernsey
Isle of Man
Jersey
Milan
Paris
Beijing
Hong Kong
Singapore
aUSTraLIa
Melbourne
Sydney
www.canaccord.com