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All markets present
challenges and
opportunities, and
we recognize that it
is our responsibility
to navigate the
challenges and
find the right
opportunities.
Dan Daviau
President & CEO
Canaccord Genuity Group Inc.
FISCAL 2020
Annual
Report
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
C
Financial Overview
Selected financial information (1)(2)(7)
(C$ thousands, except per share and % amounts,
and number of employees)
Canaccord Genuity Group Inc. (CGGI)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Expenses
Compensation expense
Other overhead expenses(3)
Restructuring costs(4)
Acquisition-related costs
Loss on extinguishment of convertible debentures
Acceleration of long-term incentive plan expense
Share of loss of an associate(5)
Total expenses
Income before income taxes
Net income
Net income attributable to CGGI shareholders
Non-controlling interests
Earnings per common share – basic
Earnings per common share – diluted
Dividends per common share
Dividends per Series A Preferred Share
Dividends per Series C Preferred Share
Excluding significant items(6)
Total revenue
Total expenses
Income before income taxes
Net income
Net income attributable to CGGI shareholders
Net income attributable to non-controlling interests
Earnings per common share – diluted
Balance sheet data
Total assets
Total liabilities
Non-controlling interests
Total shareholders’ equity
Number of employees
For the years ended March 31
2020
2019
2018
2020/2019 change
$
586,884
$
556,475
$
461,937
$
30,409
236,962
206,507
108,834
63,690
20,990
294,241
142,228
125,830
51,008
20,785
282,195
122,372
113,921
27,875
14,577
1,223,867
1,190,567
1,022,877
738,313
383,527
1,921
(124)
—
—
207
716,625
356,240
13,070
3,064
8,608
—
304
625,853
298,250
7,643
6,732
—
48,355
298
1,123,844
1,097,911
987,131
100,023
86,554
86,490
64
0.78
0.65
0.20
0.9712
1.2482
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
92,656
71,582
70,530
1,052
0.58
0.48
0.20
0.9712
1.2482
$
$
$
$
$
$
$
$
35,746
17,077
13,024
4,053
0.04
0.03
0.15
0.9712
1.2482
$ 1,223,867
$ 1,190,567
$ 1,022,877
$ 1,100,810
$ 1,054,981
$
$
$
$
$
123,057
106,323
105,895
428
0.81
$
$
$
$
$
135,586
107,355
106,303
1,052
0.80
$
$
$
$
$
$
912,270
110,607
81,657
77,604
4,053
0.59
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(57,279)
64,279
(16,996)
12,682
205
33,300
21,688
27,287
(11,149)
(3,188)
(8,608)
—
(97)
25,933
7,367
14,972
15,960
(988)
0.20
0.17
—
—
—
33,300
45,829
(12,529)
(1,032)
(408)
(624)
0.01
$ 5,956,195
$ 4,749,294
$ 4,020,736
$ 1,210,031
5,027,421
3,870,934
3,165,813
1,156,487
156
928,618
2,308
1,997
876,363
2,112
13,571
841,352
1,956
(1,841)
55,385
196
5.5%
(19.5)%
45.2%
(13.5)%
24.9%
1.0%
2.8%
3.0%
7.7%
(85.3)%
(104.0)%
(100.0)%
—
(31.9)%
2.4%
8.0%
20.9%
22.6%
(93.9)%
34.5%
35.4%
—
—
—
2.8%
4.3%
(9.2)%
(1.0)%
(0.4)%
(59.3)%
1.3%
25.5%
29.9%
(92.2)%
6.3%
9.3%
(1) Data is in accordance with IFRS except for book value per diluted common share, figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [ March 31, 2019 – 15%].
(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) Restructuring costs for the year ended March 31, 2020 were incurred in connection with our UK & Europe wealth management operations, as well as real estate and other integration costs
related to the acquisition of Patersons in Australia. Restructuring costs for the year ended March 31, 2019 were incurred in connection with our UK & Europe capital markets operations.
Restructuring costs for the year ended March 31, 2018 related to termination benefits as a result of the closing of certain trading operations in our UK & Europe capital markets operations, staff
reductions in our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale.
(5) Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Growth II Corp. for the year ended March 31, 2020, the Company’s equity portion of the net
loss of its investments in Canaccord Genuity Growth Corp. and Canaccord Genuity Acquisition Corp. for the year ended March 31, 2019, and the Company’s equity portion of the net loss of its
investment in Canaccord Genuity Acquisition Corp. for the year ended March 31, 2018.
(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 21.
(7) Data includes the operating results of Hargreave Hale since September 18, 2017, Jitneytrade since June 6, 2018, McCarthy Taylor since January 29, 2019, Petsky Prunier since February 13, 2019,
Thomas Miller since May 1, 2019, and Patersons since October 21, 2019.
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
D
The solid financial performance that we delivered in
fiscal 2020 reflects our efforts to increase recurring
revenue contributions from our global wealth
management businesses while intensifying our efforts
to grow our share of higher margin capital markets
activities. We have achieved a balanced business mix
that can perform in all markets.
Revenue
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
Net Income (Loss)(1)
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
($6.0)
Diluted Earnings (Loss) Per Share(1)
(C$, �scal years ended March 31)
$1,223.9
$1,190.6
$1,022.9
$879.5
$787.8
$106.3
$107.4
$81.7
$49.2
2020
2019
2018
2017
2016
($0.21)
$0.81
$0.80
$0.59
$0.32
Contents
Introduction 1
Global Performance 2
Letter from the
President & CEO 4
Letter from the
Executive Chairman 7
Canaccord Genuity
Wealth Management 8
Canaccord Genuity
Capital Markets 10
MD&A and Financials 13
Shareholder Information
Inside Back Cover
About Canaccord Genuity
Group Inc.
Through its principal subsidiaries,
Canaccord Genuity Group Inc. (the
Company) 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, the Company
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. The
Company has wealth management
offices located in Canada, the UK,
Guernsey, Jersey, the Isle of Man and
Australia. The international capital
markets division operates in North
America, the UK & Europe, Asia, Australia
and the Middle East.
Canaccord Genuity Group Inc. is publicly
traded under the symbol CF on the TSX.
(1) These figures exclude significant items. Figures
excluding significant items are non-IFRS
measures. See Non-IFRS Measures on page 14.
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
1
Global
Performance
All business units contributed to our profitability in
fiscal 2020, and this is the third consecutive year that
total firm-wide revenues have surpassed $1 billion.
$1.2B
fiscal 2020 revenue
$0.81
fiscal 2020 diluted
earnings per share(1)
$80M
returned to shareholders
in fiscal 2020
57%
fiscal 2020 EPS(1)
contributed by global
wealth management
7%
fiscal 2020 reduction
in outstanding
common shares
(1) These figures exclude significant items. Figures
excluding significant items are non-IFRS
measures. See Non-IFRS Measures on page 14.
2
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
Our Company is demonstrating the resilience and stability that we have been
working to achieve in recent years. As a result of our efforts, we were able to
return $80 million to our shareholders through dividends and share buybacks
and reduced our outstanding common shares by 7% during fiscal 2020.
Fiscal 2020 EPS(1) Contribution
by Business Segment
Income (Loss) before Income Taxes(1) –
Contributions by Business Segment
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
$59.8
$80.2
$80.4
$75.4
$62.5
$57.5
$46.4
$29.5
($10.2) $16.4
• CG Capital Markets • CG Wealth Management
Geographic Distribution of Revenue
(Percentage of total �scal year revenue)
2020
2019
2018
2017
2016
• Canada • US • Rest of World
Total Expenses as a Percentage of Revenue(1)
(Fiscal years ended March 31)
2020
2019
2018
2017
2016
89.9%
88.6%
89.2%
93.0%
100.8%
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
3
• 57% CG Wealth Management
• 43% CG Capital Markets
Fiscal 2020 Revenue
by Division
• 56% CG Capital Markets
• 42% CG Wealth Management
• 2% Corporate and Other
(1) These figures exclude significant items. Figures
excluding significant items are non-IFRS
measures. See Non-IFRS Measures on page 14.
Letter from the
President & CEO
Fellow Shareholders,
At the time of this report, the world is working
together to fight a healthcare crisis that has had an
unprecedented impact on businesses and economies
across the globe. It has also had a profound impact
on our daily lives, both personally and professionally,
and we are adapting to new ways of fostering our
connections as we support our employees and clients.
Although we could not have predicted the dramatic change in our
operating environment, the strategies that we have implemented
in recent years have served us well through the crisis and will
continue to enhance value for our business and our shareholders
well into the future.
Our firm-wide business continuity plan is designed
to ensure that we can provide uninterrupted
service for CG clients in all our businesses and
geographies, while managing our exposure to risk
and maintaining compliance with best practices
and regulatory requirements.
In recent years, we’ve made significant investments to advance
the infrastructure, technology and trading platforms across
our organization, and we rigorously stress-test our protocols,
capacity and capabilities. These critical investments have
provided resilience and flexibility for today and will continue to
support our ambitions for the future.
Within a matter of days, our teams in all geographies transitioned
to a remote work setting, with all businesses collaborating
seamlessly in a secure environment. Our trading and specialty
desks managed through heightened volatility with no technology
interruptions, and we have since been able to create thousands of
virtual touchpoints for our clients across our wealth management
and capital markets businesses.
Our commitment to investing in our people and
strengthening our firm-wide culture has enhanced
our operational resilience and made us an increasingly
stronger firm.
Our first priority was, and continues to be, protecting the health
and safety of our employees and clients. We established dedicated
response teams in each business and geography, and engaged in
frequent and transparent communications with our employees.
4
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
The response from employees across the organization has
been extraordinary, and it has been incredible to see our core
values represented so strongly. The commitment from our IT
and operations teams has exceeded all expectations. In the
days and weeks following the historic market rout, our wealth
management and capital markets teams mobilized quickly
to identify the clients that needed us most, and put forth
remarkable efforts to support them.
We are fortunate to have entered this environment
with a solid financial position, and the agility to support
our business through unprecedented market turmoil.
Our financial performance for fiscal 2020 reflects the underlying
strength and stability that we have achieved across all our
businesses and geographies.
The operating backdrop during the first half of our fiscal year
was impacted by an uncertain interest rate environment, trade
wars, and ongoing confusion surrounding Brexit. While some
of this uncertainty was alleviated mid-year, the onset of the
Covid-19 pandemic led to an abrupt market downturn late in
our fourth quarter.
There was a time when such events would have had a more
profound impact on our profitability, but I am pleased to report
that we delivered a solid financial result. Canaccord Genuity Group
Inc. earned firm-wide revenue of $1.2 billion, making fiscal 2020
the third consecutive year that our revenues have surpassed
$1 billion. Excluding significant items(1), diluted earnings per share
amounted to $0.81, a modest improvement from $0.80 in the prior
year, notwithstanding the significantly higher market volatility.
Our performance is a testament to our efforts to increase net
income contributions from our global wealth management
businesses, while intensifying our focus on growing our share
of higher margin capital markets activities, with a particular
emphasis on advisory. As you will see in the pages of this report,
we have made excellent progress against both objectives.
/ LETTER FROM THE PRESIDENT & CEO
Despite the impact of the abrupt market downturn in March, which impacted the
value of our client assets and the revenue and net income associated with them,
our global wealth management businesses contributed 57% of the diluted earnings
per share(1) from our combined operating businesses for the fiscal year. While the
value of our client assets naturally declined from their peak of $73 billion, in line
with the broader market, the responsiveness of our investment professionals in all
regions helped us to attract new client assets while limiting outflows. We anticipate
further benefits from these efforts into the coming fiscal year.
During the fiscal year, we made additional progress to support the growth of
our wealth management businesses in all regions. Our acquisition of the private
client businesses of Thomas Miller in the UK and the Isle of Man further expands
our regional footprint, while enhancing our financial planning capability. In
Canada, we continued to experience steady recruiting momentum throughout
the fiscal year as we focused on attracting high quality advisors with stable and
scalable books of business. We have been purposeful about driving collaboration
between our wealth and capital markets teams in this region, which has
contributed to improved financial stability in both segments. Expanding upon
this strategy, we welcomed Patersons Securities in October, adding significant
scale to our Australian wealth management business and expanding our national
footprint in this very important geography.
Healthy levels of client engagement and increased cross-border collaboration
supported a productive year for our global capital markets businesses, and
our efforts to diversify our revenue mix have further enhanced stability in this
segment. In the context of lower overall industry volumes for capital raising,
full-year advisory revenue improved by 46% year over year, reflecting our
organic growth initiatives and the contributions from our expanded US business.
Fiscal 2020 revenue earned by our global capital markets businesses amounted
to $689 million and the adjusted(1) pre-tax net income for the fiscal year was a
healthy $60 million, both very solid results by historical standards.
Our expanded US capital markets business contributed more than 50% of global
capital markets revenue, and this business has become an increasingly stronger
competitor in the technology and life sciences sectors, which are positioned
to benefit from the changes in our operating environment. Although revenue
in our Canadian capital markets business decreased when compared to an
exceptionally strong prior fiscal year, we continue to be a top-ranked domestic
underwriter in the country. For fiscal 2020, this team ranked #1 for IPOs and
was the #1 equities underwriter by number of deals, based on league table
data provided by FP Infomart. Looking outside of North America, the revenue
contribution from our Australian capital markets business improved markedly
in the second half of the fiscal year, attributable to increased small- and mid-
cap financing activities, with particularly strong growth in the mining sector. By
refocusing our UK & Europe capital markets operations, this business achieved
profitability for the full fiscal year and we were also able to unlock capital for
deployment into our firm-wide strengths.
We know that this
prolonged period
of uncertainty and
volatility requires
everyone in our
organization to be
nimble and adaptable.
More than ever,
we are focused on
leveraging our scale
and resources to
provide our clients
with innovative
products, advice
and solutions as we
navigate new market
realities together.
(1) These figures exclude significant items. Figures
excluding significant items are non-IFRS
measures. See Non-IFRS Measures on page 14.
Dan Daviau
President & CEO
Canaccord Genuity
Group Inc.
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
5
/ LETTER FROM THE PRESIDENT & CEO
All markets present challenges and opportunities, and
we recognize that it is our responsibility to navigate the
challenges and find the right opportunities.
We know that this prolonged period of uncertainty and volatility
requires everyone in our organization to be nimble and adaptable.
More than ever, we are focused on leveraging our scale and
resources to provide our clients with innovative products, advice
and solutions as we navigate new market realities together.
Knowing that our response in a crisis shapes our future
relationships, we are using this period of dislocation productively
to advance our collaboration and client engagement practices,
while expanding our digital capabilities to deliver excellent
experiences for our employees and clients.
I am confident that we have the foundation to make
fiscal 2021 incredibly productive.
Our diversified global platform has proven its strength in prior
cycles, and our independence affords us a level of agility that allows
us to meet the evolving needs of our clients in any market.
Although we anticipate continued fluctuations as we progress
through the Covid-19 environment, we are pleased to be
reporting positive inflows across our wealth management
businesses, reflecting demand for advice-based solutions.
Subsequent to the end of the fiscal year, we announced that
Canaccord Genuity was selected as the platform provider for
the launch of Morgan Stanley’s wealth management business in
Canada. This development speaks to the breadth and quality of
our capabilities and provides the impetus to further develop our
discount brokerage, robo-advisory and advice-based offerings, in
addition to our custody and clearing services.
In our capital markets businesses, secondary and follow-on
offerings in healthcare, technology, cannabis and mining have
been increasing, as issuers prepare for new challenges and
opportunities. Our restructuring and fixed income practices have
won several new mandates, and we expect that strategic activity
will increase over the coming year. Unbiased advice is critical in
markets like this, and we are not conflicted by the balance sheet,
in contrast to many bank and bulge firms.
Having said that, we are navigating an unprecedented and
evolving situation, and we are acutely aware of the impact
that another market downturn could have on the value of our
client assets, and the financial performance associated with
those assets. A prolonged environment of low to negative
interest rates will negatively impact the profitability connected
with lending activities in our wealth management business.
Additionally, despite a healthy pipeline of advisory activity
in our capital markets businesses, persistent volatility will
impact the timing of completions, which will reduce near-term
contributions from this segment.
We do not see these as long-term threats, and we will remain
focused on our strategic priorities and committed to operating
our business for long-term value.
We continue to be very disciplined in managing our exposure
to risk, with prudent oversight to ensure compliance with best
practices and regulatory requirements.
We will protect the strength of our balance sheet and manage
our capital prudently, just as we would in any market backdrop. In
February, we announced our intention to reduce our annual cost
base by approximately $20 million over the course of fiscal 2021.
Given the change in our operating environment, we expect to
be able to accelerate this strategy and achieve substantial cost
savings within the first half of the fiscal year. This initiative will
help us to achieve our sustainable margin growth objectives as
conditions improve.
All our decisions will be guided by our long-term values, and
we will continue to manage our business for stability and
predictability. No matter what the environment presents, we are
driven to aggressively add value for our clients and create long-
term shareholder value as we strive to emerge from this crisis as
a stronger company.
I would like to thank our employees and directors for their
ongoing commitment to our long-term strategy. And to my
fellow shareholders, I thank you for your continued support.
Wishing you safety and health,
“Dan Daviau”
Dan Daviau
President & CEO
Canaccord Genuity Group Inc.
6
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
Letter from the
Executive Chairman
As I reflect on fiscal 2020, I see the culmination of
many initiatives that we embarked on in recent years
to strengthen our business, and better insulate from
factors beyond our control.
We took steps to eliminate any barriers that were preventing us
from leading in our core focus areas, and we adjusted our business
mix towards activities which contribute to a more stable earnings
foundation. By refocusing and aligning our operations, we have
been able to strengthen our operating leverage and maintain
ample liquidity and financial flexibility. Perhaps most importantly,
we achieved a firm-wide culture of partnership and accountability,
where actions and decisions at every level are guided by our
commitment to creating enduring value for our shareholders.
While implementing these changes was uncomfortable at times,
and certain benefits were not immediately visible, the abrupt
market downturn in March served as a bold endorsement of the
value of our efforts.
Today, Canaccord Genuity is a much stronger business. This is the
third consecutive year that more than 50% of our adjusted earnings
per share has been contributed by our wealth management
businesses, reflecting our commitment to deriving a greater
portion of our earnings from stable and recurring revenue sources.
Our refocusing and alignment efforts have also made us more
productive across businesses and geographies, and firm-wide
revenue per employee has increased by 21% since fiscal 2016.
Underscoring our commitment to enhancing shareholder returns,
we returned $80 million to our shareholders during fiscal 2020.
In addition to increasing our regular quarterly common share
dividends, we have reduced our common shares outstanding by
7% since the end of fiscal 2019 through share buyback activity,
which we will continue to pursue as excess capital is available.
The stability that we achieved from growing our wealth
management businesses and increasing contributions from higher
margin capital markets activities, in addition to the advancements
to our technological and systems infrastructure, has been critical
as we navigate the unprecedented period of volatility and market
turmoil driven by the Covid-19 crisis. As a result of these efforts,
we have been able to focus on helping our clients navigate a difficult
environment while creating new opportunities for them.
I am immensely proud of our employees across the organization for
their collective efforts during a period where we have been asked
to put the welfare of many before any individual. Our resilience
has been tested in prior downturns, and I am confident that we will
emerge from this one in a position of even greater strength.
On behalf of my fellow directors, I would also like to thank Dan
and our Global Operating Committee for their leadership and
steadfast commitment to creating the stable and resilient
business that Canaccord Genuity has become. We know we have
a long and difficult road before us, but I am confident that our
defensive business mix, scale and financial position will protect
our capacity to provide continuous service for our clients as we
strive to increase the value of our Company.
I believe our business is advantageously positioned to capture
market share as we continue guiding our clients through a rapidly
changing market backdrop. Throughout the organization, we
have a robust set of assets to draw upon, and we are immensely
differentiated by our deep cross-border capabilities and
entrepreneurial agility.
As we continue to advance our business goals, we are also
committed to fostering an inclusive environment where
all employees and clients can thrive. We have made steady
progress on embedding this into our firm-wide culture, and while
our organization intuitively feels inclusive to people from all
backgrounds, we also recognize that there is a profound difference
between intention and action. We know we have more work to do,
and we are committed to continuous education and advancement
of the policies and processes that address inequality, as they
relate to both the employee and client experience.
And finally, the Board remains committed to ensuring strong
corporate governance with the benefit of diverse experience and
perspectives, as we continually strive to advance the best interests
of our shareholders. We will be nominating two additional directors
at our upcoming Annual General Meeting, to continue our tradition
of strong oversight and governance. Jill Denham will be nominated
as Lead Independent Director. Jill brings more than two decades
of North American and European financial services experience,
her expertise spanning investment banking, retail banking and
private equity, and more recently she has been active in the
financial technology segment. Eric Rosenfeld will be nominated
as an Independent Director. Eric is an accomplished professional
investor and director with experience spanning multiple industries,
and we look forward to his perspectives.
And to my fellow shareholders, we begin fiscal 2021 more
focused and determined than ever to be an outstanding business
for our employees and clients and in doing so, creating lasting
value for our investors.
Thank you for your continued support.
“David Kassie”
David Kassie
Executive Chairman
Canaccord Genuity Group Inc.
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
7
Canaccord Genuity
Wealth Management
Canaccord Genuity Wealth Management provides clients with the focused,
personalized service that they expect from a local wealth manager, differentiated by
the vast resources, expertise and support uniquely available from a global financial
institution. We are focused on driving margin growth across our wealth management
operations through the sharing of best practices globally, continuously advancing our
technological infrastructure and reducing our non-variable costs.
$60.7B in total client assets
The value of our client assets declined 17% from their
fiscal 2020 peak of $72.8 billion following the abrupt market
downturn in March 2020, but we are pleased to be reporting
positive inflows in all our geographies, reflecting increased
demand for advice-based solutions.
GLOBAL WEALTH MANAGEMENT
Since 2016, we have materially invested to support the growth of our wealth management
businesses in all geographies. As a result of this growth, client assets have increased
substantially, and Canaccord Genuity Wealth Management has become a stable and
significant contributor to firm-wide profitability and earnings.
Global Wealth Management Revenue(1)
(C$ millions, �scal years ended March 31)
Global Wealth Management Income
before Income Taxes(1)(2)
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
$511.4
$461.8
$370.3
$267.1
$246.6
2020
2019
2018
2017
2016
$29.5
$16.4
$80.2
$75.4
$57.5
(1) Beginning in Q3/20, amounts include Australia
wealth management.
(2) These figures exclude significant items. Figures
excluding significant items are non-IFRS
measures. See Non-IFRS Measures on page 14.
8
8
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
UK & EUROPE
With more than 70% of revenues derived from recurring, fee-based business, our UK & Europe wealth
management business is an important contributor to our firm-wide stability. During fiscal 2020, we continued to
expand our national footprint in the UK, while enhancing our financial planning capability with the acquisition of
the private client business of Thomas Miller.
UK & Europe Wealth Management Client Assets(1)
(C$ billions and £ billions, �scal years ended March 31)
UK & Europe Wealth Management Income
before Income Taxes(2)
(C$ millions, �scal years ended March 31)
$39.9 | £22.7
$44.2 | £25.4
$44.9 | £24.8
2020
2019
2018
2017
2016
$24.5 | £14.7
$22.8 | £12.2
$56.5
$48.5
$37.4
$27.6
$23.9
2020
2019
2018
2017
2016
CANADA
Our continuous improvement initiatives have made CG Wealth Management a very attractive destination for top industry
talent as we implement best-in-class technology, tools and solutions to help new and existing advisors grow their
businesses. During fiscal 2020, we experienced steady recruiting momentum as we focused on attracting high quality
advisors with stable and scalable books of business.
Canada Wealth Management Client Assets(1)
(C$ billions, �scal years ended March 31)
Canada Wealth Management Income (Loss)
before Income Taxes(2)
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
$9.2
$18.4
$20.7
$15.6
$13.2
2020
2019
2018
2017
2016
$2.0
($7.5)
$22.7
$26.8
$20.2
AUSTRALIA
In October 2019, we welcomed Patersons Securities
Limited, a premier Australian financial services business
with operations in wealth management and capital
markets. This development has added significant scale
to our wealth management business and given us an
expanded national footprint in Australia from which to
explore additional growth over time. We have had an
excellent experience integrating this team.
(1) Assets under administration, management and management contract.
(2) These figures exclude significant items. Figures excluding significant items
are non-IFRS measures. See Non-IFRS Measures on page 14.
(3) Australia wealth management revenue was previously recorded as part of
Canaccord Genuity Capital Markets Australia. Commencing in Q3/20, it is
disclosed as a separate operating segment.
Australia Wealth Management Revenue(3)
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
$4.4
$5.0
$5.2
$6.1
$23.9
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
9
Canaccord Genuity
Capital Markets
Our global capital markets operations provide investment banking, advisory, sales, trading,
equity research and fixed income services to corporate and institutional clients around
the world. Independent advice and a globally integrated service model are the hallmarks of
our ability to lead the market in key sectors of the global economy. During fiscal 2020, we
continued to diversify our revenue streams and establish leadership in our core focus sectors,
improving our stability through market cycles.
$51.7B
raised for global growth
companies in fiscal 2020
We are leaders in facilitating a robust
market for small and mid-size
companies in emerging growth and
value sectors. During the fiscal year,
we participated in over 370 transactions
for global growth companies.
46%
year-over-year increase in
advisory revenues
Our specialized expertise in key sectors
of the economy allows us to see ahead
of the curve and unlock opportunities
for companies at every stage of the
business cycle.
Global Capital Markets Revenue
(C$ millions, �scal years ended March 31)
2020
2019
2018
2017
2016
$689.5
$704.3
$637.6
$597.2
$532.3
In the context of lower overall industry
volumes for capital raising driven by
global growth concerns, trade tensions
and the unprecedented market
disruption attributable to the onset
of the Covid-19 crisis, our full-year
revenue amounted to $689.5 million,
a solid result by historical standards.
Healthy levels of client engagement and cross-border
collaboration supported a productive fiscal year for all
activities in our global capital markets business.
10
10
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
Our efforts to improve product and revenue diversity in our capital
markets business are helping us improve our competitive position,
while simultaneously enhancing value for our shareholders.
DIVERSE REVENUE STREAMS
IMPROVE STABILITY
Fiscal 2020 Capital Markets
Revenue by Region
By staying focused in our established areas of strength,
we were able to increase revenue from advisory activities
by 46% year over year to a record $206 million. When the
dramatic market downturn in March impacted our capital
raising and M&A activities, our restructuring teams stepped
forward to win several new mandates and our trading and
specialty desks successfully managed through the volatility,
placing CG ahead of our mid-market peers.
BUILDING UPON OUR ESTABLISHED
MID-MARKET STRENGTHS
Fiscal 2020 saw increased contributions from our activities
in the life sciences, technology and mining sectors, which
are positioned to benefit from the changes in our operating
environment. We also continued to establish success
in alternative financing vehicles, such as SPACs, which
provide an attractive option for private companies looking
for access to public capital. We take very seriously our role
in helping small- and mid-cap companies access the capital
and relationships that are essential to helping them move
their businesses forward and confront new challenges.
PROVIDING OUTSTANDING EXPERIENCES
FOR OUR CLIENTS
With support from a unified network of sales, trading,
research and banking professionals, Canaccord Genuity
has been a leader in facilitating lasting connections
between global growth companies and the investors who
follow them. Since transitioning to a remote working
environment, we have created thousands of virtual
touchpoints for our clients through online conferences,
corporate access roadshows, and timely and informative
market updates. We are using this experience to advance
our collaboration and client engagement practices as we
adjust to new market realities.
• 50.8% United States
• 29.7% Canada
• 13.9% UK, Europe and Dubai
• 5.6% Australia
Fiscal 2020 Capital Markets
Revenue by Activity
Investment Banking
• 29.8% Advisory
• 28.1%
• 22.1% Commissions and Fees
• 15.8% Trading
• 4.2%
Interest and Other
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
11
A CULTURE OF PARTNERSHIP AND ACCOUNTABILITY
The Canaccord Genuity brand is built on the idea that employees
across our organization are driven to always do better – for our
clients, our shareholders and our colleagues. By steadily evolving our
platforms and expanding our client focus while staying true to our
independent roots, we have set new benchmarks for excellence and
we have become an increasingly stronger company.
/ We are partners
/ We are entrepreneurial
/ We are collegial
/ We work hard
/ We operate with integrity
/ We are earnings focused
OUR COMMITMENT
Our business and our industry are certainly not immune to the economic and
financial impacts of Covid-19, and we are preparing for significant near-term
headwinds. No matter what the environment presents, we will remain committed
to aggressively adding value for our clients while creating long-term shareholder
value, as we strive to emerge from this crisis as a stronger company.
/ We will continue to be guided by our long-term values and manage
our business for stability and predictability.
/ We will commit to staying agile and innovative, so that we can move
swiftly into new areas of opportunity.
/ We will protect the strength of our balance sheet and manage our
capital prudently, just as we would in any market backdrop.
While it is too early to predict the shape of the recovery, we are confident
that we have the appropriate business mix, competitive position and
culture to make our coming fiscal year very productive.
12
12
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
13
Financial Review
14
14
15
17
18
19
20
25
29
38
39
40
40
41
42
Management’s Discussion and Analysis
Non-IFRS Measures
Business Overview
Core Business Performance Highlights for Fiscal 2020
Market Environment During Fiscal 2020
Fiscal 2021 Outlook
Financial Overview
Quarterly Financial Information
Business Segment Results
Financial Condition
Off-Balance Sheet Arrangements
Liquidity and Capital Resources
Preferred Shares
Outstanding Share Data
Share-Based Payment Plans
44
45
49
51
51
51
55
55
55
56
58
105
111
Related Party Transactions
Critical Accounting Policies and Estimates
Financial Instruments
Future Changes in Accounting Policies and Estimates
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
Supplemental Information
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 the potential continued impacts of the coronavirus (COVID-19) pandemic
on our business operations, financial results and financial condition and on the global economy and financial market conditions,
and Canaccord Genuity Group’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. Disclosure identified as an “Outlook” including the section entitled
“Fiscal 2021 Outlook” contains forward-looking information. 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 and the potential continued impacts of the coronavirus (COVID-19) pandemic on our business operations,
financial results and financial condition and on the global economy and financial market conditions discussed from time to time in
the Company’s interim condensed and annual consolidated financial statements and its annual report and Annual Information
Form (AIF) filed on www.sedar.com as well as the factors discussed in the sections entitled “Risk Management” in this
Management’s Discussion and Analysis (MD&A) and “Risk Factors” in the AIF, which include market, liquidity, credit, operational,
legal, cyber 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 2021 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 AIF filed on www.sedar.com. The preceding list is not exhaustive of all possible risk factors
that may influence actual results. Readers are also 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.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
14
Management’s Discussion and Analysis
Fiscal year 2020 ended March 31, 2020 – this document is dated June 2, 2020.
The following discussion of Canaccord Genuity Group Inc.’s financial condition, financial performance and cash flows is provided
to enable a reader to assess material changes in the financial condition, financial performance and cash flows for the year ended
March 31, 2020 compared to the preceding fiscal year, with an emphasis on the most recent year. Unless otherwise indicated
or the context otherwise requires, the “Company” or “Canaccord Genuity Group” refers to Canaccord Genuity Group Inc. and its
direct and indirect subsidiaries. The Management’s Discussion and Analysis (MD&A) should be read in conjunction with the audited
consolidated financial statements for the years ended March 31, 2020 and 2019, beginning on page 58 of this report. The
Company’s financial information is expressed in Canadian dollars unless otherwise specified. The Company’s consolidated financial
statements for the years ended March 31, 2020 and 2019 are prepared in accordance with International Financial Reporting
Standards (IFRS).
Non-IFRS Measures
Certain non-IFRS measures are utilized by the Company 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, and figures that exclude significant items.
The Company’s capital is represented by common and preferred 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 adjusted for assumed proceeds from the exercise
of options and warrants, issuance of common shares in connection with deferred consideration related to acquisitions, settlement
of a promissory note issued as purchase consideration in shares at the Company’s option, and conversion of convertible
debentures divided by the number of diluted common shares that would then be outstanding including estimated amounts in
respect of share issuance commitments including options, warrants, other share-based payment plan, deferred consideration
related to acquisitions, convertible debentures and a promissory note, as applicable, and adjusted for shares purchased or
committed to be purchased under the normal course issuer bid and not yet cancelled, and estimated forfeitures in respect of
unvested share awards under share-based payment plans.
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 – Australia and AUM – UK & Europe are the market value of
client assets managed and administered by the Company from which the Company earns commissions and 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. The Company’s method of calculating AUA – Canada,
AUM – Canada, AUM – Australia and AUM – UK & Europe 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 the Company and is included
in AUA – Canada.
Financial statement items that exclude significant items are non-IFRS measures. Significant items include restructuring costs,
amortization of intangible assets acquired in connection with a business combination, impairment of goodwill and other assets
and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions,
gains or losses related to business disposals including recognition of realized translation gains on the disposal of foreign
operations, certain accounting charges related to the change in the Company’s long-term incentive plan (LTIP) as recorded with
effect on March 31, 2018, certain incentive-based costs related to the acquisitions and growth initiatives in the UK & Europe wealth
management business, loss related to the extinguishment of convertible debentures as recorded for accounting purposes as
well as certain expense items, typically included in development costs, which are considered by management to reflect a singular
charge of a non-operating nature. See the Selected Financial Information Excluding Significant Items table on page 21.
Management believes that these non-IFRS measures allow for a better evaluation of the operating performance of the Company’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 the
Company’s core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting
effects of these items do in fact reflect the underlying financial results of the Company’s business; thus, these effects should not
be ignored in evaluating and analyzing the Company’s financial results. Therefore, management believes that the Company’s
IFRS measures of financial performance and the respective non-IFRS measures should be considered together.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 15
Business Overview
Through its principal subsidiaries, Canaccord Genuity Group 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, the Company 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 Genuity Group has wealth management offices located in Canada, the UK,
Guernsey, Jersey, the Isle of Man and Australia. Canaccord Genuity Capital Markets, the Company’s international capital markets
division, operates in North America, the UK & Europe, Asia, Australia and the Middle East.
Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX. Canaccord Genuity Series A Preferred Shares
are listed on the TSX under the symbol CF.PR.A. Canaccord Genuity Series C Preferred Shares are listed on the TSX under the symbol
CF.PR.C. The Company’s 6.25% Convertible Unsecured Senior Subordinated Debentures are listed on the TSX under the symbol
CF.DA.A.
Operating results of Jitneytrade Inc. and Finlogik Inc. (collectively referred to as “Jitneytrade”) since the closing date of June 6,
2018 are included as part of Canaccord Genuity Capital Markets Canada. In addition, operating results of Petsky Prunier LLC
(“Petsky Prunier”) since the closing date of February 13, 2019 are included as part of Canaccord Genuity Capital Markets US.
Included as part of Canaccord Genuity UK & Europe Wealth Management segment are the operating results of Hargreave Hale
Limited (“Hargreave Hale”) since September 18, 2017, the operating results of McCarthy Taylor Limited (renamed as CG McCarthy
Taylor Limited) (“McCarthy Taylor”) since the closing date of January 29, 2019, and the operating results of Thomas Miller Wealth
Management Limited (renamed as CG Wealth Planning Limited) (“Thomas Miller”) since the closing date of May 1, 2019.
Commencing in Q3/20, Canaccord Genuity Australia wealth management segment includes the operating results of Patersons
Securities Limited (renamed as Canaccord Genuity Financial Limited) (“Patersons”) since the closing date of October 21, 2019.
ABOUT CANACCORD GENUITY GROUP INC.’S OPERATIONS
Canaccord Genuity Group Inc.’s operations are divided into two business segments: Canaccord Genuity Capital Markets (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 the Company’s institutional,
corporate and private clients. The Company’s administrative segment is referred to as Corporate and Other.
Canaccord Genuity Capital Markets
Canaccord Genuity Capital Markets is the global capital markets division of Canaccord Genuity Group Inc., offering institutional
and corporate clients idea-driven investment banking, merger and acquisition, research, sales and trading services with capabilities
in North America, the UK & Europe, Asia, Australia and the Middle East. We are committed to providing valued services to our
clients throughout the entire lifecycle of their business and operating as a gold standard independent investment bank – expansive
in resources and reach, but targeted in industry expertise, market focus and individual client attention.
Canaccord Genuity Wealth Management
Canaccord Genuity 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 its markets. The Company’s wealth management division now has Investment Advisors (IAs) and professionals
in Canada, the UK, Jersey, Guernsey, the Isle of Man and Australia.
Corporate and Other
Canaccord Genuity Group’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 Capital Markets or Canaccord Genuity Wealth Management divisions. Also
included in this segment are the Company’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
of Canaccord Genuity Group Inc.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
16 Management’s Discussion and Analysis
Corporate structure
Canaccord Genuity
Group Inc.
US
sub-group
UK and Europe
Wealth Management
sub-group
UK and Europe
Capital Markets
sub-group
Australia
sub-group
80%
Jitneytrade
Inc.
(Canada)
Canaccord
Genuity Corp.
(Canada)
Canaccord
Genuity Wealth
Management
(USA) Inc.
Canaccord
Genuity
Petsky
Prunier LLC
(US)
Canaccord
Genuity LLC
(US)
Canaccord
Genuity Wealth
(International)
Limited
(Channel Islands)
Canaccord
Genuity
Wealth Limited
(UK)
CG McCarthy
Taylor Ltd.
Canaccord
Genuity
(Dubai) Ltd.
Canaccord
Genuity
Limited
(UK)
Canaccord
Genuity Asia
(China and
Hong Kong)
Canaccord
Genuity
SG Pte. Ltd.
(Singapore)
Canaccord
Genuity
(Australia)
Limited
Canaccord
Genuity
Financial
Limited
(Australia)
Hargreave
Hale
Limited
(UK)
CG Wealth
Planning Ltd.
(formerly Thomas
Miller Wealth
Management Limited)
The chart shows principal operating companies of Canaccord Genuity Group as of March 31, 2020.
The Company owns 80% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd., and through that ownership an 80% indirect interest in Canaccord Genuity (Australia) Limited and
Canaccord Genuity Financial Limited [previously Patersons Securities Limited] [March 31, 2019 – 80%], but for accounting purposes, as of March 31, 2020, the Company is considered to have an 85%
interest because of shares held in an employee trust controlled by Canaccord Financial Group (Australia) Pty Ltd. [March 31, 2019 – 85%].
BUSINESS ACTIVITY
Our business is affected by the overall condition of the worldwide debt and equity markets.
The timing of revenue recognition can also materially affect the Company’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 for the recognition of such transactions in our capital markets business.
The Company has taken steps 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. To improve recurring revenue streams and offset the inherent
volatility of the capital markets business, the Company has taken steps to increase the scale of its global wealth management
operations. Historically, the Company’s diversification across major financial centres has allowed it to benefit from strong equity
markets in certain regions and improve our capability for identifying and servicing opportunities in regional centres and across our
core focus sectors.
IMPACT OF CHANGES IN CAPITAL MARKETS ACTIVITY
As a brokerage firm, the Company 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, and to some degree Asia and Australia. Canaccord Genuity Group’s
long- term international business development initiatives over the past several years have laid a solid foundation for revenue
diversification. A disciplined capital strategy allows the Company to remain competitive in today’s changing financial landscape.
During fiscal 2020, the Company’s capital markets activities were focused on the following sectors: Healthcare & Life Sciences,
Technology, Industrials, Financials, Metals & Mining, Energy, Diversified, Consumer & Retail, Real Estate and Sustainability. 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 GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 17
Core Business Performance Highlights for Fiscal 2020
CANACCORD GENUITY WEALTH MANAGEMENT (GLOBAL)
Globally, Canaccord Genuity Wealth Management generated $511.4 million in revenue during fiscal 2020 and, excluding significant
items, recorded net income before taxes of $80.2 million.(1)
• Canaccord Genuity Wealth Management (North America) generated $209.6 million in revenue and, after intersegment allocations
and taxes, recorded net income before taxes of $22.7 million
• Wealth management operations in the UK & Europe generated $278.0 million in revenue and, after intersegment allocations
and excluding significant items, recorded net income before taxes of $56.5 million in fiscal 2020(1)
• Wealth management operations in Australia generated earned revenue of $23.9 million and, after intersegment allocations and
excluding significant items, recorded net income before taxes of $1.0 million in fiscal 2020(1)
• Client assets were $60.7 billion at March 31, 2020, representing a decrease of $5.0 billion or 7.6% from $65.7 billion at
March 31, 2019 and a 16.6% decrease from $72.8 billion at December 31, 2019. The decline in client assets during the fourth
quarter of fiscal 2020 reflects the broader market declines in equity markets arising from uncertainties in connection with the
COVID-19 pandemic which arose during that period. Client assets across the individual business units were:
• Client assets in North America were $18.4 billion as of March 31, 2020, a decrease of $2.2 billion or 10.8% from March 31,
2019
• Client assets in the UK & Europe were $39.9 billion (£ 22.7 billion) as at March 31, 2020, a decrease of $4.3 billion
(£ 2.7 billion) or 9.8% from $44.2 billion (£25.4 billion) at the end of the previous fiscal year.
• Client assets in Australia held in our investment management platforms were $2.4 billion as at March 31, 2020.
CANACCORD GENUITY CAPITAL MARKETS
Globally, Canaccord Genuity Capital Markets generated revenue of $689.5 million, and excluding significant items, recorded net
income before taxes of $59.8 million.(1)
• Canaccord Genuity Capital Markets led 185 transactions globally, each over C$1.5 million, to raise total proceeds of C$9.7 billion
during fiscal 2020.
• During fiscal 2020 Canaccord Genuity Capital Markets participated in a total of 373 investment banking transactions globally,
raising total proceeds of $51.7 billion
SUMMARY OF CORPORATE DEVELOPMENTS
On May 1, 2019, the Company completed its acquisition of Thomas Miller Wealth Management Limited and the private client
investment management business of Thomas Miller Investment (Isle of Man) Limited.
On August 7, 2019 at the fiscal 2019 Annual General Meeting of Shareholders, Sally Tennant, OBE, was elected to the Company’s
Board of Directors as an independent director. The Company has eight directors, six of whom are independent.
In a substantial issuer bid which commenced on July 3, 2019, and expired on August 9, 2019, the Company made an offer to
repurchase for cancellation up to $40.0 million of its common shares. The offer was made by way of a “modified Dutch auction”,
which allowed shareholders who chose to participate in the offer to individually select the price, within a price range of not less than
$5.50 per common share and not more than $6.30 per common share (in increments of $0.10 per common share), at which
they were willing to sell their common shares. Upon expiry of the offer, the Company determined that $5.50 was the lowest purchase
price that allowed it to purchase the maximum number of common shares properly tendered to the offer, and not properly
withdrawn, having an aggregate purchase price of $40.0 million. The Company therefore purchased for cancellation 7,272,727 of
its common shares at a purchase price of $5.50 per share, representing approximately 6.28% of the issued and outstanding
common shares on a non-diluted basis at July 3, 2019. These shares were cancelled effective August 19, 2019.
On August 12, 2019, the Company filed a notice to renew the normal course issuer bid (NCIB) to provide the Company with the
choice to purchase up to a maximum of 5,423,872 of its common shares during the period from August 15, 2019 to August 14,
2020 through the facilities of the TSX and on alternative trading systems in accordance with the requirements of the TSX. The
purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares for cancellation. The
maximum number of shares that may be purchased under the current NCIB represents 5.0% of the Company’s outstanding common
shares at the time of the notice. There were 7,272,727 shares purchased and cancelled under a substantial issuer bid that
commenced on July 3, 2019 and completed on August 9, 2019. There were an additional 1,467,656 shares purchased and
cancelled under the current NCIB during the year ended March 31, 2020.
On October 21, 2019, through its Australian business, the Company completed its acquisition of Patersons Securities Limited,
increasing the scale of the Company’s wealth management business in Australia and establishing a significant platform for
expansion. Patersons Securities Limited has now been renamed Canaccord Genuity Financial Limited.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
(2) See Non-IFRS Measures on page 14.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
18 Management’s Discussion and Analysis
During Q4/20, the COVID-19 pandemic led to significant disruptions in the global financial markets and economies around the
world. This disruption led to significant declines in the broader equity markets and, in turn, declines in the equity portfolios of our
wealth management clients. Accordingly, fee-based revenues as determined based on the value of client assets as of
March 31, 2020 decreased in a corresponding fashion, although this decrease was partially offset by increased commission
revenue generated through higher levels of trading activity. Revenue generated through trading by institutional clients, market-
making and other trading activity was also positively impacted by the volatility in the equity markets at the end of Q4/20. The extent
to which the Company’s business and financial condition will continue to be affected by COVID-19 is uncertain and will depend
on future developments including the duration and spread of the pandemic and the impact of related controls and restrictions
imposed by various government and regulatory authorities. If the uncertainty in the market environment continues and if equity
values remain lower for an extended period of time then the Company’s revenue from all sources, including investment banking and
advisory activity as well as trading, fees and commission-based activity, and the corresponding effect of that reduced revenue on
the Company’s results of operations may be negatively impacted.
Market Environment During Fiscal 2020:
Economic backdrop
Throughout our 2020 fiscal year, financial markets remained focused on reflation efforts by the Federal Reserve, and the potential
for a US-China trade deal. We entered the fourth fiscal quarter with a stabilizing, yet subdued outlook for earnings growth. In
March 2020 equity markets sold off sharply driven by the COVID-19 outbreak and by lockdowns in China, and eventually worldwide.
Liquidity and credit backstops have been delivered to businesses by various governments and governmental authorities and
agencies to contain solvency risk while income backstops have been provided to consumers to bridge the income gap until economic
activity returns to normal.
Across the broader markets, the S&P 500, S&P/TSX and the MSCI Emerging Market index declined 7.0 %, 14.2 % and 12.7 %
respectively in fiscal 2020. The decline in demand led commodities sharply lower (-41.0 %) and hurt the Canadian dollar against
the U.S. dollar (-5.1 %). Meanwhile, US Treasury bonds (+21.5 %) benefitted from a flight to safety.
Government and central bank actions, coupled with an anticipated plateau in COVID-19 infection rates eventually reassured
investors, allowing equity markets to rebound from oversold and undervalued conditions as we start our 2021 fiscal year.
Investment banking and advisory
Small- and mid-cap equities underperformed relative to large-cap equities during the fourth quarter of fiscal 2020. We expect
that bold monetary/fiscal reflation from central banks and governments will continue to underpin commodity prices. As such, the
bull market in precious metals and underlying equities is expected to persist and the industrial metals recovery should come later
and coincide with future fiscal stimulus targeting infrastructure spending. With medical cannabis having been declared essential
by US and Canadian governments through the COVID-19 pandemic, the industry continues to provide opportunities as many markets
see development and attractive long-term growth. We are seeing a reacceleration of follow-on activity in the healthcare sector,
primarily in medtech and diagnostics. As working-from-home becomes the new normal, the e-commerce and digital adoption cycles
have accelerated, providing growth companies in the technology and healthcare IT sectors with new market opportunities.
Overall, we expect that the current environment should continue to provide opportunities for our investment banking and advisory
activities in our core areas of mid-market expertise.
Index Value at End of
Fiscal Quarter
Q4/19
Q1/20
Q2/20
Q3/20
Q4/20
2019-03-29
(Y/Y)
2019-06-28
(Y/Y)
2019-09-30
(Y/Y)
2019-12-31
(Y/Y)
2020-03-31
(Y/Y)
S&P IFCI Global Small Cap
S&P IFCI Global Large Cap
262.4 -14.3%
-8.7%
238.3
258.7
239.3
-6.8%
0.0%
244.1
227.4
-6.1%
-3.8%
267.1 12.1%
253.0 15.7%
191.9 -26.9%
194.0 -18.6%
(Q/Q)
-28.2%
-23.3%
Our capital-raising and advisory activities are primarily focused on small- and mid-capitalization companies in specific growth
sectors of the global economy. These sectors may experience growth or downturns independent of broader economic and market
conditions, and government regulation can also have a more profound impact on capital formation for smaller companies. Volatility
in the business environment for these industries or in the market for securities of companies within these industries in the
regions where we operate could adversely affect our financial results and ultimately, the market value of our shares. Advisory
revenues are primarily dependent on the successful completion of merger, acquisition and restructuring mandates. The projected
easing of confinement measures related to the COVID-19 pandemic could lead to a second wave of infection, therefore, the
length and magnitude of the economic recovery over the next fiscal year remain uncertain. We are preparing for a more challenging
business environment and a slowing in small and mid-market M&A and capital raising activity. However, our large sectoral and
geographical breadth should mitigate downside risk to our investment banking and advisory operations.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 19
Trading
Trading activities in our core focus areas advanced during fiscal 2020 when compared to year-ago levels. Increased market
volatility toward the end of the fourth quarter prompted investors to adjust their asset mix, sector and company weights due to a
rapidly changing economic landscape. This performance was achieved despite the underperformance of small- and mid-cap equities
in some of the markets in which we operate. Looking ahead, we expect that easing lockdowns coupled with hyper reflation
measures targeting the economy should help support commodity prices and that resource-centric small and mid-cap stocks will
benefit from this environment.
Average Value During Fiscal
Quarter/Year
Russell 2000
S&P 400 Mid Cap
FTSE 100
MSCI EU Mid Cap
S&P/TSX
Q4/19
Q1/20
Q2/20
Q3/20
29-Mar-19
(Y/Y) 28-Jun-19
(Y/Y) 30-Sep-19
(Y/Y) 31-Dec-19
(Y/Y) 31-Mar-20
1509.0
1845.1
7061.3
1027.2
15621.7
-2.9% 1549.0
-3.6% 1917.1
-4.0% 7357.4
-7.0% 1076.6
-0.8% 16374.1
-3.7% 1534.2
-0.8% 1922.5
-2.5% 7359.4
-3.5% 1083.4
3.2% 16472.7
-9.7% 1590.6
-4.4% 1985.2
-2.6% 7329.4
-3.6% 1137.9
1.0% 16780.2
6.3% 1508.0
8.8% 1871.8
4.8% 6867.8
12.4% 1095.3
11.6% 16204.3
Q4/20
(Q/Q) 31-Mar-20
-5.2%
-5.7%
-6.3%
-3.7%
1544.4
1926.8
7187.2
1105.6
-3.4% 16487.2
(Y/Y)
-0.1%
1.4%
-2.7%
6.6%
3.7%
FY20
(Y/Y)
-1.5%
1.8%
-0.2%
4.9%
5.3%
Global wealth management
Investors worldwide suffered from increased volatility due to the COVID-19 pandemic. The S&P 500, S&P/TSX and the MSCI
Emerging Market indices declined 19.6 %, 20.9 % and 19.0 % respectively on a quarter-over-quarter basis during the three-month
period. On a year-over-year basis, equity market losses were less pronounced with declines of 7.0 %, 14.2 % and 12.7 % owing
to a lower base effect. Meanwhile, treasury bonds (+21.5 % year over year) offered some protection for diversified portfolios.
Although clients’ asset values were negatively impacted in-line with the broader market at the end of fiscal 2020, a diversified
portfolio of stocks and bonds has provided stability against an unprecedented backdrop. When considering the addition of new
investment advisors and client assets to our platform, the decline in client assets has been marginal during fiscal 2020 and entirely
market driven.
Total Return (excl. currencies)
S&P 500
S&P/TSX
MSCI EMERGING MARKETS
MSCI WORLD
S&P GS COMMODITY INDEX
US 10-YEAR T-BONDS
CAD/USD
CAD/EUR
FISCAL 2021 Outlook
Q4/19
Change
(Q/Q)
13.6%
13.3%
9.9%
12.3%
15.0%
3.0%
2.2%
4.5%
Q1/20
Change
(Q/Q)
4.3%
2.6%
0.3%
3.8%
-1.4%
4.4%
1.9%
0.6%
Q2/20
Change
(Q/Q)
1.7%
2.5%
-1.9%
0.1%
-4.2%
3.8%
-1.1%
3.1%
Q3/20
Change
(Q/Q)
9.1%
3.2%
9.6%
9.1%
8.3%
-1.9%
1.9%
-0.9%
Q4/20
Change
(Q/Q)
-19.6%
-20.9%
-19.0%
-21.3%
-42.3%
14.3%
-7.6%
-6.1%
Fiscal
2020
Change
-7.0%
-14.2%
-12.7%
-10.8%
-41.0%
21.5%
-5.1%
-3.5%
The various monetary and fiscal packages delivered by world central banks and governments appear to have ringfenced the
world economy against a more pronounced liquidity/solvency crisis. That said, as lockdowns are being eased globally, there may
be future downside risk if infection rates of COVID-19 increase or do not subside. Otherwise, we expect the manufacturing sector will
lead consumption as a recovery takes hold with physical distancing measures having a repressive impact on the service economy.
The next fiscal stimulus announcements, whether in the US, Europe or China, are expected to target infrastructure spending
where the economic multiplier effect is optimal. As such, we view commodities and other inflation-sensitive assets as main
beneficiaries of hyper monetary and fiscal reflation measures as demand recovers. We believe this environment will support our
agency trading activities, as investors shift their asset mix, sector and company weights accordingly. We expect that our wealth
management business will continue to grow client assets as markets increasingly look toward an economic and earnings recovery in
calendar 2021. Finally, despite subdued activity levels at the start of fiscal 2021, we expect sustained investment banking and
advisory activities as companies in our core focus sectors look to raise capital, restructure, merge or acquire new companies in order
to benefit from perceived opportunities that the next business cycle is expected to provide.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
20 Management’s Discussion and Analysis
Financial Overview
SELECTED FINANCIAL INFORMATION(1)(2)(7)
(C$ thousands, except per share and % amounts, and number
of employees)
2020
2019
2018
2020/2019
change
For the years ended March 31
Canaccord Genuity Group Inc. (CGGI)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Expenses
Compensation expense
Other overhead expenses(3)
Restructuring costs(4)
Acquisition-related costs
Loss on extinguishment of convertible debentures
Acceleration of long-term incentive plan expense
Share of loss of an associate(5)
Total expenses
Income before income taxes
Net income
Net income attributable to CGGI shareholders
Non-controlling interests
Earnings per common share – basic
Earnings per common share – diluted
Dividends per common share
Dividends per Series A Preferred Share
Dividends per Series C Preferred Share
Excluding significant items(6)
Total revenue
Total expenses
Income before income taxes
Net income
Net income attributable to CGGI shareholders
Net income attributable to non-controlling interests
Earnings per common share – diluted
Balance sheet data
Total assets
Total liabilities
Non-controlling interests
Total shareholders’ equity
Number of employees
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
586,884 $
236,962
206,507
108,834
63,690
20,990
$
556,475
294,241
142,228
125,830
51,008
20,785
$
461,937
282,195
122,372
113,921
27,875
14,577
1,223,867
1,190,567
1,022,877
738,313
383,527
1,921
(124)
—
—
207
716,625
356,240
13,070
3,064
8,608
—
304
1,123,844
1,097,911
100,023
86,554 $
86,490 $
64 $
0.78 $
0.65 $
0.20 $
0,9712 $
1.2482 $
92,656
71,582
70,530
1,052
0.58
0.48
0.20
0.9712
1.2482
$
$
$
$
$
$
$
$
625,853
298,250
7,643
6,732
—
48,355
298
987,131
35,746
17,077
13,024
4,053
0.04
0.03
0.15
0.9712
1.2482
1,223,867 $ 1,190,567
1,100,810 $ 1,054,981
135,586
107,355
106,303
1,052
0.80
123,057 $
106,323 $
105,895 $
428 $
0.81 $
$ 1,022,877
912,270
$
110,607
$
81,657
$
77,604
$
4,053
$
0.59
$
5,956,195 $ 4,749,294
5,027,421 $ 3,870,934
1,997
876,363
2,112
156
928,618
2,308
$ 4,020,736
3,165,813
13,571
841,352
1,956
$
$
$
$
$
$
$
$
$
$
$
$
30,409
(57,279)
64,279
(16,996)
12,682
205
33,300
21,688
27,287
(11,149)
(3,188)
(8,608)
—
(97)
25,933
7,367
14,972
15,960
(988)
0.20
0.17
—
33,300
45,829
(12,529)
(1,032)
(408)
(624)
0.01
1,210,031
1,156,487
(1,841)
55,385
196
5.5%
(19.5)%
45.2%
(13.5)%
24.9%
1.0%
2.8%
3.0%
7.7%
(85.3)%
(104.0)%
(100.0)%
—
(31.9)%
2.4%
8.0%
20.9%
22.6%
(93.9)%
34.5%
35.4%
—
2.8%
4.3%
(9.2)%
(1.0)%
(0.4)%
(59.3)%
1.3%
25.4%
29.9%
(92.2)%
6.0%
9.3%
(1) Data is in accordance with IFRS except for book value per diluted common share, figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [ March 31, 2019 – 15%].
(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) Restructuring costs for the year ended March 31, 2020 were incurred in connection with our UK & Europe wealth management operations, as well as real estate and other integration costs related
to the acquisition of Patersons in Australia. Restructuring costs for the year ended March 31, 2019 were incurred in connection with our UK & Europe capital markets operations. Restructuring
costs for the year ended March 31, 2018 related to termination benefits as a result of the closing of certain trading operations in our UK & Europe capital markets operations, staff reductions in
our Canadian and US capital markets operations, as well as real estate costs related to the acquisition of Hargreave Hale.
(5) Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Growth II Corp. for the year ended March 31, 2020, the Company’s equity portion of the net loss of
its investments in Canaccord Genuity Growth Corp. and Canaccord Genuity Acquisition Corp. for the year ended March 31, 2019, and the Company’s equity portion of the net loss of its investment in
Canaccord Genuity Acquisition Corp for the year ended March 31, 2018.
(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 below.
(7) Data includes the operating results of Hargreave Hale since September 18, 2017, Jitneytrade since June 6, 2018, McCarthy Taylor since January 29, 2019, Petsky Prunier since February 13,
2019, Thomas Miller since May 1, 2019, and Patersons since October 21, 2019.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 21
SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)
(C$ thousands, except per share and % amounts)
2020
2019
2018
2020/2019
change
Total revenue per IFRS
Total expenses per IFRS
$ 1,223,867 $ 1,190,567
$ 1,123,844 $ 1,097,911
$ 1,022,877
987,131
$
$
$
33,300
25,933
2.8%
2.4 %
For the years ended March 31
Expenses
Significant items recorded in Canaccord Genuity Capital Markets
Amortization of intangible assets
Acquisition-related costs
Restructuring costs
Acceleration of long-term incentive plan expense
Significant items recorded in Canaccord Genuity Wealth
Management
Amortization of intangible assets
Restructuring costs
Acquisition-related costs
Acceleration of long-term incentive plan expense
Development costs
Incentive based payments related to acquisitions(2)
Significant items recorded in Corporate and Other
Loss on convertible debentures
Acceleration of long-term incentive plan expense
Total significant items
Total expenses excluding significant items
Net income before income taxes – adjusted
Income tax expense – adjusted
Net income – adjusted
Net income attributable to common shareholders, adjusted
Earnings per common share – basic, adjusted
Earnings per common share – diluted, adjusted
9,167
1,806
—
—
13,940
1,921
(1,930)
—
—
(1,870)
—
—
2,496
1,976
13,070
—
11,153
—
1,088
—
245
4,294
8,608
—
23,034
1,100,810
42,930
1,054,981
$
$
$
$
123,057 $
16,734
106,323 $
96,491
0.98 $
0.81 $
135,586
28,231
107,355
96,899
1.01
0.80
$
$
$
$
2,317
—
4,704
42,399
8,273
2,939
6,732
4,058
—
1,541
—
1,898
74,861
912,270
110,607
28,950
81,657
68,011
$
0.73
0.59
$
$
6,671
(170)
(13,070)
—
2,787
n.m.
(3,018)
—
(245)
(6,164)
(8,608)
—
(19,896)
45,829
(12,529)
(11,497)
(1,032)
(408)
(0.03)
0.01
267.3%
(8.6)%
(100)%
—
25.0%
n.m.
(277.4)%
—
(100)%
(143.5)%
(100)%
—
(46.3)%
4.3%
(9.2)%
(40.7)%
(1.0)%
(0.4)%
(3.0)%
1.3%
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
(2)
n.m.: not meaningful (percentages over 300% are indicated as n.m.)
Incentive-based costs related to the acquisitions and growth initiatives in the UK & Europe wealth management business.
FOREIGN EXCHANGE
Revenues and expenses from our foreign operations are initially recorded in their respective functional currencies and translated
into Canadian dollars at exchange rates prevailing during the period. Fluctuations in foreign exchange contributed to certain changes
in revenue and expense items in Canadian dollars when compared to the applicable prior periods and should be considered
when reviewing the following discussion in respect of our consolidated results as well as the discussion in respect of Canaccord
Genuity Capital Markets and Canaccord Genuity Wealth Management UK & Europe.
GEOGRAPHIES
Our Dubai operation is included as part of Canaccord Genuity Capital Markets UK & Europe. For purposes of the discussion
provided herein the Canaccord Genuity Capital Markets operations in the UK, Europe and Dubai are referred to as “UK & Europe”.
Starting in Q1/20, our Asian based operations, including Singapore, China and Hong Kong, have been combined with our Canadian
and Australian capital markets operations to reflect management of these operating units. Also, commencing in Q3/20, our Australian
wealth management business, comprised of the operating results of Patersons since October 21, 2019 and the wealth
management business of Australia previously included as part of Canaccord Genuity Capital Markets Australia, is disclosed as a
separate operating segment in the discussions below. Comparatives have not been restated.
GOODWILL
Utilizing management’s estimates for revenue and operating performance, growth rates and other assumptions typically required
in connection with discounted cash flow models, the Company determined that there was no impairment in the goodwill and
indefinite life intangible assets associated with any of its wealth management business units in the UK & Europe or its goodwill
recorded in Canaccord Genuity Capital Markets Canada, US and Australia. Notwithstanding this determination as of March 31,
2020, changes or uncertainty in the economic environment may cause this determination to change. If the business climate changes
and the Company is unable to achieve its internal forecasts, the Company may determine that there has been impairment and
the Company may be required to record a goodwill impairment charge in future periods in respect of the Canaccord Genuity Wealth
Management business units in the UK & Europe or in respect of the goodwill recorded in Canaccord Genuity Capital Markets
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
22 Management’s Discussion and Analysis
Canada, US and Australia. Adverse changes in the key assumptions utilized for purposes of impairment testing for goodwill and
indefinite life intangible assets may result in the estimated recoverable amount of some or all of the applicable business units
declining below the carrying value with the result that impairment charges may be required. The amount of any impairment charge
would affect some or all of the amounts recorded for goodwill and indefinite life intangible assets. Any such impairment charges
would be determined after incorporating the effect of any changes in key assumptions including any consequential effects of such
changes on estimated operating income and on other factors. In addition, notwithstanding that there may be no change in the
performance estimates used by the Company for purposes of determining whether there has been any impairment in its indefinite
life intangible asset related to the Genuity brand name, in the event that the Company changes the way in which it uses that
asset, the Company may be required to record an impairment charge.
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 2020 was $1.2 billion, an increase of 2.8% or $33.3 million from fiscal 2019, marking the third consecutive
year our consolidated revenue has surpassed $1.0 billion. The increase in revenue compared to the prior year was mainly driven
by an increase in revenue generated in our global wealth management operations of $49.6 million as well as higher revenue earned
in our US capital markets operations.
Revenue in our Canaccord Genuity Capital Markets segment decreased by $14.9 million or 2.1% compared to fiscal 2019. Our
US operations generated $350.4 million of revenue in fiscal 2020, an increase of $46.8 million or 15.4% compared to last year
due to higher advisory revenue. Compared to our exceptionally strong performance during fiscal 2019, revenue in our Canadian
operations decreased by $56.0 million or 21.5%, largely due to lower investment banking and commission and fees revenue.
Our UK operations generated $96.1 million in revenue during fiscal 2020, a decrease of $12.7 million or 11.7%. Despite the overall
decline in revenue, our UK operations completed certain advisory mandates during fiscal 2020, which led to an increase of
26.5% in advisory fees revenue compared to the prior year. Our Australian operations recorded an increase of $7.0 million or
22.3% compared to fiscal 2019, mainly due to higher investment banking and advisory fees revenue earned in fiscal 2020.
Revenue from our global wealth management operations increased by $49.6 million or 10.7% compared to fiscal 2019. Revenue
in our wealth management operations in the UK & Europe increased by $23.0 million or 9.0% compared to the year ended March 31,
2019, driven mainly by a growth in fee-based revenue resulting from increased client assets during the fiscal year. Our Canadian
wealth management operations also generated $209.6 million of revenue in fiscal 2020, representing an increase of $2.7 million
or 1.3% over the prior year. In addition, there was $23.9 million of revenue generated in our Australian wealth management
operations, an increase of $22.8 million compared to fiscal 2019 as a result of the acquisition of Patersons during Q3/20 (wealth
management revenue in Australia has been recorded under capital markets prior to Q3/20).
Commissions and fees revenue is primarily generated from private client trading activity and institutional sales and trading.
Revenue generated from commissions and fees increased by $30.4 million or 5.5% from fiscal 2019 to $586.9 million in fiscal
2020. The increase was driven by higher commissions and fees revenue generated in our UK & Europe and Australia wealth
management operations. Partially offsetting the increase was a decline of $23.0 million or 13.1% in commissions and fees revenue
generated in our capital markets operations compared to fiscal 2019.
Revenue generated from investment banking activities decreased by $57.3 million or 19.5% to $237.0 million in fiscal 2020,
compared to $294.2 million in fiscal 2019, as a result of a decline in equity capital markets activities. All of our core operating
regions experienced decreases in investment banking revenue except for Australia, which generated $21.8 million of investment
banking revenue in fiscal 2020, up from $17.5 million in fiscal 2019.
Advisory fees revenue increased by $64.3 million or 45.2% compared to the prior year to $206.5 million for fiscal 2020. The
largest increase was recorded in our US capital markets operations, which experienced a growth of $47.7 million or 97.0% due to
the acquisition of Petsky Prunier in Q4/19. Our UK operations also saw an increase of $11.1 million or 26.5% compared to the
year ended March 31, 2019. The Canadian and Australian capital markets operations both reported smaller increases of $4.5 million
and $1.6 million, respectively, compared to the prior year.
Revenue derived from principal trading dropped by $17.0 million to $108.8 million for the year ended March 31, 2020, largely
driven by lower revenue generated in our Canadian and UK capital markets operations.
Interest revenue was $63.7 million in fiscal 2020, an increase of $12.7 million or 24.9% from the prior year, due to higher
revenue earned in our Canadian operations arising from increased margin loan and stock loan activity. Increased investment
banking activity in Canada during the year gave rise to increased opportunities for lending activity and increased interest revenue.
Other revenue was $21.0 million, a slight increase of $0.2 million from the prior year.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
EXPENSES
Expenses as a percentage of revenue
Compensation expense
Other overhead expenses(1)
Restructuring costs(2)(3)
Acquisition-related costs(2)
Acceleration of long-term incentive plan expense(2)(3)
Loss on extinguishment of convertible debentures
Share of loss of an associate(4)
Total
Management’s Discussion and Analysis 23
For the years ended March 31
2020
60.3%
31.3%
0.2%
0.0%
0.0%
0.0%
n.m.
91.8%
2019
60.2%
29.9%
1.1%
0.3%
0.0%
0.7%
n.m.
92.2%
2020/2019
change
0.1 p.p.
1.4 p.p.
(0.9) p.p.
(0.3) p.p.
0.0 p.p.
(0.7) p.p.
n.m.
(0.4) 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 Significant Items table on page 21.
(3) Restructuring costs for the year ended March 31, 2020 were incurred in connection with our UK & Europe wealth management operations, as well as real estate and other integration costs related
to the acquisition of Patersons in Australia. Restructuring costs for the year ended March 31, 2019 were incurred in connection with our UK & Europe capital markets operations.
(4) Represents the Company’s equity portion of the net loss of its investment in Canaccord Genuity Growth II Corp. for the year ended March 31, 2020, the Company’s equity portion of the net loss of
its investments in Canaccord Genuity Growth Corp. and Canaccord Genuity Acquisition Corp. for the year ended March 31, 2019.
p.p.: percentage points
n.m.: not meaningful (percentages over 300% are indicated as n.m.)
Expenses for fiscal 2020 were $1.12 billion, an increase of $25.9 million or 2.4% compared to the last fiscal year. Excluding
significant items(1), total expenses were $1.1 billion, up $45.8 million or 4.3% from fiscal 2019. Total expenses excluding significant
items(1) as a percentage of revenue increased by 1.3 percentage points compared to the year ended March 31, 2019.
Compensation expenses
Commencing in Q1/20, expenses previously recorded as incentive compensation expense and salaries and benefits are combined
under compensation costs. This reclassification reflects the way in which management manages overall compensation.
Comparatives for prior periods have also been similarly combined.
Compensation expense was $738.3 million, an increase of $21.7 million or 3.0% from the prior year, in line with the increase in incentive-
based revenue. Total compensation expense was 60.3% in fiscal 2020, a slight increase of 0.1 percentage point from the prior
year.
OTHER OVERHEAD EXPENSES
(C$ thousands, except% amounts)
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization(1)
Amortization of right of use of assets
Development costs
Total other overhead expenses
For the years ended March 31
$
2020
83,964 $
18,094
66,666
33,678
113,612
32,594
22,866
12,053
2019
83,577
41,719
64,930
25,453
100,768
24,280
—
15,513
$
383,527 $
356,240
2020/2019
change
0.5%
(56.6)%
2.7%
32.3%
12.7%
34.2%
n.m.
(22.3)%
7.7%
(1)
Includes amortization of intangible assets for the years ended March 31, 2020 and March 31, 2019, respectively. See the Selected Financial Information Excluding Significant Items table on
page 21.
n.m.: not meaningful (percentages over 300% are indicated as n.m.)
Other overhead expenses were $383.5 million or 7.7% higher in fiscal 2020, which as a percentage of revenue was 31.3%
compared to 29.9% in fiscal 2019. The most significant increases in overhead expenses included interest expense, general and
administrative expense, amortization expense as well as development costs, partially offset by lower premises and equipment
expense (including amortization of right of use asset).
As a result of the adoption of the new accounting standard IFRS 16 Leases (IFRS 16), lease payments are no longer recorded
through premises and equipment expense. Instead, right of use (ROU) assets are recorded together with the corresponding lease
liabilities on the statement of financial position. The comparatives for the prior periods have not been restated as part of the
transition to IFRS 16. As a result of this change in accounting policy, premises and equipment expense for fiscal 2020 decreased
by $23.6 million or 56.6% compared to fiscal 2019 with an offsetting charge of $22.9 million being recorded as amortization of
ROU assets in the current year.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
24 Management’s Discussion and Analysis
In addition, amortization expense increased by $8.3 million or 34.2% compared to the prior year largely as a result of the
amortization of intangible assets related to the acquisitions of Petsky Prunier and McCarthy Taylor in Q4/19, Thomas Miller in
Q1/20 and Patersons in Q3/20.
Interest expense increased by $8.2 million or 32.3% compared to the year ended March 31, 2019, partially as a result of the
interest expense recorded in relation to the lease liabilities after adoption of IFRS 16. In addition, interest expense also increased
in our UK & Europe wealth management operations in connection with the additional bank loan obtained to finance the acquisition
of Thomas Miller.
General and administrative expense increased by $12.8 million or 12.7% compared to the prior year. Our Canadian capital
markets operations reported an increase of $3.9 million or 22.4% compared to fiscal 2019 partially as a result of higher conference
costs and professional fees. In the US, general and administrative expense also increased by $4.1 million or 21.3% as a result
of an increase in conference and other costs to support the growth in this region. In addition, general and administrative expense
in our wealth management operations increased by $8.9 million or 26.4% compared to fiscal 2019, partially due to expansion
of our operations in Australia through the acquisition of Patersons as well as the continued growth in our UK & Europe operations.
In addition, our UK & Europe wealth management operations also recorded higher reserves in connection with ongoing legal
matters and our Canadian wealth management operations recorded higher provisions related to client margin accounts in Q4/20
as a result of the rapid decline in market prices in March 2020.
Development costs decreased by $3.5 million or 22.3% compared to fiscal 2019, largely due to an adjustment in certain incentive-
based costs in the UK & Europe wealth management operations to align with the current market environment.
Restructuring costs of $1.1 million were recorded in fiscal 2020 in connection with our UK & Europe wealth management operations
as a result of the integration activity in connection with our acquisition activity in the UK. In addition, there was $0.8 million of
restructuring costs related to certain integration and real estate costs in connection with the acquisition of Patersons in Q3/20.
During the year ended March 31, 2019, there was $13.1 million of restructuring costs recorded in connection with our UK capital
markets operations.
There were acquisition related costs of $4.1 million recorded during fiscal 2020 related to the acquisitions of Thomas Miller in
Q1/20 and the acquisition of Patersons in October 2019 as well as other integration costs related to previous acquisitions. In
addition, there was a recovery of $4.2 million related to a partial reversal of the contingent consideration in connection with the
acquisition of Thomas Miller due to revised estimates resulting from the recent market downturn.
INCOME TAX
During the year ended March 31, 2020, there was $11.6 million of deferred tax assets recognized in connection with our US
operations which, because of the historical losses in the US, had not been previously recognized. As a result of the recognition of
the deferred tax assets during the current fiscal year, the effective tax rate for fiscal 2020 was 13.5% compared to an effective
tax rate of 22.7% in the prior year. All deferred tax assets in respect of our US operations have been recognized as of March 31,
2020.
NET INCOME
Net income for fiscal 2020 was $86.6 million compared to net income of $71.6 million in fiscal 2019, an increase of $15.0 million
or 20.9%. Net income attributable to common shareholders was $77.1 million for fiscal 2020 compared to $61.1 million for
fiscal 2019. Diluted earnings per common share was $0.65 in fiscal 2020 compared to earnings per common share of $0.48 in
the prior fiscal year. Excluding significant items(1), net income for fiscal 2020 was $106.3 million and net income attributable to
common shareholders was $96.5 million, compared to net income of $107.4 million and net income attributable to common
shareholders of $96.9 million in fiscal 2019. Diluted earnings per share excluding significant items(1) was $0.81 for fiscal 2020
compared to $0.80 for the prior year.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 25
Quarterly Financial Information(1)(2)
The following table provides selected quarterly financial information for the eight most recently completed financial quarters
ended March 31, 2020. This information is unaudited but reflects all adjustments of a recurring nature that are, in the opinion of
management, necessary to present a fair statement of the results of operations for the periods presented. Quarter-to-quarter
comparisons of financial results are not necessarily meaningful and should not be relied upon as an indication of future
performance.
(C$ thousands,
except per share amounts)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Total revenue
Total expenses
Net income before
income taxes
Net income
Earnings per
share – basic(4)
Earnings per
share – diluted(4)
Excluding significant items(3)
Net income
Earnings per share – basic(4)
Earnings per share – diluted(4)
Q4
Q3
Fiscal 2020
Q1
Q2
Q4
Q3
Fiscal 2019
Q1
Q2
$ 165,576 $ 147,191 $ 132,325 $ 141,792
84,801
53,804
25,073
15,185
4,853
51,550
60,691
27,149
16,622
4,811
48,619
49,997
35,352
15,222
4,882
51,992
42,015
21,260
16,661
6,444
319,648
289,430
308,014
285,731
270,697
254,527
325,508
294,156
30,218
26,246 $
22,283
22,840 $
16,170
13,178 $
31,352
24,290
0.25 $
0.21 $
0.11 $
0.22
0.21 $
0.17 $
0.10 $
0.18
21,451 $
0.20 $
0.17 $
30,458 $
0.29 $
0.23 $
23,760 $
0.21 $
0.18 $
30,654
0.28
0.23
$
$
$
$
$
$
$ 137,578
60,316
32,220
35,197
13,733
5,764
284,808
279,265
$ 143,115
98,978
40,698
30,776
12,703
5,330
331,600
290,991
$ 139,402
67,426
44,396
28,949
15,326
4,537
300,036
275,414
$ 136,380
67,521
24,914
30,908
9,246
5,154
274,123
252,241
5,543
2,456
0.00
0.00
16,610
0.15
0.12
$
$
$
$
$
$
40,609
32,458
0.31
0.25
36,843
0.35
0.28
$
$
$
$
$
$
24,622
18,019
0.11
0.09
28,867
0.27
0.23
$
$
$
$
$
$
21,882
18,649
0.16
0.14
25,035
0.23
0.19
$
$
$
$
$
$
(1) Data is in accordance with IFRS except for figures excluding significant items. See Non-IFRS Measures on page 14.
(2) The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [March 31, 2019 – 15%].
(3) Figures excluding significant items are non-IFRS measures. See the Quarterly Financial Information Excluding Significant Items table below.
(4) Due to rounding or calculation of the dilutive impact of share issuance commitments in the quarterly and year to date EPS figures, the sum of the quarterly earnings per common share figures may
not equal the fiscal year earnings per share figure.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
26 Management’s Discussion and Analysis
QUARTERLY FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)(2)
(C$ thousands,
except per share amounts)
Total revenue per IFRS
Total expenses per IFRS
Expenses
Significant items recorded in
Canaccord Genuity Capital
Markets
Amortization of intangible
assets
Restructuring costs
Acquisition-related costs
Significant items recorded in
Canaccord Genuity Wealth
Management
Amortization of intangible
assets
Restructuring costs
Acquisition-related costs
Development costs(4)
Incentive payment related to
acquisitions(3)
Significant items recorded in
Corporate and Other
Loss on convertible
debentures(4)
Total significant items
Total expenses excluding
significant items
Net income before income
taxes – adjusted
Income tax expense – adjusted
Net income – adjusted
Net income attributable to
common shareholders
Earnings per share –
basic – adjusted(6)
Earnings per share –
diluted – adjusted(6)
Q4
Q1
$ 319,648 $ 308,014 $ 270,697 $ 325,508 $ 284,808 $ 331,600 $ 300,036 $ 274,123
252,241
279,265
275,414
290,991
254,527
285,731
289,430
294,156
Q1
Q2
Q3
Q2
Q3
Q4
Fiscal 2020
Fiscal 2019
1,773
—
—
2,458
—
—
2,465
—
1,629
2,471
—
177
639
11,754
803
639
—
—
639
—
—
579
1,316
1,173
3,924
(427)
(4,238)
—
3,445
1,250
—
—
3,528
1,098
1,973
—
3,043
—
335
—
2,801
—
918
—
2,745
—
170
245
2,751
—
—
—
2,856
—
—
—
(6,305)
1,574
1,709
1,152
(237)
1,490
1,498
1,543
—
(5,273)
—
8,727
—
12,402
—
7,178
—
16,678
—
5,289
8,608
13,496
—
7,467
294,703
277,004
242,125
286,978
262,587
285,702
261,918
244,774
$
$
$
$
$
24,945 $
3,494
21,451 $
31,010 $
552
30,458 $
28,572 $
4,812
23,760 $
38,530 $
7,876
30,654 $
22,221 $
5,611
16,610 $
45,898 $
9,055
36,843 $
38,118 $
9,251
28,867 $
29,349
4,314
25,035
19,142 $
27,619 $
21,512 $
28,218 $
14,466 $
34,491 $
26,291 $
21,651
0.20 $
0.29 $
0.21 $
0.28 $
0.15 $
0.35 $
0.27 $
0.23
0.17 $
0.23 $
0.18 $
0.23 $
0.12 $
0.28 $
0.23 $
0.19
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
(2) The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [March 31, 2019 – 15%].
(3)
Incentive-based costs related to the acquisitions and growth initiatives in the UK & Europe wealth management business.
(4) Related to costs directly attributable to internal development of software used in our UK wealth management operations.
(5) During Q2/19, there was an accounting loss of $13.5 million related to the extinguishment of the $60.0 million convertible unsecured subordinated debentures issued in October 2016. This loss
was adjusted to reflect directly in shareholders’ equity $4.9 million of the loss that was related to the conversion feature of the extinguished debentures. The adjustment had no impact on the
calculation of the basic or diluted earnings per share.
(6) Due to rounding or calculation of the dilutive impact of share issuance commitments in the quarterly and year to date EPS figures, the sum of the quarterly earnings per common share figures may
not equal the year to date earnings per share figure.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 27
Quarterly trends and risks
Our quarterly results are generally not significantly affected by seasonal factors. However, the Company’s revenue and income
can experience considerable variations from quarter to quarter and year to year due to factors beyond the Company’s control. The
business is affected by the overall condition of the global capital markets and by activity in our core focus sectors as well as by
changes in the market for growth companies and companies in emerging sectors. The Company’s revenue from an underwriting
transaction is recorded only when a transaction has been substantially completed or closed. Consequently, the timing of revenue
recognition can materially affect Canaccord Genuity Group Inc.’s quarterly results.
With higher contribution from our global wealth management operations and increased capital raising and advisory activity in our
core focus areas in Canada and the US, the Company continued to post strong revenue and pre-tax earnings. Revenue for five of the
past eight quarters surpassed $300.0 million, with Q3/19 being the highest at $331.6 million. Revenue for Q4/20 increased by
3.8% over the previous quarter, and overall revenue in fiscal 2020 was $1.2 billion, marking the third consecutive year that the
Company crossed the $1.0 billion revenue mark.
Our Canaccord Genuity Capital Markets operations generated annual revenue of $689.5 million, a slight decrease of 2.1% from
our record year in fiscal 2019. Revenue in our Canadian capital markets operations decreased overall compared to fiscal 2019, as
a result of fewer transactions in the cannabis sector during the year ended March 31, 2020. Revenue for the last two quarters
of fiscal 2020 was comparatively lower than the previous periods due mainly to lower investment banking activity. The Canadian
operating region has been consistently profitable for the past eight quarters, with pre-tax profit margins excluding significant items(1)
reaching a high of 32.5% in Q2/19.
The quarterly revenue earned in our US capital markets operations in the past eight quarters has been consistently strong, with
revenue reaching $105.6 million in Q4/20. The completion of the acquisition of Petsky Prunier in Q4/19 contributed in large part
to the higher advisory fees revenue. Our International Equities Group continued to perform well, with the principal trading revenue
reaching $38.0 million in the last quarter of fiscal 2020. Our US operations have also been profitable over the last eight consecutive
quarters, with pre-tax income excluding significant items(1) reaching $14.8 million in Q4/20.
Our UK & Europe capital markets operations recorded an increase in advisory fees revenue in the second half of fiscal 2020.
Profitability has also improved over the recent quarters, with pre-tax income of $3.4 million recorded in Q3/20, the highest in the
past eight quarters, partially due to cost reductions from the restructuring efforts at the end of fiscal 2019.
Revenue in our Australian capital markets operations increased during fiscal 2020, primarily due to an increase in investment
banking activity. In particular, investment banking revenue reached $9.3 million in Q3/20, a record over the past eight quarters.
Our Canaccord Genuity Wealth Management North America operations have been positively impacted by improved transaction
activity and a growth in managed assets during the fiscal year, despite the decline in market values at the end of March due to
the impact of the COVID-19 pandemic. Revenue increased by 5.8% during Q4/20 compared to the same period a year ago and was
23.3% higher than the previous quarter. Our fee-related revenue continued to grow, reaching 40.1% in Q4/20. Assets under
management decreased in Q4/20 by 5.0% compared to Q4/19 to $4.0 billion as a result of the decline in market values at the
end of March 31, 2020 due to the impact of the COVID-19 pandemic. Assets under administration, including assets under management,
decreased by 10.8% from $20.7 billion at the end of fiscal 2019 to $18.4 billion at the end of fiscal 2020.
The Canaccord Genuity Wealth Management UK & Europe operations were expanded during fiscal 2020 with the completion of
the Thomas Miller acquisition. The quarterly revenue generated in this region increased by 7.7% in Q4/20 compared to the same
period in the prior year. Although this region incurred higher operating expenses as a result of the expansion of this business
and increased headcount, pre-tax profit margins continued to be strong at 19.1% in Q4/20 excluding significant items(1). At the
end of Q4/20, fee-related revenue was at 68.6%, a decrease of 4.8 percentage points from Q4/19, due to increased transactional
activity during the year. Assets under management for this group decreased by 9.8% as of the end of Q4/20 compared to
Q4/19 due to the decline in market values. In local currency, AUM decreased by 10.8% to £22.7 billion at the end of March 31,
2020.
With the completion of the acquisition of Patersons in Q3/20, our Australian operations were expanded, with revenue reaching
$12.9 million in Q4/20. AUM at the end of March 31, 2020 was $2.4 billion, a decrease of $1.3 billion compared to the previous
quarter.
The movement in revenue in the Corporate and Other segment was mainly due to foreign exchange gains or losses resulting from
fluctuations in the Canadian dollar.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
28 Management’s Discussion and Analysis
Fourth quarter 2020 performance
Revenue
Revenue for the fourth quarter was $319.6 million, an increase of $34.8 million or 12.2% compared to the same period in the
previous year. Our global wealth management operations generated an increase in revenue of $20.8 million compared to Q4/19,driven
partially by contributions from the acquisition of Patersons completed in Q3/20.
Our Canaccord Genuity Capital Markets segment recorded an increase of $16.5 million or 10.3% in revenue compared to Q4/19.
Our US operations recorded an increase of $32.2 million or 43.8% compared to Q4/19, driven mainly by higher advisory fees
revenue, largely as a result of the acquisition of Petsky Prunier completed in February 2019. In Australia, revenue increased by
$5.6 million or 170.4% over Q4/19, primarily due to increased advisory fees and investment banking revenue. Partially offsetting
the higher revenue in the US and Australia were decreases in Canada and the UK. The decrease in revenue recorded in our Canadian
capital markets operations was largely driven by lower investment banking and commission and fees revenue compared to the
same period in the prior year. A decrease of $6.0 million or 20.7% in our UK operations was largely a result of a decline in principal
trading revenue in that region.
On a consolidated basis, commissions and fees revenue increased by $28.0 million or 20.4% to $165.6 million compared to the
same period in the previous year, predominantly attributable to our wealth management operations as discussed above. Investment
banking revenue decreased by $11.7 million or 19.4% to $48.6 million in Q4/20 as our Canadian capital markets operations
recorded a decline of $18.4 million or 64.7% due to a reduction in financing activities, partially offset by increases in the US, the
UK and Australia.
Advisory fees revenue increased by $17.8 million or 55.2% to $50.0 million in Q4/20 compared to the same period in the prior
year as revenue increased in all our principal operating regions.
Principal trading revenue increased,slightly, by $0.2 million during the three months ended March 31, 2020 compared to the
same period last year, as the increase in US capital markets operations was mostly offset by decreases in our Canadian and UK
operations.
Interest revenue for Q4/20 was $15.2 million, an increase of $1.5 million or 10.8% over Q4/19, mainly attributable to increased
margin loan and stock loan activity in our Canadian capital markets and wealth management operations.
Other revenue for Q4/20 decreased by $0.9 million or 15.3% compared to the three months ended March 31, 2019, as a result
of a decrease in revenue in our Pinnacle Correspondent Services business.
Expenses
Expenses were $289.4 million, up $10.2 million or 3.6% from Q4/19. Total expenses excluding significant items(1) were
$294.7 million, an increase of $32.1 million or 12.2% from the same period last year. Total expenses as a percentage of revenue
excluding significant items(1) was 92.2%, unchanged from Q4/19.
Compensation expense increased by $23.7 million or 13.5% compared to the same period in the prior year. Total compensation
expense as a percentage of revenue was 62.2% in Q4/20, an increase of 0.7 percentage points compared to the three months
ended March 31, 2019.
Excluding significant items(1), non-compensation overhead expenses as a percentage of revenue was 29.9%, a slight decrease
from Q4/19. The largest variances in overhead expenses compared to the same period in the prior year were trading costs, interest
expense, general and administrative expense, and amortization expense. As discussed earlier, the adoption of IFRS 16 resulted
in a decline in premises and equipment expense of $6.3 million compared to Q4/19 partially offset by an increase in right of use
amortization expense of $5.5 million.
Trading costs increased by $4.9 million, mainly driven by higher trading activity in our US capital markets operations as well as by
our expanded Australian wealth management operations, achieved through the acquisition of Patersons in Q3/20. Interest
expense increased by $3.0 million or 52.7% mainly due to interest on lease liabilities recorded under IFRS 16. Development
costs decreased by $5.7 million over the same period in the prior year largely due to an adjustment made in the incentive-based
costs in our UK & Europe wealth management operations to align with market conditions.
A restructuring costs recovery of $0.4 million was recorded, resulting from a small adjustment to the integration costs in connection
with the acquisition of Patersons in Q3/20. During the same period in the prior year, there were restructuring costs of $11.8 million
comprised of termination benefits and real estate costs related to the restructuring in our UK capital markets operations
announced in Q4/19.
In addition, there was a recovery of $4.2 million related to a partial reversal of the contingent consideration in connection with the
acquisition of Thomas Miller due to revised estimates resulting from the recent market downturn.
Income tax expense
Income tax expense was $4.0 million in Q4/20 compared to income tax expense of $3.1 million for the three months ended
March 31, 2019. Excluding significant items(1), the effective tax rate for Q4/20 was 14.0% compared to 25.3% in Q4/19. The
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 29
decrease in the effective tax rate for the current quarter was due to the recognition of deferred tax assets of $3.7 million in
connection with our US operations as discussed above.
Net income
Net income for the fourth quarter of fiscal 2020 was $26.2 million compared to net income of $2.5 million in Q4/19. Net income
attributable to common shareholders was $23.9 million for Q4/20 compared to net income attributable to common shareholders
of $0.3 million in Q4/19. Diluted income per common share in the current quarter was $0.21, compared to a diluted income per
common share of $0.00 in Q4/19. Excluding significant items(1), net income for Q4/20 was $21.5 million compared to
$16.6 million in Q4/19, an increase of $4.8 million or 29.1%, primarily due to the increase in revenue compared to the same
period in the prior year. Net income attributable to common shareholders excluding significant items(1) was $19.1 million compared
to $14.5 million in the same period of the prior year. Diluted EPS excluding significant items(1) was $0.17 in Q4/20 compared to
$0.12 in Q4/19.
Business Segment Results(1)(2)
Canaccord
Genuity
Capital
Markets
Canaccord
Genuity
Wealth
Management
Corporate
and
Other
For the years ended March 31
2020
Total
Canaccord
Genuity
Capital
Markets
Canaccord
Genuity
Wealth
Management
Corporate
and
Other
$
204,636 $
96,103
350,379
38,351
—
689,469
623,663
17,005
206,455 $
277,953
3,111
23,916
—
511,435
430,518
12,743
22,963 $
—
—
—
—
434,054 $
374,056
353,490
62,267
—
22,963
69,663
(29,748)
1,223,867
1,123,844
—
260,665 $
108,789
303,587
31,366
(81)
704,326
622,760
18,689
204,420 $
254,985
2,406
—
—
461,811
388,741
14,467
24,430 $
—
—
—
—
24,430
86,410
(33,156)
1,190,567
1,097,911
—
2019
Total
489,515
363,774
305,993
31,366
(81)
(C$ thousands,
except number of employees)
Revenue
Canada
UK & Europe
US
Australia
Other Foreign Locations
Total revenue
Expenses
Intersegment allocations
Income (loss) before income
taxes
$
48,801 $
68,174 $
(16,952) $
100,023 $
62,877 $
58,603 $
(28,824) $
92,656
Excluding significant items(3)
Revenue
Expenses
Intersegment allocations
Income (loss) before income
689,469
612,690
17,005
511,435
418,457
12,743
22,963
69,663
(29,748)
1,223,867
1,100,810
—
704,326
605,218
18,689
461,811
371,961
14,467
24,430
77,802
(33,156)
1,190,567
1,054,981
—
taxes
$
59,774 $
80,235 $
(16,952) $
123,057 $
80,419 $
75,383 $
(20,216) $
135,586
Number of employees
789
1,180
339
2,308
832
972
308
2,112
(1) Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page 14. Detailed financial results for the business segments
are shown in Note 25 of the audited consolidated financial statements on page 95.
(2) The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [March 31, 2019 –
15%].
(3) See the Selected Financial Information Excluding Significant Items table on page 21.
Canaccord Genuity Group’s operations are divided into three segments: Canaccord Genuity Capital Markets and Canaccord
Genuity Wealth Management are the main operating segments while Corporate and Other is mainly an administrative segment.
CANACCORD GENUITY CAPITAL MARKETS
Overview
Canaccord Genuity Capital Markets provides investment banking, advisory, equity 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 & Europe
and the Asia-Pacific region. Canaccord Genuity Capital Markets has offices in 21 cities in nine countries worldwide.
Our operating results demonstrate the strength of our global business and the success of our efforts to diversify our revenue
streams and improve alignment across our businesses and regions. For fiscal 2020, 70.3% of total Canaccord Genuity Capital
Markets revenue was earned outside of Canada.
Canaccord Genuity Capital Markets’ global alignment efforts are helping to firmly position the Company as a leading global
independent investment bank focused on the mid-market.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
30 Management’s Discussion and Analysis
Outlook
Canaccord Genuity Capital Markets continues to be very well positioned in many of the Company’s key markets. In the fiscal year
ahead, management intends to focus on capturing operating efficiencies and improving profitability through further integration of its
global capital markets platform and encouraging further cross-border coordination among our global offices.
We believe Canaccord Genuity Capital Markets’ integrated global platform provides a competitive advantage for our business
compared to many of the domestically focused firms we compete with. Smaller regional or local investment dealers are increasingly
under pressure to diversify, and larger international competitors dedicate limited resources to servicing growth companies. We
believe this competitive landscape provides a significant opportunity for Canaccord Genuity Capital Markets in the global mid-
market, as this space is currently relatively underserviced by other global investment banks. Canaccord Genuity Capital Markets’
mid-market strategy and focus on key growth sectors differentiate the firm from its competition.
Canaccord Genuity Capital Markets 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.
While we are optimistic about our prospects for the future, the Company has made the prudent decision to balance investments
in growth with our ability to generate profit in the current market environment. The dynamic nature of our operating environment
requires us to maintain a level of agility in our business mix that allows us to stay competitive and meet the evolving needs of
our clients. For this reason, the Company will continue to make disciplined investments with the addition of small teams in specific
sector verticals or key service offerings to further strengthen our operations in areas where we believe we can capture additional
market share.
The management team believes the investments that the Company has made to improve Canaccord Genuity Capital Markets’
global presence and refine its service offering have positioned the business very well for the future.
FINANCIAL PERFORMANCE(1)(2)
(C$ thousands, except number
of employees)
Canada
UK(5)
US
Australia
Other
Foreign
Locations(6)
Total
Canada
UK(5)
US
Australia
For the years ended March 31
2020
Other
Foreign
Locations
2019
Total
Revenue
Expenses
204,636
96,103
350,379
38,351
— 689,469 $ 260,665 $ 108,789 $ 303,587 $ 31,366 $
(81) $ 704,326
Compensation expense
110,163
60,830
205,929
Other overhead expenses
63,880
30,753
113,916
31
—
—
—
—
—
464
177
—
25,149
10,742
—
1,629
—
— 402,071
134,562
78,278
170,618
19,981
— 219,291
53,052
38,333
101,533
9,407
—
—
—
495
1,806
—
72
1,173
96
—
—
13,070
284
803
—
—
—
—
808
690
404,247
203,015
—
—
—
452
1,976
13,070
174,074
91,583
320,486
37,520
— 623,663
188,859
129,777
273,238
29,388
1,498
622,760
12,241
895
3,010
859
—
17,005
12,458
2,908
3,037
286
—
18,689
$ 18,321 $
3,625 $ 26,883 $
(28)
— $ 48,801 $ 59,348 $ (23,896) $ 27,312 $
1,692 $ (1,579) $ 62,877
204,636
96,103
350,379
171,522
91,583
313,694
12,241
895
3,010
38,351
35,891
859
— 689,469
260,665
108,789
303,587
— 612,690
185,194
116,707
272,431
—
17,005
12,458
2,908
3,037
31,366
29,388
286
(81)
704,326
1,498
605,218
—
18,689
$ 20,873 $
3,625
33,675 $
1,601
— $ 59,774 $ 63,013 $ (10,826) $ 28,119 $
1,692 $ (1,579) $ 80,419
Development costs
Acquisition-related costs
Restructuring costs
Total expenses
Intersegment allocations(3)
Income (loss) before income
taxes (recovery)(3)
Excluding significant items(4)
Total revenue
Total expenses
Intersegment allocations(3)
Income (loss) before income
taxes (recovery)(3)
Number of employees
257
136
313
83
—
789
255
197
308
68
4
832
(1) Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [March 31, 2019 – 15%].
(3)
Income (loss) before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 37.
(4) Refer to the Selected Financial Information Excluding Significant Items table on page 21.
(5)
Includes our Dubai based operations.
(6) Starting in Q1/20, our Asian based operations, including Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets operations to reflect management
of these operating units.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 31
REVENUE
REVENUE BY GEOGRAPHY AS A PERCENTAGE OF CANACCORD GENUITY CAPITAL MARKETS REVENUE
Revenue generated in:
Canada
UK & Europe(1)
US
Australia
Other Foreign Locations
p.p.: percentage points
(1)
Includes our Dubai based operations
For the years ended March 31
2020
2019
2020/2019
change
29.7%
13.9%
50.8%
5.6%
0.0%
37.0%
15.4%
43.1%
4.5%
0.0%
(7.3) p.p.
(1.5) p.p.
7.7 p.p.
1.1 p.p.
0.0 p.p.
100.0%
100.0%
Canaccord Genuity Capital Markets generated revenue of $689.5 million, a decrease of 2.1% or $14.9 million compared to fiscal
2019. Revenue increased in the US and Australia by $46.8 million or 15.4% and by $7.0 million or 22.3%, respectively, compared
to the prior year, largely driven by higher advisory fees revenue. In Canada, revenue decreased by $56.0 million or 21.5% compared
to the operation’s exceptionally strong performance in fiscal 2019. Revenue in our UK operations decreased by $12.7 million or
11.7% to $96.1 million in fiscal 2020 due to reduced principal trading, commission and fees and financing revenue, partially offset
by higher advisory fees earned during the year.
Investment banking activity
The Company’s focus sector mix in fiscal 2020 showed continued diversity. While capital raising contributions from the Life
Sciences sector includes revenues from cannabis-related businesses, we note that our US investment banking practice was a
significant contributor to revenue growth from the Healthcare and Healthcare IT segments as well as the overall Life Sciences sector.
Revenue from the Technology & Industrials sectors was led by our US and Canadian capital markets businesses and reflects our
continued growth in the US Technology segment.
Canaccord Genuity Capital Markets’ transactions and revenue by focus sectors are detailed below.
CANACCORD GENUITY CAPITAL MARKETS – OVERALL
Investment banking transactions and revenue by sector
Sectors
Life Sciences
Technology
Industrials
Metals & Mining
Diversified
Financials
Consumer & Retail
Real Estate
Others
Structured Products & Sustainability
Energy
Total
For the year ended March 31, 2020
as a % of
investment
banking
transactions
as a % of
investment
banking
revenue
22.4%
17.9%
5.9%
è9.2%
6.6%
4.9%
4.0%
5.9%
4.0%
6.0%
3.2%
28.9%
26.4%
12.6%
è2.1%
7.1%
5.8%
3.3%
2.0%
0.9%
0.5%
0.4%
100.0%
100.0%
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
32 Management’s Discussion and Analysis
CANACCORD GENUITY CAPITAL MARKETS – BY GEOGRAPHY
Investment banking transactions by sector (as a% of the number of investment banking transactions for each geographic
region)
Sectors
Life Sciences
Metals & Mining
Technology
Diversified
Structured Products & Sustainability
Real Estate
Industrials
Financials
Consumer & Retail
Others
Energy
Total
For the year ended March 31, 2020
Canada
20.6%
23.8%
6.4%
11.7%
11.2%
10.7%
1.0%
5.6%
1.8%
4.1%
3.1%
US
43.4%
0.0%
43.4%
0.0%
0.0%
0.0%
11.4%
0.0%
1.8%
0.0%
0.0%
UK
5.4%
5.4%
25.7%
0.0%
0.0%
1.4%
25.6%
13.5%
16.2%
0.0%
6.8%
Australia
7.2%
43.3%
15.5%
2.1%
0.0%
0.0%
1.0%
4.1%
7.2%
13.4%
6.2%
100.0%
100.0%
100.0%
100.0%
Investment banking revenue by sector (as a% of investment banking revenue for each geographic region)
Sectors
Life Sciences
Technology
Industrials
Metals & Mining
Diversified
Financials
Consumer & Retail
Real Estate
Others
Structured Products & Sustainability
Energy
Total
For the year ended March 31, 2020
Canada
39.3%
6.7%
0.2%
21.2%
18.7%
6.0%
0.5%
5.3%
0.3%
1.3%
0.5%
US
34.9%
51.3%
12.2%
0.0%
0.0%
0.0%
1.6%
0.0%
0.0%
0.0%
0.0%
UK
1.9%
14.3%
46.8%
0.8%
0.0%
23.8%
11.1%
0.5%
0.0%
0.0%
0.8%
100.0%
100.0%
100.0%
Australia
5.5%
11.9%
5.4%
51.5%
5.5%
0.1%
9.2%
0.0%
9.6%
0.0%
è.3%
100.0%
Note for reference in the tables above: transactions with companies in the cannabis sector in Canada are included under the Life Sciences sector.
EXPENSES
Expenses for fiscal 2020 were $623.7 million, an increase of $0.9 million or 0.1% compared to the prior year. Excluding significant
items(1), total expenses for fiscal 2020 were $612.7 million, an increase of $7.5 million or 1.2% compared to fiscal 2019. As
a percentage of revenue, total expenses increased by 2.9 percentage points compared to the year ended March 31, 2019.
Compensation expense
Compensation expense for fiscal 2020 decreased by $2.2 million or 0.5% compared to fiscal 2019. Total compensation expense
(incentive compensation expense plus salaries and benefits) as a percentage of revenue was 0.9 percentage points higher than
in fiscal 2019, at 58.3% for the year ended March 31, 2020.
In Canada, total compensation as a percentage of revenue increased by 2.2 percentage points compared to fiscal 2019 due to a
decrease in revenue relative to fixed staff costs. Our US operations recorded a compensation ratio of 58.8% in fiscal 2020, an
increase of 2.6 percentage points compared to the prior year, as a result of adjustments to incentive compensation pools and
fixed staff costs. In our UK operations, total compensation expense as a percentage of revenue decreased by 8.7 percentage points
compared to fiscal 2019 as a result of the decline in fixed staff costs. Total compensation expense as a percentage of revenue
in our Australian operations was 65.6%, an increase of 1.9 percentage points due to an increase in the non-variable nature of certain
staff costs.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Canaccord Genuity Capital Markets compensation expense (incentive compensation plus salaries and benefits) as a percentage
of revenue by geography
Management’s Discussion and Analysis 33
Canada
UK & Europe
US
Australia
Other Foreign Locations
Canaccord Genuity Capital Markets (total)
p.p.: percentage points
n.m.: not meaningful
Other overhead expenses
For the years ended March 31
2020
53.8%
63.3%
58.8%
65.6%
n.m.
58.3%
2019
51.6%
72.0%
56.2%
63.7%
n.m.
57.4%
2020/2019
change
2.2 p.p.
(8.7) p.p.
2.6 p.p.
1.9 p.p.
n.m.
0.9 p.p.
Other overhead expenses were $219.3 million for fiscal 2020 compared to $203.0 million in fiscal 2019, an increase of
$16.3 million or 8.0%. The most significant increases in overhead costs compared to the prior year include general and
administrative expense, amortization expense, and interest expense.
General and administrative expense increased by $4.7 million or 8.8% compared to fiscal 2019, resulting from higher professional
fees, promotion and travel expenses, and other office expenses to support and grow our business.
Amortization expense increased by $5.8 million to $13.0 million compared to the prior year due to the amortization of intangible
assets in connection with the acquisition of Petsky Prunier.
Interest expense increased by $5.8 million or 59.6% compared to fiscal 2019 due to the recognition of interest expense related
to lease liabilities as prescribed under IFRS 16. In addition, the accounting change also led to a decrease in premises and
equipment expense of $15.1 million, partially offset by an increase in amortization of right of use assets of $13.2 million.
There were acquisition-related costs of $1.8 million recorded during the year ended March 31, 2020 related to the acquisition of
Patersons [the Australian wealth management business was recorded as part of the Australian capital markets operations prior to Q3/
20].
INCOME BEFORE INCOME TAXES
Income before income taxes in fiscal 2020 was $48.8 million, a decrease of $14.1 million compared to fiscal 2019. Excluding
significant items(1), income before income taxes, including allocated overhead expenses, decreased from $80.4 million in fiscal
2019 to $59.8 million in fiscal 2020. The decrease in income before income taxes excluding significant items(1) was attributable to
lower revenue generated in our Canadian and UK operating segments combined with an increase in overhead expenses.
CANACCORD GENUITY WEALTH MANAGEMENT
Overview
Canaccord Genuity Group’s wealth management division provides a range of comprehensive financial services and investment
products to individual investors (private clients), institutions and intermediaries, and charities. Revenue from wealth management
operations 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 Investment Advisors (IAs) in Canada from investment banking and venture
capital transactions. The Company has wealth management operations in Canada, the UK & Europe, and Australia. In addition
to the acquisition of Hargreave Hale in Q2/18, the Company acquired McCarthy Taylor in Q4/19 and Thomas Miller in Q1/20 further
expanding its wealth management operations in the UK & Europe.
In the UK & Europe, Canaccord Genuity Wealth Management has 12 offices in the UK, Guernsey, Jersey and the Isle of Man.
Revenue earned by this business is largely generated through fee-based accounts and portfolio management activities. The
business offers services to both domestic (UK) and international and European clients and provides clients with investing options
from both third party and proprietary financial products, including investment funds and model portfolios managed by Canaccord
Genuity Wealth Management portfolio managers.
At March 31, 2020, Canaccord Genuity Wealth Management had 9 offices located across Canada. The Company is focused on
actively recruiting established Advisory Teams to accelerate growth in this business.
Outlook
Our strategic shift to strengthening contributions from our global wealth management performance will continue to be a main
focus for the Company. Management’s priorities for Canaccord Genuity Wealth Management will be focused on growing assets
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
34 Management’s Discussion and Analysis
under administration and management, and increasing the proportion of fee-based revenue as a percentage of total revenue. By
increasing recurring revenue streams, we expect to meaningfully reduce our reliance on transaction-based revenue over the coming years,
making our business less sensitive to changes in market conditions and trading activity.
With 72.9% of the division’s revenue derived from recurring, fee-based activities, the revenue stream generated through Canaccord
Genuity Wealth Management’s UK & Europe wealth management business helps to improve the stability of its overall performance.
Client holdings in our in-house investment management products exceed $1 billion and are attracting growing interest from both
domestic and international intermediaries. The Company will continue to pursue strategic opportunities to increase the scale of its
UK wealth management business.
In Canada, the Company continues to focus on enhancing margins, managing costs, and growing the business through targeted
recruitment and training. While the recruiting environment remains competitive, we expect the benefits of our independent global
platform to help drive continued recruiting success in select markets. The Company also intends to invest further in training programs
for new and existing Investment Advisors to continue developing and broadening the skills of our Advisory Teams and to support
the growth of fee-based services offered through the Canadian business. We maintain a strong focus on attracting and retaining high
quality advisors, investing in training programs and building a comprehensive suite of premium products targeted at attracting
high net worth investors and helping advisors grow their businesses.
In Australia, the Company still has a relatively small wealth management operation; however, expansion is expected to occur
through targeted recruiting, and through the build-out of wealth management services and products in this market.
FINANCIAL PERFORMANCE – NORTH AMERICA(1)(2)
(C$ thousands, except AUM and AUA (in C$ millions),
number of employees, Advisory Teams and% amounts)
Revenue
Expenses
Compensation expense
Other overhead expenses
Acceleration of long-term incentive plan expense
Total expenses
Intersegment allocations(3)
Income before income taxes(3)
AUM – Canada (discretionary)(4)
AUA – Canada(5)
Number of Advisory Teams – Canada
Number of employees
Excluding significant items(6)
Total expenses
Intersegment allocations(3)
Income before income taxes(3)
For the years ended March 31
2020
2019
2020/2019
change
$
209,566 $
206,826
$
2,740
1.3%
121,494
53,184
—
174,678
12,229
22,659 $
$
4,009
18,440
146
432
$
174,678 $
12,229
22,659
118,860
47,968
—
166,828
13,152
26,846
4,221
20,674
155
430
166,828
13,152
26,846
$
$
2,634
5,216
—
7,850
(923)
(4,187)
(212)
(2,234)
(9)
2
7,850
(923)
(4,187)
2.2%
10.9%
—
4.7%
(7.0)%
(15.6)%
(5.0)%
(10.8)%
(5.8)%
0.5%
4.7%
(7.0)%
(15.6)%
(1) Data is in accordance with IFRS except for figures excluding significant items, AUA, AUM, number of Advisory Teams and number of employees. See Non-IFRS Measures on page 14.
(2)
(3)
(4) AUM represents assets managed on a discretionary basis under our programs generally described as or known as the Complete Canaccord Investment Counselling Program and the Complete
Includes Canaccord Genuity Wealth Management operations in Canada and the US.
Income before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 37.
Canaccord Private Investment Management Program.
(5) AUA is the market value of client assets administered by the Company, for which the Company earns commissions or fees. AUA includes AUM.
(6) Refer to the Selected Financial Information Excluding Significant Items table on page 21.
Revenue from Canaccord Genuity Wealth Management North America was $209.6 million, an increase of $2.7 million or 1.3%
from fiscal 2019, driven by higher commissions and fees revenue partially offset by lower investment banking revenue.
AUA in Canada decreased by 10.8% to $18.4 billion at March 31, 2020 from $20.7 billion at March 31, 2019, as a result of a
decline in market values due to the impact of the COVID-19 pandemic. There were 146 Advisory Teams in Canada, a decrease of
nine from a year ago. The fee-based revenue in our North American operations was 5.3 percentage points higher than in the prior year
and accounted for 40.2% of the wealth management revenue earned in Canada during the year ended March 31, 2020.
Expenses for fiscal 2020 were $174.7 million, an increase of $7.9 million or 4.7% from fiscal 2019. Total expenses as a percentage
of revenue increased by 2.7 percentage points compared to last year.
Compensation expense increased by $2.6 million or 2.2% compared to the prior year, consistent with the increase in incentive-
based revenue. Total compensation expense (incentive compensation expense plus salaries and benefits) as a percentage of
revenue increased slightly by 0.5 percentage points compared to last year to 58.0% in fiscal 2020.
Other overhead expenses as a percentage of revenue increased by 2.2% compared to fiscal 2019. Trading costs increased by
$2.3 million compared to the year ended March 31, 2019, in line with the increase in commission and fees revenue. General and
administrative expense increased by $2.0 million or 14.0% due to higher conference costs, as well as transfer fees associated
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 35
with new accounts and provisions for legal costs and settlements. Development costs increased by $1.5 million as a result of the
amortization of incentive-based payments to new recruits.
Premises and equipment expense decreased by $2.2 million compared to fiscal 2019 as a result of the change to the lease
accounting standard as discussed above, with a similar increase of $2.4 million for the amortization of right of use assets recorded
in fiscal 2020.
Income before income taxes decreased by $4.2 million in fiscal 2020 to $22.7 million due to increases in certain overhead
expenses that do not vary directly with revenue.
FINANCIAL PERFORMANCE – UK & EUROPE(1)(5)
(C$ thousands, except AUM (in C$ millions), number of employees,
investment professionals and fund managers, and% amounts)
Revenue
Expenses
Compensation expense
Other overhead expenses
Acceleration of long-term incentive plan expense
Restructuring costs
Acquisition-related costs
Total expenses
Intersegment allocations(2)
Income before income taxes(2)
AUM – UK & Europe(3)
Number of investment professionals and fund managers – UK & Europe
Number of employees
Excluding significant items(4)
Total expenses
Intersegment allocations(2)
Income before income taxes(2)
For the years ended March 31
2020
2019
2020/2019
change
$
277,953 $
254,985
$
22,968
9.0%
151,020
80,881
—
1,098
(1,930)
231,069
1,149
$
45,735 $
39,879
210
548
$
220,274 $
1,149
56,530
144,827
75,998
—
—
1,088
221,913
1,315
31,757
44,195
190
542
205,133
1,315
48,537
$
$
6,193
4,883
—
1,098
(3,018)
9,156
(166)
13,978
(4,316)
20
6
15,141
(166)
7,993
4.3%
6.4%
—
n.m.
(277.4)%
4.1%
(12.6)%
44.0%
(9.8)%
10.5%
1.1%
7.4%
(12.6)%
16.5%
(1) Data is in accordance with IFRS except for figures excluding significant items, AUM, number of investment professionals and fund managers, and number of employees. See Non-IFRS Measures on
page 14.
Income before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 37.
(2)
(3) AUM in the UK & Europe is the market value of client assets managed and administered by the Company, for which the Company earns commissions or fees. This measure includes both discretionary
and non-discretionary accounts.
(4) Refer to the Selected Financial Information Excluding Significant Items table on page 21.
(5)
Includes the operating results of McCarthy Taylor which was acquired on January 29, 2019 and the operating results of Thomas Miller since the acquisition date of May 1, 2019.
Operating results of McCarthy Taylor are included since the closing date of January 29, 2019 and the operating results of Thomas
Miller after the closing date of May 1, 2019, are also included in the discussions below.
Revenue generated by our UK & Europe operations is largely produced through fee-based accounts and portfolio management
activities, and, as such, is less sensitive to changes in market conditions. Revenue for fiscal 2020 was $278.0 million, an increase
of $23.0 million or 9.0% compared to fiscal 2019. Measured in local currency (GBP), revenue was £164.3 million during fiscal
2020, an increase of £16.2 million or 10.9% compared to the previous year.
AUM in the UK & Europe as of March 31, 2020 was $39.9 billion, a decrease of 9.8% compared to $44.2 billion as of March 31,
2019 due to decline in market values. Measured in local currency (GBP), AUM decreased by 10.8% compared to March 31,
2019. The fee-related revenue in our UK & European wealth management operations accounted for 72.9% of total revenue in this
geography in fiscal 2020, an increase of 0.3 percentage points compared to last year.
Compensation expense was $151.0 million, a $6.2 million increase from $144.8 million in fiscal 2019, in line with the increase
in incentive-based commissions and fees revenue. Total compensation expense (incentive compensation expense plus salaries and
benefits) as a percentage of revenue decreased by 2.5 percentage points from 56.8% in fiscal 2019 to 54.3% in fiscal 2020.
Other overhead expenses for the year ended March 31, 2020 increased by $4.9 million or 6.4% compared to the prior year.
General and administrative expense increased by $4.4 million or 23.0% partially as a result of additional reserves recorded in
respect of certain ongoing legal matters, as well as costs to support the expanded operations. The increase in amortization expense
of $2.5 million or 16.6% compared to fiscal 2019 was attributable to the amortization of intangible assets related to the
acquisitions of McCarthy Taylor in Q4/19 and Thomas Miller in Q1/20. Interest expense increased by $1.8 million or 70.0% as a
result of additional bank loan obtained to complete the acquisition of Thomas Miller in Q1/20 as well as interest expense
recorded on lease liabilities as a result of the adoption of IFRS 16. The increase in trading costs of $2.6 million or 32.1% was
mainly due to higher trading activity compared to the prior year. Development costs decreased by $5.0 million compared to the prior
year as a result of an adjustment to incentive-based costs related to the acquisitions and growth initiatives of the UK wealth
management business to align with the current market conditions.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
36 Management’s Discussion and Analysis
Restructuring costs of $1.1 million were recorded in fiscal 2020 related to the integration costs of the recent acquisitions. There
were no restructuring costs recorded in fiscal 2019.
The Company also recorded $2.3 million of acquisition-related costs in connection with the acquisition of Thomas Miller in
May 2019. The acquisition-related costs included professional and consulting fees incurred during the year. In addition, there was
a recovery of $4.2 million related to a partial reversal of the contingent consideration initially recorded in connection with the
acquisition of Thomas Miller due to revised estimates resulting from the recent market downturn. The $1.1 million of acquisition-
related costs recorded in fiscal 2019 were related to the acquisitions of McCarthy Taylor and Thomas Miller.
Income before income taxes was $45.7 million compared to $31.8 million in the prior year as a result of higher revenue and
adjustments to the incentive-based costs and contingent consideration discussed above. Excluding significant items(1), income
before income taxes was $56.5 million, an increase of $8.0 million or 16.5% from the prior year, reflecting the net contribution from
our expanded operations.
FINANCIAL PERFORMANCE – AUSTRALIA(1)(5)
(C$ thousands, except AUM (in C$ millions), number of employees,
investment professionals and fund managers, and% amounts)
Revenue
Expenses
Compensation expense
Other overhead expenses
Acceleration of long-term incentive plan expense
Restructuring costs
Acquisition-related costs
Total expenses
Intersegment allocations(2)
Loss before income taxes(2)
AUM(3)
Number of investment professionals and fund managers
Number of employees
Excluding significant items(4)
Total expenses
Intersegment allocations(2)
Income before income taxes(2)
For the years ended March 31
2020
2019
2020/2019
change
$
23,916
— $
23,916
15,268
8,680
—
823
—
24,771
(635)
(220)
2,400
119
200
23,505
(635)
1,046
$
$
—
—
—
—
—
—
—
— $
—
—
—
— $
—
—
15,268
8,680
—
823
—
24,771
(635)
(220)
2,400
119
200
23,505
(635)
1,046
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
(1) Data is in accordance with IFRS except for figures excluding significant items, AUM, number of investment professionals and fund managers, and number of employees. See Non-IFRS Measures on
page 14.
Income before income taxes includes intersegment allocations. See the Intersegment Allocated Costs section on page 37.
(2)
(3) AUM is the market value of client assets managed and administered by the Company, for which the Company earns commissions or fees. This measure includes both discretionary and non-
discretionary accounts.
(4) Refer to the Selected Financial Information Excluding Significant Items table on page 21.
Commencing Q3/20, the Canaccord Genuity Australia wealth management segment includes the operating results of Patersons
Securities Limited (renamed as Canaccord Genuity Financial Limited) since the closing date of October 21, 2019, as well as the
wealth management business previously included as part of Canaccord Genuity Australia capital markets.
During the year ended March 31, 2020, Canaccord Genuity Wealth Management Australia generated revenue of $23.9 million.
AUM in the Australian wealth management operations was $2.4 billion at March 31, 2020 comprised of client assets held in its
investment management platforms. Fee-related revenue in our Australian operations as a percentage of total revenue accounted for
23.1% of the wealth management revenue during fiscal 2020.
Total expenses for the fiscal 2020 were $24.8 million, largely made up of compensation expense, trading costs and general and
administrative expense. Compensation expense was $15.3 million in fiscal 2020. Total compensation expense as a percentage of
revenue was 63.8% for the year ended March 31, 2020.
Restructuring costs of $0.8 million were recorded in fiscal 2020, related to integration costs incurred in connection with the
acquisition of Patersons.
There was a loss before income taxes of $0.2 million in the current fiscal year principally as a result of restructuring costs related
to integration efforts and other real estate costs. Excluding significant items(1), pre-tax income was $1.0 million for the year
ended March 31, 2020.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 37
CORPORATE AND OTHER SEGMENT
Overview
The Corporate and Other segment includes Pinnacle Correspondent Services, interest, foreign exchange revenue, and expenses
not specifically allocable to Canaccord Genuity Capital Markets or Canaccord Genuity Wealth Management.
Pinnacle Correspondent Services provides trade execution, clearing, settlement, custody, and other middle- and back-office
services to other introducing brokerage firms, portfolio managers and other financial intermediaries. This business unit was
developed as an extension and application of the Company’s substantial investment in its information technology and operating
infrastructure.
Also included in this segment are the Company’s administrative, operational 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. The Company has 339 employees in the Corporate and Other segment. Most of the Company’s
corporate support functions are based in Vancouver and Toronto, Canada.
Our operations group is responsible for processing securities transactions, including the clearing and settlement of securities
transactions, account administration 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. The Company’s risk management
and compliance activities include procedures to identify, control, measure and monitor the Company’s risk exposure at all times.
FINANCIAL PERFORMANCE(1)
(C$ thousands, except number of employees and% amounts)
2020
2019
2020/2019
change
For the years ended March 31
Revenue
Expenses
Compensation expense
Other overhead expenses
Acceleration of long-term incentive plan expense
Loss on convertible debentures
Share of loss of an associate
Total expenses
Intersegment allocations(2)
Loss before income tax recovery(2)
Number of employees
Excluding significant items(3)
Total expenses
Intersegment allocations(2)
Loss before income taxes (recovery)(2)
$
22,963 $
24,430
$
(1,467)
(6.0)%
48,460
20,996
—
—
207
69,663
(29,748)
(16,952)
339
48,691
28,807
—
8,608
304
86,410
(33,156)
(28,824)
308
(231)
(7,811)
—
(8,608)
(97)
(16,747)
3,408
11,872
31
$
69,663 $
(29,748)
(16,952)
$
77,802
(33,156)
(20,216)
(8,139)
3,408
3,264
(0.5)%
(27.1)%
—
n.m.
(31.9)%
(19.4)%
(10.3)%
(41.2)%
10.1%
(10.5)%
(10.3)%
(16.1)%
(1) Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page 14.
(2) Loss before income tax recovery includes intersegment allocations. See the Intersegment Allocated Costs section on page 37.
(3) Refer to the Selected Financial Information Excluding Significant Items table on page 21.
Revenue for fiscal 2020 was $23.0 million, a decrease of $1.5 million or 6.0% from fiscal 2019 resulting from a decrease in
interest revenue from cash balances held during the year.
Total expenses were $69.7 million for the year ended March 31, 2020, a decrease of $16.7 million or 19.4% compared to the
prior year. Other overhead expenses decreased by $7.8 million or 27.1% compared to the prior year, largely as a result of an increase
in trading cost recoveries from the Canadian capital markets and wealth management operations.
Loss before income taxes was $17.0 million for fiscal 2020 compared to a loss before income taxes of $28.8 million for the prior
year. Excluding significant items(1), loss before income taxes was $17.0 million for the year ended March 31, 2020 compared to
a loss before income taxes of $20.2 million last year.
INTERSEGMENT ALLOCATED COSTS
Included in the Corporate and Other segment are certain support services, research and other expenses that have been incurred
to support the activities within the Canaccord Genuity Capital Markets and Canaccord Genuity Wealth Management segments in
Canada. Certain trading, clearing and settlement charges are included as a trading cost in the applicable business units and as
a trading cost recovery in Corporate and Other. In addition, certain overhead costs are charged by Canaccord Genuity Capital Markets
UK & Europe to Canaccord Genuity Wealth Management UK & Europe and included in intersegment allocated costs for these
business units.
(1) Figures excluding significant items are non-IFRS measures. See Non-IFRS Measures on page 14.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
38 Management’s Discussion and Analysis
Financial Condition
Below are selected balance sheet items for the past five years:
(C$ thousands)
Assets
Cash and cash equivalents
Securities owned
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Equipment and leasehold improvements
Goodwill and other intangible assets
Right of use assets
Total assets
Liabilities and shareholders’ equity
Bank indebtedness
Securities sold short
Accounts payable and accrued liabilities
Provisions
Income taxes payable
Current portion of bank loan
Current portion of lease liability
Current portion of contingent consideration
Deferred consideration
Contingent consideration
Promissory note
Lease liability
Other long-term liability
Bank loan
Deferred tax liabilities
Liability portion of convertible debenture
Subordinated debt
Shareholders’ equity
Non-controlling interests
Balance sheet summary as at March 31
2020
2019
2018
2017
2016
$
997,111 $
931,467
3,275,841
5,603
39,487
10,105
24,860
565,587
106,134
820,739
690,499
2,656,664
2,502
22,117
6,224
25,792
524,757
—
$
862,838
469,217
2,215,837
1,170
19,941
2,035
30,967
418,731
—
$
677,769
784,230
3,395,736
1,085
15,323
2,829
31,479
295,065
—
$
428,329
564,746
2,041,150
12,537
11,221
5,578
37,049
323,936
—
$ 5,956,195 $ 4,749,294
$ 4,020,736
$ 5,203,516
$ 3,424,546
$
— $
875,017
3,673,451
6,735
11,721
7,042
23,417
57,859
8,966
47,614
—
88,922
1,760
79,192
9,903
128,322
7,500
928,618
156
9,639
373,419
3,123,765
18,212
5,415
9,294
—
—
22,225
108,319
5,832
—
1,741
50,370
7,978
127,225
7,500
876,363
1,997
$
— $
301,006
2,638,954
8,428
7,851
9,679
—
—
9,997
49,844
—
—
—
61,758
13,715
57,081
7,500
841,352
13,571
25,280
645,742
3,669,883
11,793
10,093
—
—
—
—
—
—
—
—
—
140
56,442
7,500
764,785
11,858
$
14,910
427,435
2,185,047
18,811
4,242
—
—
—
—
—
—
—
—
—
450
—
15,000
749,929
8,722
Total liabilities and shareholders’ equity
$ 5,956,195 $ 4,749,294
$ 4,020,736
$ 5,203,516
$ 3,424,546
ASSETS
Cash and cash equivalents were $997.1 million at March 31, 2020 compared to $820.7 million at March 31, 2019. Refer to the
Liquidity and Capital Resources section for more details.
Securities owned were $931.5 million at March 31, 2020 compared to $690.5 million at March 31, 2019 mainly due to an
increase in corporate and government debt owned.
Accounts receivable were $3.3 billion at March 31, 2020 compared to $2.7 billion at March 31, 2019, mainly due to an increase
in receivables from brokers and investment dealers.
Goodwill was $395.4 million and intangible assets were $170.2 million at March 31, 2020. At March 31, 2019, goodwill was
$370.2 million and intangible assets were $154.5 million. These amounts represent the goodwill and intangible assets acquired
through the purchases of Genuity Capital Markets, Collins Stewart Hawkpoint plc (CSHP), Eden Financial Ltd., Hargreave Hale,
Jitneytrade, McCarthy Taylor, Petsky Prunier and Patersons.
Other assets, consisting of income taxes receivable, deferred tax assets, equipment and leasehold improvements, and investments
were $80.1 million at March 31, 2020 compared to $56.6 million at March 31, 2019, mainly due to an increase in income
taxes receivable, deferred tax assets, and investments.
LIABILITIES AND SHAREHOLDERS’ EQUITY
Securities sold short were $875.0 million at March 31, 2020 compared to $373.4 million at March 31, 2019, mostly due to an
increase in short positions in corporate and government debt.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 39
Accounts payable and accrued liabilities, including provisions, were $3.7 billion, an increase from $3.1 billion on March 31,
2019, mainly due to an increase in payables to clients and brokers and investment dealers.
Other liabilities, including subordinated debt, income taxes payable, other long-term liability and deferred tax liabilities, were
$30.9 million at March 31, 2020 compared to $22.6 million in the prior year. The increase was mostly due to an increase in income
tax payable.
In connection with our acquisition of Hargreave Hale through a subsidiary of the Company, that subsidiary obtained a £40.0 million
bank loan to finance a portion of the cash consideration. During the year ended March 31, 2020, the Company obtained additional
financing on the loan of £17.0 million in connection with the acquisition of Thomas Miller. The balance outstanding as of
March 31, 2020 net of principal repayments and unamortized financing fees was £49.0 million ($86.2 million) [March 31, 2019 –
£34.3 million ($59.7 million)]. The loan is repayable in instalments of principal and interest over a period of four years and
matures in September 2023. The interest rate on this loan is variable and is currently at 2.6584% per annum as at March 31,
2020 [March 31, 2019 – 2.9646% per annum].
Excluding the bank loan in connection with the acquisitions of Hargreave Hale and Thomas Miller described above, subsidiaries of
the Company have other credit facilities with banks in Canada and the UK for an aggregate amount of $653.7 million [March 1,
2019 – $683.2 million]. Bank overdrafts and call loan facilities utilized by the Company may vary significantly on a day-to-day basis
and depend on securities trading activity. These credit facilities are utilized by the Company to facilitate settlement activities and
consist of call loans, letters of credit and daylight overdraft facilities, and are collateralized by unpaid client securities and/or
securities owned by the Company. On March 31, 2020, there was no bank indebtedness outstanding [March 31, 2019 – $9.6
million].
There were deferred and contingent considerations of $9.0 million and $105.5 million, respectively, recorded at March 31, 2020
in connection with the acquisitions of Hargreave Hale, Jitneytrade, McCarthy Taylor and Petsky Prunier. Refer to Notes 7 and 13 of
the audited consolidated financial statements for the year ended March 31, 2020 for further information.
Non-controlling interests were $0.2 million at March 31, 2020 compared to $2.0 million at March 31, 2019, which represents
15% [March 31, 2019 – 15%] 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 totaling
$3.3 million (US$2.3 million) [March 31, 2019 – $2.7 million (US$2.0 million)] as rent guarantees for its leased premises in New
York.
Bank Indebtedness and Other Credit Facilities
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 unpaid client securities and/or securities owned
by the Company. As of March 31, 2020, the Company had no bank indebtedness outstanding [March 31, 2019 – $9.6 million].
In the normal course of business, the Company enters into contracts that give rise to commitments of future minimum payments
that affect its liquidity.
The following table summarizes Canaccord Genuity Group’s long-term contractual obligations on March 31, 2020:
(C$ thousands)
Premises and equipment operating leases
Bank loan(1)
Convertible debenture(2)
Total contractual obligations
Total
Fiscal 2021
Fiscal 2022 –
Fiscal 2023
Fiscal 2024
and thereafter
134,894
94,183
165,906
394,983
29,899
9,503
8,295
47,697
49,843
33,851
16,591
100,285
55,152
50,829
141,020
247,001
(1) Bank loan consists of £40,000,000 credit facility obtained to finance a portion of the cash consideration for the acquisition of Hargreave Hale and £15,000,000 for the acquisition of Thomas
Miller. The bank loan bears interest at 2.6584% per annum and is repayable in instalments of principal and interest over four years and matures in September of 2023. The current balance outstanding
net of unamortized financing fees is £49.0 million.
(2) Convertible debentures consist of the unsecured senior subordinated convertible debentures (the Debentures) issued in Q2/19. The Debentures bear interest at a rate of 6.25% per annum and
mature on December 31, 2023. The Company, under certain circumstances, may redeem the Debentures on or after December 31, 2021.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
40 Management’s Discussion and Analysis
Liquidity and Capital Resources
The Company has a capital structure comprised of the equity portion of the convertible debentures, preferred shares, common
shares, contributed surplus, retained deficit and accumulated other comprehensive income. On March 31, 2020, cash and cash
equivalents were $997.1 million, an increase of $176.4 million from $820.7 million as of March 31, 2019. During the year ended
March 31, 2020, financing activities used cash in the amount of $143.9 million, mainly due to purchases of common shares for
the LTIP ($39.8 million), cash dividends paid on the preferred and common shares ($41.9 million) and lease payments of $31.7
million, partially offset by proceeds from the bank loan ($26.3 million). Investing activities used cash in the amount of
$49.9 million mainly for the acquisitions of Thomas Miller, and Patersons during the year. Operating activities generated cash of
$365.2 million, which was largely due to changes in non-cash working capital. An increase in cash of $5.0 million was attributable
to the effect of foreign exchange translation on cash balances.
The Company’s business requires capital for operating and regulatory purposes. The majority of current assets reflected on the
Company’s audited consolidated 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. Securities sold short are highly liquid securities. 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 collectability. Receivables and payables from brokers and dealers represent the following: current open transactions
that generally settle within the normal two-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.
Preferred Shares
SERIES A PREFERRED SHARES
In fiscal 2012, the Company issued 4,540,000 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 $113.5 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, as declared, were paid at an annual rate of 5.5% for the initial five-year period ended on
September 30, 2016. Commencing October 1, 2016 and ending on and including September 30, 2021, quarterly cumulative
dividends, if declared, will be paid at an annual rate of 3.885%. 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 had the 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
have the option on September 30 every five years thereafter. The number of shares tendered for conversion by the conversion
deadline of September 15, 2016 was below the minimum required to proceed with the conversion and, accordingly, no Series B
Preferred Shares were issued. Series B Preferred Shares would entitle any holders thereof 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 had the option to redeem the Series A Preferred Shares on September 30, 2016, and has the option to redeem on
September 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 41
SERIES C PREFERRED SHARES
In fiscal 2013, the Company issued 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 $100.0 million. The aggregate net amount recognized
after deducting issue costs, net of deferred taxes of $1.0 million, was $97.5 million.
Quarterly cumulative cash dividends, as declared, were paid at an annual rate of 5.75% for the initial five-year period ended on
June 30, 2017. Commencing July 1, 2017 and ending on and including June 30, 2022, quarterly cumulative dividends, if declared,
will be paid at an annual rate of 4.993%. 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 had the 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
have the option on June 30 every five years thereafter. The number of shares tendered for conversion by the conversion deadline
of June 30, 2017 was below the minimum required to proceed with the conversion and, accordingly, no Series D Preferred Shares
were issued. Series D Preferred Shares would entitle any holders thereof 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 had the option to redeem the Series C Preferred Shares on June 30, 2017 and has the option to redeem on
June 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
CONVERTIBLE DEBENTURES
On August 22, 2018, the Company completed its bought deal offering of convertible unsecured senior subordinated debentures
for gross proceeds of $59,225,000 (the Offered Debentures). The Company had also closed the concurrent non-brokered private
placement with a large Canadian asset manager for gross proceeds of $73,500,000, which together with the gross proceeds from
the Offered Debentures, represent an aggregate principal amount of $132,725,000 (together with the Offered Debentures, the
“Convertible Debentures”). The proceeds of the non-brokered private placement were used to repay the convertible debentures
issued in October 2016 in the principal amount of $60,000,000 and a premium of $13,500,000 for a total of $73,500,000. The
remainder of the proceeds were allocated for use by the Company to finance growth in its wealth management business in
Canada and the UK & Europe, and elsewhere as opportunities arise.
The Convertible Debentures bear interest at a rate of 6.25% per annum, payable semi-annually on the last day of December and
June each year commencing December 31, 2018. The Convertible Debentures are convertible at the holder’s option into common
shares of the Company, at a conversion price of $10.00 per common share. The Convertible Debentures mature on December 31,
2023 and may be redeemed by the Company in certain circumstances, on or after December 31, 2021.
Outstanding Share Data
Preferred shares
Series A – issued shares outstanding
Series C – issued shares outstanding
Common shares
Issued shares excluding unvested shares(1)
Issued shares outstanding(2)
Issued shares outstanding – diluted(3)
Average shares outstanding – basic
Average shares outstanding – diluted(4)
Average shares outstanding – diluted, excluding significant items(4)(5)
Outstanding shares as of March 31
2020
2019
4,540,000
4,000,000
4,540,000
4,000,000
93,464,251
107,812,361
130,722,846
98,449,097
128,302,744
128,302,744
97,580,334
115,616,744
140,241,098
96,259,582
130,943,743
130,943,743
Includes 284,645 unvested shares related to share purchase loans for recruitment and 14,063,465 unvested shares purchased by the employee benefit trusts for the LTIP.
Includes 22,910,485 of share issuance commitments net of forfeitures.
(1) Excludes 284,645 outstanding unvested shares related to share purchase loans for recruitment and 14,063,465 unvested shares purchased by the employee benefit trusts for the LTIP.
(2)
(3)
(4) This is the diluted share number used to calculate diluted EPS.
(5) See Non-IFRS Measures on page 14. This is the diluted share number used to calculate diluted EPS on an excluding significant items basis.
In a substantial issuer bid which commenced on July 3, 2019, and expired on August 9, 2019, the Company made an offer to
repurchase for cancellation up to $40.0 million of its common shares. The offer was made by way of a “modified Dutch auction”,
which allowed shareholders who chose to participate in the offer to individually select the price, within a price range of not less than
$5.50 per common share and not more than $6.30 per common share (in increments of $0.10 per common share), at which
they are willing to sell their common shares. Upon expiry of the offer, the Company determined that $5.50 was the lowest purchase
price that allowed it to purchase the maximum number of common shares properly tendered to the offer, and not properly
withdrawn, having an aggregate purchase price of $40.0 million. The Company therefore purchased for cancellation 7,272,727 of
its common shares at a purchase price of $5.50 per share, representing approximately 6.28% of the issued and outstanding
common shares on a non-diluted basis at July 3, 2019. These shares were cancelled effective August 19, 2019.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
42 Management’s Discussion and Analysis
On August 12, 2019, the Company filed a notice to renew the normal course issuer bid (NCIB) to provide the Company with the
choice to purchase up to a maximum of 5,423,872 of its common shares during the period from August 15, 2019 to August 14,
2020 through the facilities of the TSX and on alternative trading systems in accordance with the requirements of the TSX. The
purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares for cancellation. The
maximum number of shares that may be purchased under the current NCIB represents 5.0% of the Company’s outstanding common
shares at the time of the Notice. During the year ended March 31, 2020, there were 1,467,656 shares purchased and cancelled
under the NCIB.
The Company has entered into a predefined plan with a designated broker to allow for the repurchase of its common shares
under this NCIB. The Company’s broker may repurchase the common shares under the plan on any trading day during the NCIB,
including at any time during the Company’s internal trading blackout periods. The plan has been reviewed by the TSX and will
terminate on the earlier of the termination of the plan by the Company in accordance with its terms and the expiry of the NCIB.
The ability to make purchases under the current NCIB commenced on August 15, 2019 and will continue for one year (to August 14,
2020) at the discretion of the Company. The maximum consideration will be the market price of the securities at the time of
acquisition. In order to comply with the trading rules of the TSX, the daily purchases are limited to 60,212 common shares of the
Company (which is 25% of the average daily trading volume of common shares of the Company on the TSX (ADTV) in the six
calendar months from February 2019 to July 2019.
As of May 31, 2020, the Company has 107,813,482 common shares issued and outstanding.
ISSUANCE AND CANCELLATION OF COMMON SHARE CAPITAL
Balance, March 31, 2019
Shares issued in connection with share-based payment plans
Shares issued in connection with acquisition of Petsky Prunier
Shares issued in connection with exercise of private placement warrants
Shares purchased and cancelled under substantial issuer bid
Shares purchased and cancelled under the normal course issuer bid
Balance, March 31, 2020
Share-Based Payment Plans
LONG-TERM INCENTIVE PLAN
115,616,744
54,236
736,850
144,914
(7,272,727)
(1,467,656)
107,812,361
Under the long-term incentive plan (LTIP), eligible participants are awarded restricted share units (RSUs), which generally vest over
three years. For employees in Canada, the United States, Channel Islands, Australia and the United Kingdom, employee benefit
trusts (the Trusts) have been established. The Company or certain of its subsidiaries, as the case may be, fund the Trusts with cash
which is used by the trustees to purchase common shares on the open market that will be held in the Trusts until the RSUs
vest.
FORGIVABLE COMMON SHARE PURCHASE LOANS
The Company provides loans to certain employees (other than directors or executive officers) for the purpose of partially funding
the purchase of shares of the Company and increasing share ownership by the employees. The Company has provided such loans
to executive officers in the past but has now adopted a policy not to make any further such loans to directors or executive
officers. No interest is charged in relation to the share purchase loans.
REPLACEMENT PLANS
As a result of the acquisition of Collins Stewart Hawkpoint plc (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, which replaced the existing LTIPs at CSHP as of the acquisition date for eligible
employees.
DEFERRED SHARE UNITS
Beginning April 1, 2011, the Company adopted a deferred share unit (DSU) plan for its independent directors. From August 7,
2020, half of the independent directors’ annual fee was paid in the form of DSUs. Directors may elect annually to use more of their
directors’ fees for DSUs. When a director leaves the Board of Directors, outstanding DSUs are paid out in cash with the amount
equal to the number of DSUs held multiplied by the volume weighted average price of the Company’s common shares for the ten
trading days immediately preceding the first publication of interim financial statements and management’s discussion and analysis
for the fiscal quarter of the Company next ending following the director’s leaving. 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.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 43
PERFORMANCE SHARE UNITS
Beginning March 31, 2018, the Company adopted a performance share unit (PSU) plan for certain senior executives. The PSUs
are a notional equity-based instrument linked to the value of the Company’s common shares. At the end of a three-year vesting
period, the number of PSUs which vest is determined upon performance against certain pre-determined metrics. The PSUs cliff vest
on the third anniversary of the date of the grant. The PSUs are settled in cash, based on the share price of the Company’s
shares at the time of vesting.
PERFORMANCE SHARE OPTIONS
On June 1, 2018, the Company created a performance share option (“PSO”) plan that was approved at the Company’s Annual
General Meeting held on August 2, 2018. On June 14, 2018, the Company granted 5,620,000 options under the PSO plan. The
options have an exercise price of $6.73 per share. In addition, the Company granted 600,000 options on August 16, 2018 with an
exercise price of $7.067. On June 12, 2019, the Company granted 100,000 options on the same terms as the June 14, 2018
grant (including a five-year term from June 14, 2018). For accounting purposes under IFRS 2, the grant date of the initial PSOs is
August 2, 2018, being the date the PSO plan was approved at the Annual General Meeting. The PSOs have a term of five years and
will time-vest ratably over four years (with one third vesting on each of the second, third and fourth anniversaries of the date of
the grant). The PSOs will also be subject to market (stock price) performance vesting conditions, as well as have a four times
exercise price cap on payout value (i.e., the gain on the exercise of the options is limited to three times the exercise price). The PSOs
will expire on June 14, 2023.
OTHER SHARE-BASED PAYMENT PLAN
During the year ended March 31, 2019, the Company granted a share-based award to a senior executive. The award vests on
March 31, 2021, or at the holder’s option, can be extended to March 31, 2022.
OTHER RETENTION AND INCENTIVE PLANS
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 the aggregate.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
44 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.
The Company’s trading subsidiaries and intermediate holding companies are listed in the following table:
% equity interest
Canaccord Genuity Corp.
CG Investments Inc.
CG Investments Inc. III
Jitneytrade Inc.
Finlogik Inc.
Finlogik Inc. Tunisia SARL
Canaccord Genuity SAS
Canaccord Genuity Wealth (International) Limited
Canaccord Genuity Financial Planning Limited
Canaccord Genuity Wealth Limited
Canaccord Genuity Wealth Group Limited
Canaccord Genuity Wealth (International) Holdings Limited
Hargreave Hale Limited
CG McCarthy Taylor Ltd.
CG Wealth Planning Limited
Canaccord Genuity Limited
Canaccord Genuity Wealth Group Holdings Ltd.
Canaccord Genuity LLC
Canaccord Genuity Wealth Management (USA) Inc.
Canaccord Genuity Wealth & Estate Planning Services Ltd.
Canaccord Genuity Petsky Prunier LLC
Canaccord Asset Management Inc.
Canaccord Adams Financial Group Inc.
Collins Stewart Inc.
Canaccord Adams BC ULC
Canaccord Genuity Finance Corp.
Canaccord Adams Finance Company ULC
Canaccord Adams Finance Company LLC
Canaccord Adams (Delaware) Inc.
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*
Canaccord Genuity Financial Limited*
Canaccord Genuity Asia (Beijing) Limited
The Balloch Group Limited
Canaccord Genuity Asia (Hong Kong) Limited
Canaccord Genuity (Dubai) Ltd.
Canaccord Genuity SG Pte. Ltd.
Canaccord Genuity Wealth Group Holdings (Jersey) Limited
Canaccord Genuity Hawkpoint Limited
Canaccord Genuity Management Company Limited
Country of
incorporation
Canada
Canada
Canada
Canada
Canada
Tunisia
France
Guernsey
United Kingdom
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Canada
United States
United States
Canada
United States
Canada
United States
United States
Canada
Canada
Canada
United States
United States
United States
Canada
Canada
China (Hong Kong SAR)
Australia
Australia
Australia
China
British Virgin Islands
China (Hong Kong SAR)
United Arab Emirates
Singapore
Jersey
United Kingdom
Ireland
March 31,
2020
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
80%
80%
100%
100%
100%
100%
100%
100%
100%
100%
March 31,
2019
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
80%
80%
100%
100%
100%
100%
100%
100%
100%
100%
*
The Company owns 80% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd., Canaccord Genuity (Australia) Limited, and Canaccord Genuity Financial Limited, but for accounting
purposes, as of March 31, 2020 the Company is considered to have an 85% interest because of the shares held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd. [March 31, 2019 –
85%] [Note 8].
Security trades executed for employees, officers and directors of Canaccord Genuity Group Inc. 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 Genuity Group Inc.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 45
The Company offers various share-based payment plans to its key management personnel, including common share purchase
loans, a long-term incentive plan, a PSU plan and a PSO plan. Independent directors have also been granted DSUs.
Disclosed in the table below are the amounts recognized as expenses related to individuals who are key management personnel
as at March 31, 2020 and March 31, 2019.
(in thousands)
Short term employee benefits
Share-based payments
Total compensation paid to key management personnel
March 31,
2020
$
$
12,877 $
1,068
13,945 $
March 31,
2019
10,167
2,656
12,823
Accounts payable and accrued liabilities include the following balances with key management personnel:
(in thousands)
Accounts receivable
Accounts payable and accrued liabilities
Critical Accounting Policies and Estimates
March 31,
2020
March 31,
2019
$
$
2,328 $
980 $
837
942
The following is a summary of Canaccord Genuity Group’s critical accounting estimates. The Company’s significant accounting
policies are in accordance with IFRS and are described in Note 5 to the audited consolidated financial statements for the year ended
March 31, 2020. The Company’s consolidated financial statements for the years ended March 31, 2020 and 2019 were also
prepared in accordance with IFRS.
The preparation of the March 31, 2020 audited 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 judgments, estimates and assumptions include consolidation, revenue recognition, share-based
payments, income taxes and valuation of deferred tax assets, impairment of goodwill, intangible assets and other long-lived assets,
allowance for credit losses, fair value of financial instruments, capitalization of intangible assets related to software costs, and
provisions. Amendments may be made to estimates relating to net assets acquired in an acquisition as well as the allocation of
identifiable intangible assets between indefinite life and finite lives. Judgments, estimates and assumptions were also utilized in
connection with the valuation of goodwill and intangible assets acquired in connection with the acquisitions of Patersons
Securities Limited and Thomas Miller Wealth Management and Thomas Miller Investment (Isle of Man) Limited.
The economic uncertainty related to the outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization
in March 2020 has cast additional uncertainty on the assumptions used by management in making its judgements and estimates.
In response to the economic conditions caused by the pandemic, governments and central banks have reacted with significant
monetary and fiscal interventions designed to stabilize the economy. The duration and impact of the COVID-19 outbreak and the
efficacy of the government and central bank interventions is unknown at this time. Accordingly, it is not possible to reliably estimate
the length and severity of these developments and the impact that the COVID-19 pandemic will have on the financial results and
condition of the Company in future periods and the impact that such developments may have on the assumptions used by management
in making its judgements and estimates.
Significant accounting policies used and policies requiring management’s judgment and estimates are disclosed in Notes 2 and 5
of the audited consolidated financial statements for the year ended March 31, 2020.
CONSOLIDATION
The Company owns 80% of the voting shares of Canaccord Genuity (Australia) Limited (CGAL) and Canaccord Genuity Financial
Limited as at March 31, 2020. The Company also completed an evaluation of its contractual arrangements with the other
shareholders of CGAL and the control it has over the financial and operating policies of CGAL and determined it should consolidate
under IFRS 10, “Consolidated Financial Statements” (IFRS 10), as at March 31, 2020 and 2019. Therefore, the financial position,
financial performance and cash flows of CGAL have been consolidated. Although the Company owns 80% of the issued shares
of CGAL as at March 31, 2020, for accounting purposes, the Company is considered to have an 85% interest because of the shares
held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd. Accordingly, the Company has consolidated the entity
and recognized a 15% non-controlling interest, which represents the portion of CGAL’s net identifiable assets not owned by the
Company. Net income and each component of other comprehensive income are attributed to the non-controlling interest and to the
owners of the parent.
The Company has established employee benefit trusts, which are considered special purpose entities (SPEs), to fulfill obligations
to employees arising from the Company’s share-based payment plans. The employee benefit trusts have been consolidated in
accordance with IFRS 10 since their activities are conducted on behalf of the Company, and the Company retains the majority of
the benefits and risks of the employee benefit trusts.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
46 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.
Technology development expenditures on an individual project are recognized as an intangible asset when the Company can
demonstrate that the technical feasibility of the asset for use has been established. The asset is carried at cost less any
accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete,
and the asset is available for use. It is amortized over the period of expected future benefit.
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. 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 the impairment is
recognized in the consolidated statements of operations.
In assessing fair value less costs to sell, 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 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 consolidated statement of operations 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 at least 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.
REVENUE RECOGNITION
Revenue is recognized either at a point in time when a single performance obligation is satisfied at once or over the period of
time when a performance obligation is received and utilized by the customer over that period. The Company assesses its revenue
arrangements in order to determine if it is acting as principal or agent. The main types of revenue contracts are as follows:
Commissions and fees revenue consist 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 net of
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 47
commission revenue. Facilitation losses for the year ended March 31, 2020 were $14.8 million [2019 – $6.4 million]. Commissions
are recognized at a point in time (trade date) as the performance obligation is satisfied.
Investment banking revenue consists of underwriting fees and commissions earned on corporate finance activities. The act of
underwriting the securities is the sole performance obligation and revenue is recognized at the point in time when the underwriting
transaction is complete.
Advisory fees consist of ongoing management and advisory fees that are recognized over the period of time that this performance
obligation is delivered. Also included in advisory fees is revenue from mergers and acquisitions activities, which is recognized at
the point in time when the underlying transaction is substantially completed under the engagement terms and it is probable that a
significant revenue reversal will not occur.
Principal trading revenue consists of income earned in connection with principal trading operations and is outside the scope of
IFRS 15.
Interest revenue consists of interest earned on client margin accounts, interest earned on the Company’s cash, interest earned
on cash delivered in support of securities borrowing activity, and dividends earned on securities owned. Interest and dividend
revenue is outside the scope of IFRS 15.
Other revenue includes foreign exchange gains or losses, revenue earned from correspondent brokerage services and administrative
fee revenue.
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.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statements of
operations.
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 carryforward of
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.
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 consolidated statements of financial position.
SHARE-BASED PAYMENTS
Employees (including senior executives) 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). The participating employees
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
48 Management’s Discussion and Analysis
are eligible to receive shares that generally vest over three years (the RSUs). This program is referred to as the Long-Term
Incentive Plan (the “LTIP” or the “Plan”).
Independent directors also receive deferred share units (DSUs) as part of their remuneration, which can only be settled in cash (cash-
settled transactions). Certain executives may also receive performance stock options (PSOs) as part of their remuneration, which
are equity-settled. Beginning for the year ended March 31, 2018, certain senior executives receive performance share units (PSUs)
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 (loss) 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.
RSUs used by the plan to vest after termination of employment so long as the employee does not violate certain post-termination
restrictions and is not engaged in certain competitive or soliciting activities as provided in the Plan. Because of this change, the
Company determined that the awards do not meet the criteria for an in-substance service condition, as defined by IFRS 2. Accordingly,
RSUs granted as part of the normal course incentive compensation payment cycle are expensed in the period in which those
awards are deemed to be earned with a corresponding increase in contributed surplus, which is generally the fiscal period in which
the awards are either made or the immediately preceding fiscal year for those awards made after the end of such fiscal year but
were determined and earned in respect of that fiscal year.
For certain awards, typically new hire awards or retention awards, vesting is subject to continued employment and therefore these
awards are subject to a continuing service requirement. Accordingly, the Company recognizes the cost as an expense on a
graded basis over the applicable vesting period with a corresponding increase in contributed surplus. The Company estimates the
number of equity instruments that will ultimately vest when calculating the expense attributable to equity-settled transactions.
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 and PSUs 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.
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.
The Company also has monetary assets and liabilities that are receivable or payable from a foreign operation. If settlement of the
receivable or payable is neither planned nor likely to occur in the foreseeable future, the differences upon translation are
recognized in accumulated other comprehensive income (loss) as these receivables and payables form part of the net investment
in the foreign operation.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 49
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 significant, 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.
Financial Instruments
A significant portion of the Company’s assets and liabilities are composed of financial instruments. The Company uses financial
instruments for both trading and non-trading activities. The Company engages in trading activities which include the purchase and
sale of securities in the course of facilitating client trades and taking principal trading positions with the objective of earning a
profit.
The use of financial instruments may either introduce or mitigate exposures to market, credit and/or liquidity risks. See Risk
Management in this MD&A for details on how these risks are managed. For significant assumptions made in determining the
valuation of financial and other instruments, refer to Critical Accounting Policies and Estimates in this MD&A. For additional
information regarding the Company’s financial instruments, refer to Note 7 of the audited consolidated financial statements for the
year ended March 31, 2020.
FOREIGN EXCHANGE
The Company 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, 2020, forward
contracts outstanding to sell US dollars had a notional amount of US$2.1 million, an increase of US$1.9 million compared to
March 31, 2019. Forward contracts outstanding to buy US dollars had a notional amount of US$0.8 million, a decrease of
US$4.8 million from March 31, 2019. The fair value of these contracts was nominal. Some of the Company’s operations in the US,
the UK & 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.
These contracts were entered into in an attempt to mitigate 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.
The Company’s Canaccord Genuity Wealth Management segment in the UK & Europe trades foreign exchange forward contracts
on behalf of its clients and establishes matching contracts with the counterparties. The Company has no significant net exposure,
assuming no counterparty default.
FUTURES
The Company’s Canadian operations are involved in trading various futures contracts, in an attempt to mitigate market risk,
interest rate risk, yield curve risk and liquidity risk. Futures contracts are agreements to buy or sell a standardized amount of an
underlying asset, 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’s Canadian operations have traditionally engaged in the trading of Canadian
and US government bond futures contracts to mitigate its risk. At March 31, 2020, the notional amount of the bond futures contracts
outstanding was long $29.9 million [March 31, 2019 – long $0.1 million].
The Company’s Canadian operations are also involved in trading US Treasury futures in an attempt to mitigate interest rate risk,
yield curve risk and liquidity risk. There were no outstanding US Treasury futures contracts outstanding as at March 31, 2020 and
March 31, 2019.
The fair value of all of the above futures 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.
Adoption of New and Revised Standards
IFRS 16, LEASES
In January 2016, the IASB issued IFRS 16, Leases (IFRS 16), which replaces IAS 17, Leases (IAS 17), with the key change being
that lessee accounting will eliminate the IAS 17 distinction between operating leases and finance leases, treating most leases in the
same manner as finance leases under IAS 17. The new standard requires lessees to recognize assets and liabilities for most
leases, other than leases eligible for low-value (less than USD $5,000) or short-term (12 months or less) exemption.
Where an arrangement meets the IFRS 16 definition of a lease, at the commencement a loan obligation for future lease payables
will be recognized together with a non-current asset representing the right to use the underlying asset during the lease term. In
place of the lease rental expense in the consolidated statement of operations, lease costs will be recognized in the form of
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
50 Management’s Discussion and Analysis
amortization of the right-of-use asset and interest on the lease liability. IFRS 16 also has the effect of skewing expenses towards
the earlier years of a lease (when the outstanding lease liability, and thus interest expense, is higher), although both the total
expense and cash flows during the life of a lease are identical under IFRS 16 and IAS 17.
The Company has implemented IFRS 16 for its fiscal year ending March 31, 2020 and has elected to adopt IFRS 16 using the
modified retrospective method with no restatement of prior year comparatives. The Company has also elected to take advantage
of the option not to recognize a right of use asset and associated lease liability for low-value (less than USD $5,000) or short-term
(12 months or less) assets. In addition, the Company has taken advantage of the following transitional options to:
(1)
treat all leases that have less than 12 months remaining at the date of transition as short-term leases.
(2)
rely on existing assessments on whether leases are onerous in accordance with IAS 37 Provisions, Contingent Liabilities
and Contingent Assets
(3) exclude initial direct costs from the measurement of right of use assets at the date of initial application
(4) use hindsight in the assessment of determining lease terms in those situations where leases contain an option to extend
or terminate the lease
Accordingly, upon adoption of IFRS 16 on April 1, 2019, the Company has recognized both right of use (ROU) assets and
corresponding lease liabilities for each lease (subject to the low-value and short-term exemptions noted above). Lease liabilities
were calculated at the present value of expected lease payments with right of use assets reflecting the same values after adjustment
for prepaid rental payments and onerous lease provisions as applicable.
As at April 1, 2019, the Company has recognized in its consolidated statement of financial position the right of use assets and
corresponding lease liabilities of $112.7 million and $121.5 million, respectively. For the year ended March 31, 2020, the Company
recorded amortization expense related to the ROU assets of $22.9 million and interest expense related to the lease liabilities of
$7.2 million.
IFRIC 23 Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application
of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include
requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses
the following:
(1) Whether an entity considers uncertain tax treatments separately
(2) The assumptions an entity makes about the examination of tax treatments by taxation authorities
(3) How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
(4) How an entity considers changes in facts and circumstances
An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other
uncertain tax treatments. The approach that better predicts the resolution needs to be followed.
The Company applies significant judgement in identifying uncertainties over income tax treatments. Since the Company operates
in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements.
Upon adoption of the Interpretation as of April 1, 2019, the Company considered whether it has any uncertain tax positions, and
determined, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities.
The interpretation did not have an impact on the consolidated financial statements for the year ended March 31, 2020.
Amendments to IAS 12 Income Taxes
The amendments to IAS 12 Income Taxes clarify that the income tax consequences of dividends are linked more directly to past
transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognizes the income
tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognized
those past transactions or events.
The Company adopted the amendments to IAS 12 commencing on April 1, 2019. Since the Company’s current practice is in line
with these amendments, they had no impact on the consolidated financial statements for the year ended March 31, 2020.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 51
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.
STANDARDS ISSUED BUT NOT YET EFFECTIVE
There are no standards issued, which may be reasonably expected to materially impact upon the Company’s financial statements,
but which are not yet effective as of March 31, 2020.
Please see Note 4 of the audited consolidated financial statements for the year ended March 31, 2020.
Disclosure Controls and Procedures and Internal Control over Financial Reporting
DISCLOSURE CONTROLS AND PROCEDURES
As of March 31, 2020, an evaluation was carried out, under the supervision of and with the participation of management,
including the President & CEO and the Executive Vice President & Chief Financial Officer, 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 & Chief Financial Officer concluded that the design and operation of these disclosure controls and
procedures were effective as of and during the fiscal year ended March 31, 2020.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management, including the President & CEO and the Executive Vice President & Chief Financial Officer, 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 & Chief Financial Officer concluded that the Company’s internal
control over financial reporting was designed and operating effectively as of and during the year ended March 31, 2020 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, 2020 that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Risk Management
OVERVIEW
Uncertainty and risk are inherent when conducting operations within financial markets. As an active participant in the Canadian
and international capital markets, the Company is exposed to risks that could result in financial losses. The Company 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 the Company’s financial stability and profitability. Therefore,
an effective risk management framework is integral to the success of Canaccord Genuity Group Inc.
RISK MANAGEMENT STRUCTURE AND GOVERNANCE
The Company’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, procedures and reports that enable the Company to assess
and control its risks. These policies and procedures are subject to ongoing review and modification as activities, markets and
circumstances change.
As part of the Company’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 the Company’s risk exposure is conducted
through a variety of separate, but complementary, financial, credit, operational, compliance and legal reporting systems.
The Company’s governance structure includes the following elements:
Audit
Committee
Board of
Directors
Canaccord
Genuity Group Inc.
Corporate Governance &
Compensation Committee
Risk Management
Committee
Cyber Security
Committee
Canaccord Genuity Global
Operating Committee
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
52 Management’s Discussion and Analysis
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. See the company’s current Annual Information Form (AIF) for details of
the Audit Committee’s mandate as it relates to risk management.
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 as
well as 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
firm’s Chief Risk Officer and committee members include the CEO, the CFO and senior management representation from the key revenue-
producing businesses and functional areas of the Company. The Risk Management Committee identifies, measures and monitors
the principal risks facing the business through review and approval of the Company’s risk appetite, policies, procedures and limits/
thresholds.
The segregation of duties and management oversight are important aspects of the Company’s risk management framework. The
Company 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 Audit, Treasury, Finance, Information Technology and Legal.
The Company’s global Cybersecurity Committee exists to help identify, monitor and manage risks specific to the company’s
information networks, data and internal systems. This committee is chaired by the firm’s Chief Risk Officer and committee members
include senior IT management from across the firm, as well as representation from Legal, Compliance, Internal Audit and
Operations. The Cybersecurity Committee is focused on issues such as cybersecurity risk assessment, IT safeguards and controls,
risks related to third-party service providers, employee training and awareness and incident response planning.
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 exposure is prudent within a set of risk limits set by the Risk
Management Committee and approved by the Audit Committee. In addition, the Company has established procedures to ensure
that risks are measured, closely monitored, controlled and visible to senior levels of management.
The Company is exposed to equity price risk, liquidity risk and volatility risk as a result of its principal trading activities in listed
options and equity securities. The Company 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 Genuity Group mitigates its risk exposure through a variety of limits to control concentration, capital
allocation and usage, as well as through trading policies and guidelines. The Company manages and monitors its risks in this area
using both qualitative and quantitative measures, on a company-wide basis, as well as by trading desk. Management regularly
reviews and monitors inventory levels and positions, trading results, liquidity profile, position aging and concentration levels.
Canaccord Genuity Group also utilizes scenario analysis and a Value-at-Risk (VaR) risk measurement system for its equity and fixed
income and derivative inventories. Consequently, the Company can ensure 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.
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 Genuity Group is in connection with trading activity by clients in the Jitneytrade trade business acquired
by the Company in fiscal 2019 (now rebranded as CG Direct) and Canaccord Genuity Wealth Management business segments,
including client margin accounts. In order to minimize financial exposure in this area, the Company applies a set of credit standards
and conducts financial reviews with respect to clients and new accounts.
The Company provides financing to clients by way of margin lending. In margin-based lending, the Company extends credit for a
portion of the market value of the securities in a client’s account, up to certain limits. The margin loans are collateralized by those
securities in the client’s account. In connection with this lending activity, the Company 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 the Company is unable to
recover sufficient value from the collateral held. For margin lending purposes, the Company has established risk-based limits that
are generally more restrictive than those required by applicable regulatory policies. In addition, the Company has established
limits to how much it will lend against an individual security or group of securities in a single sector so as to limit credit concentration
risk.
Trading strategies involving derivative products, such as exchange traded options and futures carry certain levels of risk to the
Company. Due to the non-linear and intrinsically leveraged nature of derivative securities, the speed at which their value changes
is exacerbated, thereby potentially triggering margin calls and client-related losses. Although the Company imposes strict limits on
clients trading and monitors client exposure on a real-time basis there is no certainty that such procedures will be effective in
eliminating or reducing the risk of losses to the Company.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 53
The extension of credit via margin lending is overseen by the firm’s Credit Committee. The Committee meets regularly to review
and discuss the firm’s credit risks, including large individual loans, collateral quality, loan coverage ratios and concentration risk.
The Committee will also meet, as required, to discuss any new loan arrangements proposed by senior management.
The Company 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. The Company 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.
The Company 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 and principal
trading, securities borrowing and lending, and entering into repurchase agreements and reverse repurchase agreements. In the
event that counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the
creditworthiness of the counterparty and/or the issuer of the instrument. The Company manages this risk by imposing and monitoring
individual and aggregate trading and 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.
The Company records a provision for bad debts in general and administrative expense. 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, people and systems, or from external
events such as the occurrence of disasters or security threats. Operational risk exists in all of the Company’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, credit or other risks.
The Company operates in different markets and relies on its employees and systems to process a high number of transactions. In
order to mitigate this risk, the Company 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, transaction and daily
value limits within all trading applications, cash controls, physical security, independent review procedures, documentation standards,
billing and collection procedures, and authorization and processing controls for transactions and accounts. In addition, the
Company has implemented an operational risk program that helps Canaccord Genuity Group measure, manage, report and monitor
operational risk issues (see RCSA below). The Company also has disaster recovery procedures, business continuity plans and
built-in redundancies in place in the event of a systems or technological failure. In addition, the Company utilizes third party service
agreements and security audits where appropriate.
Risk and Control Self-Assessment (RCSA)
The purpose of RCSAs is to:
• Identify and assess key risks inherent to the business and categorize them based on severity and frequency of occurrence
• Rate the effectiveness of the control environment associated with the key risks
• Mitigate the risks through the identification of action plans to improve the control environment where appropriate
• Provide management with a consistent approach to articulate and communicate the risk profiles of their areas of responsibility
• Meet regulatory requirements and industry standards
The Company 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 operations 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 impact 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. The
Company has established procedures to ensure compliance with all applicable statutory and regulatory requirements in each
jurisdiction in which it operates. 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, use of and
safekeeping of client data, credit granting, collection activity, anti-money laundering, insider trading, employee misconduct,
conflicts of interest and recordkeeping.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
54 Management’s Discussion and Analysis
Legal risk results from potential criminal, civil or regulatory litigation against the Company that could materially affect the Company’s
business, operations or financial condition. The Company 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 the Company’s interests in various legal
actions.
Losses or costs associated with routine regulatory and legal matters are included in general and administrative expense in the
Company’s audited consolidated financial statements.
The Company and its affiliates provide financial advisory, underwriting and other services to, and trade the securities of issuers
that are involved with, new and emerging industries, including the US cannabis industry. Activities within such industries, including
the US cannabis industry, typically have not had the benefit of a history of successful operating results. In addition to the economic
uncertainties associated with new industries, new activities and new issuers, the laws applicable to such industries or activities,
particularly the US cannabis industry and the activities of issuers in that industry, and the effect or enforcement of such laws are
undetermined, conflicting and uncertain. With respect to the US cannabis industry, cannabis continues to be a controlled substance
under the United States Controlled Substances Act and as such, there is a risk that certain issuers, while in compliance with
applicable state law, may be prosecuted under federal law. Accordingly, the Company has adopted policies and procedures
reasonably designed to ensure compliance with the United States Currency and Foreign Transactions Reporting Act of 1970 (the
Bank Secrecy Act) and the guidance issued by the United States Department of the Treasury Financial Crimes Enforcement Network,
FIN-2014-G001 (the FinCEN Guidance) relating to providing financial services to marijuana related businesses in the United
States (as that term is used in the FinCEN Guidance). While the Company takes steps to identify the risks associated with emerging
industries, including the US cannabis industry, and only provides services to those issuers where it determines that there is no
material risk to the Company or where any risk is unlikely to result in a material adverse consequence to the Company, there is a
risk that the Company could be the subject of third party proceedings which may have a material adverse effect on the Company
business, revenues, operating results and financial condition as well as the Company’s reputation, even if such proceedings were
concluded successfully in favour of the Company. The Company has determined that any such proceedings are unlikely and,
accordingly, has not recorded a provision in respect of such matters.
Cybersecurity risk
Cybersecurity risk is the risk that the Company’s information networks, data or internal systems will be damaged, disrupted,
misappropriated, stolen, accessed without permission or otherwise attacked. This risk exists due to the interconnected nature of
the Company’s business with its clients, suppliers, vendors, partners and the public via the internet and other networks. As a result
of this interconnectivity, third parties with which the Company does business with or that facilitate the Company’s business may
also be a source of cybersecurity risk to the firm. The Company devotes considerable effort and resources to defend against and
mitigate cybersecurity risk, including increasing awareness throughout the organization by implementing a firm-wide cybersecurity
training program for all employees. The Company’s management of cybersecurity risk, as well as any reported incidents, is regularly
presented to both senior management via the Cybersecurity Committee and the Audit Committee of the Board of Directors. The
Company has implemented a third party risk management framework as part of onboarding new vendors and other third parties as
well as vetting existing vendors. The purpose of this mitigant is to ensure all parties interacting with the Company are adhering
to high standards as it relates to cybersecurity.
Reputational risk
Reputational risk is the risk that an activity undertaken, or alleged to have been 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 revenue, legal action or increased
regulatory oversight. Possible sources of reputational risk could come from operational failures, non-compliance with laws and
regulations, disparaging traditional or online media coverage, or leading an unsuccessful financing. The Company could face
reputational risk through its association with past or present corporate finance clients who are the subject of regulatory and/or legal
scrutiny. 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, the Company has a formal Code of Business
Conduct and Ethics, a Business Integrity Line for reporting incidents, and an integrated program of marketing, branding,
communications and investor relations to help manage and support the Company’s reputation.
Pandemic risk
Pandemic risk is the risk of large-scale outbreaks of infectious diseases that can greatly increase morbidity and mortality over a
wide geographic area and cause significant social and economic disruption. Such disruptions could have a negative impact on the
Company’s operations and could prevent the Company from operating as it would under normal conditions. The global outbreak
of COVID-19 and the declaration of a pandemic by the World Health Organization in March 2020 caused a significant disruption in
economic activity and resulted in a sharp downturn in global equity markets which impacted the normal operation of the Company’s
business. In the early stages of the outbreak, the Company overhauled its Disaster Recovery Plan in preparation of an escalation of
the outbreak. This overhaul included the setup of low-latency remote access trading systems for trading desks, updates of
technology solutions and the network infrastructure, load testing of remote access systems, and policy and procedural
enhancements to reduce the need for manual processes to ensure the smooth operations of the business in the event of a remote
working environment. As a result, the company was well prepared and experienced no visible disruptions to its operations as a
result of move most employees working from remote locations. Trading desks operated smoothly and effectively to both service
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Management’s Discussion and Analysis 55
clients and to limit the Company’s exposure and risks in managing its own inventory and trading positions. Although the Company’s
systems, processes and procedures were effective in limiting the risk associated with the outbreak of the COVID-19 pandemic
there is a risk that such systems, processes and procedures may not be successful in the event of future pandemics or in the event
that conditions under the COVID-19 pandemic deteriorate or persist for an extended period of time.
Control risk
As of March 31, 2020, senior officers and directors of the Company collectively owned approximately 13.1% of the issued and
outstanding (17.9% fully diluted) common shares of Canaccord Genuity Group 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 Genuity Group 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.
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 the Company’s business.
Restrictions on ownership and transfer of common shares
Restrictions on ownership and transfer of common shares in the articles of Canaccord Genuity Group Inc. to prevent unauthorized
change in control without regulatory approval could, in certain cases, affect the marketability and liquidity of the common shares.
Risk factors
For a detailed list of the risk factors that are relevant to the Company’s business and the industry in which it operates, see the
Risk Factors section in the Company’s current 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 the Company considers to be of
particular relevance. Other risk factors may apply.
Further discussion regarding risks can be found in our Annual Information Form.
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, the Company’s financial
condition, results of operations, capital requirements and such other factors as the Board determines to be relevant.
Dividend Declaration
On June 2, 2020, the Board of Directors approved a dividend of $0.05 per common share, payable on June 30, 2020, with a
record date of June 19, 2020.
On June 2, 2020, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on June 30, 2020 to
Series A Preferred shareholders of record as at June 19, 2020.
On June 2, 2020, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on June 30, 2020 to
Series C Preferred shareholders of record as at June 19, 2020.
Additional Information
Additional information relating to Canaccord Genuity Group Inc., including our Annual Information Form, is available on our
website at www.canaccordgenuitygroup.com/EN/IR/FinReports/Pages/default.aspx and on SEDAR at www.sedar.com.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
56
Independent Auditors’ Report
To the Shareholders of
Canaccord Genuity Group Inc.
Opinion
We have audited the consolidated financial statements of Canaccord Genuity Group Inc. and its subsidiaries (the Group), which
comprise the consolidated statements of financial position as at March 31, 2020 and 2019, and the consolidated statements of
operations, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated
statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of Canaccord Genuity Group Inc. as at March 31, 2020 and 2019, and its consolidated financial performance
and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of
our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion & Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this
auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will
perform on this other information, we conclude there is a material misstatement of other information, we are required to report
that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFRSs, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
57
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Andre de Haan.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
June 2, 2020
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
58
Canaccord Genuity Group Inc.
Consolidated Statements of Financial Position
As at (in thousands of Canadian dollars)
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
Right of use assets
Total assets
LIABILITIES AND EQUITY
Current
Bank indebtedness
Securities sold short
Accounts payable and accrued liabilities
Provisions
Income taxes payable
Subordinated debt
Current portion of bank loan
Current portion of lease liabilities
Current portion of contingent consideration
Total current liabilities
Deferred tax liabilities
Convertible debentures
Deferred consideration
Contingent consideration
Promissory note
Other long-term liability
Bank loan
Lease liabilities
Total liabilities
Equity
Preferred shares
Common shares
Equity portion of convertible debentures
Warrants
Contributed surplus
Deferred consideration
Retained deficit
Accumulated other comprehensive income
Total shareholders’ equity
Non-controlling interests
Total equity
Total liabilities and shareholders’ equity
See accompanying notes
On behalf of the Board:
“Daniel Daviau”
“Terrence A. Lyons”
DANIEL DAVIAU
Director
TERRENCE A. LYONS
Director
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes
6, 7
9, 24
15
10
11
14
14
12
March 31,
2020
$
March 31,
2019
$
$
997,111 $
931,467
3,275,841
5,603
5,210,022
39,487
10,105
24,860
170,170
395,417
106,134
820,739
690,499
2,656,664
2,502
4,170,404
22,117
6,224
25,792
154,521
370,236
—
$ 5,956,195 $ 4,749,294
7 $
— $
6, 7
9, 24
28
16
17
18
15
19
7, 13
7, 13
7, 8
23
17
18
20
21
19
21
8
875,017
3,673,451
6,735
11,721
7,500
7,042
23,417
57,859
4,662,742
9,903
128,322
8,966
47,614
—
1,760
79,192
88,922
5,027,421
9,639
373,419
3,123,765
18,212
5,415
7,500
9,294
—
—
3,547,244
7,978
127,225
22,225
108,319
5,832
1,741
50,370
—
3,870,934
205,641
663,553
5,156
—
101,501
6,545
(193,131)
139,353
928,618
156
928,774
205,641
672,896
5,156
1,975
124,710
—
(237,770)
103,755
876,363
1,997
878,360
$ 5,956,195 $ 4,749,294
Canaccord Genuity Group Inc.
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
Compensation expense
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Amortization of right of use assets
Development costs
Restructuring costs
Acquisition-related costs
Loss on extinguishment of convertible debentures
Share of loss of an associate
Income before income taxes
Income tax expense (recovery)
Current
Deferred
Net income for the year
Net income attributable to:
CGGI shareholders
Non-controlling interests
Weighted average number of common shares outstanding (thousands)
Basic
Diluted
Income per common share
Basic
Diluted
Dividend per Series A Preferred Share
Dividend per Series C Preferred Share
Dividend per common share
See accompanying notes
59
March 31,
2020
$
March 31,
2019
$
586,884
236,962
206,507
108,834
63,690
20,990
556,475
294,241
142,228
125,830
51,008
20,785
1,223,867
1,190,567
738,313
83,964
18,094
66,666
33,678
113,612
32,594
22,866
12,053
1,921
(124)
—
207
716,625
83,577
41,719
64,930
25,453
100,768
24,280
—
15,513
13,070
3,064
8,608
304
1,123,844
1,097,911
100,023
92,656
29,344
(15,875)
13,469
86,554
31,611
(10,537)
21,074
71,582
11, 14
12
28
19
15
$
8 $
86,490 $
64 $
70,530
1,052
21
21
98,449
128,303
96,260
130,944
21 $
21 $
22 $
22 $
22 $
0.78 $
0.65 $
0.97 $
1.25 $
0.20 $
0.58
0.48
0.97
1.25
0.20
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
60
Canaccord Genuity Group Inc.
Consolidated Statements of Comprehensive Income
For the years ended (in thousands of Canadian dollars)
Net income for the year
Other comprehensive income
Net change in valuation of available for sale investments, net of tax
Net change in unrealized gains (losses) on translation of foreign operations, net of tax
Comprehensive income for the year
Comprehensive income attributable to:
CGGI shareholders
Non-controlling interests
See accompanying notes
March 31,
2020
$
86,554 $
March 31,
2019
$
71,582
—
36,745
123,299 $
122,088 $
1,211 $
443
(9,448)
62,577
60,953
1,624
$
$
$
$
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Canaccord Genuity Group Inc.
Consolidated Statements of Changes in Equity
As at and for the years ended (in thousands of Canadian dollars)
Preferred shares, opening and closing
Common shares, opening
Shares issued in connection with share-based payments
Acquisition of common shares for long-term incentive plan (LTIP)
Release of vested common shares from employee benefit trusts
Private placement warrants exercise
Shares purchased under substantial issuer bid
Shares issued in connection with purchase of non-controlling interests
Shares issued in connection with acquisition of Petsky Prunier
Shares cancelled
Net unvested share purchase loans
Common shares, closing
Warrants, opening
Reclassification to liability
Warrants, closing
Convertible debentures – equity, opening
Equity portion of convertible debentures issued during the period, net of tax
Convertible debentures – equity, closing
Contributed surplus, opening
Share-based payments, net
Shares cancelled
Purchase of non-controlling interests
Unvested share purchase loans
Change in deferred tax asset relating to share-based payments
Contributed surplus, closing
Retained deficit, opening
Net income attributable to CGGI shareholders
Common share dividends
Preferred share dividends
Equity portion of loss on extinguishment of convertible debentures
Retained deficit, closing
Deferred consideration, opening
Petsky Prunier
Deferred consideration, closing
Accumulated other comprehensive income, opening
Other comprehensive income (loss) attributable to CGGI shareholders
Accumulated other comprehensive income, closing
Total shareholders’ equity
Non-controlling interests, opening
Foreign exchange on non-controlling interests
Comprehensive income attributable to non-controlling interests
Purchase of non-controlling interests
Dividends paid to non-controlling interests
Non-controlling interests, closing
Total equity
See accompanying notes
61
March 31,
2019
$
205,641
649,846
331
(32,073)
39,322
—
—
16,807
6,631
(9,419)
1,451
672,896
1,975
—
1,975
2,604
2,552
5,156
145,426
7,306
827
(27,315)
(1,058)
(476)
124,710
(277,472)
70,530
(16,534)
(9,402)
(4,892)
(237,770)
—
—
—
113,332
(9,577)
103,755
Notes
20
8
13
21
22
22
19
March 31,
2020
$
205,641
672,896
489
(39,846)
69,903
732
(40,000)
—
7,094
(10,136)
2,421
663,553
1,975
(1,975)
—
5,156
—
5,156
124,710
(23,490)
2,935
—
(2,421)
(233)
101,501
(237,770)
86,490
(32,447)
(9,404)
—
(193,131)
—
6,545
6,545
103,755
35,598
139,353
$
928,618 $
876,363
1,997
(1,542)
1,211
—
(1,510)
156
13,571
(777)
1,624
(9,697)
(2,724)
1,997
928,774
878,360
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
62
Canaccord Genuity Group Inc.
Consolidated Statements of Cash Flows
For the years ended (in thousands of Canadian dollars)
OPERATING ACTIVITIES
Net income for the year
Items not affecting cash
Amortization
Amortization of right-of-use assets
Deferred income tax recovery
Share-based compensation expense
Loss on extinguishment of convertible debentures
Share of loss of associate
Interest expense in connection with lease liabilities
Changes in non-cash working capital
Increase in securities owned
Increase in accounts receivable
Decrease (increase) in income taxes payable, net
Increase in securities sold short
Increase in accounts payable, accrued liabilities and provisions
Cash provided by operating activities
FINANCING ACTIVITIES
(Decrease) increase in bank indebtedness
Purchase of shares for cancellation under normal course issuer bid
Purchase of shares under substantial issuer bid
Acquisition of common shares for long-term incentive plan
Proceeds from convertible debentures
Proceeds from bank loan
Cash dividends paid on common shares
Cash dividends paid on preferred shares
Lease payments
Cash used in financing activities
INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements
Acquisition of Thomas Miller, net of cash acquired
Acquisition of Patersons Securities Limited, net of cash acquired
Investment in associate
Acquisition of Jitneytrade Inc. and Finlogik Inc., net of cash acquired
Purchase of non-controlling interests
Purchase of investments
Acquisition of McCarthy Taylor Limited, net of cash acquired
Acquisition of Petsky Prunier LLC, net of cash acquired
Cash used in investing activities
Effect of foreign exchange on cash balances
Increase (decrease) in cash position
Cash position, beginning of year
Cash position, end of year
Supplemental cash flow information
Interest received
Interest paid
Income taxes paid
See accompanying notes
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes
11, 14
12
23
19
March 31,
2020
$
March 31,
2019
$
$
86,554 $
71,582
32,594
22,866
(15,875)
42,820
—
207
7,193
(240,968)
(618,636)
4,173
501,598
542,721
365,247
(9,639)
(7,201)
(40,000)
(39,846)
—
26,318
(32,447)
(9,404)
(31,699)
(143,918)
(6,353)
(27,634)
(11,433)
(4,000)
—
—
(498)
—
—
(49,918)
4,961
176,372
820,739
997,111
24,280
—
10,537
49,500
8,608
304
—
(221,282)
(446,453)
(10,227)
72,413
482,886
42,148
9,639
(8,592)
—
(32,073)
56,699
—
(16,534)
(9,402)
—
(263)
(4,382)
—
—
(2,500)
(7,545)
(14,431)
(4,063)
(3,611)
(39,783)
(76,315)
(7,669)
(42,099)
862,838
820,739
$
$
$
$
63,439
32,055
$
27,685 $
51,429
23,396
38,464
63
Notes to Consolidated Financial Statements
As at March 31, 2020 and March 31, 2019
and for the years ended March 31, 2020 and 2019
(in thousands of Canadian dollars, except per share amounts)
NOTE 01
Corporate Information
Through its principal subsidiaries, Canaccord Genuity Group Inc. (the Company or CGGI) is a leading independent, full-service
investment dealer with capital markets operations in North America, the UK & Europe, Asia, Australia and the Middle East. The
Company also has wealth management operations in Canada, the UK, Jersey, Guernsey, the Isle of Man and Australia. 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 Genuity Group 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 400 – 725 Granville Street, Vancouver, British
Columbia, V7Y 1G5.
The Company’s common shares are publicly traded under the symbol CF on the Toronto Stock Exchange (TSX). 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. The Company’s 6.25% Convertible Unsecured Senior Subordinated Debentures are listed on
the TSX under the symbol CF.DA.A.
The Company’s business 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.
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).
These audited consolidated financial statements have been prepared on a historical cost basis except for investments, securities
owned, securities sold short, deferred and contingent consideration, and certain impaired non-current assets, which have been
measured at fair value as set out in the relevant accounting policies.
These audited 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 June 2,
2020.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the financial statements of the Company, its subsidiaries and controlled special
purpose entities (SPEs).
The financial results of a subsidiary or controlled SPE are consolidated if the Company acquires control. Control is achieved when
an entity has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee.
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 inter-company 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.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
64 Notes to Consolidated Financial Statements
USE OF JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of these consolidated financial statements requires management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities, accompanying note disclosures, and the disclosure
of contingent liabilities at the reporting date. Therefore, actual results may differ from those estimates and assumptions. The
global pandemic related to an outbreak of COVID-19 has cast additional uncertainty on the assumptions used by management in
making its judgements and estimates. Governments and central banks have reacted with significant monetary and fiscal interventions
designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the
efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these
developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods.
Given that the full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will
have on the global economy and the Company’s business is highly uncertain and difficult to predict at this time, there is a higher
level of uncertainty with respect to management’s judgements and estimates.
The significant judgments, estimates and assumptions include consolidation, revenue recognition, share-based payments, income
taxes and valuation of deferred tax assets, impairment of goodwill, intangible assets and other long-lived assets, allowance for
credit losses, fair value of financial instruments, capitalization of intangible assets related to software costs, and provisions.
Amendments may be made to estimates relating to net assets acquired in an acquisition as well as the allocation of identifiable
intangible assets between indefinite life and finite lives. Judgments, estimates and assumptions were also utilized in connection
with the purchase price allocation, including the valuation of goodwill and intangible assets acquired in connection with the
acquisitions of Thomas Miller Wealth Management Limited and Patersons Securities Limited.
In the discussions below, unless otherwise noted, Hargreave Hale Limited is referred to as “Hargreave Hale”, Petsky Prunier LLC
is referred to as “Petsky Prunier”, McCarthy Taylor Ltd. (renamed as CG McCarthy Taylor Limited) is referred to as “McCarthy Taylor”,
Thomas Miller Wealth Management Limited and the private client business of Thomas Miller Investment (Isle of Man) Limited
(renamed as CG Wealth Planning Limited) is referred to as “Thomas Miller”, Patersons Securities Limited (renamed as Canaccord
Genuity Financial Limited) is referred to as “Patersons”, and Jitneytrade Inc., Finlogik Capital Inc. and Finlogik Inc. are collectively
referred to as “Jitneytrade”.
Consolidation
The Company owns 80% of the voting shares of Canaccord Genuity (Australia) Limited (CGAL) and Canaccord Genuity Financial
Limited (CGF) as at March 31, 2020. The Company also completed an evaluation of its contractual arrangements with the other
shareholders of CGAL and CGF and the control it has over the financial and operating policies of the two subsidiaries and determined
it should consolidate under IFRS 10, “Consolidated Financial Statements” (IFRS 10), as at March 31, 2020 and 2019. Therefore,
the financial position, financial performance and cash flows of CGAL and CGF have been consolidated. Although the Company owns
80% of the issued shares of CGAL and CGF as at March 31, 2020, for accounting purposes, the Company is considered to have
an 85% interest because of the shares held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd. Accordingly, the
Company has consolidated the entity and recognized a 15% non-controlling interest, which represents the portion of net
identifiable assets of CGAL and CGF not owned by the Company. Net income and each component of other comprehensive
income are attributed to the non-controlling interest and to the owners of the parent.
The Company has employee benefit trusts, which are considered SPEs [Note 23], to fulfill obligations to employees arising from
the Company’s share-based payment plans. The employee benefit trusts have been consolidated in accordance with IFRS 10 since
their activities are conducted on behalf of the Company, and the Company retains the majority of the benefits and risks of the
employee benefit trusts.
Revenue recognition
Revenue is recognized to the extent that it is probable that the Company has an enforceable right to payment for performance
completed to date and that a transaction price can be reliably measured. Estimation may be required to determine the amount of
revenue that can be recognized and also the timing of the substantial completion of the performance obligations of the underlying
investment banking or advisory transactions.
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, if and as applicable, are disclosed in Note 23.
Income taxes and valuation of deferred 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
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 65
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.
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 (CGU) 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, relief of royalties related to
brand names 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 14.
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 recoverable amount of the asset or the CGU
containing the asset 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
based on a forward-looking, expected credit loss (ECL) approach. The Company establishes an allowance for credit losses in
accordance with management’s valuation policy based on its historical credit loss experience adjusted for forward-looking factors
or other considerations as appropriate. 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.
Fair value of financial instruments
The Company measures a number of its financial instruments at fair value as discussed in Note 7. Fair value is determined based
on 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 as they apply to restructuring costs are fulfilled.
NOTE 03
Adoption of New and Revised Standards
IFRS 16, “Leases”
In January 2016, the IASB issued IFRS 16, “Leases” (IFRS 16), which replaces IAS 17, “Leases” (IAS 17), with the key change
being that lessee accounting will eliminate the IAS 17 distinction between operating leases and finance leases, treating most leases
in the same manner as finance leases under IAS 17. The new standard requires lessees to recognize assets and liabilities for
most leases, other than leases eligible for low-value (less than US$5,000) or short-term (12 months or less) exemption.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
66 Notes to Consolidated Financial Statements
Where an arrangement meets the IFRS 16 definition of a lease, at the commencement a loan obligation for future lease payables
will be recognized together with a non-current asset representing the right to use the underlying asset during the lease term. In
place of lease rental expense in the consolidated statement of operations, lease costs will be recognized in the form of amortization
of the right-of-use asset and interest on the lease liability. IFRS 16 also has the effect of skewing expenses toward the earlier years
of a lease (when the outstanding lease liability, and thus interest expense, is higher), although both the total expense and cash
flows during the life of a lease are identical under IFRS 16 and IAS 17.
The Company has implemented IFRS 16 for its fiscal year ended March 31, 2020 and has elected to adopt IFRS 16 using the
modified retrospective method with no restatement of prior year comparatives. The Company has also elected to take advantage
of the option not to recognize a right-of-use asset and associated lease liability for low-value (less than US$5,000) or short-term
(12 months or less) assets. In addition, the Company has taken advantage of the following transitional options to:
• treat all leases that have less than 12 months remaining at the date of transition as short-term leases
• rely on existing assessments of whether leases are onerous in accordance with IAS 37, “Provisions, Contingent Liabilities
and Contingent Assets”
• exclude initial direct costs from the measurement of right-of-use assets at the date of initial application
• use hindsight in the assessment of determining lease terms in those situations where leases contain an option to extend or
terminate the lease
Accordingly, upon adoption of IFRS 16 on April 1, 2019, the Company has recognized both right-of-use (ROU) assets and
corresponding lease liabilities for each lease (subject to the low-value and short-term exemptions noted above). Lease liabilities
were calculated at the present value of expected lease payments with ROU assets reflecting the same values after adjustment for
prepaid rental payments and onerous lease provisions as applicable.
As at April 1, 2019, the Company has recognized in its consolidated statement of financial position the ROU assets and
corresponding lease liabilities of $112.7 million and $121.5 million, respectively. For the year ended March 31, 2020, the
Company recorded amortization expense related to the ROU assets of $22.9 million and interest expense related to the lease
liabilities of $7.2 million [Notes 12 and 18].
IFRIC Interpretation 23, “Uncertainty over Income Tax Treatments”
The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application
of IAS 12, “Income Taxes”. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include
requirements relating to interest and penalties associated with uncertain tax treatments. The interpretation specifically addresses
the following:
• Whether an entity considers uncertain tax treatments separately
• The assumptions an entity makes about the examination of tax treatments by taxation authorities
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
• How an entity considers changes in facts and circumstances
An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other
uncertain tax treatments. The approach that better predicts the resolution needs to be followed.
The Company applies significant judgement in identifying uncertainties over income tax treatments. Since the Company operates
in a complex multinational environment, it assessed whether the interpretation had an impact on its consolidated financial statements.
Upon adoption of the Interpretation as of April 1, 2019, the Company considered whether it has any uncertain tax positions, and
determined that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities.
The interpretation did not have an impact on the consolidated financial statements for the year ended March 31, 2020.
Amendments to IAS 12, “Income Taxes”
The amendments to IAS 12, “Income Taxes” (IAS 12), clarify that the income tax consequences of dividends are linked more
directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity
recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where
it originally recognized those past transactions or events.
The Company adopted the amendments to IAS 12 commencing on April 1, 2019. Since the Company’s current practice is in line
with these amendments, they had no impact on the consolidated financial statements for the year ended March 31, 2020.
NOTE 04
Future Changes in Accounting Policies
Standards issued but not yet effective
There are no standards issued, but which are not yet effective as of March 31, 2020, which may reasonably be expected to
materially impact the Company’s financial statements, but which are not yet effective as of March 31, 2020.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 67
NOTE 05
Summary of Significant Accounting Policies
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.
The Company also has monetary assets and liabilities that are receivable or payable from a foreign operation. If settlement of the
receivable or payable is neither planned nor likely to occur in the foreseeable future, the differences upon translation are
recognized in accumulated other comprehensive income (loss) as these receivables and payables form part of the net investment
in the foreign operation.
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 with indefinite useful lives are not amortized, but are tested for impairment annually.
Identifiable intangible assets purchased through the acquisitions of Genuity Capital Markets (Genuity), the 80% interest in
Canaccord Genuity (Australia) Limited and Patersons Securities Limited, Collins Stewart Hawkpoint plc (CSHP), Eden Financial
Ltd., Hargreave Hale, McCarthy Taylor and Petsky Prunier are customer relationships, non-competition agreements, trading licences,
fund management contracts and technology, which have finite lives and are amortized on a straight-line basis over their estimated
useful lives. 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. Software under development or acquired is amortized over its useful life once
the asset is available for use. Brand names with definite lives are amortized over three years. Customer relationships are amortized
over five to 24 years. Internally developed or acquired software is amortized over 10 years.
Internally developed or acquired software
Expenditures towards the development or acquisition of projects are recognized as intangible assets when the Company can
demonstrate that the technical feasibility of the assets for use has been established. The assets are carried at cost less any
accumulated amortization and accumulated impairment losses in accordance with IAS 38, “Intangible Assets”. Capitalized costs
are expenditures directly attributable to the software development, such as employment, consulting or professional fees. Amortization
of the assets begins when development is complete, and the assets are available for use. The assets are amortized over the
period of expected future benefit.
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
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
68 Notes to Consolidated Financial Statements
asset’s recoverable amount is the higher of the FVLCS and the value-in-use of a particular asset or 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 the impairment is recognized in the consolidated
statements of operations.
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. A long-term growth rate is then
calculated and applied to project future cash flows after the fifth year.
Impairment losses 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 an 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 statements of operations.
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, which are subject to an insignificant risk of changes in value.
FINANCIAL INSTRUMENTS
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
[i] Financial assets
Initial recognition and measurement
On initial recognition, financial assets are classified as instruments measured at amortized cost, fair value through other
comprehensive income and fair value through profit or loss. The classification is based on two criteria: the Company’s business
approach for managing the financial assets; and whether the instruments’ contractual cash flows result in cash flows that are solely
payments of principal and interest on the principal amount outstanding (the SPPI criteria).
The business approach considers whether the Company’s objective is to receive cash flows from holding the financial assets,
from selling the assets or a combination of both.
Classification and subsequent measurement
Financial assets classified as fair value through profit or loss (FVTPL)
Financial assets are classified as FVTPL when they either fail the contractual cash flow test or are held in a business model in
which the aim is to realize the asset’s value through a short-term sale. Financial assets at FVTPL are stated at fair value, with any
resulting gain or loss recognized in the statement of operations. The net gain or loss recognized in the statement of operations
includes any dividend or interest earned on the financial asset. Financial assets measured at FVTPL consist of marketable securities
owned and sold short.
The Company periodically evaluates the classification of its financial assets classified as FVTPL 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
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 69
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 fair value through other comprehensive income (FVOCI)
A financial asset is classified as FVOCI if it is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets, and the contractual terms of the financial asset result in cash flows that meet
the SPPI criteria. Included in the FVOCI category is our investment in Euroclear, which was previously classified as available for
sale under IAS 39. There are no other financial assets classified as FVOCI.
Financial assets classified as amortized costs
A financial asset is measured at amortized cost if it is held within a business model that has an objective to hold financial assets
to collect contractual cash flows and the contractual terms of the financial asset result in cash flows that meet the SPPI criteria.
Items included in this category include cash and cash equivalents and accounts receivable.
The Company reclassifies financial assets only when its business approach for managing those assets changes.
Impairment of financial assets
The Company’s accounts receivables are classified as financial assets measured at amortized cost and are subject to the ECL
model. Accounts receivable includes trade receivables from clients and brokers and dealers. All our corporate finance and client
receivables have a maturity of less than 12 months from initial recognition; therefore, the allowance is limited to 12-month ECLs.
The Company established a valuation policy that is based on its historical credit loss experience, adjusted for forward-looking
factors or other considerations as appropriate. The impact of the allowance is not considered to have a significant impact on our
audited consolidated financial statements for the year ended March 31, 2020. A financial asset or group of financial assets was
deemed to be impaired if there was objective evidence of impairment as a result of one or more events that occurred since the
initial recognition of the asset.
Derecognition
A financial asset is derecognized primarily when the rights to receive cash flows from the asset have expired, or the Company has
transferred its right to receive cash flows from the asset.
[ii] Financial liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and classified as either FVTPL or other financial liabilities.
Classification and subsequent measurement
Financial liabilities classified as fair value through profit or loss
Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial
recognition as fair value through profit or 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 FVTPL that would not otherwise meet the definition of FVTPL upon initial
recognition. Bank indebtedness; securities sold short, including derivative financial instruments; and contingent and deferred
considerations are classified as held for trading and recognized at fair value.
Financial liabilities classified as amortized costs
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. Financial liabilities
classified as amortized costs include accounts payable and accrued liabilities, bank loans, convertible debentures 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] 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.
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.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
70 Notes to Consolidated Financial Statements
Realized and unrealized gains and losses related to these contracts are recognized in the consolidated statements of operations
during the reporting period.
The Company trades in futures contracts, which are agreements to buy or sell standardized amounts of a financial instrument 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.
The Company also trades in forward contracts, which are non-standardized contracts to buy or sell a financial instrument at a
specified price on a future date. The Company trades in forward contracts in an attempt to mitigate foreign exchange risk on pending
security settlements in foreign currencies.
FAIR VALUE MEASUREMENT
The Company measures financial instruments at fair value at each reporting period. 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 fair
value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either
in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the
asset or liability.
When available, quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions),
without any deduction for transaction costs, are used to determine fair value. 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.
The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs
used by the Company’s valuation techniques. A level is assigned to each fair value measured based on the lowest level input
significant to the fair value measurement in its entirety [Note 7]. For assets and liabilities that are recognized in the consolidated
financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
The convertible unsecured senior subordinated debentures are classified as compound financial instruments. On initial recognition,
the fair value of the liability was calculated based on the present value of future cash flows under the instruments, discounted at
7%, [March 31, 2019 – 7%], being equal to the rate of interest applied by the market at the time of issue to instruments of
comparable credit status and future cash flows, without the conversion feature. The residual amount is recorded as a component
of shareholders’ equity.
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 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. The value of collaterals for 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 collateralized.
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.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 71
SECURITIES PURCHASED UNDER REVERSE REPURCHASE AGREEMENTS AND OBLIGATIONS RELATED TO SECURITIES
SOLD UNDER REPURCHASE AGREEMENTS
The Company recognizes these transactions on the trade date at amortized cost using the effective interest rate method. Securities
sold and purchased under repurchase agreements remain on the consolidated statement of financial position. Reverse repurchase
agreements and repurchase agreements are treated as collateralized lending and borrowing transactions.
REVENUE RECOGNITION
Revenue is recognized either at a point in time when a single performance obligation is satisfied at once or over the period of
time when a performance obligation is received and utilized by the customer over that period. The Company assesses its revenue
arrangements in order to determine if it is acting as principal or agent. The main types of revenue contracts are as follows:
Commissions and fees 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 net of
commission revenue. Facilitation losses for the year ended March 31, 2020 were $14.8 million [2019 – $6.4 million]. Commissions
are recognized at a point in time (trade date) as the performance obligation is satisfied.
Investment banking revenue consists of underwriting fees and commissions earned on corporate finance activities. The act of
underwriting the securities is the sole performance obligation, and revenue is recognized at the point in time when the underwriting
transaction is complete.
Advisory fees consist of ongoing management and advisory fees that are recognized over the period of time that this performance
obligation is delivered. Also included in advisory fees is revenue from mergers and acquisitions activities, which is recognized at
the point in time when the underlying transaction is substantially completed under the engagement terms and it is probable that a
significant revenue reversal will not occur.
Principal trading revenue consists of income earned in connection with principal trading operations and is outside the scope of
IFRS 15.
Interest revenue consists of interest earned on client margin accounts, interest earned on the Company’s cash, interest earned
on cash delivered in support of securities borrowing activity, and dividends earned on securities owned. Interest and dividend
revenue is outside the scope of IFRS 15.
Other revenue includes foreign exchange gains or losses, revenue earned from correspondent brokerage services and administrative
fee revenue.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Computer equipment, furniture and equipment, and leasehold improvements are recorded at cost less accumulated amortization.
Amortization is being recorded as follows:
Computer equipment
Furniture and equipment
Leasehold improvements
Straight-line over useful life
Straight-line over useful life
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 methods 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 Company’s tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where appropriate.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statements of
operations.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
72 Notes to Consolidated Financial Statements
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 carryforward of
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.
No deferred tax liability has been recognized for taxable temporary differences associated with investments in subsidiaries from
undistributed profits and foreign exchange translation differences as the Company is able to control the timing of the reversal of
these temporary differences. The Company has no plans or intention to perform any actions that will cause the temporary differences
to reverse in the foreseeable future.
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 consolidated statements of financial position.
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 the employee benefit trusts and unvested share purchase loans and preferred shares held in treasury.
No gain or loss is recognized in the statements of operations on 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 (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is computed by dividing the net income (loss) attributable to common shareholders for
the period by the weighted average number of common shares outstanding. Diluted earnings per common share reflects the dilutive
effect in connection with the LTIP, warrants, other share-based payment plans and the convertible debentures 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) 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). The participating employees
are eligible to receive shares that generally vest over three years (the RSUs). This program is referred to as the long-term incentive
plan (the LTIP or the Plan).
Independent directors also receive deferred share units (DSUs) as part of their remuneration, which can only be settled in cash
(cash-settled transactions). Certain executives may also receive performance stock options (PSOs) as part of their remuneration
which are equity-settled. Beginning for the year ended March 31, 2018, certain senior executives receive performance share units
(PSUs) 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 (loss) per common share.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 73
Equity-settled transactions
For equity-settled transactions, the Company measures the fair value of share-based awards as of the grant date.
RSUs issued by the Plan will continue to vest after termination of employment so long as the employee does not violate certain post-
termination restrictions and is not engaged in certain competitive or soliciting activities as provided in the Plan. Because of this
change, the Company determined that the awards do not meet the criteria for an in-substance service condition, as defined by IFRS
2. Accordingly, RSUs granted as part of the normal course incentive compensation payment cycle are expensed in the period in
which those awards are deemed to be earned, with a corresponding increase in contributed surplus, which is generally either the
fiscal period in which the awards are made or the immediately preceding fiscal year for those awards made after the end of such
fiscal year but determined and earned in respect of that fiscal year.
For certain awards, typically new hire awards or retention awards, vesting is subject to continued employment, and therefore
these awards are subject to a continuing service requirement. Accordingly, the Company recognizes the cost of such awards as
an expense on a graded basis over the applicable vesting period, with a corresponding increase in contributed surplus.
The Company estimates the number of equity instruments that will ultimately vest when calculating the expense attributable to
equity-settled transactions. 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 and PSUs are
expensed upon grant, as there are no vesting conditions [Note 23]. 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 significant, 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 matters and when they can be reasonably estimated.
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. 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
At the commencement of a lease, the liability to make lease payments and an asset representing the right to use the underlying
asset during the lease term is recognized. The interest expense on the lease liability and the amortization expense on the right-of-
use assets are charged to the statement of operations and separately recognized.
CLIENT MONEY
The Company’s UK & Europe operations hold money on behalf of their 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
consolidated 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 27.
SEGMENT REPORTING
The Company’s segment reporting is based on the following operating segments: Canaccord Genuity Capital Markets, Canaccord
Genuity Wealth Management and Corporate and Other. The Company’s business operations are grouped into the following geographic
regions: Canada, the UK, Europe and Dubai, Australia, the US, and Other Foreign Locations, which is comprised of our Asian
operations. Commencing in the current fiscal year starting April 1, 2019, the Other Foreign Locations (OFL), comprised of our
operations in Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets operations.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
74 Notes to Consolidated Financial Statements
NOTE 06
Securities Owned and Securities Sold Short
Corporate and government debt
Equities and convertible debentures
March 31, 2020
March 31, 2019
Securities
owned
$
724,444 $
207,023
931,467 $
Securities
sold short
$
688,400
186,617
875,017
$
$
Securities
owned
$
364,546
325,953
$
690,499
$
Securities
sold short
$
262,720
110,699
373,419
$
$
As at March 31, 2020, corporate and government debt maturities range from 2020 to 2098 [March 31, 2019 – 2019 to 2098]
and bear interest ranging from 0.00% to 14.00% [March 31, 2019 – 0.00% to 14.00%].
NOTE 07
Financial Instruments
CATEGORIES OF FINANCIAL INSTRUMENTS
The categories of financial instruments, other than cash and cash equivalents and bank indebtedness, as well as investment
accounted for under the equity method, held by the Company at March 31, 2020 and 2019 are as follows:
Fair value through
profit or loss
Fair value through
other
comprehensive
income
Amortized
costs
Total
March 31,
2020
$
March 31,
2019
$
March 31,
2020
$
March 31,
2019
$
March 31,
2020
$
March 31,
2019
$
March 31,
2020
$
March 31,
2019
$
$ 924,594 $ 683,920 $
6,873 $
6,579 $
— $
— $ 931,467 $ 690,499
—
—
—
—
—
—
—
—
6,287
3,993
—
—
—
—
—
— 2,036,876
1,498,516
2,036,876
1,498,516
—
—
—
—
696,644
388,376
153,945
—
530,933
328,528
298,687
—
696,644
388,376
153,945
6,287
530,933
328,528
298,687
3,993
$ 930,881 $ 687,913 $
6,873 $
6,579 $ 3,275,841 $ 2,656,664 $ 4,213,595 $ 3,351,156
$ 875,017 $ 373,419 $
— $
— $
— $
— $ 875,017 $ 373,419
—
—
—
—
—
—
—
—
—
—
8,966
22,225
105,473
108,319
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 1,618,004
1,166,550
1,618,004
1,166,550
— 1,703,574
1,499,390
1,703,574
1,499,390
—
—
—
—
—
—
—
—
351,873
457,825
351,873
457,825
7,500
7,500
7,500
7,500
128,322
127,225
128,322
127,225
—
—
—
1,760
86,234
—
—
8,966
22,225
105,473
108,319
5,832
1,741
59,664
—
1,760
86,234
5,832
1,741
59,664
$ 989,456 $ 503,963 $
— $
— $ 3,897,267 $ 3,325,727 $ 4,886,723 $ 3,829,690
Financial assets
Securities owned
Accounts receivable from brokers and investment
dealers
Accounts receivable from clients
RRSP cash balances held in trust
Other accounts receivable
Investments
Total financial assets
Financial liabilities
Securities sold short
Accounts payable to brokers and investment
dealers
Accounts payable to clients
Other accounts payable and accrued liabilities
Subordinated debt
Convertible debentures
Deferred consideration
Contingent consideration
Promissory note
Other long-term liability
Bank loan
Total financial liabilities
The Company has not designated any financial instruments as fair value through profit or loss upon initial recognition using the
fair value option.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 75
FAIR VALUE HIERARCHY
All financial instruments for which fair value is recognized or disclosed are categorized within a fair value hierarchy, described as
follows, and based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 – Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
Level 2 – Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable)
Level 3 – Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable)
For financial instruments that are recognized at fair value on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair
value measurement as a whole) at the end of each reporting period.
As at March 31, 2020 and 2019, the Company held the following classes of financial instruments measured at fair value:
Securities owned
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Investments
Securities sold short
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Deferred considerations
Contingent consideration
Securities owned
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Investments
Securities sold short
Corporate debt
Government debt
Corporate and government debt
Equities
Convertible debentures
Equities and convertible debentures
Deferred considerations
Contingent consideration
March 31, 2020
$
Estimated fair value
March 31, 2020
Level 2
$
Level 1
$
$
26,428 $
— $
26,428 $
698,016
724,444
206,043
980
207,023
931,467
6,287
937,754
(1,800)
(686,600)
(688,400)
(186,617)
—
(186,617)
(875,017)
(8,966)
(105,473)
(989,456)
244,526
244,526
139,916
—
139,916
384,442
—
384,442
—
(277,653)
(277,653)
(168,826)
—
(168,826)
(446,479)
—
—
(446,479)
453,490
479,918
63,130
980
64,110
544,028
—
544,028
(1,800)
(408,947)
(410,747)
(17,791)
—
(17,791)
(428,538)
—
—
(428,538)
March 31, 2019
$
Estimated fair value
March 31, 2019
Level 2
$
Level 1
$
$
79,642 $
— $
79,642 $
284,904
364,546
325,683
270
325,953
690,499
3,993
694,492
(6,613)
(256,107)
(262,720)
(110,699)
—
(110,699)
(373,419)
(22,225)
(108,319)
(503,963)
49,946
49,946
262,641
—
262,641
312,587
—
312,587
—
(54,852)
(54,852)
(94,797)
—
(94,797)
(149,649)
—
—
(149,649)
234,958
314,600
62,991
270
63,261
377,861
—
377,861
(6,613)
(201,255)
(207,868)
(15,902)
—
(15,902)
(223,770)
—
—
(223,770)
Level 3
$
—
—
—
2,997
—
2,997
2,997
6,287
9,284
—
—
—
—
—
—
—
(8,966)
(105,473)
(114,439)
Level 3
$
—
—
—
51
—
51
51
3,993
4,044
—
—
—
—
—
—
—
(22,225)
(108,319)
(130,544)
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
76 Notes to Consolidated Financial Statements
Movement in net Level 3 financial liabilities
Balance, March 31, 2018
Addition of contingent consideration in connection with acquisition of Jitneytrade Inc. and Finlogik Inc.
Addition of deferred consideration in connection with acquisition of Jitneytrade Inc. and Finlogik Inc.
Addition of contingent consideration in connection with acquisition of McCarthy Taylor
Addition of contingent consideration in connection with acquisition of Petsky Prunier
Addition of deferred consideration in connection with acquisition of Petsky Prunier
Partial settlement of deferred consideration in connection with acquisition of Hargreave Hale Limited
Purchase of investments
Foreign exchange revaluation
Balance, March 31, 2019
Addition of contingent consideration in connection with the acquisition of Thomas Miller [Note 13]
Change in contingent consideration in connection with the acquisition of Thomas Miller [Note 13]
Purchase of investments
Payment of deferred consideration in connection with acquisition of Hargreave Hale
Reclassification of deferred consideration in connection with acquisition of Petsky Prunier to equity
Change in contingent consideration in connection with acquisition of Petsky Prunier
Movement in fair value of level 3 securities owned during the year
Payment of contingent consideration in connnection with acquisition of McCarthy Taylor
Foreign exchange revaluation
$
$
$
(59,705)
(4,000)
(744)
(3,052)
(53,044)
(13,261)
1,470
4,063
1,773
(126,500)
(14,769)
4,332
488
12,775
13,091
1,880
2,985
1,720
(1,157)
Balance, March 31, 2020
$
(105,155)
During the year ended March 31, 2020, as a result of the completion of the valuation of the contingent consideration in connection
with the acquisition of Petksy Prunier, the fair value of the contingent consideration was revised as of the acquisition date, which
resulted in a reduction of the goodwill of $2.4 million [Note 14].
In addition, an adjustment was made to the fair value of the contingent consideration in connection with the acquisition of
Thomas Miller [Note 13] as a result of changes in market condition. The charge was recorded through the statement of operations
for the year ended March 31, 2020.
Fair value estimation
i.
Level 2 financial instruments
Level 2 financial instruments include the Company’s investment in certain corporate and government debt, convertible debt and
over-the-counter equities. The fair values of corporate and government debt and convertible debt classified as Level 2 are determined
using the quoted market prices of identical assets or liabilities in markets that do not have transactions which take place with
sufficient frequency and volume to provide pricing information on an ongoing basis. The Company regularly reviews the transaction
frequency and volume of trading in these instruments to determine the accuracy of pricing information.
Level 2 financial instruments also include the Company’s investment in Euroclear, which has an estimated fair value of $6.9 million
(€4.4 million) as at March 31, 2020 [March 31, 2019 – $6.6 million (€4.4 million)]. The current fair value is determined using a
market-based approach based on recent share buyback transactions. This investment is classified as a financial asset measured
at fair value through other comprehensive income.
ii.
Level 3 financial instruments
Held for trading
The fair value for Level 3 investments classified as held for trading is determined by the Company using a market-based approach
with information that the Company has determined to be reliable, and represents the best estimate of fair value readily available.
Prices for held for trading investments are determined based on the last trade price or offer price, or, if these prices are considered
stale, the Company obtains information based on certain inquiries, recent trades or pending new issues. The fair value of the
Level 3 held for trading investments as at March 31, 2020 was $3.0 million [March 31, 2019 – $0.1 million].
As at March 31, 2020, the Company held investments of $5.8 million [March 31, 2019 – $4.0 million] in Family Office Network
and Capital Markets Gateway, which have been classified as Level 3 financial instruments given the investments do not have any
observable inputs or market indicators. During the year ended March 31, 2020, the Company also made an investment of
$0.5 million in Castle Ridge Asset Management Limited, which has also been classified as a Level 3 financial instrument [Note 10].
Level 3 financial liabilities also include the deferred and contingent consideration included as part of the total purchase
consideration for the acquisitions of Hargreave Hale, Jitneytrade, McCarthy Taylor, Petsky Prunier and Thomas Miller. The fair
value for these financial liabilities approximate their carrying value as of March 31, 2020.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 77
The fair value measurements determined as described above may not be indicative of net realizable value or reflective of future
values. Furthermore, the Company believes its valuation methods are appropriate and consistent with those which would be utilized
by a market participant.
RISK MANAGEMENT
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 financial assets as disclosed in the Company’s audited consolidated financial statements as at March 31,
2020 and 2019.
The primary source of credit risk to the Company is in connection with trading activity by private clients and in 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 collectability 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 $8.9 million as at March 31, 2020 [March 31, 2019 – $4.2 million]
[Note 9].
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, 2020 and 2019, 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 collectability. Receivables and payables from brokers and dealers represent the following:
current open transactions that generally settle within the normal two-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 26.
The following table presents the contractual terms to maturity of the financial liabilities owed by the Company as at March 31,
2020 and March 31, 2019, respectively:
Financial liability
Promissory note
Bank indebtedness
Securities sold short
Subordinated debt(1)
Accounts payable and accrued liabilities
Current portion of bank loan
Current portion of contingent consideration
Long term portion of bank loan
Long term portion of contingent consideration
Deferred consideration
Other long-term liability
Convertible debentures
(1) Subject to Investment Industry Regulatory Organization of Canada’s approval.
Carrying amount
$
Contractual term to maturity
$
March 31, 2020
—
—
875,017
7,500
3,673,451
7,042
57,859
79,192
47,614
8,966
1,760
128,322
$
March 31, 2019
5,832
9,639
373,419
7,500
3,123,765
9,294
—
50,370
108,319
22,225
1,741
127,225
February 2020
Due on demand
Due on demand
Due on demand(1)
Due within one year
Due within one year
Fiscal 2021
Fiscal 2021 to 2023
Fiscal 2021 to 2023
Fiscal 2021 to 2023
March 2023
Due in December 2023
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
78 Notes to Consolidated Financial Statements
The fair values for cash, accounts receivable and accounts payable and accrued liabilities approximate their carrying values and
will be paid within 12 months.
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,
2020 and March 31, 2019, respectively. 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
March 31, 2020
March 31, 2019
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
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
Equities and convertible debentures owned
$
200,150 $
8,576 $
(8,576) $
319,374 $
11,338 $
(11,338)
Equities and convertible debentures sold
short
(186,617)
(7,997)
7,997
(110,699)
(3,930)
3,930
The following table summarizes the effect on other comprehensive income (OCI) as a result of a fair value change in the financial
instruments classified as fair value through other comprehensive income. This analysis assumes all other variables remain constant
and there is no permanent impairment. The methodology used to calculate the fair value sensitivity is consistent with the prior
year.
Financial instrument
Carrying value
$
Effect of a
10%
increase in fair
value on OCI
$
March 31, 2020
Effect of a
10% decrease
in fair value on
OCI
$
Effect of a
10% increase
in fair value on
OCI
$
March 31, 2019
Effect of a
10% decrease
in fair value on
OCI
$
Carrying value
$
Equities held within securities owned
6,873
0.3
(0.3)
6,579
0.7
(0.7)
Interest rate risk
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, fixed income portion of securities owned and securities sold short, net clients’ balances, RRSP cash balances held
in trust and net brokers’ and investment dealers’ balances, as well as its subordinated debt and bank loan. 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 4.0%, payable monthly.
The following table provides the effect on net income for the years ended March 31, 2020 and 2019 if interest rates had increased
or decreased by 100 basis points applied to balances as of March 31, 2020 and March 31, 2019, respectively. Fluctuations in
interest rates do not have an effect on OCI. This sensitivity analysis assumes all other variables remain constant. The methodology
used to calculate the interest rate sensitivity is consistent with the prior year.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 79
Net income
effect of a
100 bps
increase in
interest rates
$
March 31, 2020
Net income
effect of a
100 bps
decreases in
interest rates(1)
$
Carrying value
Asset (Liability)
$
Net income
effect of a
100 bps
increase in
interest rates
$
March 31, 2019
Net income
effect of a
100 bps
decreases in
interest rates(1)
$
Carrying value
Asset (Liability)
$
Cash and cash equivalents, net of bank
indebtedness
$
997,111 $
8,545 $
(8,545) $
811,100
$
5,759
$
(5,759)
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
Promissory note
Bank loan
(1) Subject to a floor of zero.
Foreign exchange risk
56,450
(1,006,930)
388,376
418,872
(7,500)
—
(86,234)
484
(8,629)
3,328
3,590
(64)
—
(739)
(484)
8,629
(3,328)
(3,590)
64
—
739
317,080
(968,457)
328,528
331,966
(7,500)
(5,832)
(59,664)
2,251
(6,876)
2,333
2,357
(53)
(41)
(424)
(2,251)
6,876
(2,333)
(2,357)
53
41
424
Foreign exchange risk arises from the possibility that changes in foreign currency exchange rates will result in losses. The
Company’s primary foreign exchange risk results from its investment in its US, Australia and UK & 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 in the statement of operations.
The following table summarizes the estimated effects on net income (loss) and OCI as a result of a 5% 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, 2020:
Currency
US dollar
Pound sterling
Australian dollar
As at March 31, 2019:
Currency
US dollar
Pound sterling
Australian dollar
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
$
$
(1,261)
(509)
(104)
1,261 $
509
104
13,100 $
27,998
2,918
(13,100)
(27,998)
(2,918)
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
$
$
(1,101)
(1,221)
nil
$
1,101
1,221
nil
$
11,709
27,155
1,767
Effect of a
5% depreciation
in foreign
exchange rate
on OCI
$
(11,709)
(27,155)
(1,767)
$
$
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
80 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 the consolidated statements of operations
during the reporting period.
Forward contracts outstanding at March 31, 2020:
To sell US dollars
To buy US dollars
Forward contracts outstanding at March 31, 2019:
Notional amount
(millions)
USD $
USD $
2.1
0.8
Average price
$1.42 (CAD/USD)
$1.42 (CAD/USD)
Maturity
Fair value
April 1, 2020 $
April 1, 2020 $
0.1
(0.1)
To sell US dollars
To buy US dollars
Notional amount
(millions)
Average price
Maturity
Fair value
USD $
USD $
0.2
5.7
$1.34 (CAD/USD)
$1.34 (CAD/USD)
April 1, 2019 $
April 1, 2019 $
0
(9)
The Company’s Canaccord Genuity Wealth Management segment in the UK & Europe trades foreign exchange forward contracts
on behalf of its clients, and establishes matching contracts with the counterparties. The Company has no significant net exposure,
assuming no counterparty default. The principal currencies of the forward contracts are: the UK pound sterling, the US dollar or
the euro. The weighted average term to maturity is 60 days as at March 31, 2020 [March 31, 2019 – 77 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,
2020 and March 31, 2019, respectively. The fair value of the forward contract assets and liabilities is included in the accounts
receivable and payable balances.
Foreign exchange forward contracts
$
587 $
560 $
25,461 $
1,124
$
1,011
$
102,052
March 31, 2020
March 31, 2019
Assets
Liabilities
Notional
amount
Assets
Liabilities
Notional
amount
FUTURES
The Company’s Canadian operations are 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’s Canadian operations trade
in bond futures in an attempt to mitigate interest rate risk, yield curve risk and liquidity risk. At March 31, 2020, the notional
amount of the bond futures contracts outstanding was long $29.9 million [March 31, 2019 – $0.1 million].
The Company’s Canadian operations are also involved in trading US Treasury futures in an attempt to mitigate interest rate risk,
yield curve risk and liquidity risk. There were no outstanding US Treasury futures contracts outstanding as at March 31, 2020 and
March 31, 2019.
The fair value of all of the above futures contracts is nominal due to their short term to maturity and is included in accounts
receivable and accounts payable and accrued liabilities. Realized and unrealized gains and losses related to these contracts are
recognized in the statement of operations during the reporting period.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 81
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, 2020, the floating rates ranged from 0.00% to 0.19%
[March 31, 2019 – 1.25% to 1.61%].
March 31, 2020
March 31, 2019
BANK INDEBTEDNESS
Cash
Securities
Loaned or
delivered as
collateral
$
Borrowed or
received as
collateral
$
Loaned or
delivered as
collateral
$
$
191,244 $
314,448
119,070 $
136,163 $
45,328
66,239
Borrowed or
received as
collateral
$
195,673
407,561
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 unpaid client securities and/or securities owned
by the Company. As at March 31, 2020, the Company had a balance of $nil (£ nil) outstanding [March 31, 2019 – $9.6 million
(£5.5 million)].
BANK LOAN
A subsidiary of the Company entered into a £40.0 million senior credit facility to finance a portion of the cash consideration for its
acquisition of Hargreave Hale. During the year ended March 31, 2020, the Company obtained additional financing on the loan of
£17.0 million in connection with the acquisition of Thomas Miller. The balance outstanding as of March 31, 2020, net of principal
repayments and unamortized financing fees, was £49.0 million ($86.2 million) [March 31, 2019 – £34.3 million ($59.7 million)].
The loan is repayable in instalments of principal and interest over a period of four years and matures in September 2023. The
interest rate on this loan is variable and is currently at 2.6584% per annum [March 31, 2019 – 2.9646% per annum].
OTHER CREDIT FACILITIES
Excluding the bank loan in connection with the acquisitions of Hargreave Hale and Thomas Miller as described above, subsidiaries
of the Company have other credit facilities with banks in Canada and the UK for an aggregate amount of $653.7 million [March 31,
2019 – $683.2 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, 2020, there was no bank
indebtedness outstanding [March 31, 2019 – $9.6 million].
A subsidiary of the Company has also entered into secured irrevocable standby letters of credit from a financial institution
totalling $3.3 million (US$2.3 million) [March 31, 2019 – $2.8 million (US$2.1 million)] as rent guarantees for its leased premises
in New York. As of March 31, 2020, and March 31, 2019, there were no outstanding balances under these standby letters of
credit.
NOTE 08
Interest in Other Entities
On October 21, 2019, the Company, through its 80% owned subsidiary, completed its previously announced acquisition of 100%
of the issued share capital of Patersons Securities Limited (renamed as Canaccord Genuity Financial Limited) [Note 13].
The Company owns 80% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd., and through that ownership an
80% indirect interest in Canaccord Genuity (Australia) Limited and Canaccord Genuity Financial Limited as of March 31, 2020
[March 31, 2019 – 80%]. Canaccord Genuity (Australia) Limited (CGAL) operates in the capital markets segment, while the wealth
management business is carried out by Canaccord Genuity Financial Limited (CGCL). As discussed in Note 26, CGAL and CGFL
are both regulated by the Australian Securities and Investments Commission.
CGAL and CGFL reported total net income of $0.4 million in fiscal 2020 [March 31, 2019 – net income of $1.6 million]. As at
March 31, 2020, accumulated non-controlling interest was $0.2 million [March 31, 2019 – $2 million]. Summarized financial
information for the consolidated Australian group, including goodwill on acquisition and consolidation adjustments before inter-
company eliminations, is presented.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
82 Notes to Consolidated Financial Statements
Summarized statement of profit or loss for the years ended March 31, 2020 and 2019:
Revenue
Expenses
Net income before taxes
Income tax (recovery) expense
Net income
Attributable to:
CGGI shareholders
Non-controlling interests
Total comprehensive income
Attributable to:
CGGI shareholders
Non-controlling interests
Dividends paid to non-controlling interests
Summarized statement of financial position as at March 31, 2020 and 2019:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Summarized cash flow information for the years ended March 31, 2020 and 2019:
Cash provided by operating activities
Cash used by financing activities
Cash used by investing activities
Foreign exchange impact on cash balance
Net increase in cash and cash equivalents
NOTE 09
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
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
For the years ended
March 31,
2020
$
$
62,332
62,084
$
248
(135)
383
319
64
8,070
6,859
1,211
1,510
$
$
March 31,
2020
$
59,399
29,223
36,730
9,628
March 31,
2020
$
28,508
(11,433)
(2,714)
(3,118)
$
$
$
11,243
$
March 31,
2019
$
31,366
29,674
1,692
117
1,575
523
1,052
5,254
3,630
1,624
2,724
March 31,
2019
$
48,047
980
16,922
1,670
March 31,
2019
$
9,520
(2,359)
(144)
(38)
6,979
March 31,
2020
$
$
2,036,876 $
696,644
388,376
153,945
March 31,
2019
$
1,498,516
530,933
328,528
298,687
$
3,275,841 $
2,656,664
March 31,
2020
$
$
$
1,618,004 $
1,703,574
351,873
3,673,451 $
March 31,
2019
$
1,166,550
1,499,390
457,825
3,123,765
Notes to Consolidated Financial Statements 83
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.
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, 2020 – 5.45% to 6.25% and 0.00% to 0.05%, respectively; March 31, 2019 – 6.95% to 8.50% and 0.00%
to 0.95%, respectively].
As at March 31, 2020, the allowance for doubtful accounts was $8.9 million [March 31, 2019 – $4.2 million]. See below for the
movements in the allowance for doubtful accounts:
Balance, March 31, 2018
Charge for the year
Recoveries
Write-offs
Foreign exchange
Balance, March 31, 2019
Charge for the year
Recoveries
Write-offs
Foreign exchange
Balance, March 31, 2020
NOTE 10
Investments
Investment accounted for under the equity method
Investments held as fair value through profit or loss
$
$
$
3,363
5,378
(4,264)
(149)
(170)
4,158
8,676
(1,833)
(2,104)
(36)
8,861
March 31,
2020
$
3,818
6,287
10,105
$
$
March 31,
2019
$
2,231
3,993
6,224
$
$
During the year ended March 31, 2019, the Company, through a wholly-owned subsidiary, invested $2.5 million for 833,333
Class B Units, at $3.00 per unit, in Canaccord Genuity Growth Corp. (CGGC). CGGC was a special purpose acquisition corporation
formed to effect an acquisition of one or more businesses. On April 26, 2019, CGGC announced that it has completed its
qualifying transaction with Columbia Care LLC and CGGC was renamed “Columbia Care Inc.” The Company is no longer considered
to exert significant influence over the operations of Columbia Care. Accordingly, the investment in Columbia Care is accounted
for under financial assets measured at FVTPL and included in securities owned on the consolidated statement of financial position
as at March 31, 2020.
During the year ended March 31, 2020, the Company, through a wholly owned subsidiary, invested $4.0 million for 1,334,001
Class B Units, at $3.00 per unit, in Canaccord Genuity Growth II Corp (CGGIIC). CGGIIC is a special purpose acquisition corporation
formed to effect an acquisition of one or more businesses. Each Class B Unit consists of one Class B Share and one warrant.
The Company holds a 23.5% interest in CGGIIC and is considered to exert significant influence over the operations of CGGIIC.
Accordingly, the investment in CGGIIC is accounted for using the equity method. The Company’s equity portion of the net loss of
CGGIIC for the year ended March 31, 2020 was $0.2 million.
During the year ended March 31, 2020, the Company, through a wholly owned subsidiary, invested $0.01 for 15,180 proportionate
voting units in the capital of Subversive Real Estate Acquisition REIT LP (Subversive). The Company does not exert significant
influence over the operations of Subversive, and the investment is accounted for under financial assets measured at FVTPL as of
March 31, 2020.
During the year ended March 31, 2020, the Company, through a wholly owned subsidiary, held an investment of 8,889 Series A
Preferred Shares, at $112.50 per share, in Family Office Networks (FON) for US$1.0 million ($1.4 million) [March 31, 2019 – US$1.0 million
($1.3 million)]. In addition, the Company, through a wholly owned subsidiary, held an investment in Capital Markets Gateway Inc.
(CMG) for US$3.1 million ($4.4 million) [March 31, 2019 – US$2.0 million ($2.7 million)]. The Company is not considered to exert
significant influence over the operations of FON or CMG. Accordingly, the investments in FON and CMG are accounted for as
financial assets measured at FVTPL and included as investments on the consolidated statement of financial position as at
March 31, 2020.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
84 Notes to Consolidated Financial Statements
During the year ended March 31, 2020, the Company invested $0.5 million for 37 Class C Preferred Shares in Castle Ridge Asset
Management Limited (CRAML). The Company is not considered to exert significant influence over the operations of CRAML.
Accordingly, the investment in CRAML is accounted for under financial assets measured at FVTPL and included as investments on
the consolidated statement of financial position as at March 31, 2020.
NOTE 11
Equipment and Leasehold Improvements
March 31, 2020
Computer equipment
Furniture and equipment
Leasehold improvements
March 31, 2019
Computer equipment
Furniture and equipment
Leasehold improvements
Cost
Balance, March 31, 2018
Acquired upon acquisition
Additions
Disposals
Foreign exchange
Balance, March 31, 2019
Acquired upon acquisition [Note 13]
Additions
Disposals
Foreign exchange
Balance, March 31, 2020
Accumulated amortization and impairment
Balance, March 31, 2018
Amortization
Disposals
Foreign exchange
Balance, March 31, 2019
Acquired upon acquisition [Note 13]
Amortization
Disposals
Foreign exchange
Balance, March 31, 2020
Cost
$
Accumulated
amortization
$
Net book
value
$
$
$
24,072
29,672
89,897
$
21,730
26,256
70,795
143,641
118,781
19,068
26,918
86,492
15,789
21,407
69,490
132,478
106,686
Computer
equipment
$
Furniture and
equipment
$
Leasehold
improvements
$
$
$
$
$
19,929
—
1,608
(1,855)
(614)
19,068
4,700
986
(1,628)
946
$
$
26,265
—
804
—
(151)
26,918
2,009
724
(19)
40
$
$
86,533
329
1,970
(1,695)
(645)
86,492
1,141
4,643
—
(2,379)
$
24,072 $
29,672 $
89,897 $
Computer
equipment
$
Furniture and
equipment
$
Leasehold
improvements
$
$
$
$
$
13,350
3,523
(699)
(385)
15,789
4,241
2,314
(930)
316
$
$
20,237
1,297
—
(127)
21,407
1,865
1,413
(19)
1,590
$
$
68,173
2,683
(1,676)
310
69,490
1,118
3,187
—
(3,000)
$
21,730 $
26,256 $
70,795 $
2,342
3,416
19,102
24,860
3,279
5,511
17,002
25,792
Total
$
132,727
329
4,382
(3,550)
(1,410)
132,478
7,850
6,353
(1,647)
(1,393)
143,641
Total
$
101,760
7,503
(2,375)
(202)
106,686
7,224
6,914
(949)
(1,094)
118,781
The carrying value of any temporarily idle property, plant and equipment is not considered material as at March 31, 2020 and
March 31, 2019.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 85
$
$
112,744
4,927
8,329
3,000
129,000
—
22,866
22,866
$
106,134
NOTE 12
Right-of-Use Assets
Cost
Balance recognized on adoption of IFRS 16
Additions
Acquisition [Note 13]
Foreign exchange
As at March 31, 2020
Amortization
Balance recognized on adoption of IFRS 16
Charge for the year
As at March 31, 2020
Net book value as at March 31, 2020
NOTE 13
Business Combinations
i. Patersons Securities Limited
On October 21, 2019, the Company, through its 80% owned subsidiary, completed the acquisition of Patersons Securities
Limited (Patersons). Patersons (renamed as Canaccord Genuity Financial Limited) provides comprehensive investment management,
financial planning, stockbroking advice and execution services for Australian mass-affluent investors. Cash consideration of
AUD$25.0 million (C$22.6 million) was paid on closing.
The preliminary purchase price, determined by the fair value of the consideration given at the date of the acquisition and the fair
value of the net assets acquired on the date of the acquisition, was as follows:
Consideration paid
Cash
Net assets acquired
Cash
Accounts receivable
Securities owned
Deferred tax assets
Right-of-use assets
Other tangible assets
Liabilities
Identifiable intangible assets
Deferred tax liability related to identifiable intangible assets
Goodwill
$
$
$
22,551
11,118
5,769
2,988
5,152
8,329
1,388
(19,511)
6,529
(1,958)
2,747
22,551
Identifiable intangible assets of $6.5 million were recognized and relate to customer relationships and contract book. The
goodwill of $2.7 million represents the value of expected synergies arising from the acquisition. Goodwill is not deductible for tax
purposes.
The above amounts included in the purchase price allocation are preliminary. The purchase price and the fair value of the net
assets acquired from Patersons are estimates, which were made by management at the time of the preparation of these audited
consolidated financial statements based on available information. Amendments may be made to these amounts as well as the
identification of intangible assets and the allocation of identifiable intangible assets between indefinite life and finite lives.
Values based on estimates are subject to changes during the period ending 12 months after the acquisition date.
The aggregate acquisition-related expenses incurred by the Company during the year ended March 31, 2020 in connection with
the acquisition of Patersons were $1.6 million, which was comprised mainly of professional fees. In addition, there were restructuring
costs of $0.8 million recorded during the year ended March 31, 2020 related to certain real estate and integration costs.
Revenue and net loss generated by Patersons, including acquisition-related costs, were $21.4 million and $0.4 million, respectively,
since the acquisition date.
Had Patersons been consolidated from April 1, 2019 as part of the consolidated statement of operations, the consolidated
revenue and net income would have been approximately $1.3 billion and $87.0 million, respectively, for the year ended March 31,
2020. These figures represent historical results and are not necessarily indicative of future performance.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
86 Notes to Consolidated Financial Statements
ii. Thomas Miller Wealth Management Limited and Thomas Miller Investment (Isle of Man) Limited
On May 1, 2019, the Company completed its acquisition of Thomas Miller Wealth Management Limited and the private client
investment management business of Thomas Miller Investment (Isle of Man) Limited (collectively referred to as “Thomas Miller”).
Thomas Miller provides financial planning and investment management services to private clients, trusts, charities and
corporations in the UK. There was initial cash consideration of £18.5 million (C$32.5 million), with additional contingent
consideration of up to £9.5 million (C$16.7 million) payable over a period of three years following completion, subject to
achievement of performance targets related to revenue and client assets. There was also deferred consideration of £0.7 million
(C$1.2 million) that was paid during the year ended March 31, 2020. In connection with the acquisition, an additional £17.0 million
(C$29.9 million as of March 31, 2020) has been added to the Company’s existing bank loan facility.
The preliminary purchase price, determined by the fair value of the consideration given at the date of the acquisition and the fair
value of the net assets acquired on the date of the acquisition, was as follows:
Consideration paid
Cash
Deferred consideration
Contingent consideration
Net assets acquired
Cash
Accounts receivable
Other tangible assets
Liabilities
Identifiable intangible assets
Deferred tax liability related to identifiable intangible assets
Goodwill
$
$
$
$
32,458
1,211
14,769
48,438
4,824
2,764
1,052
(4,877)
32,484
(4,088)
16,279
48,438
Identifiable intangible assets of $32.5 million were recognized, and relate to customer relationships. The goodwill of $16.3 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 up to £8.4 million. An
adjustment was made to the fair value of the contingent consideration as of March 31, 2020 as a result of changes in market
conditions. The change was recorded through the statement of operations for the year ended March 3, 2020 [Note 7] The
contingent consideration will be payable over a period of up to three years, must be settled in cash and meets the definition of a
financial liability. Any 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, and the key assumption affecting the fair
value is the probability that the performance measures will be met.
The above amounts included in the purchase price allocation are preliminary. The purchase price and the fair value of the net
assets acquired from Thomas Miller are estimates, which were made by management at the time of the preparation of these audited
consolidated financial statements based on available information. Amendments may be made to these amounts as well as the
identification of intangible assets and the allocation of identifiable intangible assets between indefinite life and finite lives. Values
based on estimates are subject to changes during the period ending 12 months after the acquisition date.
The aggregate acquisition-related expenses incurred by the Company during the year ended March 31, 2020 in connection with
the acquisition of Thomas Miller are $1.5 million. These expenses are mainly comprised of professional and employment costs.
Revenue and net loss generated by Thomas Miller, including acquisition-related costs, were $8.5 million and $1.7 million, respectively,
since the acquisition date.
Had Thomas Miller been consolidated from April 1, 2019 as part of the consolidated statement of operations, the consolidated
revenue and net income would have been approximately $1.2 billion and $87 million, respectively, for the year ended March 31,
2020. These figures represent historical results and are not necessarily indicative of future performance.
Jitneytrade Inc. and Finlogik Inc.
On June 6, 2018, the Company completed its acquisition of Jitneytrade Inc. and Finlogik Inc. directly and indirectly through the
purchase of Finlogik Capital Inc. (collectively referred to as “Jitneytrade”). The preliminary purchase price allocation was disclosed
in the audited consolidated financial statements for the year ended March 31, 2019. The Company completed its final analysis
during the year ended March 31, 2020 and concluded that there were no changes to the purchase price allocation.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 87
NOTE 14
Goodwill and Other Intangible Assets
Brand
names
(indefinite
life)
$
Goodwill
$
Gross amount
Balance,
March 31, 2018 $ 580,606 $ 44,930 $
Brand
names
$
Customer
relationships
$
Technology
$
Non-
competition
$
Trading
licences
$
Fund
management
$
Contract
book
Favourable
lease
Total
$
— $ 123,174 $ 35,401 $ 14,153 $
196 $ 40,238 $
— $
— $ 258,092
Identifiable intangible assets
118,291
(6,029)
—
—
574
4
5,647
(3,518)
692,868
44,930
578
125,303
19,026
8,580
(2,425)
—
—
—
—
36
—
38,762
875
—
1,150
(1,253)
35,298
2,250
345
—
—
—
14,153
—
—
—
—
—
196
404
(16)
—
—
(1,253)
6,209
43
556
5
14,136
(5,972)
38,985
6,252
561
266,256
—
442
—
252
380
—
—
33
—
41,668
2,095
—
718,049
44,930
614
164,940
37,893
14,153
584
39,427
6,884
594
310,019
Additions
Foreign exchange
Balance,
March 31, 2019
Additions
Foreign exchange
Other
Balance,
March 31, 2020
Accumulated
amortization
and impairment
Balance,
March 31, 2018
(322,632)
Amortization
Foreign exchange
Balance,
—
—
March 31, 2019
(322,632)
Amortization
Foreign exchange
Balance,
—
—
March 31, 2020
(322,632)
—
—
—
—
—
—
—
—
—
—
—
(223)
(15)
(61,778)
(12,076)
1,267
(72,587)
(13,861)
(1,562)
(19,373)
(14,153)
(196)
(2,378)
1,063
—
—
—
—
(20,688)
(14,153)
(196)
(2,791)
(308)
—
—
—
—
(1,835)
(2,323)
47
(4,111)
(2,130)
(134)
—
—
—
—
(6,452)
(400)
—
—
—
(97,335)
(16,777)
2,377
— (111,735)
(223)
(15)
(25,680)
(2,434)
(238)
(88,010)
(23,787)
(14,153)
(196)
(6,375)
(6,852)
(238)
(139,849)
Net book value
March 31, 2019
March 31, 2020
370,236
395,417
44,930
44,930
578
376
52,716
76,930
14,610
14,106
—
—
—
388
34,874
33,052
6,252
32
561
356
154,521
170,170
Identifiable intangible assets purchased through the acquisitions of Genuity Capital Markets (Genuity), the 80% interest in
Canaccord Genuity (Australia) Limited (Canaccord Genuity Australia), Collins Stewart Hawkpoint plc (CSHP), Eden Financial Ltd.,
Hargreave Hale, Jitneytrade, Petsky Prunier, McCarthy Taylor, Thomas Miller and Patersons are customer relationships, non-competition
agreements, trading licences, fund management contracts, technology and brand names acquired through the acquisition of
Petsky Prunier, which have finite lives and are amortized on a straight-line basis over their estimated useful lives. Branding acquired
through the acquisition of Genuity is considered to have an indefinite life as the Company has no plans to cease its use in the
future.
During the year ended March 31, 2020, there was a change in the contingent consideration in connection with the acquisition of
Petsky Prunier LLC, which resulted in a reduction of the goodwill of $2.4 million.
As a result of the acquisition of Thomas Miller, the Company recognized goodwill of $16.3 million and identifiable intangible
assets of $32.5 million relating to customer relationships as of the acquisition date, which are being amortized over 14.6 years
[Note 13].
Also, as a result of the acquisition of Patersons, the Company recognized goodwill of $2.7 million and identifiable intangible
assets of $6.5 million relating to customer relationships and contract book as of the acquisition date [Note 13].
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
88 Notes to Consolidated Financial Statements
IMPAIRMENT TESTING OF GOODWILL AND OTHER ASSETS
The carrying amounts of goodwill and indefinite life intangible assets acquired through business combinations are as follows:
Canaccord Genuity Capital Markets
CGUs
Canada
US (Petsky Prunier)
Canaccord Genuity Wealth
Management CGUs
UK & Europe (Channel Islands)
UK & Europe (UK Wealth)
Australia
Intangible assets with indefinite lives
Goodwill
Total
March 31, 2020
$
March 31, 2019
$
March 31, 2020
$
March 31, 2019
$
March 31, 2020
$
March 31, 2019
$
$
44,930 $
—
44,930 $
—
101,732 $
110,031
101,732 $
105,682
146,662 $
110,031
146,662
105,682
—
—
—
—
—
—
94,944
86,073
2,637
93,870
68,952
—
94,944
86,073
2,637
93,870
68,952
—
$
44,930 $
44,930 $
395,417 $
370,236 $
440,347 $
415,166
Goodwill that was previously allocated to the Canaccord Genuity Wealth Management UK & Europe (Eden Financial Ltd.) CGU, the
UK & Europe (Hargreave Hale) CGU and the UK & Europe (McCarthy Taylor) CGU are now combined with the goodwill in connection
with the acquisition of Thomas Miller [Note 13], to form the Canaccord Genuity Wealth Management UK & Europe (UK Wealth) CGU.
This change in CGUs reflects changes in the way management monitors and reviews its UK & Europe wealth management
businesses and the synergies of the various business activities which now comprise the entire UK & Europe wealth management
group. Given the Company manages its UK & Europe wealth management business as one operating unit, it is appropriate to allocate
the goodwill acquired in connection with the acquisitions of Eden Financial Ltd., Hargreave Hale, McCarthy Taylor and Thomas
Miller to one CGU for the purpose of goodwill impairment testing.
In addition, goodwill that was previously allocated to Canaccord Genuity Capital Markets (Genuity) and Jitneytrade are combined
into one single CGU to reflect the integration of the two businesses.
The Genuity brand name is considered to have an indefinite life as the Company has no plans to cease its use in the future.
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 CGU to which goodwill and indefinite life intangible assets are allocated. Where the carrying amount of a CGU exceeds
its recoverable amount, an impairment loss is recognized. Any impairment loss first reduces the carrying amount of any goodwill
allocated to the CGUs 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.
In accordance with IAS 36, “Impairment of Assets” (IAS 36), the recoverable amounts of the CGUs’ net assets have been
determined using fair value less costs to sell (FVLCS) calculations, which are based on future cash flow assumptions considered
to be appropriate for the purposes of such calculations. In accordance with IFRS 13, fair value represents an estimate of the price
at which an orderly transaction to sell an asset or transfer a liability would take place between market participants as at the end
of the reporting period under market conditions as at that date (an exit price as at the measurement date). There is a material degree
of uncertainty with respect to the estimates of the recoverable amounts of the CGUs’ 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. These
valuations are categorized as Level 3 in the fair value hierarchy.
The FVLCS calculations are based on assumptions, as described above, made in connection with future cash flows, relief of
royalties with respect to the brand name indefinite life intangible asset, terminal growth rates and discount rates. In order to
estimate the FVLCS for each CGU, 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 CGUs which recorded goodwill in their carrying
value as of March 31, 2020 were Canaccord Genuity Capital Markets Canada, Canaccord Genuity Capital Markets US (Petsky
Prunier), Canaccord Genuity Wealth Management UK & Europe (Channel Islands), Canaccord Genuity Wealth Management UK &
Europe (UK) and Canaccord Genuity Wealth Management (Australia). 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 of
these CGUs for the purposes of these calculations was 12.5% [March 31, 2019 – 12.5%]. Cash flow estimates for each of
these CGUs were based on management assumptions as described above and utilized a compound annual revenue growth rate
of 5.0% over the forecast period except for Canaccord Genuity Capital Markets US which utilized a compound annual growth rate of
2.5% [March 31, 2019 – 5.0%] as well as estimates in respect of operating margins. The terminal growth rate used for each of
Canaccord Genuity Capital Markets Canada, Canaccord Genuity Capital Markets US (Petsky Prunier), Canaccord Genuity Wealth
Management UK & Europe (Channel Islands), Canaccord Genuity Wealth Management UK & Europe (UK), and Canaccord Genuity
Wealth Management (Australia) was 2.5% [March 31, 2019 – 2.5%].
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 89
Sensitivity testing was conducted as part of the annual impairment test of goodwill and indefinite life intangible assets for the
Canaccord Genuity – Canada CGU and for the annual impairment test of goodwill for the Canaccord Genuity – US CGU. The sensitivity
testing includes assessing the impact that reasonably possible declines in revenue estimates for the 12-month period ending on
March 31, 2021, declines in the compound annual revenue growth rate over the forecast period and increases in the discount rates
would have on the recoverable amounts of the CGUs, with other assumptions being held constant. In respect of the Canaccord
Genuity – Canada CGU an increase in the discount rate of 1.8 percentage points, a decrease in the estimated revenue for the year
ending March 31, 2021 of $11.4 million or a decrease in the five year compound annual growth rate of 5.0 percentage points
would result in the estimate of the recoverable amount declining below the carrying value with the result that an impairment charge
would be required. In respect of the Canaccord Genuity – US CGU an increase in the discount rate of 1.3 percentage points, a
decrease in the estimated revenue for the year ending March 31, 2021 of $13.0 million or a decrease in the five year compound
annual growth rate of 3.1 percentage points would result in the estimate of the recoverable amount declining below the carrying value
with the result that an impairment charge would be required. Any such impairment charges would be determined after incorporating
the effect of any changes in key assumptions including any consequential effects of such changes on estimated operating
income and on other factors.
NOTE 15
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 recovery
Origination and reversal of temporary differences
Impact of change in tax rates
March 31,
2020
$
March 31,
2019
$
$
27,097 $
2,247
29,344
(16,139)
264
(15,875)
34,897
(3,286)
31,611
(10,543)
6
(10,537)
Income tax expense reported in the statements of operations
$
13,469 $
21,074
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:
March 31,
2020
$
March 31,
2019
$
Net income before income taxes
Income tax expense at the statutory rate of 27.0% (2019 – 27.0%)
Difference in tax rates in foreign jurisdictions
Non-deductible items affecting the determination of taxable income
Change in accounting and tax base estimate
Recognition of loss carryforwards and other deducible temporary differences previously not recognized
Utilization of tax losses and other temporary differences not recognized
Impact of change in tax rates on temporary difference
Share-based payments
Other
$
100,023 $
26,996
(3,895)
3,651
797
(11,640)
(3,182)
—
2,470
(1,728)
Income tax expense reported in the statements of operations
$
13,469 $
92,656
25,018
(599)
5,450
(5,140)
—
(1,106)
(1,300)
(297)
(952)
21,074
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
90 Notes to Consolidated Financial Statements
The following were the deferred tax assets and liabilities recognized by the Company and movements thereon during the year:
Consolidated statements
of financial position
Consolidated statements
of operations
March 31,
2020
$
March 31,
2019
$
March 31,
2020
$
March 31,
2019
$
Unrealized gain on securities owned
Legal provisions
Unpaid remunerations
Unamortized capital cost of equipment and leasehold improvements over
$
(783) $
1,248
7,671
(7,116) $
917
4,375
(6.333) $
(331)
(3,296)
their net book value
Unamortized common share purchase loans
Loss carryforwards
Long-term incentive plan
Other intangible assets
Other
5,771
8,049
12,473
21,927
(29,538)
2,766
3,434
2,949
7,186
26,008
(26,053)
2,439
(2,337)
(5,100)
(5,287)
4,081
3,485
(757)
(3,385)
(143)
(445)
(449)
(515)
(1,962)
(643)
(2,734)
(261)
Deferred tax assets and liabilities as reflected in the consolidated statements of financial position are as follows:
$
29,584 $
14,139 $
(15,875) $
(10,537)
Deferred tax assets
Deferred tax liabilities
The movement for the year in the net deferred tax position was as follows:
Opening balance
Tax recovery recognized in the consolidated statements of operations
Deferred tax liability on convertible debentures
Deferred taxes acquired in business combination
Other
Ending balance as of March 31
March 31,
2020
$
39,487 $
(9,903)
29,584 $
March 31,
2019
$
22,117
(7,978)
14,139
2020
$
14,139 $
15,875
—
(662)
232
29,584 $
2019
$
6,226
10,537
(944)
(1,168)
(512)
14,139
$
$
$
$
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 $5.0 million [2019 – $4.2 million] in the UK and Europe, $9.1 million [2019 – $nil] in the US and
$8.7 million [2019 – $nil] in Australia have been recognized as deferred tax assets. The losses in these jurisdictions can be
carried forward indefinitely. Tax loss carryforwards of $26.1 million [2019 – $22.9 million] in Canada have been recognized as a
deferred tax asset and can be carried forward 20 years.
At the balance sheet date, the Company has tax loss carryforwards of approximately $35.5 million [2019 – $33.9 million] and
other temporary differences of $nil million [2019 – $35.0 million] for which a deferred tax asset has not been recognized. These
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 deferred tax
assets, as the likelihood of future economic benefit is not sufficiently assured. These losses begin expiring in 2029.
NOTE 16
Subordinated Debt
Loan payable, interest payable monthly at prime + 4% per annum, due on demand
March 31,
2020
$
7,500
March 31,
2019
$
7,500
The loan payable is subject to a subordination agreement and may only be repaid with the prior approval of the Investment
Industry Regulatory Organization of Canada (IIROC). As at March 31, 2020 and 2019, the interest rates for the subordinated debt
were 6.45% and 7.95%, respectively. The carrying value of subordinated debt approximates its fair value due to the short-term
nature of this liability.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
NOTE 17
Bank Loan
Loan
Less: Unamortized financing fees
Current portion
Long-term portion
Notes to Consolidated Financial Statements 91
$
March 31,
2020
$
87,421 $
(1,187)
86,234
7,042
79,192
March 31,
2019
$
60,326
(662)
59,664
9,294
50,370
A subsidiary of the Company entered into a £40.0 million senior credit facility to finance a portion of the cash consideration for its
acquisition of Hargreave Hale. During the year ended March 31, 2020, the Company obtained additional financing on the loan of
£17.0 million in connection with the acquisition of Thomas Miller. The balance outstanding as of March 31, 2020, net of principal
repayments and unamortized financing fees, was £49.0 million ($86.2 million) [March 31, 2019 – £34.3 million ($59.7 million)].
The loan is repayable in instalments of principal and interest over a period of four years and matures in September 2023. The
interest rate on this loan is variable and is currently at 2.6584% per annum as at March 31, 2020 [March 31, 2019 – 2.9646%
per annum].
NOTE 18
Lease Liabilities
Year one
Year two
Year three
Year four
Year five and thereafter
Effect of discounting
Present value of minimum lease payments
Less: current portion
Non-current portion of lease liabilities
NOTE 19
Convertible Debentures
March 31,
2020
$
29,899
27,215
22,627
20,107
35,046
134,894
(22,555)
112,339
(23,417)
88,922
March 31,
2019
$
—
—
—
—
—
—
—
—
—
—
Convertible debentures
March 31, 2020
March 31, 2019
Liability
$
128,322 $
Equity
5,156
Liability
$127,225
Equity
$5,156
On August 22, 2018, the Company completed its bought deal offering of convertible unsecured senior subordinated debentures
for gross proceeds of $59,225,000 (the Offered Debentures). The Company had also closed the concurrent non-brokered private
placement with a large Canadian asset manager for gross proceeds of $73,500,000, which, together with the gross proceeds from
the Offered Debentures, represent an aggregate principal amount of $132,725,000 (together with the Offered Debentures, the
Convertible Debentures). The Company used the proceeds from the Convertible Debentures to redeem the $60.0 million convertible
unsecured subordinated debentures issued in 2016. The remainder of the proceeds will be used by the Company to finance
growth in its wealth management business in Canada and the UK & Europe, and elsewhere as opportunities arise. The net amount
recognized after deducting issue costs net of deferred tax liability was $129.2 million.
The $60.0 million convertible unsecured subordinated debentures issued in October 2016 were considered extinguished for
accounting purposes under IFRS 9, “Financial Instruments” (IFRS 9). As a result, the liability associated with the extinguished
debentures was derecognized on the statement of financial position as at March 31, 2019 and the Company recorded a loss of
$13.5 million on the extinguishment during the year ended March 31, 2019, with $8.6 million recorded through the consolidated
statement of operations and $4.9 million recorded directly against shareholders’ equity.
The Convertible Debentures bear interest at a rate of 6.25% per annum, payable semi-annually on the last day of December and
June each year commencing December 31, 2018. The Convertible Debentures are convertible at the holder’s option into common
shares of the Company, at a conversion price of $10.00 per common share. The Convertible Debentures mature on December 31,
2023 and may be redeemed by the Company in certain circumstances, on or after December 31, 2021.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
92 Notes to Consolidated Financial Statements
The Convertible Debentures are classified as compound financial instruments. On initial recognition, the fair value of the liability
is calculated based on the present value of future cash flows under the instruments, discounted at 7%, being equal to the rate of
interest applied by the market at the time of issue to instruments of comparable credit status and future cash flows, without
the conversion feature. The residual amount is recorded as a component of shareholders’ equity until maturity or conversion.
NOTE 20
Preferred Shares
Series A Preferred Shares issued and outstanding
Series C Preferred Shares issued and outstanding
Series C Preferred Shares held in treasury
[i] SERIES A PREFERRED SHARES
March 31, 2020
March 31, 2019
Amount
$
110,818
97,450
(2,627)
94,823
205,641
Number of
shares
$
4,540,000
4,000,000
(106,794)
3,893,206
8,433,206
Amount
$
110,818
97,450
(2,627)
94,823
205,641
Number of
shares
$
4,540,000
4,000,000
(106,794)
3,893,206
8,433,206
The Company issued 4,540,000 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 $113.5 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, as declared, were paid at an annual rate of 5.5% for the initial five-year period ended on
September 30, 2016. Commencing October 1, 2016 and ending on and including September 30, 2021, quarterly cumulative
dividends, if declared, will be paid at an annual rate of 3.885%. 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 had the 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 have the option on September 30 every five years thereafter. The number of shares tendered for conversion by the conversion
deadline of September 15, 2016 was below the minimum required to proceed with the conversion and, accordingly, no Series B
Preferred Shares were issued. Series B Preferred Shares would entitle any holders thereof 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 had the option to redeem the Series A Preferred Shares on September 30, 2016, and has the option to redeem 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
The Company issued 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 $100.0 million. The aggregate net amount recognized after deducting
issue costs, net of deferred taxes of $1.0 million, was $97.5 million.
Quarterly cumulative cash dividends, as declared, were paid at an annual rate of 5.75% for the initial five-year period ending on
June 30, 2017. Commencing July 1, 2017 and ending on and including June 30, 2022, quarterly cumulative dividends, if declared,
will be paid at an annual rate of 4.993%. 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 had the 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
have the option on June 30 every five years thereafter. The number of shares tendered for conversion by the conversion deadline
of June 30, 2017 was below the minimum required to proceed with the conversion and, accordingly, no Series D Preferred Shares
were issued. Series D Preferred Shares would entitle any holders thereof 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 had the option to redeem the Series C Preferred Shares on June 30, 2017, and has the option to redeem on
June 30 every five years thereafter, in whole or in part, at $25.00 per share together with all declared and unpaid dividends.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 93
NOTE 21
Common Shares and Warrants
Issued and fully paid
Held for share-based payment plans
Held for the LTIP
Warrants
Warrants issued in connection with private placement
March 31, 2020
March 31, 2019
Amount
$
745,275
(1,226)
(80,496)
663,553
Number of
shares
107,812,361 $
(284,645)
(14,063,465)
Amount
$
787,096
(3,647)
(110,553)
Number of
shares
115,616,744
(346)
(18,036,064)
93,464,251 $
672,896
97,580,334
$
$
March 31, 2020
March 31, 2019
Amount
$
—
Number of
shares
$
—
Amount
$
1,975
Number of
shares
$
3,438,412
Upon vesting of the warrants on June 17, 2019, the terms of the warrants were modified, resulting in a reclassification of the
warrants from shareholders’ equity to liability measured at fair value on the modification date of the warrants. The warrants expired
on December 17, 2019.
[i] AUTHORIZED
Unlimited common shares without par value.
[ii] ISSUED AND FULLY PAID
Balance, March 31, 2018
Shares issued in connection with share-based payment plans [Note 23]
Shares issued in connection with purchase of non-controlling interest
Shares issued in connection with acquisition of Petsky Prunier
Shares cancelled
Balance, March 31, 2019
Shares issued in connection with share-based payment plans [Note 23]
Shares issued in connection with acquisition of Petsky Prunier
Shares issued in connection with exercise of private placement warrants
Shares purchased and cancelled under the substantial issuer bid
Shares purchased and cancelled under the normal course issuer bid
Balance, March 31, 2020
$
Number of shares
113,522,629
36,708
2,331,132
1,105,275
(1,379,000)
115,616,744
54,236
736,850
144,914
(7,272,727)
(1,467,656)
107,812,361 $
Amount
$
772,746
331
16,807
6,631
(9,419)
787,096
489
7,094
732
(40,000)
(10,136)
745,275
In a substantial issuer bid which commenced on July 3, 2019 and expired on August 9, 2019, the Company made an offer to
repurchase for cancellation up to $40.0 million of its common shares. The offer was made by way of a “modified Dutch auction”,
which allowed shareholders who chose to participate in the offer to individually select the price, within a price range of not less than
$5.50 per common share and not more than $6.30 per common share (in increments of $0.10 per common share), at which
they are willing to sell their common shares. Upon expiry of the offer, the Company determined that $5.50 was the lowest purchase
price that allowed it to purchase the maximum number of common shares properly tendered to the offer, and not properly
withdrawn, having an aggregate purchase price of $40.0 million. The Company therefore purchased for cancellation 7,272,727 of
its common shares at a purchase price of $5.50 per share, representing approximately 6.28% of the issued and outstanding
common shares on a non-diluted basis at July 3, 2019. These shares were cancelled effective August 19, 2019.
On August 12, 2019, the Company filed a notice to renew the normal course issuer bid (NCIB) to provide the Company with the
choice to purchase up to a maximum of 5,423,872 of its common shares during the period from August 15, 2019 to August 14,
2020 through the facilities of the TSX and on alternative trading systems in accordance with the requirements of the TSX. The
purpose of the purchase of common shares under the NCIB is to enable the Company to acquire shares for cancellation. The
maximum number of shares that may be purchased under the current NCIB represents 5.0% of the Company’s outstanding common
shares at the time of the Notice. During the year ended March 31, 2020, there were 1,467,656 shares purchased and cancelled
under the NCIB.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
94 Notes to Consolidated Financial Statements
[iii] FORGIVABLE COMMON SHARE PURCHASE LOANS
The Company provides forgivable common share purchase loans to certain employees (other than directors or executive officers)
in order to purchase common shares of the Company. 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.
[iv] EARNINGS PER COMMON SHARE
Earnings per common share
Net income attributable to CGGI shareholders
Preferred share dividends
Equity portion of loss on extinguishment of convertible debentures
Net income attributable to common shareholders
Weighted average number of common shares (number)
Basic earnings per share
Diluted earnings per common share
Net income attributable to common shareholders
Interest on convertible debentures, net of tax
Adjusted net earnings available to common shareholders
Weighted average number of common shares (number)
Dilutive effect in connection with LTIP (number)
Dilutive effect in connection with warrants (number)
Dilutive effect in connection with a promissory note (number)
Dilutive effect in connection with other share-based payment plans (number)
Dilutive effect in connection with convertible debentures (number)
Dilutive effect in connection with acquisition of Petsky Prunier (number)
Adjusted weighted average number of common shares (number)
Diluted earnings per common share
NOTE 22
Dividends
COMMON SHARE DIVIDENDS
For the years ended
March 31,
2020
$
March 31,
2019
$
$
$
86,490 $
(9,404)
—
77,086
70,530
(9,402)
(4,892)
56,236
98,449,097
0.78 $
96,259,582
0.58
77,086
6,856
83,942
98,449,097
12,296,639
—
—
2,810,808
13,272,500
1,473,700
56,236
7,216
63,452
96,259,582
17,568,822
819,097
661,728
151,464
13,272,500
2,210,550
128,302,744
130,943,743
$
0.65 $
0.48
The Company declared the following common share dividends during the year ended March 31, 2020:
Record date
February 28, 2020
November 29, 2019
August 30, 2019
June 21, 2019
Payment date
Cash dividend per
common share
Total common
dividend amount
March 10, 2020 $
December 10, 2019 $
September 10, 2019 $
July 2, 2019 $
0.05
0.05
0.05
0.17
$
$
$
$
5,390
5,390
5,424
19,677
On June 2, 2020, the Board of Directors approved a dividend of $0.05 per common share, payable on June 30, 2020, with a
record date of June 19, 2020. [Note 29].
PREFERRED SHARE DIVIDENDS
Record date
March 20, 2020
December 20, 2019
September 13, 2019
June 21, 2019
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Payment date
Cash dividend per
Series A Preferred
Share
Cash dividend per
Series C Preferred
Share
Total preferred
dividend amount
March 31, 2020 $
December 31, 2019 $
September 30, 2019 $
July 2, 2019 $
0.24281
0.24281
0.24281
0.24281
$
$
$
$
0.312060
0.312060
0.312060
0.312060
$
$
$
$
2,351
2,351
2,351
2,351
Notes to Consolidated Financial Statements 95
On June 2, 2020, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on June 30, 2020 to
Series A Preferred shareholders of record as at June 19, 2020 [Note 29].
On June 2, 2020, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on June 30, 2020 to
Series C Preferred shareholders of record as at June 19, 2020 [Note 29].
NOTE 23
Share-Based Payment Plans
[i] LONG-TERM INCENTIVE PLAN
Under the long-term incentive plan (LTIP or the Plan), eligible participants are awarded restricted share units (RSUs), which
generally vest over three years. All awards under the LTIP are settled by transfer of shares from employee benefit trusts (Trusts)
which are funded by the Company, or certain of its subsidiaries, as the case may be, with cash which is used by the trustees to
purchase common shares on the open market that will be held in the Trusts until the RSUs vest. No further shares may be issued
from treasury under the LTIP.
For RSUs granted as part of the normal course incentive compensation payment cycle, vesting will continue after termination of
employment so long as the employee does not violate certain post-termination restrictions and is not engaged in certain competitive
or soliciting activities as provided in the Plan. These RSUs are expensed in the period in which those awards are deemed to be
earned with, a corresponding increase in contributed surplus, which is generally either the fiscal period in which the awards are made
or the immediately preceding fiscal year for those awards made after the end of such fiscal year but determined and earned in
respect of that fiscal year.
For certain awards, typically new hire awards or retention awards, vesting is subject to continued employment, and therefore
these awards are subject to a continuing service requirement. Accordingly, the Company recognizes the cost of such awards as
an expense on a graded basis over the applicable vesting period, with a corresponding increase in contributed surplus.
There were 6,262,102 RSUs [year ended March 31, 2019 – 4,661,519 RSUs] granted in lieu of cash compensation to employees
during the year ended March 31, 2020. The Trusts purchased 7,502,033 common shares [year ended March 31, 2019 – 4,554,070
common shares] during the year ended March 31, 2020.
The fair value of the RSUs at the measurement date is based on the fair value on the grant date. The weighted average fair value
of RSUs granted during the year ended March 31, 2020 was $5.42 [March 31, 2019 – $7.06].
Awards outstanding, March 31, 2018
Grants
Vested
Forfeited
Awards outstanding, March 31, 2019
Grants
Vested
Forfeited
Awards outstanding, March 31, 2020
Common shares held by the Trusts, March 31, 2018
Acquired
Released on vesting
Common shares held by the Trusts, March 31, 2019
Acquired
Released on vesting
Common shares held by the Trusts, March 31, 2020
[ii] FORGIVABLE COMMON SHARE PURCHASE LOANS
Number
20,130,388
4,661,519
(6,311,853)
(115,120)
18,364,934
6,262,102
(11,474,622)
(47,439)
13,104,975
Number
19,814,432
4,554,070
(6,332,438)
18,036,064
7,502,033
(11,474,632)
14,063,465
The Company provides loans to certain employees (other than directors or executive officers) for the purpose of partially funding
the purchase of shares of the Company and increasing share ownership by the employees. The Company has provided such loans
to executive officers in the past but has now adopted a policy not to make any further such loans to directors or executive
officers.
[iii] REPLACEMENT PLANS
As a result of the acquisition of Collins Stewart Hawkpoint plc (CSHP), the following share-based payment plans were introduced
to replace the share-based payment plans that existed at CSHP at the acquisition date:
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
96 Notes to Consolidated Financial Statements
Canaccord Genuity Group 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 options to purchase common
shares of the Company under the Replacement ABED Plan. The exercise price of these options was $nil. The options, which are
now vested, vested between one and three years from the acquisition date of CSHP. In accordance with IFRS 3, “Business
Combinations” (IFRS 3), a portion of the awards granted was included as part of the purchase consideration for the acquisition of
CSHP and a portion was deferred and amortized to incentive compensation expense over the vesting period. The awards were
fully amortized as of March 31, 2015.
Balance, March 31, 2018
Exercised
Balance, March 31, 2019
Exercised
Expired
Balance, March 31, 2020
Number
18,482
(3,226)
15,256
(4,339)
—
10,917
Canaccord Genuity Group 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 options to purchase shares of the Company under the
Replacement LTIP. The exercise price of these options was $nil. The options, which are now vested, vested 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 was deferred and amortized to incentive compensation expense over the
vesting period. The awards were fully amortized as of March 31, 2015.
Balance, March 31, 2018
Exercised
Balance, March 31, 2019
Exercised
Expired
Balance, March 31, 2020
[iv] DEFERRED SHARE UNITS
Number
121,458
(33,482)
87,976
(49,897)
(38,079)
—
Beginning April 1, 2011, the Company adopted a deferred share unit (DSU) plan for its independent directors. From August 7,
2020, half of the independent director annual fee was paid in the form of DSUs. Directors may elect annually to use more of their
directors’ fees for DSUs. When a director leaves the Board of Directors, outstanding DSUs are paid out in cash with the amount
equal to the number of DSUs held multiplied by the volume weighted average price of the Company’s common shares for the ten
trading days immediately preceding the first publication of interim financial statements and management’s discussion and analysis
for the fiscal quarter of the Company next ending following the director’s leaving. 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, 2020, the Company granted 125,134 DSUs [2019 – 62,916 DSUs]. The carrying amount of the
liability relating to DSUs at March 31, 2020 was $2.3 million [2019 – $2.7 million].
[v] PERFORMANCE SHARE UNITS
The Company adopted a performance share unit (PSU) plan for certain senior executives during the year ended March 31, 2019.
On June 12, 2018, the Company granted 877,485 units under the PSU plan. The Company also granted an additional 1,844,497
PSUs on June 6, 2019. The PSUs are a notional equity-based instrument linked to the value of the Company’s common shares.
At the end of a three-year vesting period, the number of PSUs which vest is determined upon performance against certain metrics pre-
determined for each annual grant. The PSUs cliff-vest on the third anniversary of the date of the grant. The PSUs are settled in
cash, based on the market price of the Company’s shares at the time of vesting.
The PSUs were measured at fair value on grant date. 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. The carrying amount of
the liability recognized in accounts payable and accrued liabilities relating to PSUs at March 31, 2020 was $22.7 million
[March 31, 2019 – $5.7 million].
[vi] PERFORMANCE STOCK OPTIONS
On June 1, 2018, the Company created a performance share option (PSO) plan that was approved at the Company’s Annual
General Meeting held on August 2, 2018. On June 14, 2018, the Company granted 5,620,000 options under the PSO plan. The
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 97
options have an exercise price of $6.73 per share. In addition, the Company granted 600,000 options on August 16, 2018 with
an exercise price of $7.067. On June 12, 2019, the Company granted 100,000 options on the same terms as the June 14, 2018
grant (including a five-year term from June 14, 2018). For accounting purposes under IFRS 2, the grant date of the initial PSOs is
August 2, 2018, being the date the PSO plan was approved at the Annual General Meeting. The PSOs have a term of five years and
will time-vest ratably over four years (with one-third vesting on each of the second, third and fourth anniversaries of the date of
the grant). The PSOs will also be subject to market (stock price) performance vesting conditions, and have a four times exercise
price cap on payout value (i.e., the gain on the exercise of the options is limited to three times the exercise price). The PSOs will
expire on June 14, 2023.
The following is a summary of the Company’s PSOs as at March 31, 2020:
Balance, March 31, 2019
Granted
Exercised
Balance, March 31, 2020
Number of PSOs
Weighted average
exercise price ($)
$
6,220,000
100,000
—
6,320,000 $
6.76
6.73
—
6.76
Under IFRS 2, “Share-Based Payments”, the impact of market conditions, such as a target share price upon which vesting is
conditioned, should be considered when estimating the fair value of the PSOs. A Monte Carlo simulation is used to simulate a
range of possible future stock prices for the Company over the period from the grant date to the expiry date of the PSOs. The purpose
of this modelling is to use a probabilistic approach for estimating the fair value of the PSOs under IFRS 2. The following
assumptions were used in the Monte Carlo model for grants made in the year ended March 31, 2020:
Dividend yield
Expected volatility
Risk-free interest rate
Expected life
2.16%
40.92%
2.24%
4 years
The weighted average fair value of the PSOs awarded is $1.93 per option. Compensation expense of $3.9 million was recognized
for the year ended March 31, 2020.
Option pricing models require the input of highly subjective assumptions including the expected price volatility. 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 PSOs.
[vii] OTHER SHARE-BASED PAYMENT PLAN
During the year ended March 31, 2019, the Company granted a share-based award to a senior executive. The award vests on
March 31, 2021 or, at the holder’s option, can be extended to March 31, 2022. Compensation expense of $2.7 million was
recorded for the year ended March 31, 2020 [2019 – $0.1 million].
[viii] SHARE-BASED COMPENSATION EXPENSE
Long-term incentive plan
Forgivable common share purchase loans
Deferred share units (cash-settled)
PSO
PSU (cash-settled)
Other share-based payment plan
Accelerated share-based payment expense included as restructuring expense
Total share-based compensation expense
For the years ended
March 31,
2020
$
March 31,
2019
$
$
41,438 $
—
(650)
3,896
(4,576)
2,712
—
$
42,820 $
45,184
335
128
3,483
(488)
—
858
49,500
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
98 Notes to Consolidated Financial Statements
NOTE 24
Related Party Transactions
[i] CONSOLIDATED SUBSIDIARIES
The consolidated financial statements include the financial statements of the Company and the Company’s operating subsidiaries
and intermediate holding companies listed in the following table:
Canaccord Genuity Corp.
CG Investments Inc.
CG Investments Inc. III
Jitneytrade Inc.
Finlogik Inc.
Finlogik Inc. Tunisia SARL
Canaccord Genuity SAS
Canaccord Genuity Wealth (International) Limited
Canaccord Genuity Financial Planning Limited
Canaccord Genuity Wealth Limited
Canaccord Genuity Wealth Group Limited
Canaccord Genuity Wealth (International) Holdings Limited
Hargreave Hale Limited
CG McCarthy Taylor Ltd.
CG Wealth Planning Limited
Canaccord Genuity Limited
Canaccord Genuity Wealth Group Holdings Ltd.
Canaccord Genuity LLC
Canaccord Genuity Wealth Management (USA) Inc.
Canaccord Genuity Wealth & Estate Planning Services Ltd.
Canaccord Genuity Petsky Prunier LLC
Canaccord Asset Management Inc.
Canaccord Adams Financial Group Inc.
Collins Stewart Inc.
Canaccord Adams BC ULC
Canaccord Genuity Finance Corp.
Canaccord Adams Finance Company ULC
Canaccord Adams Finance Company LLC
Canaccord Adams (Delaware) Inc.
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*
Canaccord Genuity Financial Limited*
Canaccord Genuity Asia (Beijing) Limited
The Balloch Group Limited
Canaccord Genuity Asia (Hong Kong) Limited
Canaccord Genuity (Dubai) Ltd.
Canaccord Genuity SG Pte. Ltd.
Canaccord Genuity Wealth Group Holdings (Jersey) Limited
Canaccord Genuity Hawkpoint Limited
Canaccord Genuity Management Company Limited
% equity interest
Country of
incorporation
March 31,
2020
March 31,
2019
Canada
Canada
Canada
Canada
Canada
Tunisia
France
Guernsey
United Kingdom
United Kingdom
United Kingdom
Guernsey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Canada
United States
United States
Canada
United States
Canada
United States
United States
Canada
Canada
Canada
United States
United States
United States
Canada
Canada
China (Hong Kong SAR)
Australia
Australia
Australia
China
British Virgin Islands
China (Hong Kong SAR)
United Arab Emirates
Singapore
Jersey
United Kingdom
Ireland
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
80%
80%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
80%
80%
100%
100%
100%
100%
100%
100%
100%
100%
*
The Company owns 80% of the issued shares of Canaccord Financial Group (Australia) Pty Ltd., Canaccord Genuity (Australia) Limited, and Canaccord Genuity Financial Limited, but for accounting
purposes, as of March 31, 2020 the Company is considered to have an 85% interest because of the shares held in a trust controlled by Canaccord Financial Group (Australia) Pty Ltd. [March 31,
2019 – 85%] [Note 8].
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 99
[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, 2020 and 2019:
Short-term employee benefits
Share-based payments
Total compensation paid to key management personnel
March 31,
2020
$
$
$
12,877
1,068
$
13,945
$
March 31,
2019
$
10,167
2,656
12,823
[iii] OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Accounts payable and accrued liabilities include the following balances with key management personnel:
Accounts receivable
Accounts payable and accrued liabilities
March 31,
2020
$
$
$
2,328
980
$
$
March 31,
2019
$
837
942
[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 25
Segmented Information
The Company operates in two industry segments as follows:
Canaccord Genuity Capital Markets – includes investment banking, advisory, research and trading activities on behalf of
corporate, institutional and government clients as well as principal trading activities in Canada, the UK & Europe (including
Dubai), Australia and the US. Commencing in the fiscal year starting April 1, 2019, the Other Foreign Locations (OFL), comprised
of our operations in Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets
operations.
Canaccord Genuity Wealth Management – provides brokerage services and investment advice to retail or institutional clients in
Canada, the US, Australia and the UK & Europe.
Corporate and Other includes correspondent brokerage services, interest and foreign exchange revenue and expenses not
specifically allocable to Canaccord Genuity Capital Markets 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 Capital Markets Canada segment, as it relates to the acquisitions of Genuity and Jitneytrade.
Amortization of the identifiable intangible assets acquired through the purchase of Collins Stewart Hawkpoint plc (CSHP) is
allocated to the Canaccord Genuity Capital Markets and Canaccord Genuity Wealth Management segments in the UK & Europe
(Channel Islands). Amortization of identifiable intangible assets acquired through the acquisitions of Eden Financial Ltd., Hargreave
Hale, McCarthy Taylor and Thomas Miller is allocated to the Canaccord Genuity Wealth Management UK & Europe (UK Wealth)
segment. Amortization of identifiable intangible assets acquired through the acquisition of Petsky Prunier is allocated to the
Canaccord Genuity Capital Markets US segment. Amortization of identifiable intangible assets acquired through the acquisition of
Patersons is allocated to Canaccord Genuity Wealth Management Australia. 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. The Company also does not allocate cash flows by reportable segments.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
100 Notes to Consolidated Financial Statements
For the years ended
March 31, 2020
Canaccord
Genuity
Capital
Markets
$
Canaccord
Genuity
Wealth
Management
$
Corporate
and
Other
$
Canaccord
Genuity
Capital
Markets
$
Total
$
$ 152,482 $ 434,402 $
194,013
205,614
108,788
24,584
3,988
42,949
893
46
28,857
4,288
— $ 586,884 $ 175,511
243,715
—
140,744
—
125,753
—
13,882
10,249
4,721
12,714
236,962
206,507
108,834
63,690
20,990
Canaccord
Genuity
Wealth
Management
$
$ 380,964
50,526
1,484
100
24,136
4,601
March 31, 2019
Corporate
and
Other
$
Total
$
$
— $ 556,475
294,241
—
142,228
—
125,830
(23)
51,008
12,990
20,785
11,463
579,505
12,975
386,940
19,154
54,204
465
1,020,649
32,594
590,253
7,199
351,929
16,225
65,437
856
1,007,619
24,280
13,228
495
15,654
—
1,806
—
—
6,304
11,364
6,765
1,921
(1,930)
—
—
3,334
194
11,259
—
—
—
207
22,866
12,053
33,678
1,921
(124)
—
207
—
452
9,810
13,070
1,976
—
—
—
14,906
4,593
—
1,088
—
—
—
155
11,050
—
—
—
15,513
25,453
13,070
3,064
8,608
8,608
304
304
65,806
17,005
80,917
12,743
(46,700)
(29,748)
100,023
—
81,566
18,689
73,070
14,467
(61,980)
(33,156)
92,656
—
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses, excluding
undernoted
Amortization
Amortization of right of use
assets
Development costs
Interest expense
Restructuring costs
Acquisition-related costs
Loss on extinguishment of
convertible debentures
Share of loss of an
associate
Income (loss) before
intersegment allocations
and income taxes
Intersegment allocations
Income (loss) before income
taxes
$
48,801 $
68,174 $ (16,952) $ 100,023 $
62,877
$
58,603
$ (28,824) $
92,656
For geographic reporting purposes, the Company’s business operations are grouped into Canada, the US, the UK & Europe
(including Dubai), Australia and Other Foreign Locations (OFL), which is comprised of our Asian operations. Commencing in the
fiscal year starting April 1, 2019, the OFL geography is allocated to our Canadian and Australian capital markets operations. The
comparatives have not been restated. The following table presents the revenue of the Company by geographic location (revenue is
attributed to geographic areas on the basis of location of the underlying corporate operating results):
$
For the years ended
March 31,
2020
$
434,054 $
374,056
353,490
62,267
—
March 31,
2019
$
489,515
363,774
305,993
31,366
(81)
$
1,223,867 $
1,190,567
Canada
UK & Europe
United States
Australia
Other Foreign Locations
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
The following table presents selected figures pertaining to the financial position of each geographic location:
Notes to Consolidated Financial Statements 101
As at March 31, 2020
Equipment and leasehold improvements
Goodwill
Intangible assets
Non-current assets
As at March 31, 2019
Equipment and leasehold improvements
Goodwill
Intangible assets
Canada
$
7,025
101,729
49,775
158,529
7,919
101,732
52,484
$
$
$
$
$
$
UK &
Europe
$
United
States
$
Other Foreign
Locations
$
Australia
$
Total
$
$
8,626
181,021
113,014
$
6,009
110,030
867
302,661
$
116,906
$
$
11,376
162,822
94,553
$
5,463
105,682
7,484
39
—
—
39
54
—
—
54
$
$
$
$
$
3,161
2,637
6,514
24,860
395,417
170,170
12,312
$
590,447
980
—
—
980
$
25,792
370,236
154,521
$
550,549
Non-current assets
$
162,135
$
268,751
$
118,629
$
NOTE 26
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, warrants, retained deficit and accumulated other comprehensive income (loss), and is further complemented
by the subordinated debt, bank loans and convertible debentures. The following table summarizes our capital as at March 31,
2020 and 2019:
Type of capital
Preferred shares
Common shares
Convertible debentures – equity portion
Deferred consideration
Warrants
Contributed surplus
Retained deficit
Accumulated other comprehensive income
Shareholders’ equity
Convertible debentures
Subordinated debt
Bank loan
$
March 31,
2020
$
205,641 $
663,553
5,156
6,545
—
101,501
(193,131)
139,353
928,618
128,322
7,500
86,234
March 31,
2019
$
205,641
672,896
5,156
—
1,975
124,710
(237,770)
103,755
876,363
127,225
7,500
59,664
$
1,150,674 $
1,070,752
The Company’s capital management framework is designed to maintain the level of capital that will:
• Meet the Company’s regulated subsidiaries’ target ratios as set out by the respective regulators
• Fund current and future operations
• Ensure that the Company is able to meet its financial obligations as they become due
• Support the creation of shareholder value
The following subsidiaries are subject to regulatory capital requirements in the respective jurisdictions by the listed regulators:
• Canaccord Genuity Corp. and Jitneytrade Inc. are subject to regulation in Canada primarily by the Investment Industry
Regulatory Organization of Canada (IIROC)
• Canaccord Genuity Limited, Canaccord Genuity Wealth Limited, Canaccord Genuity Financial Planning Limited, McCarthy
Taylor Ltd. and Hargreave Hale Limited are regulated in the UK by the Financial Conduct Authority (FCA)
• 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
• Canaccord Genuity (Australia) Limited and Canaccord Genuity Financial Limited are regulated by the Australian Securities
and Investments Commission
• Canaccord Genuity (Hong Kong) Limited is regulated in Hong Kong by the Securities and Futures Commission
• Canaccord Genuity LLC is registered as a broker dealer in the US and is subject to regulation primarily by the Financial
Industry Regulatory Authority, Inc. (FINRA)
• Canaccord Genuity Wealth Management (USA) Inc. is registered as a broker dealer in the US and is subject to regulation
primarily by FINRA
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
102 Notes to Consolidated Financial Statements
• Canaccord Asset Management Inc. is subject to regulation in Canada by the Ontario Securities Commission
• Canaccord Genuity (Dubai) Ltd, is subject to regulation in the United Arab Emirates by the Dubai Financial Services Authority
(DFSA)
• Canaccord Genuity SG Pte. Ltd. is subject to regulation by the Monetary Authority of Singapore
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. Some of the subsidiaries are also
subject to regulations relating to withdrawal of capital, including payment of dividends to the Company. 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 as at and during the year ended March 31, 2020.
NOTE 27
Client Money
At March 31, 2020, the UK & Europe operations held client money in segregated accounts of $3.451 billion (£1.960 billion)
[2019 – $3.042 billion (£1.748 billion)]. This is comprised of $11.1 million (£6.3 million) [2019 – $6.9 million (£4.0 million)] of
balances held on behalf of clients to settle outstanding trades and $3.440 billion (£1.954 billion) [2019 – $3.035 billion (£1.744 billion)]
of segregated deposits, held on behalf of clients, which are not reflected on the consolidated statements of financial position.
Movement in settlement balances is reflected in operating cash flows.
NOTE 28
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. 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, 2020 and 2019:
Balance, March 31, 2018
Additions
Utilized
Balance, March 31, 2019
Additions
Utilized
Balance, March 31, 2020
$
Legal
provisions
$
Restructuring
provisions
$
$
3,253
4,078
(1,660)
5,671
2,899
(4,025)
$
5,175
13,070
(5,704)
12,541
1,921
(12,272)
$
4,545 $
2,190 $
Total
provisions
$
8,428
17,148
(7,364)
18,212
4,820
(16,297)
6,735
Commitments, litigation proceedings and contingent liabilities
In the normal course of business, the Company is involved in litigation, and as of March 31, 2020, it was a defendant in various
legal actions. The Company has established provisions 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 Company is also subject to asserted and unasserted claims arising in the normal course of business which, as of March 31,
2020, have not resulted in the commencement of legal actions. The Company cannot determine the effect of all asserted and
unasserted claims on its financial position; however, where losses arising from asserted and unasserted claims are considered
probable and where such losses can be reasonably estimated, the Company has recorded a provision.
Litigation matters and asserted and unasserted claims against the Company may be in respect of certain subsidiaries of CGGI,
CGGI directly or both CGGI and certain of its subsidiaries.
A final finding of liability has been made in an action against Collins Stewart (C.I.) Limited, now called Canaccord Genuity Wealth
(International) Limited (CGWIL), arising out of a non-compete agreement with one of its clients entered into before CGWIL became
a subsidiary of the Company in 2012. Proceedings to determine the quantumof damages are continuing and the Company
intends to vigorously defend itself. As at the date of these audited annual consolidated financial statements the probable outcome
of the current proceedings in respect of this matter cannot be determined and the amount of any damages award cannot be
reasonably estimated.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Notes to Consolidated Financial Statements 103
Proceedings have been brought against the Company in respect of the recommendation by a predecessor of certain wealth
management tax advantaged film partnership products in the UK which could be material if such claims are successful, additional
claims are made or the Company’s assumptions used to evaluate the matter as neither probable nor estimable change in future
periods.
The Company is either vigorously defending such proceedings or intends to in respect of any further claims that may be advanced.
Notwithstanding that the Company considers that all such claims are, and would be, without merit, the Company may be required
to record a provision for an adverse outcome, which could have a material adverse effect on the Company’s financial position. The
aggregate investment by the Company’s clients who have standstill agreements in place in respect of these products, and for
whom such information is available, is estimated to be approximately $10.0 million (£6.0 million). The aggregate initial tax deferral
amount realized by the Company’s clients, who have standstill agreements, in respect of these products when they were purchased
during the period from 2006 to 2009, is estimated to be less than $15.0 million (£9.0 million).
Enforcement by HMRC, (the U.K. taxation authority), the outcome of litigation in respect of the taxation of other similar products
sold by other financial advisors, and settlements reached with HMRC by some investors may result in tax liabilities to the purchasers
of these products in excess of the initial tax deferral amount. As at the date of these audited annual consolidated financial
statements, civil claims have been issued by current and former clients, and one former client is involved in pre-action
correspondence under the relevant pre-action protocol. All the claims (or potential claims) notified to the Company have been
defended or denied. The potential tax liability for those clients engaged in pre-action correspondence and the issued civil claims,
which is in addition to the initial tax deferral amount is estimated to be less than $18.0 million (£10.8 million), plus other potential
costs (such as interest). For those clients not currently engaged in the issued civil claims and pre-action correspondence that
could assert a tax liability against the Company the potential tax liability which is in addition to the initial tax deferral amount is
estimated to be approximately $5.0 million (£3.0 million).
The probable outcome of the enforcement actions by HMRC in respect of this matter and the likelihood of a loss to, or the
amount of any such loss suffered by the Company in connection with any such claims made or asserted of the type set out above,
or which may be further asserted are not determinable at the date of these audited annual consolidated financial statements.
An action has been commenced in Alberta by a former client and others claiming the return of losses in certain accounts, return
of administration fees, interest and costs. The claim alleges breach of contract and negligence in the administration of the accounts.
The damages claimed in this action are in excess of $14 million. Although the Company has denied the allegations and intends
to vigorously defend itself, the probable outcome of this action and a reliable estimate of the amount of damages in the event of an
adverse outcome are not determinable at the date of these audited consolidated financial statements.
The Company provides financial advisory, underwriting and other services to, and trades the securities of issuers that are involved
with, new and emerging industries, including the US cannabis industry. Activities within such industries, including the US cannabis
industry, typically have not had the benefit of a history of successful operating results. In addition to the economic uncertainties
associated with new industries, new activities and new issuers, the laws applicable to such industries or activities, particularly
the US cannabis industry and the activities of issuers in that industry, and the effect or enforcement of such laws are undetermined,
conflicting and uncertain. With respect to the US cannabis industry, cannabis continues to be a controlled substance under the
United States Controlled Substances Act and, as such, there is a risk that certain issuers, while in compliance with applicable state
law, may be prosecuted under federal law. Accordingly, the Company has adopted policies and procedures reasonably designed
to ensure compliance with the United States Currency and Foreign Transactions Reporting Act of 1970 (the Bank Secrecy Act) and
the guidance issued by the United States Department of the Treasury Financial Crimes Enforcement Network, FIN-2014-G001
(the FinCEN Guidance) relating to providing financial services to marijuana-related businesses in the United States (as that term is
used in the FinCEN Guidance). While the Company takes steps to identify the risks associated with emerging industries, including
the US cannabis industry, and only provides services to those issuers where it determines that there is no material risk to the
Company or where any risk is unlikely to result in a material adverse consequence to the Company, there is a risk that the
Company could be the subject of third party proceedings which may have a material adverse effect on the Company’s business,
revenues, operating results and financial condition as well as the Company’s reputation, even if such proceedings were concluded
successfully in favour of the Company. Notwithstanding these procedures, the Company is currently a party to securities class
action proceedings in Canada and the US relating to underwriting services provided to certain issuers in the cannabis and e-cigarette
and vaping industries. Although the Company believes that these claims are without merit and intends to vigorously defend
itself, the probable outcome of these class action proceedings cannot be predicted with certainty and a reliable estimate of the
amount of losses, if any, in the event of adverse outcomes is not determinable as at the date of these financial statements and,
accordingly, the Company has not recorded a provision in respect of these claims. The risk of any further actions against the
Company is not known. As at the date of these audited consolidated financial statements, the Company has not recorded a
provision in respect of any other such matters.
Risks associated with emerging industries such as the cannabis and e-cigarette and vaping industries also includethe risk of the
insolvency of issuers and the consequent inability of such issuers to satisfy their indemnification obligations to the Company.
Accordingly, in the event of a loss to the Company, the ability of the Company to recover amounts in respect of any indemnity
claims also cannot be predicted with certainty.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
104 Notes to Consolidated Financial Statements
NOTE 29
Subsequent Events
DIVIDENDS
On June 2, 2020, the Board of Directors approved a dividend of $0.05 per common share, payable on June 30, 2020, with a
record date of June 19, 2020. [Note 22].
On June 2, 2020, the Board approved a cash dividend of $0.24281 per Series A Preferred Share payable on June 30, 2020 to
Series A Preferred shareholders of record as at June 19, 2020 [Note 22].
On June 2, 2020, the Board approved a cash dividend of $0.31206 per Series C Preferred Share payable on June 30, 2020 to
Series C Preferred shareholders of record as at June 19, 2020 [Note 22].
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
105
Supplemental Information
Advisory note: This supplemental information is not audited and should be read in conjunction with the audited financial statements
contained herein.
Financial Highlights(1)(2)(3)(4)
(C$ thousands, except for AUM, AUA, common and preferred share
information, financial measures and percentages)
Financial results
Revenue
Expenses
Income taxes expense (recovery)
Net income (loss)
Net income (loss) attributable to CGGI shareholders
Net income (loss) attributable to common shareholders
For the years ended and as at March 31
2020
2019
2018
2017
2016
1,223,867
1,123,844
13,469
86,554
86,490
77,086
1,190,567
1,097,911
21,074
71,582
70,530
61,126
1,022,877
987,131
18,669
17,077
13,024
3,431
879,546
825,662
10,698
43,186
38,103
27,025
787,805
1,151,776
(5,404)
(358,567)
(358,471)
(370,463)
Business segment
Income (loss) before income taxes
Canaccord Genuity Capital Markets
Canaccord Genuity Wealth Management
Corporate and Other
Client assets information ($ millions)
AUM – Canada (discretionary)
AUA – Canada
AUM – UK & Europe
AUM – Australia
Total
Common share information
Per common share ($)
Basic (loss) earnings
Diluted (loss) earnings
Common share price ($)
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
48,801
68,174
(16,952)
4,009
18,440
39,879
2,400
60,719
0.78
0.65
6.00
3.29
4.33
93,464
107,812
130,723
98,449
128,303
566,031
62,877
58,603
(28,824)
4,221
20,674
44,195
854
65,723
0.58
0.48
7.47
5.54
5.84
97,580
115,617
140,241
96,260
130,944
819,007
13,126
33,999
(11,379)
2,815
15,567
44,877
830
61,274
0.04
0.03
7.49
4.08
6.93
93,054
113,523
124,294
92,587
110,862
861,357
44,268
24.267
(14,651)
(349,110)
10,171
(25,032)
2,637
13,228
24,526
862
38,616
0.29
0.27
5.70
3.53
5.09
92,780
113,511
124,479
91,657
101,149
633,598
1,257
9,192
22,791
731
32,714
(4.09)
(4.09)
8.58
3.50
4.01
89,084
103,812
109,072
90,553
n/a
437,379
8,540
8,540
8,540
8,540
8,540
Dividends per common share
Common dividend yield (closing common share price)
0.20
4.6%
0.20
3.4%
0.15
2.2%
0.10
2.0%
0.10
2.5%
(1)
(2)
(3)
(4)
Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page14 of the MD&A.
The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [ March 31, 2019 -
15%].
Data includes the operating results of Hargreave Hale since September 18, 2017, Jitneytrade since June 6, 2018, McCarthy Taylor since January 29, 2019, Petsky Prunier since February 13,
2019, Thomas Miller since May 1, 2019, and Patersons since October 21, 2019.
Commencing Q1/20, our Asian based operations, including Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets operations to reflect
management of these operating units. Also, commencing in Q3/20, our Australian wealth management business, comprised of the operating results of Patersons since October 21, 2019 and
the wealth management business of Australia previously included as part of Canaccord Genuity Capital Markets Australia, is disclosed as a separate operating segment in the discussions below.
Comparatives have not been restated.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
106 Supplemental Information
Condensed Consolidated Statements of Operations and Retained Earnings(1)(2)(3)(4)
(C$ thousands, except
per share amounts and percentages)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses
Compensation expense
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Development costs
Amortization of right-of-use assets
Restructuring costs
Acceleration of long-term incentive plan expense
Impairment of goodwill
Share of loss from associate
Loss on extinguishment of convertible debentures
Acquisition-related costs
Income (loss) before income taxes
Income taxes expense (recovery)
Net income (loss) for the year
Non-controlling interests
Net income (loss) attributable to CGGI shareholders
Retained earnings, beginning of year
Common shares dividends
Preferred shares dividends
Equity portion of loss on extinguishment of convertible
debentures
Retained earnings, end of year
Total compensation expenses as a % of revenue
Non-compensation expenses as a % of revenue
Total expenses as a % of revenue
Pre-tax profit margin
Effective tax rate
Net profit margin
Basic earnings (loss) per share
Diluted earnings (loss) per share
Canaccord Genuity Capital Markets
Canaccord Genuity Wealth Management
Corporate and Other
For the years ended March 31
2020
2019
2018
2017
2016
586,884
236,962
206,507
108,834
63,690
20,990
1,223,867
738,313
83,964
18,094
66,666
33,678
113,612
32,594
12,053
22,866
1,921
—
—
207
—
(124)
1,123,844
100,023
13,469
86,554
64
86,490
(237,770)
(32,447)
(9,404)
—
(193,131)
60.3%
31.5%
91.8%
8.2%
13.5%
7.1%
0.78
0.65
689,469
511,435
22,963
1,223,867
556,475
294,241
142,228
125,830
51,008
20,785
1,190,567
716,625
83,577
41,719
64,930
25,453
100,768
24,280
15,513
—
13,070
—
—
304
8,608
3,064
1,097,911
92,656
21,074
71,582
1,052
70,530
(277,472)
(16,534)
(9,402)
(4,892)
(237,770)
60.2%
32.0%
92.2%
7.8%
22.7%
6.0%
0.58
0.48
704,326
461,811
24,430
1,190,567
461,937
282,195
122,372
113,921
27,875
14,577
1,022,877
625,853
68,209
39,605
56,346
18,437
83,982
24,007
7,664
—
7,643
48,355
—
298
—
6,732
987,131
35,746
18,669
17,077
4,053
13,024
(267,559)
(13,344)
(9,593)
—
(277,742)
61.2%
30.6%
96.5%
3.5%
52.2%
1.7%
0.04
0.03
637,556
370,265
15,056
1,022,877
396,741
196,129
130,749
119,040
16,847
20,040
879,546
540,696
65,211
42,286
52,381
12,744
79,011
21,124
12,209
—
—
—
—
—
—
—
825,662
53,884
10,698
43,186
5,083
38,103
(294,586)
—
(11,076)
—
(267,559)
61.5%
32.4%
93.9%
6.1%
19.9%
4.9%
0.29
0.27
598,391
267,111
14,044
879,546
376,817
132,029
160,180
85,559
16,830
16,390
787,805
510,857
56,998
40,863
55,975
10,222
87,004
25,339
26,129
—
17,352
—
321,037
—
—
—
1,151,776
(363,971)
(5,404)
(358,567)
(96)
(358,471)
92,815
(16,938)
(11,992)
—
(294,586)
64.8%
81.4%
146.2%
(46.2)%
1.5%
(45.5)%
(4.09)
(4.09)
532,270
246,567
8,968
787,805
(1)
(2)
(3)
(4)
Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page14 of the MD&A.
The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [ March 31, 2019 -
15%].
Data includes the operating results of Hargreave Hale since September 18, 2017, Jitneytrade since June 6, 2018, McCarthy Taylor since January 29, 2019, Petsky Prunier since February 13,
2019, Thomas Miller since May 1, 2019, and Patersons since October 21, 2019.
Commencing Q1/20, our Asian based operations, including Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets operations to reflect
management of these operating units. Also, commencing in Q3/20, our Australian wealth management business, comprised of the operating results of Patersons since October 21, 2019 and
the wealth management business of Australia previously included as part of Canaccord Genuity Capital Markets Australia, is disclosed as a separate operating segment in the discussions below.
Comparatives have not been restated.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Condensed Consolidated Statements of Financial Position
Supplemental Information 107
As at March 31 (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
Right-of-use assets
Liabilities and shareholders’ equity
Bank indebtedness
Securities sold short
Accounts payable, accrued liabilities and other
Income taxes payable
Current portion of bank loan
Current portion of lease liabilities
Current portion of contingent consideration
Deferred consideration
Contingent consideration
Promissory note
Lease liability
Other long-term liabilities
Bank loan
Deferred tax liabilities
Subordinated debt
Convertible debentures
Non-controlling interests
Shareholders’ equity
Miscellaneous Operational Statistics(1)
As at March 31
Number of employees in Canada
Number in Canaccord Genuity Capital Markets
Number in Canaccord Genuity Wealth Management
Number in Corporate and Other
Total Canada
Number of employees in the UK & Europe
Number in Canaccord Genuity Capital Markets
Number in Canaccord Genuity Wealth Management
Number of employees in the US
Number in Canaccord Genuity Capital Markets
Number of employees in Australia
Number in Canaccord Genuity Capital Markets
Number in Canaccord Genuity Wealth Management
Number of employees in Other Foreign Locations
Number in Canaccord Genuity Capital Markets
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 & Europe(3)
Number of Advisors – Australia
AUM – Canada (discretionary) (C$ millions)
AUA – Canada (C$ millions)
AUM – UK & Europe (C$ millions)
AUM – Australia (C$ millions)
Total (C$ millions)
(1)
(2)
2020
2019
2018
2017
2016
997,111
931,467
3,275,841
5,603
39,487
10,105
24,860
565,587
106,134
5,956,195
—
875,017
3,680,186
11,721
7,042
23,417
57,859
8,966
47,614
—
88,922
1,760
79,192
9,903
7,500
128,322
156
928,618
5,956,195
2020
257
432
339
1,028
136
548
313
83
200
0
2,308
146
435
210
119
4,009
18,440
39,879
2,400
60,719
820,739
690,499
2,656,664
2,502
22,117
6,224
25,792
524,757
—
4,749,294
9,639
373,419
3,141,977
5,415
9,294
—
—
22,225
108,319
5,832
—
1,741
50,370
7,978
7,500
127,225
1,997
876,363
4,749,294
862,838
469,217
2,215,837
1,170
19,941
2,035
30,967
418,731
—
4,020,736
—
301,006
2,647,382
7,851
9,679
—
—
9,997
49,844
—
—
—
61,758
13,715
7,500
57,081
13,571
841,352
4,020,736
677,769
784,230
3,395,736
1,085
15,323
2,829
31,479
295,065
—
5,203,516
25,280
645,742
3,681,676
10,093
—
—
—
—
—
—
—
—
—
140
7,500
56,442
11,858
764,785
5,203,516
428,329
564,746
2,041,150
12,537
11,221
5,578
37,049
323,936
—
3,424,546
14,910
427,435
2,203,858
4,242
—
—
—
—
—
—
—
—
—
450
15,000
8,722
749,929
3,424,546
2019
2018
2017
2016
255
430
308
993
197
542
308
58
10
4
2,112
155
420
190
6
4,221
20,674
44,195
854
65,723
189
379
288
856
214
559
256
57
11
3
1,956
142
374
188
7
2,815
15,567
44,877
830
61,274
178
359
279
816
225
313
275
58
11
2
1,700
141
367
118
8
2,637
13,228
24,526
862
38,616
180
354
288
822
282
312
291
55
10
23
1,795
139
392
118
7
1,257
9,192
22,791
731
32,714
These miscellaneous operational statistics are non-IFRS measures.
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.
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.
(3)
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
108 Supplemental Information
Quarterly Financial Highlights(1)(2)(3)(4)
(C$ thousands, except for AUM, AUA,
common and preferred share information,
financial measures and percentages)
Financial results
Fiscal 2020
Fiscal 2019
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenue
Expenses
Income taxes expense (recovery)
Net income
Net income attributable to CGGI shareholders
Net income attributable to common shareholders
319,648
289,430
3,972
26,246
26,288
23,937
308,014
285,731
(557)
22,840
22,509
20,158
270,697
254,527
2,992
13,178
13,488
11,137
325,508
294,156
7,062
24,290
24,205
21,854
284,808
279,265
3,087
2,456
2,663
312
331,600
290,991
8,151
32,458
32,457
30,106
Business segment
Income (loss) before income taxes
Canaccord Genuity
Canaccord Genuity Wealth Management
Corporate and Other
Client assets ($ millions)
AUM – Canada (discretionary)
AUA – Canada
AUM – UK & Europe
AUM – Australia
Total
Common share information
Per common share ($)
Basic earnings (loss)
Diluted earnings (loss)
Common share price ($)
High
Low
Close
Common shares outstanding (thousands)
Issued shares excluding unvested shares
Issued and outstanding
Diluted shares
Average basic
Average diluted
Preferred shares outstanding (thousands)
Shares issued and outstanding
Financial measures
Dividends per common share
300,036
275,414
6,603
18,019
17,794
15,443
24,214
16,385
(15,977)
4,158
19,746
45,230
834
65,810
0.11
0.09
7.47
6.83
6.90
274,123
252,241
3,233
18,649
17,616
15,265
10,096
14,306
(2,520)
3,721
18,921
46,434
845
66,200
0.16
0.14
7.44
5.76
7.26
12,765
23,652
(6,199)
4,009
18,440
39,879
2,400
60,719
0.25
0.21
5.75
3.29
4.33
13,553
12,351
(3,621)
4,584
20,989
48,110
3,691
72,790
0.21
0.17
5.63
4.63
4.84
4,706
13,412
(1,948)
4,423
20,408
44,183
858
65,449
0.11
0.10
5.89
4.90
5.22
17,777
18,759
(5,184)
4,346
21,223
45,574
774
67,571
0.22
0.18
6.00
4.98
6.00
(2,529)
13,099
(5,027)
4,221
20,674
44,195
854
65,723
0.00
0.00
6.65
5.65
5.84
31,096
14,813
(5,300)
3,954
18,260
41,153
771
60,184
0.31
0.25
7.11
5.54
5.77
93,464
107,812
130,723
94,291
124,064
94,415
107,292
129,040
96,861
125,698
98,308
108,492
132,682
102,503
131,613
106,540
115,748
132,759
100,085
129,910
97,580
115,617
140,241
96,696
118,327
96,259
114,857
136,659
97,163
129,169
97,055
115,707
137,741
96,583
115,861
96,502
113,548
124,646
94,363
117,541
8,540
8,540
8,540
8,540
8,540
8,540
8,540
8,540
0.05
0.05
0.05
0.05
0.17
0.01
0.01
0.01
(1)
(2)
(3)
(4)
Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page14 of the MD&A.
The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [ March 31, 2019 - 15%].
Data includes the operating results of Hargreave Hale since September 18, 2017, Jitneytrade since June 6, 2018, McCarthy Taylor since January 29, 2019, Petsky Prunier since February 13, 2019, Thomas Miller since
May 1, 2019, and Patersons since October 21, 2019.
Commencing Q1/20, our Asian based operations, including Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets operations to reflect management of these operating
units. Also, commencing in Q3/20, our Australian wealth management business, comprised of the operating results of Patersons since October 21, 2019 and the wealth management business of Australia previously
included as part of Canaccord Genuity Capital Markets Australia, is disclosed as a separate operating segment in the discussions below. Comparatives have not been restated.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Supplemental Information 109
Condensed Consolidated Statements of Operations(1)(2)(3)(4)
(C$ thousands, except per share amounts
and percentages)
Revenue
Commissions and fees
Investment banking
Advisory fees
Principal trading
Interest
Other
Expenses
Compensation expense
Trading costs
Premises and equipment
Communication and technology
Interest
General and administrative
Amortization
Amortization of right-of-use of assets
Development costs
Restructuring costs
Acquisition-related costs
Acceleration of long-term Incentive plan
expense
Share of loss from associate
Loss on extinguishment of convertible
debentures
Impairment of goodwill
Income before income taxes
Income tax (recovery) expense
Net income for the period
Non-controlling interests
Net income attributable to CGGI shareholders
Total compensation expenses as a % of
revenue(8)
Non-compensation expenses as a % of revenue
Total expenses as a % of revenue
Pre-tax profit margin
Effective tax rate
Net profit margin
Basic (loss) earnings per share
Diluted (loss) earnings per share
Canaccord Genuity Capital Markets
Canaccord Genuity Wealth Management
Corporate and Other
Fiscal 2020
Fiscal 2019
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
165,576
48,619
49,997
35,352
15,222
4,882
319,648
198,976
22,925
4,585
17,378
8,764
30,437
8,194
5,513
(2,710)
(427)
(4,238)
33
—
—
289,430
30,218
3,972
26,246
(42)
26,288
62.2%
28.3%
90.5%
9.5%
13.1%
8.2.%
0.25
0.21
176,579
137,938
5,131
319,648
147,191
51,550
60,691
27,149
16,622
4,811
308,014
186,649
19,836
4,501
17,739
8,490
26,519
8,415
5,832
6,560
1,250
—
132,325
51,992
42,015
21,260
16,661
6,444
270,697
157,780
21,083
4,224
15,191
8,313
26,289
8,049
5,939
2,994
1,098
3,602
141,792
84,801
53,804
25,073
15,185
4,853
325,508
194,908
20,120
4,784
16,358
8,111
30,367
7,936
5,582
5,209
—
512
137,578
60,316
32,220
35,197
13,733
5,764
284,808
175,262
18,040
10,895
18,154
5,738
29,103
5,769
—
2,940
11,754
1,721
143,115
98,978
40,698
30,776
12,703
5,330
331,600
195,939
24,575
10,647
16,575
5,903
26,689
5,675
—
4,661
—
170
139,402
67,426
44,396
28,949
15,326
4,537
300,036
179,091
22,462
10,230
15,015
8,218
21,292
6,198
—
4,053
—
—
136,380
67,521
24,914
30,908
9,246
5,154
274,123
166,333
18,500
9,947
15,186
5,594
23,684
6,638
—
3,859
1,316
1,173
—
(60)
—
(35)
—
269
—
(111)
—
157
—
247
—
11
—
—
285,731
22,283
(557)
22,840
331
22,509
60.6%
32.2%
92.8%
7.2%
(2.5)%
7.4%
0.21
0.17
174,174
128,384
5,456
308,014
—
—
254,527
16,170
2,992
13,178
(310)
13,488
58.3%
35.7%
94.0%
6.0%
18.5%
4.9%
0.11
0.10
148,693
115,372
6,632
270,697
—
—
294,156
31,352
7,062
24,290
85
24,205
59.9%
30.5%
90.4%
9.6%
22.5%
7.5%
0.22
0.18
190,023
129,741
5,744
325,508
—
—
279,265
5,543
3,087
2,456
(207)
2,663
61.5%
36.5%
98.1%
1.9%
55.7%
0.9%
0.00
0.00
160,047
117,130
7,631
284,808
—
—
290,991
40,609
8,151
32,458
1
32,457
59.1%
28.7%
87.8%
12.2%
20.1%
9.8%
0.31
0.25
209,373
115,979
6,248
331,600
8,608
—
275,414
24,622
6,603
18,019
225
17,794
59.7%
32.1%
91.8%
8.2%
26.8%
6.0%
0.11
0.09
178,734
116,126
5,176
300,036
—
—
252,241
21,882
3,233
18,649
1,033
17,616
60.7%
31.3%
92.0%
8.0%
14.8%
6.8%
0.16
0.14
156,172
112,576
5,375
274,123
(1)
(2)
(3)
(4)
Data is in accordance with IFRS except for figures excluding significant items and number of employees. See Non-IFRS Measures on page14 of the MD&A.
The operating results of the Australian operations have been fully consolidated and a non-controlling interest of 15% has been recognized for the year ended March 31, 2020 [ March 31, 2019 -
15%].
Data includes the operating results of Hargreave Hale since September 18, 2017, Jitneytrade since June 6, 2018, McCarthy Taylor since January 29, 2019, Petsky Prunier since February 13,
2019, Thomas Miller since May 1, 2019, and Patersons since October 21, 2019.
Commencing Q1/20, our Asian based operations, including Singapore, China and Hong Kong, have been combined with our Canadian and Australian capital markets operations to reflect
management of these operating units. Also, commencing in Q3/20, our Australian wealth management business, comprised of the operating results of Patersons since October 21, 2019 and
the wealth management business of Australia previously included as part of Canaccord Genuity Capital Markets Australia, is disclosed as a separate operating segment in the discussions below.
Comparatives have not been restated.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
110 Supplemental Information
Condensed Consolidated Statements of Financial Position
(C$ thousands)
Assets
Cash and cash equivalents
Securities owned
Accounts receivable
Income taxes recoverable
Deferred tax assets
Investments
Equipment and leasehold improvements
Goodwill and other intangibles
Right-of-use assets
Liabilities and shareholders’ equity
Bank indebtedness
Securities sold short
Accounts payable, accrued liabilities and other
Income taxes payable
Current portion of bank loan
Current portion of lease liabilities
Current portion of contingent consideration
Deferred consideration
Contingent consideration
Promissory note
Lease liability
Other long-term liabilities
Bank loan
Deferred tax liabilities
Subordinated debt
Convertible debentures
Non-controlling interests
Shareholders’ equity
Fiscal 2020
Fiscal 2019
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
997,111
931,467
548,674
923,455
459,158
585,502
758,130 1,416,525
3,275,841 2,246,922 2,688,154 2,636,928
7,473
17,838
8,170
24,685
551,288
110,087
5,956,195 4,453,741 4,612,600 5,358,496
5,603
39,487
10,105
24,860
565,587
106,134
12,793
23,266
8,225
24,555
560,164
105,687
14,877
16,043
8,249
23,754
539,118
105,117
4,379
543,035
—
569,012
—
875,017
—
540,668
3,680,186 2,560,810 2,758,400 3,490,204
5,492
3,324
22,326
29,729
9,653
83,139
5,516
97,675
1,662
81,070
11,063
7,500
127,492
2,296
839,687
5,956,195 4,453,741 4,612,600 5,358,496
11,721
7,042
23,417
57,859
8,966
47,614
—
88,922
1,760
79,192
9,903
7,500
128,322
156
928,618
7,360
6,843
23,055
23,426
8,733
82,274
5,457
90,825
1,725
76,844
8,260
7,500
128,040
2,343
851,234
3,753
6,510
20,893
29,301
8,344
81,104
5,363
92,759
1,628
76,200
7,723
7,500
127,763
1,733
836,212
930,912
709,037
820,739
690,499
897,276
654,784
739,311
625,799
2,656,664 1,888,600 2,209,995 2,388,761
5,362
18,200
2,191
28,467
413,745
—
4,749,294 3,998,083 4,220,131 4,221,836
5,697
20,802
2,278
26,014
403,285
—
9,789
20,831
6,184
25,941
406,789
—
2,502
22,117
6,224
25,792
524,757
—
5,903
438,348
40,635
409,623
9,639
373,419
14,526
418,081
3,141,977 2,426,381 2,691,837 2,742,571
3,739
9,233
—
—
10,117
51,550
—
—
—
59,009
13,435
7,500
57,249
15,259
819,567
4,749,294 3,998,083 4,220,131 4,221,836
4,344
8,982
—
—
9,743
50,258
5,594
—
—
53,003
11,848
7,500
126,707
2,004
798,053
6,527
9,238
—
—
9,553
51,572
5,733
—
—
54,596
14,264
7,500
126,964
2,338
839,166
5,415
9,294
—
—
22,225
108,319
5,832
—
1,741
50,370
7,978
7,500
127,225
1,997
876,363
Miscellaneous Operational Statistics(1)
Fiscal 2020
Fiscal 2019
Q4
257
432
339
1,028
136
548
313
83
200
—
2,308
146
435
210
119
4,009
18,440
39,879
2,400
60,719
Q3
260
425
337
1,022
137
557
322
77
201
—
2,316
147
429
214
115
4,584
20,989
48,110
3,691
72,790
Q2
256
430
328
1,014
141
572
322
58
15
—
2,122
151
426
215
11
4,423
20,408
44,183
858
65,449
Q1
258
427
315
1,000
154
593
306
60
15
—
2,128
153
421
218
11
4,346
21,223
45,574
774
67,571
Q4
255
430
308
993
197
542
308
58
10
Q3
248
425
303
976
192
548
260
58
10
Q2
248
413
294
955
192
559
260
56
10
Q1
244
412
291
947
197
559
263
57
11
4
2,112
155
420
190
6
4,221
20,674
44,195
854
65,723
4
2,048
150
416
188
6
3,954
18,260
41,153
771
60,184
4
2,036
150
410
193
6
4,158
19,746
45,230
834
65,810
4
2,038
148
407
190
7
3,721
18,921
46,434
845
66,200
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 & 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 Australia
Number in Canaccord Genuity
Number in Canaccord Genuity Wealth
Management
Number of employees in Other Foreign Locations
Number in Canaccord Genuity
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 & Europe(3)
Number of Advisors – Australia
AUM – Canada (discretionary) (C$ millions)
AUA – Canada (C$ millions)
AUM – UK & Europe (C$ millions)
AUM – Australia (C$ millions)
Total (C$ millions)
(1)
(2)
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
These miscellaneous operational statistics are non-IFRS measures.
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.
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.
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 specific to AIM.
(3)
(4)
Glossary
Acquisition-related expense items
These expenses are mainly comprised of professional and
employment costs in connection with 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.
Advisory fees
Revenue related to the fees the Company 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
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 of business.
Assets under administration (AUA) Canada
AUA is the market value of client assets administered by the
Company, for which the Company 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 the Company as part of the Complete
Canaccord Investment Counselling Program and Complete
Canaccord Private Investment Management. Services provided
include the selection of investments and the provision of investment
advice. AUM is also administered by the Company 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 the Company, for which the Company earns
commissions or fees. This measure includes both discretionary
and non-discretionary accounts. This measure is non-IFRS.
Book value per diluted common share
Book value per diluted common shares is used by the Company
as a performance measure, which is calculated as total
common shareholders’ equity adjusted for assumed proceeds
from the exercise of options and warrants, issuance of common
shares in connection with deferred consideration related to
acquisitions, settlement of a promissory note issued as purchase
consideration in shares at the Company’s option, and
conversion of convertible debentures divided by the number of
diluted common shares that would then be outstanding including
estimated amounts in respect of share issuance commitments
including options, warrants, other share-based payment plan,
deferred consideration related to acquisitions, convertible
debentures and a promissory note, as applicable, and adjusted
for shares purchased or committed to be purchased under
the normal course issuer bid and not yet cancelled, and estimated
111
forfeitures in respect of unvested share awards under share-
based payment plans.
Canaccord Genuity Capital Markets
Canaccord Genuity Capital Markets is the global capital
markets division of Canaccord Genuity Group Inc., offering
institutional and corporate clients idea-driven investment banking,
merger and acquisition, research, sales and trading services
with capabilities in North America, the UK & Europe, Asia, Australia
and the Middle East. We are committed to providing valued
services to our clients throughout the entire lifecycle of their
business and operating as a gold standard independent investment
bank — expansive in resources and reach, but targeted in
industry expertise, market focus and individual client attention.
Canaccord Genuity Wealth Management (CGWM)
Canaccord Genuity 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 its markets. The Company’s
wealth management division now has Investment Advisors (IAs)
and professionals in Canada, the UK, Jersey, Guernsey, the
Isle of Man and Australia.
Corporate and Other
Canaccord Genuity Group’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 Capital Markets or Canaccord Genuity Wealth Management
divisions. Also included in this segment are the Company’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 of Canaccord Genuity Group Inc.
Commissions and fees
Commission and fees revenue consist of revenue generated
through commission-based brokerage services and the sale of fee-
based products and services.
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).
Earnings (loss) per share (EPS)
Basic earnings (loss) per common share is computed by
dividing the net income (loss) attributable to common shareholders
for the period by the weighted average number of common
shares outstanding. Diluted earnings per common share reflects
the dilutive effect in connection with the LTIP, warrants, other share-
based payment plans as well as the convertible debentures
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.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
112 Glossary
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.
Fixed income trading
Trading in new issues, government and corporate bonds,
treasury bills, commercial paper, strip bonds, high-yield debt
and convertible debentures.
Incentive-based revenue
A percentage of incentive-based revenue earned is directly paid
out as incentive compensation expense, including commission,
investment banking, advisory fees, and principal trading revenue.
Institutional sales and trading
A capital markets business segment providing market
information and research, advice and trade execution to
institutional clients.
International Equities Group (IEG)
The International Equities 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.
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.
Long-term incentive plan (LTIP)
Employees (including senior executives) 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). The
participating employees are eligible to receive shares that
generally vest over three years (the “RSUs”). This program is
referred to as the Long-Term Incentive Plan (the “LTIP” or the
“Plan”).
National Insurance (NI) tax
Payroll tax applicable to UK employees based on a percentage
of incentive compensation payout.
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
measured presented by other companies.
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Performance stock options
The PSOs have a term of five years and will time-vest ratably
over four years (with one third vesting on each of the second,
third and fourth anniversaries of the date of the grant). The PSOs
will also be subject to market (stock price) performance
vesting conditions, as well as have a four times exercise price
cap on payout value (i.e., the gain on the exercise of the options
is limited to three times the exercise price). The PSOs will
expire on June 14, 2023.
Performance share units
The Company adopted a performance share unit (PSU) plan for
certain senior executives beginning the year ended March 31,
2018. The PSUs are a notional equity-based instrument linked
to the value of the Company’s common shares. At the end of
a three-year vesting period, the number of PSUs which vest is
determined upon performance against certain pre-determined
metrics. The PSUs cliff vest on the third anniversary of the
date of the grant. The PSUs are settled in cash, based on the
market price of the Company’s shares at the time of vesting.
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.
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
Significant items include restructuring costs, amortization of
intangible assets acquired in connection with a business
combination, impairment of goodwill and other assets and
acquisition-related expense items, which include costs recognized
in relation to both prospective and completed acquisitions,
gains or losses related to business disposals including recognition
of realized translation gains on the disposal of foreign
operations, certain accounting charges related to the change in
the Company’s long-term incentive plan (LTIP) as recorded
with effect on March 31, 2018, certain incentive-based costs
related to the acquisitions and growth initiatives in the UK &
Europe wealth management business, loss related to the
extinguishment of convertible debentures as recorded for
accounting purposes as well as certain expense items, typically
included in development costs, which are considered by
management to reflect a singular charge of a non-operating
nature.
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:
113
• The Business Corporations Act (British Columbia)
• The Company’s articles
• The charters of its committees
• 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 Genuity Group 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.
Identification and Management of Risks
The Board’s Mandate includes:
• Assisting management to identify the principal business risks of the Company
• Taking reasonable steps to ensure the implementation of appropriate systems to manage and monitor those risks
• Reviewing plans for evaluating and testing the Company’s internal financial controls
• 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.
• 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
• The succession plan is reviewed, at least annually, by the CGCC
• On the recommendation of the Chairman & CEO, the Board appoints the senior officers of the Company
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
114 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.
• The DCP is reviewed annually by the Board
• The DCP, public securities regulatory filings, press releases and investor presentations are posted on the Company’s
website
• 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.
• 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
• 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, 2020 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 March 31, 2020.
Governance
The Board is currently composed of eight directors, six of whom are independent of management as determined under applicable
securities legislation. In order to facilitate the exercise of independent judgment by the Board of Directors, the Board has
appointed a lead director and holds regular meetings without management directors present.
• The CGCC is responsible for periodically reviewing the composition of the Board and its committees
• 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
• 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 GENUITY GROUP INC. / 2020 ANNUAL REPORT
Corporate Governance 115
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 four independent 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), Bralver, Shah and Ms. Jones.
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 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 four unrelated directors: Messrs. Harris (Chair), Bralver and Lyons, and Ms. Tennant. 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.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
116
Board of Directors
Charles N. Bralver (2010)
Audit Committee
Corporate Governance and Compensation Committee
Charles N. Bralver, ICD.D, age 68, is a financial services executive
with over 30 years of capital markets experience. For more than
23 years – from 1984 to 2007 – Mr. Bralver was a founder and Vice
Chairman of management consultancy Oliver, Wyman & Co. where
he specialized in strategy, risk and operational work for leading
investment banks, asset managers, exchanges and other market
utilities. He also served as Senior Associate Dean for International
Business and Finance at the Fletcher School of Law and Diplomacy
from 2007 to 2010, and from 2007 to 2009 as a strategic advisor
to Warburg Pincus LLC. Mr. Bralver serves as a director of the
Company and insurance risk exchange AkinovA Ltd., on the Leadership
Council of AI solution developer r4, and on the Board of Visitors of
the Fletcher School. Mr. Bralver started his career at Booz Allen
Hamilton. He is a U.S. citizen and a graduate of the Fletcher
School and Dartmouth College.
Mr. Bralver is not currently a director of any other public companies.
Daniel Daviau (2015)
Dan Daviau, age 55, was appointed President and Chief Executive
Officer and a director of the Company and Chief Executive Officer of
Canaccord Genuity Corp. effective on October 1, 2015. Mr. Daviau
served as President of Canaccord Genuity’s North American capital
markets business from February 2015. From 2012 to 2015, he
was President of the firm’s US capital markets business, where he
helped to structure the firm’s investment banking, research,
sales and trading operations in the region and improve cross-
border capabilities. From 2010 to 2012, Mr. Daviau was Head of
Investment Banking for Canaccord Genuity. Before the Canaccord/
Genuity merger that was announced in 2010, Mr. Daviau was a
Principal and Founder of Genuity Capital Markets, where he held a
variety of senior roles since 2005.
Before 2005, Mr. Daviau was Co-Head of Investment Banking at
CIBC World Markets, a firm he joined in 1991. While at CIBC World
Markets, Mr. Daviau also served as the Head of the Media and
Telecommunications Group since 2000 and Head of the Technology
Investment Banking Group in Canada since 1997.
Having started his career as a securities lawyer with Goodman &
Co., Mr. Daviau has extensive experience in a broad range of financing
transactions and M&A assignments.
Mr. Daviau is based in Toronto, Canada. He holds an MBA from
York University, an LL.B. from Osgoode Hall/York University and a
B.A. (Math and Statistics) from the University of Western Ontario.
Mr. Daviau is not currently a director of any other public companies.
Michael D. Harris, ICD.D. (2004)
Corporate Governance and Compensation Committee
Michael Harris, ICD.D, age 75, is the President of his own consulting
firm, Steane Consulting Ltd., and, in this capacity, acts as a
consultant to various Canadian companies, including Fasken
Martineau DuMoulin LLP. Before joining Fasken in September 2013,
he was a senior business advisor with the law firm of Cassels
Brock & Blackwell 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, Mr. 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 has also served as a director of the Manning Centre for Building
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
Democracy and as 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 and a director of the New Haven Learning Centre.
He has received his ICD.D certification from the Institute of
Corporate Directors.
In addition to Canaccord Genuity Group Inc., Mr. Harris is a director
of the following public companies: Chartwell Retirement Residences
(Chair), Colliers International Group Inc. (CIGI) and Route1 Inc. (Chair).
Merri Jones ICD.D. (2019)
Audit Committee
Merri Jones, ICD.D, age 69, is a corporate director and advisor.
She has over 40 years’ experience within financial services with
expertise across sales and marketing, finance, strategy and human
resources. She was the first female to lead a Schedule II Bank in
Canada. She was the Executive Vice President, Private Wealth, at
Fiera Capital from 2010 to 2015; President of GBC Asset Management
in 2008 and 2009; President and Chief Executive Officer of AGF
Private Wealth Management from 2003 to 2007; President, Chief
Operating Officer and Director of TAL Private Management from 1996
to 2003; and President and Chief Executive Officer of CIBC Trust
in 1995 and 1996. Before joining CIBC in 1995, Ms. Jones had been
President and Chief Executive Officer of First Interstate Bancorp
from 1986 to 1990 and had worked at Chemical Bank and the Royal
Bank of Canada, where she began her career.
Ms. Jones was educated at the University of Western Ontario, the
Wharton School of Business and the University of Toronto. She has
received her ICD.D certification from the Institute of Corporate
Directors.
Ms. Jones is a director of the following public company: Data
Communications Management Corp. She is also the chair of the
Investment Review Committee of the Starlight Group of Funds.
David Kassie (2010)
David Kassie, age 64, became Group Chairman and a director of
the Company 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. On the death of Paul Reynolds on April 1, 2015,
Mr. Kassie was appointed as the Chief Executive Officer of the
Company and on October 1, 2015, upon succession, Mr. Kassie
became the Executive Chairman.
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 a director and former Chairman of the Board of Baycrest Health
Sciences and was formerly on the boards of the Richard Ivey
School of Business, the Toronto International Film Festival Group
and 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).
In addition to Canaccord Genuity Group Inc., Mr. Kassie is a
director of the following public company: Reitmans (Canada) Limited.
Terrence A. Lyons, ICD.D. (2004)
Audit Committee
Corporate Governance and Compensation Committee
Terrence (Terry) Lyons, ICD.D, age 70, is a corporate director. He is
a director of several public and private corporations including
117
Sprott Resource Holdings Inc. (Chairman) and Martinrea International
Inc. Mr. Lyons is a retired Managing Partner of Brookfield Asset
Management, past Chairman of Northgate Minerals Corporation
which was acquired by AuRico Gold Inc. (now Alamos Gold Inc.), past
Chairman of Eacom Timber Corporation which was sold to a
private equity firm, past Chairman of Westmin Mining, past Vice-
Chairman of Battle Mountain Gold and past Chairman of Polaris
Materials Corporation.
Mr. Lyons is a Civil Engineer (UBC) with an MBA from the University
of Western Ontario (1974). 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 B.C., past Governor
and member of the Executive Committee of the B.C. Business
Council and a past director of the Institute of Corporate Directors
(B.C.). In 2007, Mr. Lyons was awarded the INCO Medal by the Canadian
Institute of Mining and Metallurgy for distinguished service to the
mining industry.
In addition to Canaccord Genuity Group Inc., Mr. Lyons is a director
of the following public companies: Martinrea Interational Inc.,
Mineral Mountain Resources Ltd. Inc. and Sprott Resource Holdings
Inc.
Dipesh Shah (2012)
Audit Committee
Dipesh Shah, OBE, FRSA, age 67, is a Director and Chairman of
the Investment Committee of the 2020 European Fund for Energy,
Climate Change and Infrastructure and also of the EU Marguerite
Fund. He is a Trustee of the British Youth Opera and a Governor
of Merchant Taylors’ School.
Mr. Shah was formerly the Chief Executive of the UK Atomic Energy
Authority and of various large businesses in BP Plc, where he
was a member of the Group Leadership for more than a decade
and latterly also the Global Head of Acquisitions and Divestitures.
Mr. Shah was Chairman, inter alia, of Notting Hill Genesis and Genesis
Housing Association, Viridian Group plc, HgCapital Renewable
Power Partners LLP and the European Photovoltaic Industry Association.
He was the Senior Independent Director and Chair of the
Remuneration Committee of JKX Oil & Gas Plc from 2008 to 2015,
the Senior Independent Director and Chair of the Nominations
Committee of Equus Petroleum Plc from 2013 to 2016 and a
Director of The Crown Estate from 2011 to 2018, Thames Water
from 2007 to August 2017 and of Cavendish Fluor Partnership
from 2014 to August 2017. In addition, he has been a Director of
several major organizations, including Babcock International Group
Plc and Lloyd’s of London, the insurance market. 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 and is a Life Fellow of the Royal Society of Arts
(FRSA).
Mr. Shah is not currently a director of any other public companies.
Sally Tennant (2019)
Corporate Governance and Compensation Committee
Sally Tennant, OBE, age 64, has been CEO of three banks:
Kleinwort Benson (2011-2014), Schroders Private Banking (2002-
2006) and Lombard Odier (UK) Ltd. (2007-2010) and the Chair of a
fourth, Duncan Lawrie Ltd. She additionally has extensive
experience of asset and wealth management as a former main
board director of Gartmore plc, where she successfully built the
global institutional division. She has a total of 20 years running
money at Gartmore, Morgan Grenfell and SG Warburg / Mercury
Asset Management. Ms. Tennant also co-launched a hedge fund,
Beaumont Capital, and has deep experience of dealing with
multigenerational families and family businesses in a wide range of
ways, from sitting on the board of a large family holding company,
Waypoint Capital, to working for a multigenerational family owned
bank, Lombard Odier; and advising numerous ultra high new
worth families. She has extensive chair, non-executive and remuneration
chair experience in the unquoted and private equity space. Ms.
Tennant currently chairs Style Analytics, a portfolio analytics company,
and sits on the board of a fashion label, Fiorucci.
Ms. Tennant was born and grew up in Switzerland. She has
international experience in the Channel Islands, U.S., the Middle
East and Continental and Eastern Europe. She holds a degree in
politics from Durham University. She is a trustee of the Guy’s & St.
Thomas’ Charity.
Ms. Tennant is not currently a director of any public companies.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
Asia-Pacific
Beijing
Unit 2401-33, Level 24, China World
Office 2, 1 Jianguomenwai Avenue,
Chaoyang District
Beijing 100004
China
Telephone: 8610.5929 8650
Hong Kong
1505, 15/F, ICBC Tower,
Three Garden Road, Central,
Hong Kong
Telephone: 852.3919.2500
Singapore
Level 42, Six Battery Road
Singapore 049909
Telephone: 65.6232.2187
Melbourne
Level 15, 333 Collins Street
Melbourne, VIC, 3000, Australia
Telephone: 61.3.8688.9100
Perth
Level 23, Exchange Tower
2 The Esplanade
Perth, WA, 6000, Australia
Telephone: 61.8.9263.1111
Sydney
Level 62, MLC Centre
19 Martin Place
Sydney NSW 2000, Australia
Telephone: 61.2.9263.2700
118
Locations
Capital Markets
CANACCORD GENUITY CAPITAL MARKETS
Canada
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
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
Calgary
Centennial Place – East Tower
Suite 2400, 520 3rd Ave. SW
Calgary, AB
Canada T2P 0R3
Telephone: 403.508.3800
Montréal
1250 René-Lévesque Boulevard West
Suite 2930
Montréal, QC
Canada H3B 4W8
Telephone: 514.844.5443
United States
New York
535 Madison Avenue
New York, NY
USA 10022 Telephone: 212.389.8000
Boston
99 High Street, Suite 1200
Boston, MA
USA 02110
Telephone: 617.371.3900
Toll free: 1.800.225.6201
San Francisco
44 Montgomery Street, Suite 1600
San Francisco, CA
USA 94104
Telephone: 415.392.8844
Toll free:1.800.229.7171
Nashville
1033 Demonbreun Street, Suite 620
Nashville, TN
USA 37203
Telephone: 615.490.8500
Minneapolis
45 South 7th Street, Suite 2640
Minneapolis, MN
USA 55402
Telephone: 612.332.2208
Washington
1200 G Street, NW
Suite 725
Washington, DC 20036
USA
Telephone: 301.657.4600
New York
60 Broad Street, 38th Floor
New York, NY
USA 10004
Telephone: 212-842.6020
UK & Europe
London
88 Wood Street
London, UK
EC2V 7QR
Telephone: 44.20.7523.8000
Dublin
38 Fitzwilliam Street Upper
Grand Canal Dock
Dublin 2
D02 KV05
Ireland
Telephone: 353.1.635.0210
Paris
Washington Plaza
29 rue de Berri
75008 Paris
France
Telephone : 33.1.56.69.66.66
Dubai
Gate Village Building 4
Suite 402, DIFC
PO Box 507023
Dubai
United Arab Emirates
Telephone: 971.4.454.1215
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
Kelowna
Landmark 5, 320 – 1620 Dickson
Avenue
Kelowna, BC
Canada V1Y 9Y2
Telephone: 250.712.1100
Toll free: 1.888.389.3331
Ontario
Toronto
Brookfield Place, Suite 3100
P.O. Box 516
161 Bay Street
Toronto, ON
Canada M5J 2S1
Telephone: 416.869.7368
Toll free (Canada): 1.800.382.9280
Waterloo
80 King Street South, Suite 101
Waterloo, ON
Canada N2J 1P5
Telephone: 519.886.1060
Toll free: 1.800.495.8071
Alberta
Calgary
Centennial Place – East Tower
520 3rd Avenue SW, Suite 2400
Calgary, AB
Canada T2P 0R3
Telephone: 403.508.3800
Toll free: 1.800.818.4119
Edmonton
Manulife Place
10180 – 101st Street, Suite 570
Edmonton, AB
Canada T5J 3S4
Telephone: 780.408.1500
Toll free: 1.877.313.3035
Locations 119
Manitoba
Winnipeg
1010-201 Portage Avenue
Winnipeg, MB
Canada R3B 3K6
Telephone: 204.259.2850
Toll free: 1.877.259.2888
Québec
Montréal
1250 René-Lévesque Boulevard West,
Suite 2930
Montreal, QC
Canada H3B 4W8
Telephone: 514.844.5443
Toll free: 1.800.361.4805
Nova Scotia
Halifax
Purdy’s Wharf Tower II
1969 Upper Water Street
Suite 2004 Halifax, NS
Canada B3J 3R7
Telephone: 902.442.3162
Toll free: 1.866.371.2262
Canaccord Genuity Wealth Management
(USA), Inc.
Vancouver
Pacific Centre
609 Granville Street, Suite 2200
P.O. Box 10337
Vancouver, BC
Canada V7Y 1H2
Telephone: 604.684.5992
UK & Europe
London
41 Lothbury
London, UK
EC2R 7AE
Telephone: 44.20.7523.4500
Jersey
37 The Esplanade
St Helier
Jersey JE4 0XQ
Telephone: 44.1534.708090
Guernsey
Trafalgar Court,
Admiral Park,
St. Peter Port
Guernsey GY1 2JA
Telephone : 44.1481.733900
Isle of Man
55 Athol Street
Douglas
Isle of Man IM1 1LA
Telephone: 44.1624.690100
Blackpool
Talisman House
Boardmans Way
Blackpool FY4 5FY
Telephone: 44.1253.621575
Lancaster
2 Waterview
Lancaster
LA1 4XS
Telephone: 44.1524.541560
Norwich
13-15 St Georges Street
Norwich
Norfolk NR3 1AB
Telephone: 44.1603.567120
Llandudno Junction
Anson House
1 Cae’r Llynen
Llandudno Junction
Conwy LL31 9LS
Telephone: 44.1492.558359
Nottingham
The Point
Loughborough Road
West Bridgford,
Nottingham NG2 7QW
Telephone: 44.1158.965840
Worcester
Slip House
Princes Drive
Worcester WR1 2AB
Telephone: 44.1905.953600
York
23 High Petergate
York YO1 7HS
Telephone: 44.1904.232780
Southampton
Ocean Village Innovation Centre
Ocean Way
Southampton SO14 3JZ
Telephone: 44.2380.381670
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
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
120 Locations
Australia
Melbourne
Level 15, 333 Collins Street
Melbourne, VIC, 3000, Australia
Telephone: 61.3.9242.4000
Sydney
Level 62, MLC Centre
19 Martin Place
Sydney NSW 2000
Telephone: 61.2.8238.6200
Perth
Level 23, Exchange Tower
2 The Esplanade
Perth, Western Australia, 6000
Telephone: 61.8.9263.1111
East Perth
Level 1, 197 Adelaide Terrace
East Perth, Western Australia, 6004
Telephone: 61.8.6141.1111
Albany
Level 2, Middleton Centre
184 Aberdeen Street
Albany, Western Australia, 6330
Telephone: 61.8.9842.4700
Busselton
Suite 1
72 Duchess Street
Busselton, Western Australia, 6280
Telephone: 61.8.9754.0700
Gold Coast
Suite 2, Ground Level
128 Bundall Road
Gold Coast, Queensland, 4217
Telephone: 61.7.5631.2300
Adelaide
21/25 Grenfell Street
Adelaide, South Australia, 5000
Telephone: 61.8.8407.5700
Sunshine Coast
PO Box 1062
Noosaville BC QLD 4566
Telephone: 61.7.5409.6100
CANACCORD GENUITY GROUP INC. / 2020 ANNUAL REPORT
121
Shareholder Information
Common Share Trading Information (Fiscal 2020)
Stock exchange
Toronto TSX
Diluted shares
outstanding at
March 31, 2020
Ticker
Year-end price
March 31, 2020
CF
107,812,361
$
4.33
$
High
6.00
$
Low
3.29
Total volume
of shares
60,377,447
Fiscal 2020 Preferred Dividend Dates and Amounts
Quarter end date
June 30, 2019
September 30, 2019
December 31, 2019
March 31, 2020
Preferred
dividend
record date
Preferred
dividend
payment date
September 13, 2019 September 30, 2019 $
December 20, 2019 December 31, 2019 $
March 31, 2020 $
June 30, 2020 $
March 20, 2020
June 19, 2020
$
Series A
preferred
dividend
0.24281
0.24281
0.24281
0.24281
0.97124
$
$
$
$
$
Series C
preferred
dividend
0.31206
0.31206
0.31206
0.31206
1.24824
$
$
$
$
$
Total
preferred
dividend
0.55487
0.55487
0.55487
0.55487
2.21948
Fiscal 2020 Common Dividend Dates and Amounts
Quarter end date
June 30, 2019
September 30, 2019
December 31, 2019
March 31, 2020
Common dividend
record date
August 30, 2019
November 29, 2019
February 28, 2020
June 19, 2020
Common dividend
payment date
Common
dividend
September 10, 2019 $
December 10, 2019 $
March 10, 2020 $
June 30, 2020 $
$
0.05
0.05
0.05
0.05
0.20
Fiscal 2021 Expected Dividend(1) and Earnings Release Dates
Expected earnings
release dates
Preferred dividend
record date
Preferred dividend
payment date
Common dividend
record date
Common dividend
payment date
Q1/21
Q2/21
Q3/21
Q4/21
August 5, 2020
September 18, 2020
September 30, 2020
August 28, 2020
September 10, 2020
November 4, 2020
December 18, 2020
December 31, 2020
November 27, 2020
December 10, 2020
February 3, 2021
March 19, 2021
March 31, 2021
February 26, 2021
March 10, 2021
June 2, 2021
June 18, 2021
June 30, 2021
June 18, 2021
June 30, 2021
(1) Dividends are subject to Board of Directors approval. All dividend payments will depend on general business conditions and the Company's financial conditions, results of operations, capital
requirements and such other factors as the Board determines to be relevant.
2020 ANNUAL REPORT / CANACCORD GENUITY GROUP INC.
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Shareholder Information
STOCK EXCHANGE LISTINGS
TSX: CF, CF.PR.A, CF.PR.C, CF.DB.A
TRANSFER AGENT AND
REGISTRAR
WEBSITE AND FINANCIAL
INFORMATION
For TSX required corporate
governance disclosures and current
financial information, please visit
www.cgf.com/investor-relations.
FISCAL YEAR END
March 31
REGULATORY FILINGS
To view Canaccord Genuity Group
Inc.’s regulatory filings on SEDAR,
please visit www.sedar.com.
INSTITUTIONAL INVESTORS,
ANALYSTS AND MEDIA
CONTACT
Christina Marinoff
Vice President, Investor Relations
& Communications
Telephone: 416.687.5507
Email: cmarinoff@cgf.com
GENERAL SHAREHOLDER
INQUIRIES
Investor Relations
161 Bay Street, Suite 3000
Toronto, ON, Canada
Telephone: 416.869.7293
Fax: 416.947.8343
Email: investor.relations@cgf.com
For information about stock transfers,
address changes, dividends, lost stock
certificates, tax forms and estate
transfers, contact:
Computershare Investor
Services Inc.
100 University Avenue, 8th 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
CORPORATE HEADQUARTERS
Street Address
Canaccord Genuity Group 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
INDEPENDENT AUDITOR
Ernst & Young LLP
Chartered Professional Accountants
Vancouver, BC
For information about fees paid to
shareholders’ auditors, refer to our
Fiscal 2020 Annual Information Form.
ELIGIBLE DIVIDEND
DESIGNATION:
QUALIFIED FOREIGN
CORPORATION
Income Tax Act (Canada)
In Canada, the Federal Income Tax
Act and most provincial income tax
legislation provide lower levels of
taxation for Canadian individuals who
receive eligible dividends. All
of the common share dividends paid
by Canaccord Genuity Group Inc.
since 2006 are eligible, as are common
share dividends paid hereafter, unless
otherwise indicated.
Canaccord Genuity Group Inc. is a
“qualified foreign corporation” for US
tax purposes under the Jobs & Growth
Tax Reconciliation Act of 2003.
ANNUAL GENERAL MEETING
Thursday, August 6, 2020
at 10:00 a.m. (Eastern time)
Shareholders and duly appointed
proxyholders can attend the virtual
meeting online by going to
https://web.lumiagm.com/299326102.
EDITORIAL AND DESIGN
SERVICES
The Works Design
Communications Ltd.
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
13
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www.cgf.com
Canaccord Genuity Group Inc. Fiscal 2020 Annual Report
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