TMX Group Annual Report 2006

FY2006 Annual Report · TMX Group

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TSX GROUP – A GLOBAL MARKET LEADER

TSX Group’s reach extends internationally, providing the
global ﬁnancial community with access to Canada’s
equity, energy and ﬁxed income markets. We own and
operate Toronto Stock Exchange, TSX Venture Exchange
and Natural Gas Exchange. In 2006, we purchased Scotia
Capital Inc.’s* ﬁxed income indices, PC-Bond® and related
data assets, as well as Shorcan Brokers Limited.
TSX Group also owns 47% of CanDeal.ca.Inc. Through
these entities, TSX Group operates across the following
asset classes:

EQUITIES
Toronto Stock Exchange, our senior equity market, was
established in 1852 and provides issuers with efﬁcient
access to public equity capital, liquidity for existing
investors and the prestige and market exposure
associated with being listed on a world-class exchange.
Serving the public venture equity market, TSX Venture
Exchange provides access to capital for companies at the
early stages of their growth while offering investors a
supervised market for making investments in emerging
companies. Trading on our equity exchanges is fully
electronic, reliable and fast. Our trading strategy includes
offering best-in-class technology solutions, innovative
new product initiatives and a competitive pricing model
that encourages increased trading and order ﬂow.

COMMODITIES
Natural Gas Exchange is a leading North American
exchange for the trading and clearing of natural gas
and electricity contracts. It provides energy traders with
access to one of the most liquid, secure and efﬁcient
energy marketplaces.

FIXED INCOME
CanDeal is the leading Canadian electronic ﬁxed
income trading platform. Through our acquisitions of
Scotia Capital Inc.’s* ﬁxed income indices, PC-Bond®
and Shorcan, TSX Group has become the leading
provider of ﬁxed income indices in Canada, and we
are able to offer inter-dealer broker ﬁxed income
trading to our customers.

For each of these asset classes, TSX Group offers
real-time, historical and index data as well as corporate
information, news and foreign exchange data to help
investors make investment decisions on the Canadian
capital markets.

WWW.TSX.COM

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

TSXPRESSTM

LAUNCH OF TSXCONNECT®

SHORCAN ACQUIRED

In February, TSXPress was announced.
It is an innovative series of trading system
enhancements aimed at optimizing execution
speeds for algorithmic traders.

In June, TSX Group and Thomson Financial
collaborated to create TSXconnect, an innovative
web-based solution that provides an integrated
web-based platform for ﬁnancial data for investor
relations professionals.

In December, TSX Group purchased Shorcan Brokers
Limited, the country’s ﬁrst ﬁxed income inter-dealer
broker. This purchase, along with the purchase of
PC-Bond, marked the expansion of TSX Group’s
presence in the ﬁxed income market.

ATXTM

ACQUISITION OF OXEN INC.

INTERNATIONAL BUSINESS DEVELOPMENT

Also announced in February was ATX (Alternative
Trade eXecution). Subject to regulatory approval, it
will be a new high-speed trading facility that matches
ﬁrm order ﬂow against in-house interest as well as
the undeclared interest of other market participants.

In October, Natural Gas Exchange Inc. acquired Oxen
Inc., which owns the Alberta Watt Exchange Limited.
This transaction furthers our strategy to expand into
the energy market.

TSX Group stepped up its business development
efforts in 2006 with trips to China, South Africa,
Australia, Israel, Brazil and the United States.

MOVING FORWARD IN EXCHANGE
TRADING ENGINE TECHNOLOGY

TSX Group announced development and testing
of a unique proprietary trading engine scheduled
for phased rollout beginning in Q4 2007. The next
generation TSX trading engine is designed to be
a state-of-the-art platform with world-class
messaging capabilities, linearly scalable
throughput and response time in the single
digit millisecond range.

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

FIX

NATIONAL ADVISORY COUNCIL FORMED

In April, it was announced that the Financial
Information eXchange (FIX) gateway is in production
at TSX. The FIX gateway allows customers to route
orders to TSX using this global connectivity standard.

TSX/S&P GLOBAL GOLD INDEX INTRODUCED

At the New York Hard Assets Investment Conference
in May, TSX Group and Standard & Poor’s announced
plans to create the world’s ﬁrst Global Gold Index.
Launched in December, the index tracks world
leading gold mining companies.

In 2006, we founded a national advisory council to
support capital markets research in Canada, with
UBC’s Faculty of Law and the Rotman School of
Management as founding members. This council is
part of our overall investor education program, which
includes ﬁnancial support to UNB, DeGroote, HEC,
Concordia, and Ivey.

MEMORANDUM OF
UNDERSTANDING (MOU) WITH BOVESPA

TSX and TSX Venture signed a MOU with Brazil’s
stock exchange, BOVESPA, in October. The goals
are to promote broader cooperation, exchange of
information and an ongoing relationship between
the exchanges.

NEW AND IMPROVED TSX.COM

TSX BUYS PC-BOND

TSX.com was re-launched in the spring with
a new format, streamlined navigation system and
a greater emphasis on delivering key information to
customers. The web site is the 7th busiest ﬁnancial
web site in Canada with 960,000 unique visitors and
over 40 million page views a month.

In October, a wholly-owned subsidiary of TSX Group
purchased Scotia Capital Inc.’s* (Scotia Capital) Fixed
Income Indices, PC-Bond® analytics and related data
assets, and also signed a long term data license for
Scotia Capital to continue to provide ﬁxed income
pricing data.

SECTOR STRENGTH

Canada’s economy is broadly diversiﬁed with strengths
in mining, energy, manufacturing, and ﬁnancial services.
The breadth and strength of the Canadian market has made
Canada a key investment destination and a great place to
raise capital.

MINING
More than 80% of the total number of mining equity ﬁnancing
deals in the world were completed by TSX Group issuers on our
exchanges, which represents 38% of all mining equity capital
raised in 2006. We list almost 60% of global mining companies.

ENERGY
We list approximately half of the world’s oil and gas companies.
Our 431 energy issuers with total market capitalization of $531.6
billion raised almost $10.5 billion on TSX and TSX Venture Exchange
in 2006.

TECHNOLOGY
TSX Group is the second largest technology market in the world.
Our 346 listed technology companies raised more than $1.8 billion
in equity capital in 2006.
LIFE SCIENCES
With 144 listings, TSX Group’s equity exchanges comprise the
world’s third largest life sciences market. Over 2.9 billion life
sciences shares worth $15.6 billion traded in 2006.

We are a pre-eminent resource market in the world, and we are
leveraging these and other signiﬁcant strengths in ﬁnancial
services, technology and biotechnology, to build our business
for the future.

Unless otherwise stated, all data is as at December 31, 2006.

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CONTENTS

CHAIR’S LETTER TO SHAREHOLDERS

CEO’S LETTER TO SHAREHOLDERS

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

2006 MANAGEMENT’S DISCUSSION AND ANALYSIS

NON-GAAP FINANCIAL MEASURES

VISION

OVERVIEW OF THE BUSINESS

REVIEW OF OPERATIONS - 2006

LIQUIDITY AND CAPITAL RESOURCES

SELECTED ANNUAL INFORMATION

QUARTERLY INFORMATION

CRITICAL ACCOUNTING ESTIMATES

DISCLOSURE CONTROLS AND PROCEDURES

STRATEGY AND OUTLOOK

FORWARD-LOOKING STATEMENTS, RISKS AND UNCERTAINTIES

MANAGEMENT STATEMENT
AUDITORS’ REPORT TO THE SHAREHOLDERS

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE-YEAR REVIEW

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

SHAREHOLDER INFORMATION

Forward-Looking Statements

This annual report contains forward-looking statements, which are not historical facts but are based on certain assumptions and reflect TSX Group’s current expectations.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations.

Please see Forward-Looking Statements and Risks and Uncertainties in the 2006 Management’s Discussion and Analysis for a description of some of the risk factors that

could cause actual events or results to differ materially from current expectations.

CHAIR’S LETTER TO SHAREHOLDERS

It is once again my pleasure to report to you on behalf of TSX Group’s Board of Directors. The past year has been a strong
and promising one for TSX Group and we believe the company is well positioned for the changing exchange environment.

One of the most significant industry developments in recent years is the pace at which exchanges around the world have become
increasingly globally focused. In response, exchanges are expanding their markets across borders and asset classes, and are consoli-
dating both domestically and internationally. The Board of Directors is continuing to work with TSX Group’s management team to
execute on our proven strategy to ensure that we can successfully compete for customers and market participants on a global basis.

During the year the Board maintained its focus on ensuring the company is following appropriate governance policies and practices
to guide its relationships with shareholders and other stakeholders and to provide a platform on which healthy growth can be built.
Disclosure enhancements were the subject of ongoing discussion at the Board last year, following changes initiated in the previous year.
The Board is continuing to ensure that we have an appropriate balance between protecting investors and facilitating corporate growth.

TSX Group will also continue to monitor regulatory developments to ensure Canada’s capital markets remain globally competitive
with regulation that does not impose more costs on companies to comply than it delivers in benefits to shareholders.

The Board was also active in succession planning this year, which we know will lead to smooth leadership transitions at TSX Group
in 2007 for TSX Venture Exchange and in our key technology area.

Finally, I would like to express my gratitude to each of TSX Group’s directors for fulfilling their responsibilities with dedication.
Together we would like to thank TSX Group’s employees for their diligence and commitment as the company moves into another
exciting year of new opportunities.

WAYNE FOX
Chair, Board of Directors
TSX Group Inc.

CEO’S LETTER TO SHAREHOLDERS

I am pleased to report on another excellent year.

It was excellent in two regards, for what we achieved in terms of results, and for what we accomplished in preparing for what’s ahead.

Let me start with our results.

This was a year of multiple records:

•The market capitalization of our listed issuers exceeded $2 trillion for the first time.

•New records were set on both our equity exchanges for the volume of securities traded – up 40 per cent in 2006 compared

to a year before.

•A record of 139,000 data subscriptions at year-end helped make TSX Datalinx our fastest growing primary revenue stream.

This strength across our business lines produced a 26 per cent increase in earnings per share in 2006, compared with 2005.

This is the more impressive because our markets had to absorb two shocks during the year – the correction in the resources sectors
which saw oil, natural gas, gold and some other metals prices decline sharply from historic peaks, and the surprise decision of the
federal government to change taxation policy with respect to income trusts.

So apart from the market demonstrating the capacity to produce stellar returns, it also demonstrated powerful resilience, reflecting
the underlying strength of the Canadian economy and the confidence that Canadians have in our financial markets.

Our accomplishments in building for the future were equally impressive.

On the trading side of our business, we announced several enhancements to our trading system which, collectively and individually,
add speed and efficiency to our marketplaces.

Our TSXPressTM initiative is an example of this. TSXPress improves the performance of our existing trading engine by
dedicating processing to the most actively traded securities. This optimizes execution speeds for our most demanding customers.

In addition, we added the international trading protocol known as FIX to our own protocol, STAMP, to make it easier for interna-
tional traders to access our exchanges. Trading from abroad is an increasingly important source of growth – some 40 per cent of our
trading now comes from the U.S.

Initiatives such as these provided us with an added benefit – they bought us the time to create our next generation trading engine.

By year’s end, following lab testing of the capabilities of the new engine, we were able to announce that we will roll out this new
platform – named QuantumTM – beginning in the fourth quarter of 2007.

The benchmark testing on the system was truly impressive. Throughput tested at 100,000 messages a second and response time
was in the low single digit millisecond range. Capacity tested more than two billion order messages a day. Reliability showed the
capability for full system fail-over in seconds, with no lost messages – in other words, near-perfect system availability. And finally,
we achieved order match processing in micro-seconds – that is, in millionths of a second.

When the new engine is in place we expect we will move from North American competitive parity, with our existing system,
to global leadership in trading engine technology.

Trading technology was not our only area of progress. We now provide managed services for our direct data products. We have
achieved this by co-locating their data infrastructure within our data centres to reduce latency and provide bandwidth efficiencies.
We also re-launched the tsx.com web site, in the process introducing advertising on the web site to provide a new revenue source.

We have strengthened our position in gas and electricity trading with NGX’s acquisition of Oxen Inc., the owner of the Alberta
Watt Exchange or Watt-Ex. Watt-Ex supplies services which allow the Alberta market operator to balance electricity supply and
demand on the grid. NGX has also provided services to the Ontario Power Authority, running periodic auctions of electricity.

And we have built up our position in fixed income securities, and clearly there is the potential for greater growth still. Electronic
trading in CanDeal.ca, of which we own 47 per cent, increased significantly – up 128 per cent over the previous year. CanDeal
turned its first profit during the year.

Acquisitions strengthened our position in fixed income securities even further – the addition of Shorcan Brokers Limited gives
us a leading position in the inter-dealer brokerage business; the addition of Scotia Capital’s bond indices bring into TSX Group
the most widely used fixed income performance benchmarks in the Canadian market.

These accomplishments are a solid base for moving ahead in 2007.

On March 5, 2007 we announced that we are establishing a joint venture with International Securities Exchange (ISE) to launch
our own futures and options exchange. This will bring together our strengths as the pre-eminent market for Canadian securities
and ISE’s strengths as one of the leading derivatives exchanges in the world.

I have every confidence that this venture – to be known as DEXTM – will give us the same pre-eminence in the Canadian derivatives
market as we have in equities and other cash products.

Altogether a year that gives us immense confidence in our future prospects.

Finally, one of the keys to our success has been the focused teams we have built in our operations to deal not simply with current
needs and opportunities, but to carry this company into the future.

Two of our team builders – John Cieslak, our Chief Information and Administration Officer, and Linda Hohol, President of TSX
Venture Exchange – will retire from TSX Group on April 30, 2007. Both made immense contributions during their years with TSX
Group, but the most important of their contributions may well prove to be the teams they put in place to carry their work forward
in the years ahead.

RICHARD NESBITT
Chief Executive Officer
TSX Group Inc.

STATEMENT OF CORPORATE GOVERNANCE PRACTICES

Overview
Our Board of Directors (Board) and management are committed to remaining at the forefront of good governance and to ensuring
the highest standard of corporate governance. TSX Group’s corporate governance policies and practices are designed to support
the Board in discharging its responsibilities and to enhance shareholder value. We regularly review these policies and practices with
a view to enhancing our governance structure and practices in an ever-evolving corporate governance environment. To this end,
in 2006 we adopted a policy with respect to voting for directors (see Majority Voting for a description of this policy).

TSX Group’s corporate governance system complies with National Policy 58-201—Corporate Governance Guidelines (NP 58-201),
National Instrument 58-101—Disclosure of Corporate Governance Practices (NI 58-101) and Multilateral Instrument 52-110—
Audit Committees (MI 52-110). In addition, we continue to review our corporate governance practices with reference to corporate
governance guidelines recommended by institutional and other shareholder organizations.

Board Responsibilities
The Board is responsible for TSX Group’s governance and stewardship and overseeing its corporate strategy, operations and
management. The Board discharges this responsibility, either directly or, where appropriate, through committees, and by selecting
and holding management accountable for TSX Group’s operations and for implementing its corporate strategy. The Board sets clear
policies and direction for management’s responsibilities and authority. Among its many specific duties, the Board annually moni-
tors the performance of the Chief Executive Officer (CEO) against corporate objectives (established by the Board with the CEO),
and sets the CEO’s compensation. The Board also approves strategic plans and corporate objectives that the CEO is responsible for
meeting, provides advice and counsel to the CEO, oversees ethical and legal conduct of senior management, and assesses financial
performance of TSX Group. In addition, the Board approves the adequacy and form of compensation paid to members of the Board
(Directors). The Board Charter that describes the Board’s responsibilities is available on our website.

At each regularly scheduled Board meeting, Directors and senior management examine, review and discuss a broad range of issues
relevant to TSX Group’s strategy, business interests and growth initiatives. In addition, management provides the Board with timely,
periodic reports on operational and financial performance. During fiscal 2006, the Board held ten regular meetings and one special
meeting. Attendance by Directors at these meetings was more than 98%, either in person, by teleconference or by video conference.
The Board plans to hold nine meetings in 2007. At each of these meetings, the Board will meet without management and non-
independent Directors to ensure it provides independent assessment and oversight. Each of the Finance and Audit Committee,
Governance Committee and the Human Resources Committee can, in its discretion, retain an outside advisor or expert. An individual
Director or any other committee of the Board can retain an outside advisor or expert with the approval of the Governance Committee.

Board Independence and Composition
The Board has a non-executive Chair and knowledgeable and experienced Directors, and 12 out of 14 (86%) members of the Board,
including the Chair, are “independent” within the meaning of section 1.4 of MI 52-110 and our recognition order issued by the
Ontario Securities Commission (Recognition Order). The Recognition Order requires at least 50% of Directors to be “independent”,
within the meaning of section 1.4 of MI 52-110. Furthermore, pursuant to the Recognition Order, in 2005 the Board adopted more
restrictive standards than those imposed by MI 52-110 to determine whether individual members of the Board are independent from
TSX Group. Those standards are set out on our website.

The Board also derives strength from the background, qualities, skills and experience of its Directors. The Governance Committee
recommends candidates to the Board who are suitable for nomination to the Board on an annual basis. Nominees are selected for quali-
ties such as integrity, business judgment, financial acumen, independence, business, professional or board expertise and capital markets
experience. The Board also takes into consideration representation from geographic regions relevant to TSX Group’s strategic priorities.

Director Education and Access to Management
We provide new Directors with a Directors’ Manual, which serves as a corporate reference, as well as with orientation materials
describing our business, strategy, objectives and initiatives, so new Directors understand the nature and operations of our business
and the role of the Board and its committees, as well as the contribution individual Directors are expected to make. To assist in the
integration and orientation of new Directors, the Governance Committee assigns a member of the Board as a mentor to each new
Director. Furthermore, Directors are invited to spend time at our offices and also have timely, periodic one-on-one meetings with
the CEO and key members of the senior management team. The Chair sets the agenda for Board meetings and Directors receive
a comprehensive package of information prior to each Board and committee meeting. As well, each committee delivers a report to
the full Board on its work after each committee meeting. TSX Group also provides the Directors with a variety of other materials
on an ad hoc basis, to keep them informed about internal developments as well as developments in, or which affect, our industry.
All of these materials and other corporate materials are also accessible by Directors on a permanent, secure intranet.

Evaluation
The Governance Committee annually evaluates the overall performance and effectiveness of the Board, its committees and all
Directors. This evaluation is conducted by written self-assessment and peer questionnaires and through formal interviews of each
Director (other than the Chair) by the Chair of the Board and of the Chair by the chair of the Governance Committee. The Chair
of the Board reports summary findings to the Governance Committee and to the full Board.

Code of Conduct
The Board’s Code of Conduct (Board Code) for Directors sets standards for ethical behaviour of the Board. The Board monitors comp-
liance with the Board Code and is responsible for considering and granting waivers from compliance with the Board Code, if any. No
waivers have been granted nor have there been any violations of the Board Code. A copy of the Board Code is available on our website.

Committees
The Board has four standing committees with specific areas of responsibility to effectively govern TSX Group: Finance and Audit
Committee, Governance Committee, Human Resources Committee and Public Venture Market Committee. All of the members of
the Finance and Audit Committee, Governance Committee, Human Resources Committee and Public Venture Market Committee
are independent. All of the committees also consist solely of non-management Directors. The Board believes that the composition
of its committees ensures that they operate independently from management to protect all shareholders’ interests. The Board also
believes that the members of the Finance and Audit Committee are financially literate, given their education and experience. Each
standing Board committee has a formal written Charter, approved by the Board. These Charters are reviewed at least annually and
are available on our website.

Majority Voting
The Board has adopted a policy that provides that in an uncontested election of directors, any nominee of TSX Group who does not
receive the support of a majority of the votes cast at an annual meeting of the shareholders will tender his or her resignation to the
Board, to be effective when accepted by the Board. The Governance Committee will consider the resignation and recommend to the
Board the action to be taken. The Board will have 90 days following the annual meeting to make its decision and announce it by way
of press release.

Risk Management
TSX Group recognizes that risk management is integral to its business, operations and financial performance, and we follow a
comprehensive integrated risk management program to identify, assess and prioritize principal business risks, and consider the
likelihood and potential impact of each risk. We develop strategies to manage and mitigate each identified risk. In addition, we
have a business continuity plan to protect personnel and resources and to enable us to continue critical business functions if a
disaster occurs. The Board provides oversight with respect to our risk management program and our strategies to mitigate such
risks. Also, we have an internal audit function, which reports to the Finance and Audit Committee, and which independently
assesses the adequacy and effectiveness of internal controls and recommends corrective action.

Communication
TSX Group and the Board are committed to open and proactive investor communication. Our investor relations staff provides
information to current and potential investors and responds to their inquiries. We broadcast quarterly earnings conference calls
live and archive these calls on our website. We also make recordings available via telephone to interested investors, the media and
members of the public for three months after each call. Audio webcasts of such recordings are also available on our website for six
months after each call. We promptly make available presentations from investor conferences on our website. We also make material
disclosure documents available via our website.

Additional Information
For a full report on our corporate governance practices, please refer to our Management Information Circular, which may be
accessed through www.sedar.com or through our website at www.tsx.com. The Circular also describes our corporate governance
practices, information about Directors, and the composition, responsibilities and activities of the Board’s standing committees.
All information about corporate governance practices in our Annual Report and in the Management Information Circular was
adopted and approved by our Board.

2006 MANAGEMENT’S DISCUSSION AND ANALYSIS

Note: All references to earnings per share, net income per common share, dividends per common share, common shares issued and outstanding,
common shares reserved for issuance, and options outstanding have been restated to reflect the impact of the two-for-one stock split which was
effective May 17, 2005.

This Management’s Discussion and Analysis (MD&A) of TSX Group Inc.’s (TSX Group) financial condition and results of opera-
tions is provided to enable a reader to assess our financial condition, material changes in our financial condition and our results of
operations, including our liquidity and capital resources, for the financial year ended December 31, 2006, compared with the year
ended December 31, 2005. This MD&A is dated January 31, 2007. It should be read carefully together with our 2006 Consolidated
Financial Statements and related notes for the corresponding period, filed with Canadian securities regulators, and accessible
through www.sedar.com, or our website at www.tsx.com. All amounts are in Canadian dollars and are based on financial statements
prepared in accordance with Canadian generally accepted accounting principles (GAAP), unless otherwise specified.

Additional information about TSX Group, including our most recent Annual Information Form is available through www.sedar.com
and on our website www.tsx.com. We are not incorporating information contained on the website in this MD&A.

NON-GAAP FINANCIAL MEASURES

Certain measures used in this MD&A, specifically listing fees received, initial listing fees received, additional listing fees received
and total revenue based on initial and additional listing fees received, do not have standardized meanings prescribed by Canadian
GAAP and therefore are unlikely to be comparable to similar measures presented by other issuers. We present these measures as an
indication of how initial and additional listing activity and the fees received for listing or reserving securities, impact the financial
performance and cash flows of our business. Management uses these measures to assess the effectiveness of our strategy to serve our
listed issuers and grow the listings portion of our business.

VISION

Our vision: To be a leading Canadian public company that is the best operator of electronic marketplaces on a global standard.

Our strategy: To continue to enhance our core business and seek growth opportunities by diversifying both horizontally into related
markets in which we can leverage our domestic and international competitive advantages, as well as vertically into other areas of the
trading value chain.

Competitive Advantages
Domestic:

• Brand and reputation

• Pre-eminent domestic position

International:

• Mining listings and expertise

• Oil & Gas listings and expertise

• Trading and data technology capability

• Small-Medium Enterprise (SME) expertise

• Marketplace operations capability

• Data platform and capability

OVERVIEW OF THE BUSINESS

We own and operate equity, energy and fixed income markets in Canada.

• Our equity markets, Toronto Stock Exchange and TSX Venture Exchange, are the primary venues for capital formation and
liquidity in Canada. The total market capitalization of the 3,842 issuers listed on our equity exchanges at December 31, 2006
was over $2.1 trillion, making our combined equity exchanges the third largest in North America and the eighth largest in the
world. The total volume of securities traded on our two equity exchanges in 2006 was 119.7 billion. There were over 139,000
professional and equivalent real-time market data subscriptions at the end of 2006.

• Our energy market, Natural Gas Exchange Inc. (NGX) is a Canadian-based exchange that trades and clears natural gas and

electricity contracts. During 2006, 9.8 million terajoules in natural gas and electricity contracts were traded or cleared on NGX.
In October 2006, we added to our energy business when we acquired Oxen Inc. which owns the Alberta Watt Exchange Limited
(Watt-Ex), a platform for providing ancillary services to the Alberta Electric System Operator which is used to balance supply
and demand on the Alberta grid.

• We acquired our fixed income market, Shorcan Brokers Limited (Shorcan), Canada’s first fixed income inter-dealer broker

(IDB) in December 2006. We estimate that the IDB market represents about 40% of total fixed income trading in Canada and
that Shorcan’s share of this market is about 37%, or $540 billion in 2006. This complemented the October 2006 purchase of
Scotia Capital Inc.’s* (Scotia Capital) Fixed Income Indices, PC-Bond® analytics, and related data assets by a wholly-owned
subsidiary of TSX Group. We also signed a long-term data license for Scotia Capital to continue to provide fixed income
pricing data.

• We also own 47% of CanDeal.ca. Inc. (CanDeal), an institutional fixed income trading system. During 2006, CanDeal traded

$333.5 billion in fixed income securities.

Core Business of TSX Group
We derive revenue from three principal sources – listings, trading, and market data.

2006 revenue of $ 352.8 million

2005 revenue of $ 290.0 million

Business
Services/Other
$11.1M
3%

Business
Services/Other
$9.3m
4%

Market Data
$86.9m
25%

Listing
$108.5m
31%

Market Data
$67.4m
23%

Listing
$87.7m
30%

Trading
and Related
$146.3m
41%

Trading
and Related
$125.6m
43%

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

Canadian GAAP requires that we recognize initial and additional listing fees over an estimated service period related to the fees,
which we have determined to be ten years, even though we receive these fees upon completion of the transaction and they are non-
refundable to customers. We believe it is helpful to also show total revenue based on initial and additional listing fees received* as
this measure links these listing fees more closely with the listing transactions and cash flows we generate from these transactions.
In October 2005, we adopted these GAAP requirements regarding the accounting for fees charged for initial listings and additional
financings and retroactively applied this treatment so that we recognize these fees over a ten year period, as described in our Review
of Operations – 2006 under the heading Listing Revenue.

The following is a reconciliation of total revenue based on initial and additional listing fees received* to total revenue based
on initial and additional listing fees reported:

(in millions of dollars)

Total revenue based on initial and additional listing fees received*
Initial and additional listing fees received and deferred to future periods*
Recognition of initial and additional listing fees received and
previously included in deferred revenue
Total revenue based on initial and additional listing fee revenue reported

2006

420.2
(112.9)

45.5
352.8

$
$

2005

348.6
(95.7)

37.1
290.0

2006 revenue of $ 420.2 million*
(total revenue based on initial
and additional listing fees received*)

2005 revenue of $ 348.6 million*
(total revenue based on initial
and additional listing fees received*)

Business
Services/Other
$11.1m
3%

Business
Services/Other
$9.3m
2%

Market Data
$86.9m
20%

Listing**
$175.9m
42%

Market Data
$67.4m
20%

Listing**
$146.3m
42%

Trading
and Related
$146.3m
35%

Trading
and Related
$125.6m
36%

* See discussion under the heading Non-GAAP Financial Measures.

** See discussion under the heading Non-GAAP Financial Measures. The composition of listing fees received and a reconciliation to listing fees reported is available in

our Review of Operations – 2006 under the heading Listing Revenue.

Listings – Toronto Stock Exchange and TSX Venture Exchange
Our listings operations take place through Toronto Stock Exchange, our senior market, and TSX Venture Exchange, our junior
market. TSX Venture Exchange also offers a board called NEX1 for issuers that have fallen below TSX Venture Exchange’s ongoing
listing standards.

• At December 31, 2006, 1,598 issuers with an aggregate market capitalization of $2.1 trillion were listed on Toronto Stock Exchange.

• At December 31, 2006, 2,244 issuers with an aggregate market capitalization of $55.3 billion were listed on TSX Venture Exchange.

• In 2006, revenue from listing fees on the two exchanges was $108.5 million, or 31% of our revenue, of which 80% related to
Toronto Stock Exchange listings and 20% related to TSX Venture Exchange listings. Listing fees received** from our issuers
in 2006 was $175.9 million, or 42% of our total revenue based on initial and additional listing fees received***, of which 71%
related to Toronto Stock Exchange listings and 29% related to TSX Venture Exchange listings.

• In 2005, revenue from listing fees on the two exchanges was $87.7 million, or 30% of our revenue, of which 83% related to

Toronto Stock Exchange listings and 17% related to TSX Venture Exchange listings. Listing fees received** from our issuers
in 2005 was $146.3 million, or 42% of our total revenue based on initial and additional listing fees received***, of which 75%
related to Toronto Stock Exchange listings and 25% related to TSX Venture Exchange listings.

In general, issuers initially list on Toronto Stock Exchange either in connection with their initial public offerings (IPOs), or by gradu-
ating from TSX Venture Exchange. Junior companies generally list on TSX Venture Exchange either in connection with their IPOs
or through alternative methods such as TSX Venture Exchange’s Capital Pool Company® (CPCTM) program or reverse takeovers.

Issuers list a number of different types of securities including conventional securities such as common shares, preferred shares, rights
and warrants, and an expanding variety of alternative types of securities such as exchangeable shares, convertible debt instruments,
limited partnership units, exchange-traded fund units, income trust units and structured products.

Issuers that meet initial and ongoing listing requirements of Toronto Stock Exchange or TSX Venture Exchange receive a range of
benefits, including opportunities to efficiently access public capital, liquidity for existing investors, mentorship programs and the
prestige and market exposure associated with being listed on one of Canada’s national stock exchanges. In June 2006, we launched
TSXconnect® in collaboration with Thomson Financial. TSXconnect is an integrated, web-based platform for accessing investor
relations management tools and was provided to Toronto Stock Exchange listed issuers at no additional charge.

We generate listing revenue by charging issuers the following types of listing fees:

Initial Listing Fees
Toronto Stock Exchange and TSX Venture Exchange issuers pay initial fees based on the value of the securities to be listed or
reserved, subject to minimum and maximum fees. Initial listing fees fluctuate with the number of transactions and value of securities
being listed or reserved in a given period. For accounting purposes, we recognize revenue from initial listing fees on a straight line
basis over a ten year period. Unamortized balances are recorded as part of “Deferred revenue - initial and additional listing fees”
on the consolidated balance sheet.

Additional Listing Fees
Issuers already listed on one of our equity exchanges pay fees in connection with subsequent capital market transactions, such as
the raising of new capital through the sale of additional securities. Additional listing fees are based on the value of the securities
to be listed or reserved, subject to minimum and maximum fees. Additional listing fees fluctuate with the number of transactions
and value of securities being listed or reserved in a given period. For accounting purposes, we recognize additional listing fees on
a straight line basis over a ten year period. Unamortized balances are recorded as part of “Deferred revenue - initial and additional
listing fees” on the consolidated balance sheet.

** See discussion under the heading Non-GAAP Financial Measures. The composition of listing fees received and a reconciliation to listing fees reported is available in

our Review of Operations – 2006 under the heading Listing Revenue.

*** See discussion under the heading Non-GAAP Financial Measures and reconciliation to total revenue based on initial and additional listing fee revenue reported under

the heading Core Business of TSX Group.

1 Unless otherwise indicated, market statistics and financial information for TSX Venture Exchange includes information for NEX.

Sustaining Listing Fees
Issuers listed on one of our equity exchanges pay annual fees to maintain their listing, based on their market capitalization at the
end of the prior calendar year, subject to minimum and maximum fees. Sustaining listing fees provide a relatively stable, recurring
revenue stream. Sustaining listing fees are billed during the first quarter of the year, recorded as deferred revenue and amortized
over the year on a straight-line basis.

Changes to Listing Fees for 2007
On October 25, 2006, we announced changes to the fee structure for issuers listed on Toronto Stock Exchange and TSX Venture
Exchange, effective January 1, 2007. This decision followed a review of listing fees on other major global exchanges. Based on year
to date levels of market activity up to October 25, 2006, it was anticipated that listing fees received* would have increased by about
five to seven percent on an annual basis primarily as a result of adjustments made to the maximum fee for certain listing fees2.

Trading – TSX Markets, NGX and Shorcan

TSX Markets
Our trading operations for both Toronto Stock Exchange and TSX Venture Exchange are managed through TSX Markets.
Participating Organizations and Member Firms (collectively POs), acting as principals or agents for retail and institutional investors,
place orders to buy or sell listed securities using our fully electronic trading systems.

• In 2006, trading and related fees paid by POs relating to both exchanges represented $126.3 million, or 36% of our revenue.
Trading and related revenue was $98.3 million on Toronto Stock Exchange and $28.0 million on TSX Venture Exchange.

• In 2005, trading and related fees paid by POs relating to both exchanges represented $108.7 million, or 37% of our revenue.
Trading and related revenue was $92.4 million on Toronto Stock Exchange and $16.3 million on TSX Venture Exchange.

Trading occurs on a continuous basis throughout the day but begins at market open in an auction format and ends with an extended
trading session in which trades occur at the closing price, referred to as a single price closing call market. Trading also occurs through
crosses in which POs internally match orders and report them through the exchanges. All trades are settled through The Canadian
Depository for Securities Limited (CDS), a recognized clearing agency in which we have an approximate 18% ownership interest.
The other shareholders are the major Canadian chartered banks and the Investment Dealers Association of Canada (IDA).

Trading activity is affected when listed issuers seek additional listings on foreign exchanges, principally in the United States (often
referred to as interlisting or dual listings). Interlistings generally raise the profile of issuers in the global market, and trading volumes
for these issuers’ securities often increase across all markets as well as on Toronto Stock Exchange. Whether a significant portion of
trading of a particular issuer remains in Canada following its interlisting depends on a number of factors, including the location of
the issuer’s shareholder base and the location of research analysts who cover the issuer.

TSX Markets has a dedicated sales team focused on U.S. accounts with the goal of raising the level of awareness regarding the
benefits of trading on Toronto Stock Exchange and TSX Venture Exchange.

On October 1, 2005, we introduced a volume-based trading fee structure on issues that are interlisted on Toronto Stock Exchange
and either NASDAQ or AMEX, and implemented further changes to our overall trading fee structure on January 1, 2006. Effective
July 1, 2006, we changed the fee model for most issues on Toronto Stock Exchange and TSX Venture Exchange from a value-
based fee model to a volume-based fee structure. The volume-based fee structure better aligns our trading fees with the prevailing
model in various U.S. marketplaces and replaced the value-based fee model for most issues. This model has been structured so that
market participants have an incentive to enter orders in the central limit order book. When liquidity is added to the central limit
order book, executed passive orders receive a credit on a per security basis, and when liquidity is removed from the central limit
order book, each executed active order is charged on a per security basis. While we implemented a volume-based model for TSX
Venture Exchange issues, there are no credits provided for passive order flow. To further encourage trading on our equity exchanges,
discounts are available to customers based on the volume of shares traded and total trading revenue for the month.

* See discussion under the heading Non-GAAP Financial Measures.

2 The “Changes to Listing Fees for 2007” section above contains certain forward-looking statements. Please refer to “Forward-Looking Statements, Risks and

Uncertainties” for a discussion of risks and uncertainties related to such statements.

Trading Technology
In 1997, Toronto Stock Exchange was the first major exchange in North America (and one of the first globally) to move to a fully
automated exchange where trading takes place entirely through electronic systems, thereby increasing the speed of execution, acces-
sibility to the exchange and the number of transactions that can be processed. In May 2001, our original electronic trading systems
were replaced with a more reliable, flexible and scalable system. In 2003, the gateway systems were replaced with a more scalable
and higher throughput system. The system hardware was upgraded in 2004. Two hardware upgrades and two software performance
releases were implemented in 2005 in response to increases in order message volumes and transactions being generated within the
marketplace.

In 2006, we worked on a number of initiatives to meet growing demand:

• TSXPressTM: three significant trading system performance enhancements were completed in 2006 have reduced overall average

TSX response time and optimized execution speeds for algorithmic traders.

• Next generation trading engine: a state-of-the-art platform designed to have world-class messaging capabilities and response
times in the low single digit millisecond range. This is scheduled for phased rollout starting in Q4/07. The results of bench-
mark laboratory testing conducted in December 2006 were as follows:

– Capacity tested to over 320 million order messages an hour (or approximately 2 billion order messages per trading day)

and proven to be linearly scalable;

– Throughput tested to over 100,000 messages per second and proven to be linearly scalable;

– Order matching in microseconds (less than one millisecond);

– Response time in the low single digit millisecond range; and

– Capability of full system fail-over in seconds with no lost messages.

• FIX: implementation of this protocol which allows new and existing customers to route orders using the global connectivity standard.

We have a business continuity plan designed to provide the means for us to continue to operate in the event of a disruption to our
main facility. As part of this plan, we operate two data centres in separate locations, allowing for back-up recovery in the event that
one of the centres experiences a failure.

Products
On December 1, 2001, regulatory changes (described below) were introduced, which among other things, permitted the creation
of alternative trading systems (ATSs) to compete with our marketplaces. Part of our strategy is to continually implement new trading
features and methodologies to meet diverse customer requirements for trade execution. The following products have been launched
over the last several years:

• TSX Firm Order eXecutionTM, or FOXTM, a system designed to assist POs to more effectively and efficiently manage capital

risk, and to consolidate order flow across trading desks within their own firm.

• TSX Market On CloseTM (MOC) facility (designed to increase liquidity and provide lower levels of volatility at the close

of the trading session), expanded in 2005 to include all symbols in the S&P/TSX Composite Index3.

• Multiple Broker Give-Up, designed to allow investors to distribute their trading relationships among multiple POs.

• TSX Compliance Automated Reporting SystemTM (CARSTM) provides POs with a suite of compliance-monitoring products.

• Specialty price crosses (designed to decrease costs associated with advanced trading techniques).

• Voluntary attribution (allows traders to anonymously execute transactions).

• Iceberg orders (large size orders may be entered while disclosing only a small portion of the total order size at any time).

In 2007, we plan to launch ATXTM, a high-speed TSX trading facility to match firm order flow against in-house liquidity as well
as liquidity from other POs**. In addition, we plan to introduce a market order router that should help domestic and international
customers meet best execution obligations.

** Subject to regulatory approval.

3 S&P is a trade-mark owned by The McGraw-Hill Companies, Inc. and is used under license.

Regulation
Market integrity is an essential element of any marketplace. Historically, Toronto Stock Exchange and TSX Venture Exchange
regulated the market conduct of their POs directly. In order to separate this regulatory function from our business operations, in 2001,
we proposed the creation of a separate corporate entity, Market Regulation Services Inc. (RS), to administer a set of universal market
integrity rules (UMIR) for marketplaces trading equities in Canada. RS is owned 50% by TSX Inc., a wholly-owned subsidiary of
TSX Group, and 50% by the IDA. RS is recognized by the Ontario, Manitoba, Alberta and British Columbia securities commis-
sions, as well as in Quebec, by the Autorité des marchés financiers, as a self-regulatory organization (SRO) to act as a regulation
services provider under National Instrument 21-101-Marketplace Operation and National Instrument 23-101-Trading Rules (together,
the ATS Rules). In March 2002, Toronto Stock Exchange and TSX Venture Exchange retained RS to provide regulation services to
them under the ATS Rules as agent for each of them. RS monitors and enforces compliance with UMIR by the POs, their directors,
officers, employees and affiliates and performs other regulatory functions that our equity exchanges delegate to RS.

In April 2006, the Boards of Directors of the IDA and RS announced a proposal to create a new SRO to succeed the IDA and RS.
A joint steering committee has been established by the IDA and RS which is working with Canadian securities administrators
and capital markets stakeholders to develop a detailed implementation plan.

NGX
In March, 2004 we acquired NGX, a Canadian-based energy exchange that provides customers with an electronic platform
that trades and clears natural gas and electricity contracts.

NGX generates trading and clearing revenue by applying fees to all transactions based on the contract volume traded or centrally
cleared through the exchange, and charges a monthly fixed subscription fee to each trading customer who trades on NGX.

• NGX’s revenue from trading and clearing activities for the year ended December 31, 2006 was $19.1 million, or 5% of 2006 revenue.

• NGX’s revenue from trading and clearing activities for the year ended December 31, 2005 was $16.8 million, or 6% of 2005 revenue.

In October 2006, we added to our energy business when we acquired Oxen Inc. which owns the Alberta Watt Exchange Limited
(Watt-Ex), a platform for providing ancillary services to the Alberta Electric System Operator which is used to balance supply
and demand on the Alberta grid.

Shorcan
In December 2006, we further expanded our presence in the fixed income market by acquiring Shorcan, Canada’s first fixed income
IDB. Shorcan offers broker services for clients trading in federal, provincial, corporate and mortgage bonds and treasury bills.
Shorcan became the first IDB to offer Straight Through Processing in 2004. We estimate that the IDB market represents about
40% of total fixed income trading in Canada and that Shorcan’s share of this market is about 37%, or $540 billion in 2006.

Market Data - TSX Datalinx
Through TSX Datalinx, we sell our real-time quotation and trading data, historical data and corporate information to market
participants on a global basis. Timely and comprehensive information about market activity and listed issuers assists POs and
investors in their decision-making processes and facilitates efficient markets.

• In 2006, market data revenue represented $86.9 million, or 25% of our revenue. Market data revenue was $65.7 million

on Toronto Stock Exchange, $19.2 million on TSX Venture Exchange and $0.7 million on NGX.

• In 2005, market data revenue represented $67.4 million, or 23% of our revenue. Market data revenue was $51.7 million

on Toronto Stock Exchange, $15.0 million on TSX Venture Exchange and $0.7 million on NGX.

Real-Time Market Data Products
Trading activity on our equity exchanges produces a stream of real-time data reflecting orders and executed transactions. This
stream of data is packaged by TSX Datalinx into real-time market data products and delivered, directly or indirectly, to end users
via more than 90 Canadian and global market data vendors that sell data feeds and desktop information services. As at December
31, 2006, there were over 139,000 professional and equivalent real-time data subscriptions in both Canada and the United States,
compared with over 118,000 at December 31, 2005. These information services allow end users to view the real-time market activity
of several marketplaces, as well as to view supporting reference data, corporate actions, news and foreign exchange rates. These
services also enable the end user to transfer the data to applications to manipulate and analyze the data and facilitate automated
trading. We also provide market data feeds directly to end users in order to address their requirements for reduced latency.

Our market data distribution platform offers a flexible and reliable environment over which we distribute a wide range of data
simultaneously to a large number of clients. We carry data from other sources including CanDeal and stocks traded on the Canadian
Trading and Quotation System Inc. (CNQ). In 2005, we added a number of new products including real time interbank foreign
exchange rates, TSX/CP Equities NewsTM, as well as data from Perimeter Financial Corp. In 2006, we entered into an agreement
with TriAct Canada Marketplace LP to distribute their data. This expanded content set has enhanced our delivery of relevant and
timely Canadian capital markets information to our global client base.

Subscribers for TSX Datalinx data generally pay fixed monthly rates for access to real time streaming data, which differ depending
on the number of end users and the depth of information accessed. In addition to streaming data, many individual investors consume
real time quote data, for which we charge on a per quote basis. Real-time data fees are primarily driven by the number of data
subscriptions and therefore are partly related to industry employment. We charge market data vendors and direct feed clients
a fixed monthly fee for access to data feeds. The direct feed business has been growing due to the increase in automated trading.
Sales of real-time market data represented approximately 94% of our market data revenue in 2006 and approximately 95% in 2005.

In 2003, along with CNW Group Ltd. (CNW), we announced the creation of CNX Marketlink4, which provides an investor
communications and disclosure network for publicly listed companies to disseminate press releases. We receive a portion
of the revenue from the sale of CNX Marketlink products.

Customers currently access NGX data through a fully electronic, independent trading platform. NGX applies a monthly
fixed viewing fee to firms who wish to subscribe to market data services.

Historical Market Data Products and Corporate Information
Historical market data products include market information (such as historical pricing, index constituents and weightings)
and corporate information (such as dividends and corporate actions). This information is generally made available at the end
of the trading day and is used in research, analysis and trade clearing.

Generally, we sell historical data products for a fixed amount per product accessed. Fees vary depending on the type of end use.
Data products to be used for commercial purposes require an enterprise-wide license for internal redistribution. We produce
two electronic reference data publications for each exchange, a Daily Record and a Monthly Review, both of which are sold
on a subscription and firm license basis.

Distribution
TSX Datalinx content is available directly to clients in a variety of ways:

• via a low latency data feed known as TSX Direct,

• via tsxdatalinx.com,

• through a variety of market data vendors,

• by telecommunications providers and extranets, and

• via our tsx.com web site.

Several direct data feed clients have also engaged us to provide managed services. Under this arrangement, we have co-located their
data infrastructure within our data centres to reduce latency and provide bandwidth efficiencies. In 2006, TSX Datalinx re-launched
the tsx.com web site which provides delayed market data and listed issuer information as well as information about TSX Group and
our business. We also introduced online advertising which generates market data revenue.

Index Products - Equities
We have long supported indices to measure equity market performance. Toronto Stock Exchange introduced the first Canadian
indices in 1934. We introduced the Toronto 35 index in 1987, which was the basis for the world’s first exchange-traded fund, TIPS®
(Toronto 35 Index Participation Units). TSX Datalinx and Standard & Poor’s (S&P) collaborated in 1998 to bring global recogni-
tion to the Canadian markets.

4 CNX Marketlink is a trade-mark of CNW Group Ltd. and is used under license.

Together, we introduced several indices, including the S&P/TSX 60 Index (the large capitalization index for the Canadian equity
market) and in 2002, the S&P/TSX Composite Index (the Index). The Index (formerly the TSE 300 Composite Index®) is the
most quoted index for the Canadian equity market, appearing frequently in business media which strengthens our brand profile.
In December 2006, we launched the S&P/TSX Global Gold Index in conjunction with S&P. It is an international benchmark
that tracks the world’s leading gold companies.

TSX Datalinx has an arrangement with S&P under which we share license fees received from organizations that create products,
such as mutual funds and exchange-traded funds (ETFs), based on the S&P/TSX indices. In general, these license fees are based
on a percentage of funds under management in respect for those products.

Index and Analytics Products - Fixed Income
In October 2006, we acquired Scotia Capital Inc.’s* Fixed Income Indices, its PC-Bond® analytics, and related data assets to expand
our presence in the Canadian fixed income market. We also signed a long-term data license under which Scotia Capital will provide
fixed income pricing data to us. Scotia Capital has been publishing indices to measure the performance of the Canadian fixed income
market since 1947. These indices are the most widely used fixed income performance benchmarks in Canada. The best known of
these indices is the Universe Bond Index, which tracks the broad Canadian bond market. In addition to the Universe Bond Index,
we now publish a variety of sub-indices for different term and credit sectors, as well as indices for tracking other segments of the
market, including high yield bonds, Euro Canadian bonds, maple bonds (Canadian dollar bonds issued by a non-Canadian issuer),
yankee bonds, inflation-indexed real return bonds, treasury bills and residential and commercial mortgage-backed securities. We also
purchased the ScotiaBond portfolio attribution package and Scotia Capital’s historical price database.

Changes to Market Data Fees for 2007
Effective January 1, 2007, changes were implemented to the fee structure for market data products. This followed a review of market
data fees on other major global exchanges. Based on activity levels in 2006, it is anticipated that, in aggregate, market data revenue
will increase in the range of approximately three to five percent on an annual basis as a result of these changes5.

Business Services – TSX Technologies
We have assembled a team of exchange technology professionals with extensive industry experience in installing and operating
trading and related systems at other global exchanges. We currently provide Market Regulation Services Inc. technology and related
services necessary to conduct its review and real-time monitoring of trading. Market Regulation Services Inc. pays us fees for these
services, negotiated on an arm’s length basis, in accordance with an agreement which also details service levels. We also have an
agreement with CanDeal to provide technology services for a fee in support of its institutional fixed-income trading system.

• In 2006, business services revenue represented $9.4 million, or 3% of our revenue.

• In 2005, business services revenue represented $7.9 million, or 3% of our revenue.

REVIEW OF OPERATIONS – 2006

Year Ended December 31, 2006 compared with Year Ended December 31, 2005

The following is a summary of financial results:

(in millions of dollars, except per share amounts)

Revenue
Expenses
Net income
Earnings per share:

Basic
Diluted

2006

352.8
148.3
131.5

1.92
1.91

$
$
$

$
$

2005

Increase

%
increase

$
$
$

$
$

290.0
139.2
103.4

1.52
1.51

$
$
$

$
$

62.8
9.1
28.1

0.40
0.40

22%
7%
27%

26%
26%

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

5 The “Changes to Market Data Fees for 2007” section above contains certain forward-looking statements. Please refer to “Forward-Looking Statements,

Risks and Uncertainties” for a discussion of risks and uncertainties related to such statements.

• Revenue increased in each of the three primary revenue streams of listings, trading and data.

• Expenses increased largely due to an increase in compensation and benefits costs as well as higher information and trading

systems costs, partially offset by lower general and administration costs.

• Net income increased mainly as a result of higher revenue and investment income, partially offset by increased expenses

and higher income taxes, primarily related to an adjustment in the value of our future tax asset largely as a result of federal
legislation enacted in June 2006 to reduce corporate tax rates for the years 2008-2010 and beyond.

Revenue

Listing Revenue
The following is a summary of listing fees reported and listing fees received* (reconciled below in this section) in 2006 and 2005.

(in millions of dollars)

Reported

Received*

2006

2005

$
increase

%
increase

2006

2005

$
increase

%
increase

Initial listing fees
Additional listing fees
Sustaining listing fees**
Total listing fees

$ 11.4
$ 35.9
$ 61.2
$ 108.5

$
9.3
$ 29.8
$ 48.6
$ 87.7

$
2.1
6.1
$
$ 12.6
$ 20.8

23%
20%
26%
24%

$ 28.4
$ 86.3
$ 61.2
$ 175.9

$ 28.0
$ 69.7
$ 48.6
$ 146.3

$
0.4
$ 16.6
$ 12.6
$ 29.6

1%
24%
26%
20%

Initial and additional listing fees are non-refundable fees received from listed issuers, which are recorded as “Deferred revenue
– initial and additional listing fees”, and recognized as listing revenue on a straight line-basis over an estimated service period of ten
years. The estimated service period of ten years was determined by conducting an historical review of listing activity. We determined
that the average period of time that an issuer remained listed on Toronto Stock Exchange was approximately ten years. In addition,
turnover rates were calculated for a Toronto Stock Exchange listed issuer and for a TSX Venture Exchange listed issuer, and were
determined to be in the range of ten to twelve years. Examining historical data allowed us to consider the impact of economic cycles
and other trends in capital markets over time. The service period selected affects the rate at which deferred revenue is recognized,
as well as the value of the future tax asset related to these fees.

The following is a reconciliation of listing fees received* to listing fees reported.

Initial Listing Fees

(in millions of dollars)

Initial listing fees received*
Initial listing fees received* and deferred to future periods
Recognition of initial listing fees received*
and previously included in deferred revenue
Initial listing fee revenue reported

2006

28.4
(28.0)

11.0
11.4

$
$

2005

28.0
(27.4)

8.7
9.3

* See discussion under the heading Non-GAAP Financial Measures.

** Sustaining listing fees received, as shown in this table, represents the amount recognized for accounting purposes during the year. Sustaining listing fees are billed

during the first quarter of the year, recorded as deferred revenue and amortized over the year on a straight line basis.

Additional Listing Fees
(in millions of dollars)

Additional listing fees received*
Additional listing fees received* and deferred to future periods
Recognition of additional listing fees received*
and previously included in deferred revenue
Additional listing fee revenue reported

2006

86.3
(84.9)

34.5
35.9

$
$

2005

69.7
(68.3)

28.4
29.8

• Initial and additional listing fees reported increased due to capital market activity and listing fee increases during the period from
April 1, 1996 to December 31, 2006 compared with the period from April 1, 1995 to December 31, 2005. Initial and additional
listing fees received* in 2006, as compared with 2005, reflect changes in the value of securities listed and reserved in the respective
periods, as well as changes to the pricing model that were implemented in Q1/06.

• Sustaining listing fees increased due to the overall higher market capitalization of listed issuers at the end of 2005 compared with
the end of 2004. Issuers listed on Toronto Stock Exchange and TSX Venture Exchange pay annual fees primarily based on their
market capitalization at the end of the prior calendar year, subject to minimum and maximum fees. In addition, revenue from
sustaining listing fees increased due to fee increases on each equity exchange that were effective January 1, 2006.

Trading and Related Revenue

(in millions of dollars)

Capital Markets
Energy Markets
Total trading and related revenue

Capital Markets

2006

127.2
19.1
146.3

$
$
$

2005

108.7
16.8
125.5

$
$
$

$
increase

%
increase

$
$
$

18.5
2.3
20.8

17%
14%
17%

• Trading and Related revenue increased as a result of significantly higher levels of market activity in 2006. However, the effect

of this increased activity was reduced by the impact of a series of changes to our trading fee structure, effective October 1, 2005,
January 1, 2006 and July 1, 2006 that resulted in an overall reduction in fees charged to our customers.

• The total volume of securities traded in 2006 on Toronto Stock Exchange and TSX Venture Exchange increased

by 40% over 2005 (119.7 billion securities in 2006 versus 85.7 billion securities in 2005).

• The total value of securities traded in 2006 on Toronto Stock Exchange and TSX Venture Exchange increased

by 33% over 2005 ($1,449.4 billion in 2006 versus $1,090.9 billion in 2005).

• The number of transactions in 2006 on Toronto Stock Exchange and TSX Venture Exchange increased by 57% over 2005

(92.1 million in 2006 versus 58.6 million in 2005).

• In addition, revenue from Shorcan for December 2006 has been included.

Energy Markets

• The volumes traded or cleared in natural gas and electricity contracts on NGX in 2006 increased by 11% over 2005

(9.8 million terajoules in 2006 versus 8.8 million terajoules in 2005).

* See discussion under the heading Non-GAAP Financial Measures.

Market Data Revenue

(in millions of dollars)

2006

2005

$
increase

%
increase

86.9

67.4

19.5

29%

• Market Data revenue increased due to an 18% increase in the number of professional and equivalent real-time data subscrip-

tions (over 139,000 at the end of 2006 versus over 118,000 at the end of 2005) partly due to increased sales of premium products
as well as increased sales to U.S. customers.

• The increase was also due to revenue from more recent initiatives including on-line delivery of data to retail investors,

direct to client low latency data feeds and advertising on tsx.com.

• The increase was also due to incremental revenue recoveries in 2006 of approximately $3.6 million over 2005 related

to under-reported usage of real-time quotes.

• The increase was also attributable to the inclusion of revenue from Scotia Capital’s fixed income indices and related products

following their acquisition on October 25, 2006.

• The increase was also due to fee changes that were effective April 1, 2006 and May 1, 2005.

• The increase was reduced by the negative impact of the appreciation of the Canadian dollar against the United States dollar
in 2006 versus 2005. In 2006, approximately $29.1 million Canadian was derived from market data sales to customers paying
in United States dollars compared with approximately $22.4 million Canadian in 2005.

Business Services Revenue

(in millions of dollars)

2006

2005

$
increase

%
increase

9.4

7.9

1.5

19%

• Business Services revenue increased due to providing additional services to existing and new customers.

• Market Regulation Services Inc. paid us $7.2 million in 2006 for technology related services as compared with $6.9 million in 2005.

Expenses

Compensation and Benefits

(in millions of dollars)

2006

2005

$
increase

%
increase

79.0

72.5

6.5

• In 2005, Compensation and Benefits costs were reduced by a gain of approximately $4.5 million under a hedging program related

to long-term based incentives, compared with a gain of $0.7 million in 2006.

• Compensation and Benefits costs increased due to higher costs related to salaries, pension and employee benefits as well as short-

term incentives, somewhat offset by lower organizational transition costs.

• The number of employees increased from 510 at the end of 2005 to 548 at the end of 2006 primarily due to the fourth quarter
acquisitions of Shorcan, Oxen Inc. and Scotia Capital Inc.’s* Fixed Income Indices, PC-Bond® analytics, and related data assets.

Information and Trading Systems

(in millions of dollars)

2006

2005

$
increase

%
increase

22.0

17.4

4.6

26%

• Information and Trading Systems costs increased due to higher hardware operating lease and maintenance costs relating in part
to expansion of trading system capacity required to accommodate the substantial growth in the number of orders and transac-
tions. In addition, resources were directed towards further improving execution speeds for traders with our TSXPressTM initia-
tive, and providing our listed issuers with investor relations management tools through TSXconnect.

General and Administration

(in millions of dollars)

2006

2005

$
(decrease)

%
(decrease)

34.2

35.8

(1.6)

(4%)

• General and Administration costs decreased due to reduced spending on marketing activities as well as lower capital taxes

and directors’ compensation, somewhat offset by higher fees paid to external consultants.

• We paid Market Regulation Services Inc. $3.4 million for regulation services in 2006 ($3.5 million in 2005).

Amortization

(in millions of dollars)

2006

2005

$
(decrease)

%
(decrease)

13.0

13.5

(0.5)

(4%)

• Amortization decreased primarily due to reduced depreciation of tangible assets, partially offset by an increase

in the amortization related to the intangible assets associated with acquisitions made in Q4/06.

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

Loss from Investment in Affiliate

(in millions of dollars)

2006

2005

$
(decrease)

%
(decrease)

0.1

0.7

(0.6)

(86%)

• Loss from Investment in Affiliate, which decreased from 2005, represents our share of CanDeal’s loss for 2006. The reduced loss
reflects CanDeal’s progress in adding liquidity providers and buy-side institutional investors as well as continued cost contain-
ment measures.

Investment Income

(in millions of dollars)

2006

2005

$
increase

%
increase

14.4

6.9

7.5

109%

• There was an increase in cash and marketable securities during 2006 versus 2005, generating higher investment income.

Income Taxes

(in millions of dollars)

2006

2005

$
increase

2006

Effective tax rate (%)

87.4

53.6

33.8

40%

2005

34%

• The effective tax rate increased from approximately 34% for 2005 to approximately 40% for 2006. The higher tax rate relates
primarily to an adjustment in the value of the future tax asset. In June 2006, the federal government enacted legislation to
reduce corporate tax rates for 2008-2010 and beyond. The future tax asset was reduced, and income taxes increased largely
as a result of these changes in federal corporate tax rates.

LIQUIDITY AND CAPITAL RESOURCES

We had $322.1 million of cash and marketable securities at December 31, 2006, and no external borrowings other than $0.9 million
of obligations under capital leases. Based on our current business operations and model, we believe that we have sufficient resources
to operate and continue to grow our business.

Cash and Marketable Securities

(in millions of dollars)

2006

2005

$
increase

322.1

276.2

45.9

• The increase was primarily due to $189.5 million in cash received from operations in 2006, offset by quarterly dividends

of $0.33 per common share, or $90.2 million in aggregate, and by payments of $53.7 million (net of cash acquired) related
to the purchases of Oxen Inc., Shorcan and Scotia Capital Inc.’s* Fixed Income Indices, PC-Bond® and related assets.

Total Assets

(in millions of dollars)

2006

2005

$
increase

1,572.8

1,557.2

15.6

• Total Assets increased by $15.6 million due to an increase in cash and marketable securities of $45.9 million, net of $53.7 million

(net of cash acquired) of payments related to the purchase of Oxen Inc., Shorcan and Scotia Capital Inc.’s* Fixed Income
Indices, PC-Bond® and related assets. In addition, $69.4 million was recorded in 2006 to reflect the goodwill and intangible
assets associated with these 2006 acquisitions. The increase was largely offset by lower energy contracts receivable of $889.4
million at December 31, 2006 related to the clearing operations of NGX, compared with $1,004.3 million at the end of 2005.
The reduced level of receivables reflected lower natural gas prices in December 2006 compared with December 2005. (As the
clearing counterparty to every trade, NGX also carries offsetting liabilities in the form of energy contracts payable, which
were $889.4 million at December 31, 2006 compared with $1,004.3 million at the end of 2005.)

Shareholders’ Equity

(in millions of dollars)

2006

2005

$
increase

227.0

177.8

49.2

• Shareholders’ Equity increased primarily due to net income of $131.5 million, offset by dividend payments of $90.2 million.

In addition, proceeds of $5.3 million were received on the exercise of options. Net income from NGX was $4.7 million in 2006,
as compared with $4.2 million in 2005.

• At December 31, 2006, there were 68,421,264 common shares issued and outstanding. There were 5,600,000 common shares

originally reserved for issuance under a share option plan of which 328,246 common shares were issued on the exercise of stock
options in 2006. At December 31, 2006, 4,678,918 common shares were reserved for issuance upon the exercise of options
granted under the share option plan. At December 31, 2006, there were 1,096,650 options outstanding.

• At January 30, 2007, there were 68,423,264 common shares issued and outstanding and 1,094,650 options outstanding under

the share option plan.

Cash Flows from Operating Activities

(in millions of dollars)

Cash Flows from Operating Activities

189.5

167.1

22.4

2006

2005

$ increase
in cash

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

Cash Flows from Operating Activities were $22.4 million higher in 2006 compared with 2005 due to:

(in millions of dollars)

2006

131.5
13.0

(12.6)
(6.1)

0.6

67.3
(7.4)
3.2
189.5

$
$

$
$
$
$

$
$

$
$
$
$

2005

103.3
13.5

(26.0)
(5.0)

8.9

58.8
8.3
5.3
167.1

$ increase /
(decrease)
in cash

$
$

$
$
$
$

28.2
(0.5)

13.4
(1.1)

(8.3)

8.5
(15.7)
(2.1)
22.4

Net income
Amortization
(Increase) in future tax asset primarily related to deferring
a portion of initial and additional listing fees received
(Increase) in accounts receivable and prepaid expenses
Net increase in accounts payable, accrued liabilities and
long term other liabilities
Increase in deferred revenue that results from not recognizing
a portion of listing fees received in the year
Increase/(decrease) in income taxes payable
Net increase in other items
Cash Flows from Operating Activities

Cash Flows From (Used in) Investing Activities

(in millions of dollars)

Cash Flows From (Used in) Investing Activities

(95.2)

(98.2)

3.0

2006

2005

$ increase
in cash

Cash Flows Used in Investing Activities were $3.0 million lower in 2006 compared with 2005 due to:

(in millions of dollars)

Capital expenditures (net proceeds on disposal) primarily related
to technology investments and leasehold improvements
Purchase of Oxen Inc., Shorcan and Scotia Capital Inc.’s*
Fixed Income Indices, PC-Bond® and related assets
(net of cash acquired)
Net (purchase) of marketable securities
Cash Flows (Used in) Investing Activities

2006

2005

(4.2)

(4.6)

$
$
$

(53.7)
(37.3)
(95.2)

$
$

-
(93.6)
(98.2)

$ increase /
(decrease)
in cash

$
$
$

0.4

(53.7)
56.3
3.0

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

Fixed Income Initiatives
We paid approximately $53.7 million (net of cash acquired) in the fourth quarter of 2006 related to our Scotia Capital and Shorcan
fixed income acquisitions. TSX Group, or one of its subsidiaries, will make further payments of up to $37.9 million related to
performance incentives, data licenses and other arrangements over the term of the relevant agreements. The combined revenue for
the most recently completed fiscal years was approximately $22.0 million.

Dividends
The recognition order of TSX Group and TSX Inc. contains certain financial viability tests that must be met. If TSX Inc. fails to
meet any of these tests for a period of more than three months, TSX Inc. will not, without the prior approval of the Director of
the Ontario Securities Commission, pay dividends (among other things) until the deficiencies have been eliminated for at least six
months or a shorter period of time as agreed by Ontario Securities Commission staff.

Financial Instruments
Our financial instruments include cash and investments in marketable securities. We hold units in a money market fund and a short-
term bond and mortgage fund. These investments are recorded at the lower of carrying value or market value, which is determined
by reference to quoted market prices. The primary risks related to these financial instruments are variation in interest rates and
counterparty default. Short-term interest rate risk is managed by maintaining a mix between amounts invested in the money market
fund and the short-term bond and mortgage fund. We manage credit risk by restricting investments to counterparties with a credit
rating of BBB or higher as determined by the Dominion Bond Rating Service.

Derivative Financial Instruments
We have entered into total return swaps which synthetically replicate the economics of TSX Inc. purchasing our shares as a partial
economic hedge to the share appreciation rights of deferred share units (DSUs) and restricted share units (RSUs) that are awarded
to our directors and employees. We mark to market the value of the hedged units as an adjustment to income, and simultaneously
mark to market the liability to unit holders of as an adjustment to income. The fair values of the contracts reflected in accounts
receivable were $0.8 million at December 31, 2006 and $2.6 million at December 31, 2005. During 2006, the change in the fair
market value of the total return swaps of $0.4 million was reflected as a reduction in Compensation and Benefits costs. To manage
counterparty risk, we entered into these total return swaps with a Schedule I Canadian chartered bank. The contracts are settled in
cash upon maturity. The obligation to unit holders is reflected on the balance sheet.

Financial Instruments and Comprehensive Income
The Canadian Institute of Chartered Accountants has issued new accounting rules on financial instruments, hedges and compre-
hensive income that will require us to account for all of our financial assets and liabilities at fair value. With the adoption of the new
rules on January 1, 2007, we will remeasure our financial assets and liabilities, as appropriate, at fair value and report a new section
of shareholders’ equity called other comprehensive income. We are determining the impact that these changes in accounting policy
will have on our consolidated financial statements.

NGX Collateral Arrangements and Clearing Backstop Fund
As part of its clearing operations, NGX becomes the counterparty to each transaction, thereby guaranteeing the performance of
every contract that is executed on its electronic trading platform. To backstop its clearing operations, NGX has a credit agreement
in place with a Canadian chartered bank. We are NGX’s guarantor for this credit agreement up to a maximum of $30.0 million. We
have pledged $30.0 million of marketable securities related to our obligations as guarantor. In addition, NGX has covenanted under
the agreement to maintain a minimum of $9.0 million of tangible net worth. If NGX suffers a loss on its clearing operations, it could
lose its entire tangible net worth. The bank could also realize up to a maximum of $30.0 million on our guarantee, to the extent
required to cover the loss.

NGX requires each counterparty (the Contracting Party) to provide collateral in the form of cash or letters of credit based on the
margins required for its unsettled contractual obligations, which may be accessed in the event of a default by such Contracting Party.

The collateral provided in the form of cash (the cash collateral deposits) is segregated in individually designated bank accounts held
at the same Canadian chartered bank by NGX, which acts as trustee for these funds. The cash collateral deposits, together with
letters of credit provided by all the Contracting Parties, exceed all of the outstanding credit exposure, as determined by NGX, for all
its unsettled contractual obligations at any point in time.

Contractual Obligations

(in thousands of dollars)

Capital Lease Obligations
Operating Leases
Other Obligations
Total

SELECTED ANNUAL INFORMATION

(in thousands of dollars, except per share amounts)

Total

977
69,772
74,243
144,992

Less than
1 year

830
13,006
18,332
32,168

1 – 3 years

4+ years

147
21,501
24,751
46,399

–
35,265
31,160
66,425

Revenue
Net income
Total assets
Long-term liabilities
Deferred revenue –

initial and additional listing fees (current and long-term)

Earnings per share:

Basic
Diluted
Cash dividends declared per common share

Revenue, net income and earnings per share
2006

2006

2005

2004

352,847
$
131,524
$
$ 1,572,838
43,450
$

$
$
$

346,133

1.92
1.91
1.32

$
$
$
$

$
$
$

289,964
103,353
1,557,225
30,508

278,775

1.52
1.51
0.90

$
$
$
$

$
$
$

243,430
68,490
1,036,294
24,286

220,155

1.01
1.00
0.58

• For the year ended December 31, 2006, net income was $131.5 million, or $1.92 per common share ($1.91 on a diluted basis)
on total revenue of $352.8 million, representing an increase of $28.1 million, or 27%, compared with $103.4 million, or $1.52
per common share ($1.51 on a diluted basis) for the year ended December 31, 2005.

• The 2006 results reflect significantly higher revenue across all of the primary revenue streams. The increase in revenue was
partially offset by an increase in compensation and benefits expenses and information and technology costs as well as higher
income taxes primarily related to a decrease in the value of our future tax asset. Net income in 2006 also reflects higher invest-
ment income due to increased cash and marketable securities in 2006 as well as gains on short-term bond and mortgage fund
investments in 2006.

2005

• For the year ended December 31, 2005, net income was $103.4 million, or $1.52 per common share ($1.51 on a diluted basis)
on total revenue of $290.0 million, representing an increase of $34.9 million, or 51%, compared with $68.5 million, or $1.01
per common share ($1.00 on a diluted basis) for the year ended December 31, 2004.

• The 2005 results reflect significantly higher revenue across all of the primary revenue streams and lower general and adminis-

trative expenses, partially offset by an increase in income taxes.

Total assets
2006

• During 2006, total assets of $1,572.8 million increased by $15.6 million over $1,557.2 million in 2005 due to an increase in

cash and marketable securities of $45.9 million, net of $53.7 million (net of cash acquired) of payments related to the purchase
of Oxen Inc., Shorcan and Scotia Capital Inc.’s* Fixed Income Indices, PC-Bond® and related assets. In addition, $69.4 million
was recorded in 2006 to reflect goodwill and the intangible assets associated with these 2006 acquisitions. The increase was
largely offset by lower energy contracts receivable of $889.4 million at December 31, 2006 related to the clearing operations of
NGX, compared with $1,004.3 million at the end of 2005. The reduced level of receivables reflected lower natural gas prices in
December 2006 compared with December 2005. (As the clearing counterparty to every trade, NGX also carries offsetting liabil-
ities in the form of energy contracts payable, which were $889.4 million at December 31, 2006 compared with $1,004.3 million
at the end of 2005.)

2005

• During 2005, total assets of $1,557.2 million increased by $520.9 million over $1,036.3 million in 2004 primarily as a result of
higher energy contracts receivables of $1,004.3 million related to the clearing operations of NGX ($608.4 million in 2004).
The increased level of receivables reflected higher natural gas prices in December 2005 compared with December 2004. (As the
clearing counterparty to every trade, NGX also carries offsetting liabilities in the form of energy contracts payables, which were
$1,004.3 million at the end of 2005 compared with $607.5 million at the end of 2004.) The increase in total assets also reflects
an increase in marketable securities, accounts receivable and the long-term portion of the future tax asset.

Deferred revenue-initial and additional listing fees

• Deferred revenue-initial and additional listing fees increased from 2004 through 2006 as the fees received from initial and addi-

tional listings during this period were higher than the amount of revenue recognized for these fees related to prior periods.

QUARTERLY INFORMATION

(in thousands of dollars, except per share amounts)

Dec. 31/06 Sept. 30/06

June 30/06 Mar. 31/06 Dec. 31/05 Sept. 30/05

June 30/05 Mar. 31/05

$ 91,025 $ 81,197 $ 92,612 $ 88,013
34,727

35,116

28,464

33,217

$ 76,264
27,813

$ 75,333
28,717

$ 68,621 $ 69,746
23,075

23,748

0.51
0.51

0.49
0.48

0.42
0.41

0.51
0.50

0.41
0.40

0.42
0.42

0.35
0.35

0.34
0.34

Revenue
Net Income
Earnings per share:
Basic
Diluted

2005

• Revenue in Q2/05 declined slightly from revenue in Q1/05 primarily due to lower trading revenue. Net income for Q2/05

improved over net income for Q1/05 primarily due to lower compensation and benefits costs.

• Revenue in Q3/05 improved over the revenue in Q2/05 primarily due to higher trading, listing and market data revenue.

Net income for Q3/05 improved over net income in Q2/05 primarily due to increased revenue combined with lower general
and administration costs.

• Revenue in Q4/05 improved over revenue in Q3/05 primarily due to higher listing and market data revenue somewhat offset
by lower trading revenue. Net income for Q4/05 declined over net income from Q3/05 primarily due to higher overall expenses.

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

2006

• Revenue in Q1/06 improved over revenue in Q4/05 primarily due to higher trading, listing and market data revenue. Net income
for Q1/06 increased over net income for Q4/05, primarily due to the increased revenue partially offset by higher overall expenses.

• Revenue in Q2/06 improved over revenue in Q1/06 primarily due to higher market data, listing and trading revenue. However,
net income for Q2/06 decreased over net income for Q1/06, primarily due to higher income taxes. In Q2/06, the federal govern-
ment enacted legislation to reduce corporate tax rates for 2008-2010 and beyond. The future tax asset was reduced, and income
taxes increased by $9.6 million, primarily as a result of these changes in federal corporate tax rates.

• Revenue in Q3/06 declined over revenue in Q2/06 largely due to lower trading revenue, reflecting lower trading volumes and

following the introduction of a volume-based fee structure for most issuers listed on Toronto Stock Exchange and TSX Venture
Exchange, effective July 1, 2006. Net income for Q3/06 increased over Q2/06 primarily due to higher investment income as well
as lower income taxes. The increase was partially offset by the decreased revenue and higher overall expenses.

• Revenue in Q4/06 improved over revenue in Q3/06 primarily due to higher trading, market data and listing revenue. Net income

for Q4/06 increased over Q3/06 primarily due to the increased revenue partially offset by higher overall expenses.

Review of Fourth Quarter Results

Compared with Q4/05

• Revenue in Q4/06 improved over revenue in Q4/05 primarily due to higher market data, listing and trading revenue. Net income
for Q4/06 increased over Q4/05 primarily due to the increased revenue partially offset by higher compensation and benefits
and information and trading systems expenses. Investment income increased over Q4/05 due to an increase in cash and market-
able securities and increased returns from short-term bond and mortgage fund investments. Cash flows from operating activities
in Q4/06 decreased compared with Q4/05 largely due to an increase in accounts receivable and prepaid expenses, a decrease in
income taxes payable, partially offset by an increase in net income.

Compared with Q3/06

• Revenue in Q4/06 improved over revenue in Q3/06 primarily due to higher trading, market data and listing revenue. Net income
for Q4/06 increased over Q3/06 primarily due to the increased revenue partially offset by higher compensation and benefits and
amortization expenses. Cash flows from operating activities in Q4/06 increased compared with Q3/06 primarily due to an increase
in net income and a decrease in the value of the future tax asset.

CRITICAL ACCOUNTING ESTIMATES

Revenue from initial and additional listing fees
We recognize revenue generated from initial and additional listing fees on a straight line basis over an estimated service period of
ten years. The estimated service period of ten years was determined by conducting an historical review of listing activity. We deter-
mined that the average period of time that an issuer remained listed on Toronto Stock Exchange was approximately ten years. In
addition, turnover rates were calculated for a Toronto Stock Exchange listed issuer and for a TSX Venture Exchange listed issuer,
and were determined to be in the range of ten to twelve years. Examining historical data allowed us to consider the impact of
economic cycles and other trends in capital markets over time. The service period selected affects the rate at which deferred revenue
is recognized, as well as the value of the future tax asset related to these fees.

Long-term incentive plan
We have a long-term incentive plan under which we may grant RSUs. The amount of the award payable at the end of the three years
is determined by the total shareholder return (appreciation in share price plus dividends paid) at the end of the three year period.
We accrue our obligations and include them in accounts payable and accrued liabilities and other liabilities. The obligations are
recorded at a targeted payout and not necessarily based on the maximum amount that might be paid. The maximum amount to be
paid is unknown and will be based on total shareholder return and share price at the time of payout. We have purchased derivative
financial instruments that partially hedge the impact of share price appreciation.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Disclosure Controls and Procedures
The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for establishing and maintaining adequate
disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that information required to be
disclosed in our filings under securities legislation is accumulated and communicated to management, including the CEO and CFO
as appropriate, to allow timely decisions regarding public disclosure. They are designed to provide reasonable assurance that all
information required to be disclosed in these filings is recorded, processed, summarized and reported within the time periods speci-
fied in securities legislation. We regularly review our disclosure controls and procedures; however, they cannot provide an absolute
level of assurance because of the inherent limitations in control systems to prevent or detect all misstatements due to error or fraud.

Our management, including the CEO and CFO, conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of December 31, 2006. Based on this evaluation, the CEO and CFO have concluded that our
disclosure controls and procedures are effective.

Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reason-
able assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with GAAP. Internal control over financial reporting includes those policies and procedures that: (1) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TSX
Group, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of TSX Group are being made only in accordance with authorizations of
management and directors of TSX Group, and (3) provide reasonable assurance regarding prevention or timely detection of unau-
thorized acquisition, use or disposition of TSX Group’s assets that could have a material effect on the financial statements.

There have been no changes to the design of our internal controls over financial reporting during the quarter ended December 31,
2006, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

STRATEGY AND OUTLOOK 6

Our corporate strategy has evolved through our assessment of the exchange sector and of our business. We have identified trends
that have important implications for our strategy and outlook.

Our corporate objectives are to capitalize on our competitive advantages (as outlined under our Vision) and to pursue the principal
strategies described below, organically and through acquisitions, strategic alliances and investments to achieve profitable growth and
maximize shareholder returns.

Global industry consolidation accelerated over the last twelve months, culminating in regional consolidation and trans-Atlantic
merger proposals to create “super-exchanges”. In our view, a strong driver of industry consolidation is cost synergies. We believe
consolidation will continue. We expect to see multi-asset consolidation between large and small players, and exchanges to look
abroad to broaden distribution and expand their offerings.

After March 16, 2009, when the memorandum of agreement with the Bourse de Montréal comes to an end, we plan to enter
the derivatives market. In our view, Canada needs a strong player that provides an integrated equities and derivatives offering to
compete globally in the consolidating world of exchanges. We believe that a strategic partnership, an acquisition or some combina-
tion of these alternatives is preferable to building the platform ourselves. We are encouraged by the number of parties who are inter-
ested in working with us.

Going forward, we plan to invest our cash as we pursue the many opportunities that surround us for enhancing our core business,
extending our pre-eminent domestic position in Canada through diversification and expanding internationally.

Enhance the Core Business
To maintain our pre-eminent position in the Canadian equity capital markets, we intend to further expand our product and service
offerings to address the changing needs of issuers, intermediaries and investors as we strive to maintain the highest quality market-
place.

6 The “Strategy and Outlook” section above contains certain forward-looking statements. Please refer to “Forward-looking Statements, Risks and Uncertainties”

for a discussion of risks and uncertainties related to such statements.

Listings
We have organized the listings operations of Toronto Stock Exchange and TSX Venture Exchange to increase our focus on growth.
This includes expanding the business development function to improve the efficiency of its sales efforts. The team will focus on:

• Promoting Toronto Stock Exchange and TSX Venture Exchange as listings destinations.

• Enhancing relationships with influencers that will also promote Toronto Stock Exchange and TSX Venture Exchange as listing

venues.

• Identifying targets and converting inquiries into listings.

Toronto Stock Exchange, specifically, will:

• Continue to focus on listing structured equity products, such as ETFs, which expand our reach into the investment market-

place.

• Offer value-added products by collaborating with industry leaders.

• Foster a customer-centric approach by tailoring listings standards to reflect the variety of equity products available on TSX.

TSX Venture, specifically, will:

• Focus on pursuing initiatives that drive new listings, such as expanding its Capital Pool Company® program and executing its

Public Venture Capital Campaign.

• Offer mentoring programs designed to enhance existing issuers’ probability of success as public companies.

• Pursue growth in Central and Eastern Canada, where public venture capital markets are relatively less developed.

• Pursue growth in untapped non-resource sectors.

Trading

• Through upgrades to our trading system, we intend to continue to deliver the reliability, scalability, low cost and high speed of
execution, which underpins us as one of the world’s leading electronic marketplaces. In 2007, we plan to upgrade our trading
system with the next generation of servers. We expect to enter into new operating leases that will replace existing leases.

• We are keenly aware of the importance of speed of execution due to the rapid growth of algorithmic trading and plan to take

the necessary steps to enhance capacity and performance.

• We will continue to develop and offer new customized trading products and services, such as TSX MOCTM, Multiple Broker
Give Up and FOXTM designed to meet the distinct needs of various investors and intermediaries and bring more liquidity and
efficiency to the marketplace. ATXTM, a high-speed TSX trading facility to match firm order flow against in-house liquidity as
well as liquidity from other market participants, is currently in development and is scheduled to be launched in 2007***.

Market Data
We will focus on:

• Increasing penetration of existing customers and up-selling them to premium content products.

• Continuing to work with market data vendors to upgrade their data delivery capabilities.

• Continuing to provide direct distribution to clients (TSX Direct) to meet their needs for reduced data latency.

• Leveraging existing data capabilities and infrastructure (LinxPointOneTM) to add new content, such as Over-the-Counter

(OTC), fixed income, foreign exchange, and other premium data.

• Building on our agreement with The Canadian Press to provide fact-based, non-biased journalist generated news.

*** Subject to regulatory approval.

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

Extend Pre-eminent Domestic Position
We will seek growth opportunities through diversification both horizontally into related markets in which we can leverage our
competitive advantages and vertically into other areas of the capital markets. Two areas into which we have already expanded are
fixed income and energy markets as follows:

Fixed Income
Following our fixed income acquisitions in 2006, we are now the leading provider of fixed income indices in Canada, and provide
IDB, fixed income trading. In October 2006, we acquired Scotia Capital Inc.’s* Fixed Income Indices, its PC-Bond® analytics,
and related data assets. In December 2006, we acquired Shorcan, Canada’s first fixed income IDB. Shorcan offers clients trading
in federal, provincial, corporate and mortgage bonds and treasury bills. Through our approximate 47% stake in CanDeal, we also
provide dealer to client fixed income trading. CanDeal has achieved significant growth since its inception and reported a profit of
$0.1 million in the second half of 2006. CanDeal continues to focus on expanding its product and service offering, adding more
liquidity providers and attracting more institutional customers. CanDeal also provides access beyond Canada through its technology
and co-marketing agreement with Thomson TradeWeb®.

Energy
We entered the energy trading and clearing business in March 2004 when we purchased NGX. NGX will continue to focus on
growing its business. In October 2006, we added to our energy business when we acquired Oxen Inc. which owns the Alberta Watt
Exchange Limited (Watt-Ex), a platform for providing ancillary services to the Alberta Electric System Operator which is used to
balance supply and demand on the Alberta grid.

Expand Internationally
We will look for ways to expand beyond the borders of Canada, organically and through new acquisitions, strategic alliances and
investments.

U.S. Market
We will continue to place greater focus on making Toronto Stock Exchange the market of choice for U.S. market participants for
trading all Toronto Stock Exchange listed securities. We plan to pursue multiple initiatives across all business areas:

• We will seek to capture an increasing proportion of trading in Canadian-based interlisted stocks by continuing to meet U.S. and
global connectivity standards (FIX), fostering best execution and educating the market on TSX’s value proposition. Additionally,
we will target executable order flow from U.S. market participants for Toronto Stock Exchange listed securities.

• We plan to leverage and expand the relationship between U.S. data sales agents and market data vendors with the goal of

increasing data sales.

• We will seek to attract U.S. listings on our exchanges and focus on those areas where we provide a competitive advantage

including targeting SMEs and issuers in the natural resource sector. We have planned a targeted seven-city marketing campaign
for 2007.

Global Issuers
We will work to attract foreign issuers, leveraging our global competitive advantages in:

• Mining and Oil & Gas Sectors: We will seek to attract additional listings of global mining and oil & gas issuers by capital-

izing on our international reputation of having a leading marketplace for those issuers. Based on the most recent data, as of
September 30, 2006, we had approximately 50% market share of the world’s global mining financings by value and approxi-
mately 59% of all publicly traded mining issuers were listed on one of our equity exchanges. We also listed the greatest number
of oil & gas issuers globally. We have prioritized international target markets, focusing first on the US, then on Australia,
Europe, South Africa, and China. We will increase our participation and presence in strategic events, such as conferences and
listings forums. We will further develop and enhance relationships with key stakeholders and strategic partners to enable quick
response to listing inquiries by prospective issuers.

• Structured Equity Products: We will also leverage internationally our domestic success by listing structured equity products,

such as ETFs.

* Registered trade-mark of The Bank of Nova Scotia. Used under license.

FORWARD-LOOKING STATEMENTS, RISKS AND UNCERTAINTIES

This MD&A, in particular the sections under the headings Strategy and Outlook, Changes to Listing Fees for 2007 and
Changes to Market Data Fees for 2007, contains forward-looking statements, which are not historical facts but are based on
certain assumptions and reflect our current expectations. These statements relate to among other things, anticipated financial
performance, business prospects, strategies, regulatory developments, new services, market forces, commitments and technological
developments. Forward-looking statements are typically identified by words such as “believe”, “plan”, “outlook”, “anticipate”,
“continue”, “estimate”, “may”, “will”, “should”, “could”, and similar expressions. These forward-looking statements are subject to a
number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Some of the
risk factors that could cause actual results to differ materially from current expectations are those set out below. We do not under-
take to update or revise any forward-looking statement that may be made from time to time by us or on our behalf.

We have in place an integrated risk management process in which the Board assumes overall stewardship responsibility for risk;
the Finance & Audit Committee of the Board assesses the adequacy of risk management policies and procedures; and Senior
Management oversees implementation of risk management policies and processes. The management framework supporting the risk
management objectives includes regular assessments of principal risks, and implementation of risk management tactics, which are
monitored and adjusted as required.

Our business, financial condition, or operating results could be materially adversely affected if any of these risks and uncertain-
ties were to materialize, and if we were unsuccessful in mitigation of any of these risks. Additional risk factors are discussed in our
materials filed with the securities regulatory authorities in Canada from time to time, including our most recent Annual Information
Form. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction
of actual results.

We Face Competition from Other Exchanges, ATSs, OTC Markets, Other Sources and New Technologies
We face competition from other exchanges as well as from ATSs, Electronic Communication Networks (ECNs), the OTC markets,
other sources and new technologies. This competition may intensify in the near future, especially as technological advances create
pressure to develop more efficient and less costly trading in global or regional markets. If we cannot maintain and enhance our
ability to compete or respond to competitive threats, it will have an adverse impact on our results of operations.

Other Exchanges
We face increased competition for business from other exchanges, especially those in the United States as they consolidate, and
investing becomes more global. We also face competition from foreign exchanges, such as AIM, for listings of Canadian-based
issuers and trading in their securities. If we are unable to continue to provide competitive trade execution, the volume traded in
Canadian-based interlisted issuers over our exchanges could decrease in the future and adversely affect our operating results. We
continue to face competition from CNQ, which has partially launched a facility, Pure Trading, to trade our listed issuers’ securities.

The trend for exchanges to form alliances or consolidate and become for-profit and publicly traded is increasing and will result in
our competitors becoming stronger. If we are not included in any alliances, these developments could materially adversely affect us.

ATSs
Technological advances have lowered barriers to entry and have facilitated the establishment of new exchanges and mechanisms,
such as ATSs and ECNs, to electronically trade securities and other financial instruments outside traditional exchanges. ATSs have
a framework to operate in Canada under the ATS Rules and may become our significant competitors in the future. For example,
Instinet Canada Inc. has announced that it intends to launch a trading platform in 2007.

OTC Market and Other Sources
NGX’s business of trading and clearing energy contracts faces primary competition in energy markets in Canada and the United
States from the OTC or bilateral markets (with support from voice brokers) who have recently consolidated. These voice brokers
continue to provide efficient contract matching services for both standardized and structured products and are expanding their
product offerings to include access to clearing facilities for trading parties who may have credit constraints. If NGX is unable to
compete with the OTC voice brokers and their clearing partners, NGX may not be able to expand its business, which could materi-
ally affect its business and operating results.

In addition, CanDeal faces competition primarily from the OTC market. If CanDeal fails to attract institutional order flow from
this market, it would adversely affect its operating results.

Shorcan’s competitors in the fixed income IDB market include Freedom Bond Brokers, owned by Cantor Fitzgerald, Tullett Prebon,
owned by Collins Stewart and BrokerTec, an electronic platform owned by ICAP. If Shorcan fails to attract institutional order flow
from this market, it would adversely affect its operating results.

New Technologies
Technological advances, and in particular the Internet, have made it easier to download and disseminate electronic information.
This may cause the value of our information to deteriorate since it is difficult to enforce restrictions on the use of information that
we transmit electronically.

We may not be able to maintain or increase market data revenue if we cannot enforce our proprietary rights in the future.

We Depend on the Economy of Canada
Our financial results are affected by the Canadian economy, which is relatively small.

Approximately 96% of our listed issuers as of December 31, 2006 were Canadian-based companies. The performance of these
issuers has an effect on the volume of trading on our exchanges. If the profit growth of Canadian-based companies is generally
lower than the profit growth of companies based in other countries, the markets on which those other issuers are listed and trade
may be more attractive to investors than our equity exchanges. The threat of a prolonged economic downturn may also have a
negative impact on investment performance, the number of new issuers, the market capitalization of our listed issuers, additional
securities being listed or reserved and trading volumes.

We Need to Retain and Attract Qualified Personnel
Our success depends to a significant extent upon the continued employment and performance of a number of key management
personnel whose compensation is partially tied to vested stock options and long-term incentive plans that mature over time. The
value of this compensation is dependent upon share price and total shareholder return performance. The loss of the services of key
personnel could have a material adverse effect on our business and results of operations. We also believe that our future success will
depend in large part on our ability to attract and retain highly skilled technical, managerial and marketing personnel. There can be
no assurance that we will be successful in retaining and attracting the personnel we require.

Geopolitical Factors/Business Continuity
The continuity of our critical business functions could be interrupted by geopolitical upheaval, including terrorist, criminal, political
and cyber, or by other types of disruptions, including natural events.

We have a series of integrated disaster recovery and business continuity plans for critical business functions to mitigate the risk of
an interruption. However, these plans may not be adequate, and we cannot entirely eliminate the risk of a system failure or business
interruption.

We Depend Heavily on Information Technolog y, which could Fail or Malfunction
We are extremely dependent on our information technology systems, including data and communications systems (IT Operations).
Our trading is conducted exclusively on an electronic basis. We have disaster recovery and contingency plans and back-up proce-
dures to manage, mitigate and minimize the risk of an interruption or failure to, and to ensure the integrity of, our IT Operations.
We also test our disaster recovery plans for trading on Toronto Stock Exchange and TSX Venture Exchange, and include customers
in that process. However, those plans may not be adequate and we cannot entirely eliminate the risk of a system failure or interrup-
tion. We have experienced occasional IT Operations failures and delays in the past, and we could experience future IT Operations
failures and delays.

Our current technological architecture may not effectively or efficiently support our changing business requirements. The system
hardware was upgraded in 2004. Two hardware upgrades and two software performance releases were implemented in 2005 in
response to increases in order message volumes and transactions. In January 2007, we announced the completion of much of the
work on TSXPressTM, which included three major trading system enhancements in 2006. We will continue to make additional
expenditures to further enhance and upgrade our systems. To grow, we will need to continuously improve our information tech-
nology systems so that we can handle increases and changes in trading activity and to respond to customer demand for faster
processing times. This will require ongoing expenditures, which may require us to expend significant amounts in the future. In 2006,
we tested our next generation trading engine in an independent laboratory. While results were positive, it is too early to tell if we
will be able to replicate these results in a production environment.

If our systems are significantly compromised or disrupted or if we suffer repeated failures, this could interrupt our trading services;
cause delays in settlement; cause us to lose data; corrupt our trading operations, data and records; or disrupt our business operations.
This could undermine confidence in our exchanges and have a material adverse effect on our reputation or results of operations, and
may lead to customer claims, litigation and regulatory sanctions.

We May Not Be Successful in Implementing our Strateg y
We invest significant resources in the development and execution of our corporate strategy to grow profitability and maximize
shareholder returns. We may not succeed in implementing our strategies.

We also have limited experience pursuing new business opportunities or growth opportunities in new geographic markets. We
may have difficulty executing our strategies because of, among other things, increased global competition, difficulty developing
and introducing new products, barriers to entry in other geographic markets, and changes in regulatory requirements. Any of
these factors could have a material adverse effect on the success of our strategies.

As part of our strategy to sustain growth, we expect to continue to pursue appropriate acquisitions of other entities and technolo-
gies. An acquisition will only be successful if we can integrate the acquired businesses’ operations, products and personnel; retain
key personnel; and expand our financial and management controls and our reporting systems and procedures to accommodate the
acquired businesses. If an investment or acquisition does not fulfil expectations, we may have to write down its value in the future
or sell it at a loss.

We may enter into agreements in the future which further our strategy but which may also impose restrictions on us. For example,
in the agreement with CNW Group, we agreed to certain restrictions on the business activities we can engage in until 2008 (in areas
that we view as non-core to our business) in exchange for a share of revenue earned from products and services offered by CNX
Marketlink in those areas. In addition, the memorandum of agreement with the Bourse de Montréal prevents us from providing
trading facilities and services for exchange-traded derivative products, comprising (without limitation) options and futures contracts,
other than natural gas and electricity products, until March 16, 2009.

We are Subject to Regulation
The provincial securities regulators regulate us and our exchanges and regulators in other jurisdictions may regulate our future
operations. This regulation may impose barriers or constraints which limit our ability to build an efficient, competitive organization
and may also limit our ability to expand foreign and global access. Securities regulators also impose financial and corporate gover-
nance restrictions on us. Some of the provincial securities regulators must approve or review our equity exchanges’ listing rules,
trading rules, and features and operations of, or changes to our systems and our fee structures. These approvals or procedures may
increase our costs and delay our plans for implementation. There could also be regulatory changes that impact our customers and
that could have a material adverse impact on us.

We are Subject to Litigation Risks
Some aspects of our business involve risks of litigation. Dissatisfied customers may make claims with respect to the manner in
which we operate. Although we benefit from certain contractual indemnities and limitations on liabilities, these rights may not be
sufficient. In addition, with the introduction of civil liability for misrepresentations in our continuous disclosure documents and
statements and the failure to make timely disclosures of material changes in Ontario and certain other jurisdictions, dissatisfied
shareholders can more easily make claims against us. If a lawsuit or claim is resolved against us, it could have a material adverse
effect on our reputation, business, financial condition and operating results.

Our Exchanges Depend on the Development and Acceptance of our New Products
We are dependent to a great extent on developing and introducing new financial and trading products and on their acceptance by
the investment community. While we continue to review and develop new products that respond to the needs of the marketplace,
we may not continue to develop successful new products. Our current products may become outdated or lose market favour
before we can develop adequate enhancements or replacements. Other exchanges or ATSs may introduce new products or product
enhancements that make our products less attractive.

Even if we develop an attractive new product, we could lose trading activity to another marketplace that introduces a similar or iden-
tical product which offers greater liquidity or lower cost. We also may not receive regulatory approval (in a timely manner or at all)
for our new products. Any of these events could have a material adverse effect on our results of operations.

New Business Activities May Adversely Affect Income
We may enter new business activities that could have an adverse effect on our existing profitability. While we would expect to realize
new revenue from these new activities, there is a risk that this new revenue would not be greater than the associated costs or any
related decline in existing revenue sources.

Our Trading Operation Depends Primarily on a Small Number of Clients and Vendors
During 2006, approximately 58% of our trading revenue on Toronto Stock Exchange and approximately 59% of our trading revenue
on TSX Venture Exchange were accounted for by the top ten POs on each exchange. Our business, financial condition or operating
results could suffer a material adverse effect if any one of these POs significantly reduced or stopped trading on our exchanges, or if
two or more POs consolidated.

During 2006, approximately 19% of our trading revenue on Toronto Stock Exchange and approximately 11% of our trading revenue
on TSX Venture Exchange was derived from trading in the securities of the ten most actively traded listed issuers on each exchange.
If we lost one or more of these issuers, we would not only suffer a decrease in revenue from our listing operations, but we would also
suffer an even more significant decrease in revenue from our trading operations.

We Could Suffer Losses as a Result of NGX’s Clearing Activities
We could suffer a loss if one or more of NGX’s participants defaults on their contractual obligations since NGX assumes this coun-
terparty risk. As part of its clearing services, NGX guarantees that its cleared contracts will be honoured. NGX faces other risks
associated with the clearing business including market risks, settlement risks, concentration risks and operational risks.

By providing a clearing facility, NGX is subject to the risk of a counterparty defaulting simultaneously with an extreme market price
movement. NGX manages this risk by applying standard rules and regulations, and using a conservative margining regime based on
globally accepted margin concepts. This margining regime involves valuing the market stress of client portfolios in real-time and
requiring participants to deposit liquid collateral in excess of those valuations. NGX conducts market stress scenarios regularly to
test the ongoing integrity of its clearing operation. NGX also relies on established policies, instructions, rules and regulations as well
as procedures specifically designed to actively manage and mitigate risks.

To backstop its clearing operations, NGX has a credit agreement in place with a Canadian chartered bank. We are NGX’s guarantor
for this credit agreement up to a maximum of $30.0 million. We have pledged $30.0 million of marketable securities related to our
obligations as guarantor. In addition, NGX has covenanted under the agreement to maintain a minimum of $9.0 million of tangible
net worth. If NGX suffers a loss on its clearing operations, it could lose its entire tangible net worth. The bank could also realize up
to a maximum of $30.0 million on our guarantee, to the extent required to cover the loss.

Our Cost Structure is Largely Fixed
Most of our expenses are fixed and cannot be easily lowered if our revenue decreases, which could have an adverse effect on our
results of operations and financial condition.

We Depend on Market Activity that is Outside of our Control
Our revenue is highly dependent upon the level of activity on our exchanges, including the volume of securities traded; the number
and market capitalization of listed issuers; the number of new listings; the number of active traders and brokerage firms in the
market; and the number of subscribers to market data.

We do not have direct control over these variables. Among other things, these variables depend upon the relative attractiveness of
securities traded on our exchanges and the relative attractiveness of our exchanges as a place to trade those securities as compared
with other exchanges and other trading vehicles. Those variables are in turn influenced by:

• the overall economic conditions in Canada and the United States in particular, and in the world in general (especially growth

levels and political stability);

• the condition of the resource sector;

• interest rate environment and resulting attractiveness of alternative asset classes;

• the regulatory environment for investment in securities;

• the relative activity and performance of global capital markets;

• investor confidence in the prospects and integrity of our listed issuers, and the prospects of Canadian-based listed issuers

in general;

• pricing volatility of global energy markets; and

• changes in tax legislation that would impact the relative attractiveness of certain types of securities, including income trusts.

We may be able to indirectly influence the volume of trading by providing efficient, reliable and low-cost trading; maximizing the
availability of timely, reliable information upon which research, advice and investment decisions can be based; and maximizing the
ease of access to trading facilities. However, those activities may not have a positive effect on, or effectively counteract the factors
that are outside of our control.

January 31, 2007

MANAGEMENT STATEMENT

Management is responsible for the preparation, integrity and fair presentation of the consolidated financial statements, manage-
ment’s discussion and analysis, and other information in this annual report. The consolidated financial statements were prepared
in accordance with Canadian generally accepted accounting principles and, in the opinion of management, fairly reflect the
financial position, results of operations and changes in the financial position of TSX Group Inc. Financial information contained
throughout this annual report is consistent with the consolidated financial statements.

Acting through the Finance and Audit Committee, comprised of non-management directors, all of whom are independent direc-
tors within the meaning of Multilateral Instrument 52-110-Audit Committees, the Board of Directors oversees management’s
responsibility for financial reporting and internal control systems. The Finance and Audit Committee is responsible for reviewing
the consolidated financial statements and management’s discussion and analysis and recommending them to the Board of Directors
for approval. To discharge its duties the Committee meets with management and external auditors to discuss audit plans, internal
controls over accounting and financial reporting processes, auditing matters and financial reporting issues.

TSX Group’s external auditors appointed by the shareholders, KPMG LLP, are responsible for auditing the consolidated
financial statements and expressing an opinion thereon. The external auditors have full and free access to, and meet
periodically with, management and the Finance and Audit Committee to discuss the audit.

RICHARD NESBITT
Chief Executive Officer
January 31, 2007

MICHAEL PTASZNIK
Chief Financial Officer
January 31, 2007

AUDITORS’ REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of TSX Group Inc. as at December 31, 2006 and 2005 and the consolidated state-
ments of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.

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

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with
Canadian generally accepted accounting principles.

CHARTERED ACCOUNTANTS
Toronto, Canada
January 29, 2007

CONSOLIDATED BALANCE SHEETS

December 31, 2006 and 2005 (in thousands of dollars)

2006

2005

Assets
Current assets:
Cash

Marketable securities (notes 3 and 9)

Accounts receivable
Energy contracts receivable (notes 9 and 10)
Prepaid expenses
Future tax asset (note 21)

Premises and equipment (note 5)
Future tax asset (note 21)
Other assets (note 6)
Investment in affiliate (note 8)
Intangible assets (note 11)
Goodwill (note 11)

Liabilities and Shareholders’ Equity
Current liabilities:

Accounts payable and accrued liabilities
Energy contracts payable (notes 9 and 10)

Deferred revenue
Deferred revenue-initial and additional listing fees (note 15)

Current portion of obligation under capital lease (note 12)
Income taxes payable

Accrued employee benefits liability (note 7)
Obligation under capital lease (note 12)
Other liabilities (note 14)
Deferred revenue-initial and additional listing fees (note 15)

Shareholders’ equity (note 16):

Share capital
Share option plan

Deficit

Commitments and contingent liability (notes 12 and 25)

See accompanying notes to consolidated financial statements.

On behalf of the Board:

37,018
285,055
34,298
889,395
2,914
25,095

28,485
247,747
24,511
1,004,320

2,691
16,532

1,273,775

1,324,286

25,344
127,362
12,482
11,357
62,652
59,866

25,776
127,057
13,026
11,439
30,700
24,941

1,572,838

1,557,225

39,194
889,395
6,468
50,410
778
20,465

1,006,710

10,425
145
32,880
295,723

34,116
1,004,320
3,006
41,238
833
27,872

1,111,385

8,524
903
21,081
237,537

1,345,883

1,379,430

387,501
3,942
(164,488)

226,955

380,925
2,669
(205,799)

177,795

1,572,838

1,557,225

Wayne Fox, Chair

J. Spencer Lanthier, Director

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

2006

2005

$
$

108,483
146,253
86,941
9,395
1,775

352,847

79,006
22,014
34,228
13,048

148,296

204,551

(82)

14,425

218,894

87,370

131,524

1.92
1.91

$
$

87,724
125,532
67,430
7,910
1,368

289,964

72,510
17,443
35,762
13,477

139,192

150,772

(693)

6,876

156,955

53,602

103,353

1.52
1.51

Revenue:

Listing
Trading and related

Market data

Business services (note 22)

Other

Expenses:

Compensation and benefits
Information and trading systems

General and administration

Amortization

Income from operations

Loss from investment in affiliate

Investment income

Income before income taxes

Income taxes (note 21)

Net income

Earnings per share (note 20):

Basic
Diluted

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Years ended December 31, 2006 and 2005 (in thousands of dollars)

2006

2005

Common shares:

Balance, beginning of year
Proceeds on options exercised
Cost of exercised options

Balance, end of year

Share option plan:

Balance, beginning of year
Cost of exercised options
Cost of share option plan

Balance, end of year

Deficit:

Balance, beginning of year

Net income
Dividends on common shares

Balance, end of year

Shareholders’ equity, end of year

See accompanying notes to consolidated financial statements.

380,925
5,296
1,280

387,501

2,669
(1,280)
2,553

3,942

(205,799)
131,524
(90,213)

(164,488)

375,765
4,144
1,016

380,925

1,662
(1,016)
2,023

2,669

(247,911)
103,353
(61,241)

(205,799)

226,955

177,795

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2006 and 2005 (in thousands of dollars)

2006

2005

131,524

103,353

13,048
82
2,553
-
(12,608)
114,925
(6,095)
544
(11,144)
(114,925)
11,709
67,346
(7,431)

189,528

(838)
5,296
(90,213)

(85,755)

(4,228)
-
(53,704)
(37,308)

(95,240)

8,533

28,485

37,018

741
15,026
108,112

13,477
693
2,023
7

(26,022)
(395,937)
(4,981)
1,782
2,264
396,783
6,601
58,798
8,285

167,126

(770)
4,144
(61,241)

(57,867)

(4,677)
100
-
(93,621)

(98,198)

11,061

17,424

28,485

489
8,174
74,230

$
$
$

Cash flows from (used in) operating activities:
Net income

Adjustments to determine net cash flows:

Amortization
Loss from investment in affiliate
Cost of share option plan
Loss on disposal of equipment
Future tax asset
Energy contracts receivable
Accounts receivable and prepaid expenses

Other assets

Accounts payable and accrued liabilities
Energy contracts payable
Long term other liabilities

Deferred revenue

Income taxes payable

Cash flows from (used in) financing activities:

Reduction in obligation under capital lease
Proceeds on options exercised
Dividends on common shares

Cash flows from (used in) investing activities:
Additions to premises and equipment
Proceeds on disposal of equipment
Acquisitions, net of cash acquired (note 2)

Marketable securities

Increase in cash

Cash, beginning of year

Cash, end of year

Supplemental cash flow information:

Interest paid
Interest received
Income taxes paid

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

TSX Group Inc. (the “Company”) owns and operates two national stock exchanges, Toronto Stock Exchange serving the senior
equity market and TSX Venture Exchange, serving the public venture equity market, Natural Gas Exchange Inc., an exchange for
the trading and clearing of natural gas and electricity contracts in North America and Shorcan Brokers Limited, a fixed income
inter-dealer broker.

All references to earnings per share, common shares issued and outstanding, common shares reserved for issuance, and options
reflect the impact of the two-for-one stock split which was effective May 17, 2005.

1. SIGNIFICANT ACCOUNTING POLICIES:

(a) Basis of presentation:
The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries, TSX Inc. (“TSX”), Natural
Gas Exchange Inc. (“NGX”), 2099242 Ontario Ltd., Shorcan Brokers Limited (“SBL”) and their wholly owned subsidiaries TSX
Venture Exchange Inc., Oxen Inc. and Shorcan ATS Limited. Intercompany balances and transactions have been eliminated upon
consolidation.

(b) Change in accounting policy:
During 2005 the Company retroactively changed its accounting policy for initial listing fees and additional listing fees to comply
with the evolving interpretation of The Canadian Institute of Chartered Accountants’ Emerging Issues Committee Abstract 141-
Revenue Recognition. Previously, non-refundable initial and additional listing fees were recognized at the time such fees were
received. The Company now recognizes such fees on a straight-line basis over an estimated service period of ten years.

The effect of the change in accounting policy relating to revenue recognition from the prior method on the consolidated statement
of income for the year ended December 31, 2005 was a decrease in revenue of $58,620. Income taxes for the year ended December
31, 2005 decreased by $24,246. Net income for the year ended December 31, 2005 decreased by $34,374. The effect of the change
on basic earnings per share for the year ended December 31, 2005 was a decrease of $0.50.

The effect on the consolidated balance sheet at December 31, 2005 was an increase in the future tax asset of $93,110, an increase in
deferred revenue-initial and additional listing fees of $278,775, with a corresponding increase in deficit of $185,665. Revenue that
was recorded in the years prior to the change in accounting policy and has been subsequently included in 2006 revenue amounted to
$41,238 (2005-$33,398).

Pooled funds are managed by an external investment fund manager and are carried at the lower of carrying value or market value.
Market values for securities held by the pooled funds are determined by reference to quoted market prices. To the extent that the
value of the underlying assets in the pooled funds decrease, the value of the units will decrease and such decrease will be recognized
during the period in which it occurs. There is no contractual maturity date for the investment in pooled funds.

Investment income is recognized in the period it is earned. Realized gains or losses on investments are recorded in the period in
which they occur.

The Company’s investment in an affiliate, which is subject to significant influence, is accounted for using the equity method of
accounting.

(d) Derivative financial instruments:
The Company has restricted and deferred share units that are awarded to directors and employees. The Company uses derivatives to
manage the exposure of the restricted share units and deferred share units to the Company’s share price fluctuations. The Company’s
policy is not to utilize derivative financial instruments for trading or speculative purposes.

The Company purchases total return forward contracts to economically hedge against fluctuations in the value of the units attrib-
utable to changes in the market price of the Company’s common shares. Any increase in the Company’s share price results in an
increase in the liability to directors and employees and a corresponding increase in the return on the hedged units. Changes in the
value of the total return forward contracts are recorded in income.

(e) Amortization:
Amortization is provided over the following useful lives of the assets:

Asset

Premises under capital lease
Computers and electronic trading equipment
Furniture, fixtures and other equipment
Leasehold improvements

Intangible assets comprising:
Customer bases
Data licence

Basis

Straight line
Straight line
Straight line
Straight line

Rate

25 years
3 - 5 years
5 years
Over terms of various
leases to a maximum
of 15 years

Declining balance
Straight line

2.0-8.0%
10 years

(f ) Revenue recognition:
Revenue for goods and services is recognized when the services are provided or the goods are sold.

Trading and related revenues for capital markets are recorded and recognized as revenue in the month in which the trades are
executed or when the related services are provided.

Fees relating to NGX trading, clearing and settlement are recognized over the period the services are provided.

Listing revenues are derived primarily from recurring annual sustaining fees and transaction-based fees for initial and additional list-
ings. Sustaining fees are billed during the first quarter of the year and the amount is recorded as deferred revenue and amortized
over the year on a straight-line basis. Initial and additional listing fees are recorded as deferred revenue and are recognized on a
straight-line basis over an estimated service period of ten years.

Real time market data revenue is recognized based on usage as reported by customers and vendors. The Company conducts periodic
audits of the information provided and records additional revenues, if any, at that time. Fixed income indices revenue is recognized
over the period the service is provided. Other Market Data and Business Services revenue are recorded and recognized as revenue in
the month in which the services are provided.

(g) Development expenditures:
Development expenditures, including application software, are expensed as they are incurred.

(h) Income taxes:
Future income taxes are provided in recognition of temporary differences between the carrying amount of assets and liabilities
and their respective tax bases, operating losses and tax credit carryforwards made for financial reporting and income tax purposes.
Future tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in
the periods in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabili-
ties of a change in tax rates is recognized in income in the period in which the enacted or substantive enactments occur.

(i) Employee future benefits:
TSX, TSX Venture Exchange Inc. and NGX have registered pension plans with a defined benefits tier and a defined contributions
tier covering substantially all of their employees, as well as a retirement compensation arrangement (“RCA”) for senior management.
Benefits are based on years of service and the employee’s compensation. The costs of these programs are being funded currently.
In addition, the Company provides other employee future benefits, such as supplementary medical and dental coverage, to defined
eligible employees (“other benefit plans”). The cost of the other benefit plans is not being funded; however, a provision for this has
been made in the accounts.

The Company accrues its obligations under employee defined benefit plans as the employees render the services necessary to earn
pension and other employee future benefits.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

The Company has adopted the following policies for its benefit plans:

(i) The cost of defined benefit pensions and other retirement benefits earned by employees is actuarially determined using

the projected benefit method prorated on service and management’s best estimate of salary escalation, retirement ages and
expected health care cost.

(ii) For the purpose of calculating expected return on plan assets, those assets are valued at fair value.

(iii) Past service costs from plan amendments are amortized on a straight-line basis over the expected average remaining service

period of employees active at the time of the amendment.

(iv) Actuarial gains (losses) on plan assets arise from the difference between the actual return on plan assets for a period and the

expected return on plan assets for that period. Actuarial gains (losses) on the accrued benefit obligation arise from differences
between actual and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit
obligation. The excess of the net accumulated actuarial gain (loss) over 10% of the greater of the accrued benefit obligation
and the fair value of plan assets is amortized over the expected average remaining service period of active employees.

(v) When a restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is

accounted for prior to the settlement.

( j) Intangible assets:
Intangible assets consisting of customer bases and a long term data licence are reviewed at least annually. When the carrying amount
of the reporting unit’s intangible asset exceeds the implied fair value of the intangible asset, an impairment loss is recognized as an
amount equal to the excess and is identified separately on the statement of income.

(k) Goodwill:
Goodwill is the residual amount that results when the purchase price of an acquired business exceeds the sum of the amounts allo-
cated to the assets acquired, less liabilities assumed, based on their fair values. Goodwill is allocated as of the effective date of the
transaction.

Goodwill is not amortized and is tested for impairment annually or more frequently if events or changes in circumstances indicate
that the asset might be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the
reporting unit is compared with its fair value. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is considered not to be impaired and the second step of the impairment test is unnecessary.

The second step is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case the implied fair
value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any.
The implied fair value of goodwill is determined in the same manner as the value of goodwill is initially determined as described in
the preceding paragraph, using the fair value of the reporting unit as if it was the purchase price. When the carrying amount of the
reporting unit goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the
excess and is recorded in the statement of income before extraordinary items and discontinued operations.

(l) Use of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities; specifically deferred revenue, future tax assets,
intangible assets, pension plan assets and liabilities, long term incentive plan liabilities and the allocation of purchase prices of acqui-
sitions. Management also makes estimates that affect the reported amounts and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from
those estimates.

(m) Earnings per share:
Earnings per share are calculated using the treasury stock method.

Basic earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the
reporting period.

Diluted earnings per share are computed similar to basic earnings per share except that the weighted average shares outstanding are
increased to include additional shares from the assumed exercise of share options, if dilutive. The number of additional shares is
calculated by assuming that outstanding share options were exercised and that the proceeds from such exercises were used to acquire
common shares at the average market price during the reporting period.

(n) Related party transactions:
Any transactions entered into between the Company and related parties are on terms and conditions that are at least as favourable to
the Company as market terms and conditions and are recorded at the agreed upon exchange amount.

(o) Share based compensation:
The Company has a share-based compensation plan, which is described in notes 18 and 19. The Company accounts for all share-
based payments to employees that call for settlement by the issuance of equity instruments, granted on or after January 1, 2003,
using the fair value based method. Under the fair value based method, compensation cost attributable to options to employees
is measured at fair value at the grant date and amortized over the vesting period. Compensation cost attributable to awards to
employees that call for settlement in cash is measured at intrinsic value and amortized over the vesting period. Changes in intrinsic
value between the grant date and the measurement date result in a change in the measure of compensation cost.

For options that vest at the end of the vesting period, compensation cost is recognized on a straight-line basis over the vesting
period. No compensation cost is recognized for options that employees forfeit if they fail to satisfy the service requirement for
vesting.

(p) Financial Instruments and Comprehensive Income:
The CICA has issued new accounting rules on financial instruments, hedges and comprehensive income that will require the
Company to account for all of its financial assets and liabilities at fair value. When the Company adopts the new rules effective
January 1, 2007, it will remeasure its financial assets and liabilities, as appropriate, at fair value and report a new section of share-
holders’ equity called other comprehensive income.

The Company is determining the impact that these changes in accounting policy will have on its consolidated financial statements
once adopted.

2. ACQUISITIONS:

During the year, the Company or its subsidiaries acquired 100% of the outstanding common shares of Oxen Inc. (“Oxen”) on
October 2, 2006 and Shorcan Brokers Limited (“SBL”) on December 1, 2006. Oxen owns the Alberta Watt Exchange Limited
and provides ancillary services to support the Alberta electricity market. SBL is a fixed income inter-dealer broker. In addition, on
October 25, 2006 a subsidiary of the Company purchased Scotia Capital’s* Fixed Income Indices, PC Bond®, and related data assets,
and also signed a long term data licence under which Scotia Capital will provide fixed income pricing data. These acquisitions were
accounted for using the purchase method.

The aggregate purchase prices total $64,554 in cash plus closing costs of $1,283.

* Registered trade mark of The Bank of Nova Scotia. Used under license.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the dates of acquisition:

Cash
Current assets
Premises and equipment
Intangible assets

Goodwill

Current liabilities
Income taxes payable
Future tax liability
Deferred revenue

Purchase price

4,248
3,915
5,879
34,435
34,925

83,402

10,328
24
3,739
3,474

65,837

The Company may make additional payments of up to a maximum $14,000 contingent on the results of operations over the next
two years.

The results of operations of the businesses acquired are included from the acquisition dates.

3. MARKETABLE SECURITIES:

The carrying and fair values of the investment portfolio are as follows:

As at December 31

2006

2005

Money market fund
Short-term bond and mortgage fund

Carrying
value

Fair
value

$ 184,019
101,036

$ 184,019
101,790

$ 285,055

$ 285,809

Carrying
value

134,701
113,046

247,747

Fair
value

134,701
113,117

247,818

The Company has pledged $30,000 of marketable securities related to its obligations as guarantor for NGX (note 9).

4. DERIVATIVE FINANCIAL INSTRUMENTS:

TSX Inc. has entered into total return swaps which synthetically replicate the economics of TSX Inc. purchasing the Company’s
shares as a partial economic hedge to the share appreciation rights of restricted share units and deferred share units that are awarded
to directors and employees of the Company and its affiliates. TSX Inc. marks to market the value of the hedged units as an adjust-
ment to income, and simultaneously marks to market the liability to holders of the share units as an adjustment to income. The fair
values of the contracts and the obligation to unit holders are reflected on the balance sheet. The contracts are settled in cash upon
maturity.

The following tables represent the total return swaps which are outstanding at December 31.

As at December 31, 2006:

Remaining term to maturity

(notional amount)

Fair value

Under 1
year

1 to 3
years

Total

Gain

Loss

Net

457
736
(11)
(13)
(333)
(22)

695 $

12,388
621
–
4,268
620

695 $

– $
–
–
664
–
–

12,388
621
664
4,268
620

457 $
736
–
–
–
–

– $
–
(11)
(13)
(333)
(22)

$ 18,592 $

664 $ 19,256 $ 1,193 $

(379) $

814

Remaining term to maturity

(notional amount)

Fair value

Under 1
year

1 to 3
years

Total

Gain

Loss

711
772
–
935
–

–
–
695
–
12,388

711
772
695
935
12,388

601
652
409
471
430

– $
–
–
–
–

Net

601
652
409
471
430

2,418

$ 13,083

$ 15,501

2,563

– $

2,563

Equity Swap Contract #5
Equity Swap Contract #7
Equity Swap Contract #8
Equity Swap Contract #10
Equity Swap Contract #11
Equity Swap Contract #12

As at December 31, 2005:

Equity Swap Contract #3
Equity Swap Contract #4
Equity Swap Contract #5
Equity Swap Contract #6
Equity Swap Contract #7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

5. PREMISES AND EQUIPMENT:

As at December 31, 2006

Premises under capital lease
Computers and electronic trading equipment
Furniture, fixtures and other equipment
Leasehold improvements

Cost

12,317
61,149
16,859
37,734

Accumulated
amortization

Net book
value

11,473
47,952
15,611
27,679

844
13,197
1,248
10,055

25,344

Accumulated
amortization

Net book
value

$ 128,059

102,715

As at December 31, 2005

Premises under capital lease
Computers and electronic trading equipment
Furniture, fixtures and other equipment
Leasehold improvements

Cost

12,317
51,215
16,984
40,166

Amortization charged for the year was $10,565 (2005 - $10,969).

120,682

10,818
42,080
15,209
26,799

94,906

6. OTHER ASSETS:

As at December 31

Accrued benefit assets (note 7)
Other assets

2006

9,300
3,182

12,482

1,499
9,135
1,775
13,367

25,776

2005

8,841
4,185

13,026

7. EMPLOYEE FUTURE BENEFITS:

Information about the Company’s benefit plans is as follows:

Total cash amounts recognized as paid or payable for employee future benefits in 2006, consisting of employer contributions to the
defined benefit pension plans, employer contributions to the other benefit plans, and employer contributions to the defined contri-
bution plans, was $4,856 (2005-$3,466).

Defined benefit plans:

Commencing January 1, 2004, the Company measures its accrued benefit obligations and the fair value of plan assets for accounting
purposes as at September 30 of each year. The most recent actuarial valuation of the pension plans for funding purposes was as at
December 31, 2005, and the next required valuation will be as at December 31, 2008.

Accrued benefit obligation:
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Employee contributions
Actuarial losses (gains)
Plan amendments

Balance, end of year

Pension and RCA plans
2005

2006

52,421
2,174
2,728
(2,797)
311
37
(755)

40,996
1,653
2,642
(1,799)
322
8,607
–

Other benefit plans

2006

11,541
1,287
671
(117)
–
(428)
–

2005

7,566
880
547
(129)
–
2,677
–

54,119

52,421

12,954

11,541

Pension and RCA plans
2005

2006

Other benefit plans

2006

2005

Plan assets:
Fair value, beginning of year
Actual return on plan assets
Employer contributions
Employee contributions
Benefits paid

Fair value, end of year

Funded status-plan deficiency
Unamortized net actuarial loss
Employer contributions after measurement date

Unamortized transitional obligation

Unamortized past service costs

49,478
2,969
2,816
311
(2,797)

52,777

(1,342)
9,628
619

353

Accrued benefit asset (liability)

9,300

43,406
6,142
1,407
322
(1,799)

49,478

(2,943)
10,243
276

1,207

8,841

–
–
–
–
–

–

(12,954)
2,368
39

–

122

–
–
–
–
–

–

(11,541)
2,888
–

–

129

(10,425)

(8,524)

The accrued benefit asset and accrued benefit obligation is included in the Company’s consolidated balance sheet as follows:

Pension and RCA plans
2005

2006

9,300
–

9,300

8,841
–

8,841

Other benefit plans

2006

–
(10,425)

(10,425)

2005

–
(8,524)

(8,524)

As at December 31

Other assets
Long term liabilities

Total

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

Plan assets consist of:

Asset category

Equity securities
Debt securities
Canada Revenue Agency refundable tax account

Percentage of plan assets

2006

2005

48%
38%
14%

51%
37%
12%

100%

The elements of the Company’s defined benefit plan costs recognized in the year are as follows:

Current service cost,
net of employees’ contributions
Interest cost
Actual return on plan assets
Amortization of past service costs
Plan amendments
Actuarial losses

Pension and RCA plans
2005

2006

2,174
2,728
(2,969)
–
(755)
2,007

3,185

1,653
2,642
(6,142)
–
–
6,637

4,790

Other benefit plans

2006

1,287
671
–
7
–
91

2,056

2005

880
547
–
7
–
–

1,434

Elements of employee future benefit costs
before adjustments to recognize the long-term
nature of employee future benefit costs:

Difference between expected return and actual
return on plan assets for the year (a)

Difference between actuarial (gains) losses
recognized for the year and actual actuarial (gains)
losses on accrued benefit obligation for the year (b)

Difference between amortization of past service
costs for the year and actual plan amendments
for the year (c)

Difference between costs arising in the period and
costs recognized in the period in respect
of transitional obligation (asset)

334

3,760

(1,691)

(6,575)

854

154

Net benefit plan expense

2,698

2,145

2,056

1,434

(a) Expected return on plan assets of $2,635 (2005 - $ 2,382) less the actual return on plan assets of $2,969 (2005 - $ 6,142).

(b) Actuarial (gain) loss recognized for the year of $316 (2005 - $62) less the actual actuarial (gain) loss on accrued benefit

obligation of $2,007 (2005 - $6,637).

(c) Amortization of past service costs for the year of $1,609 (2005 - $ 154) less the actual plan amendments for the year

of $755 (2005 - $nil).

The significant actuarial assumptions adopted in measuring the obligation are as follows (weighted average):

Pension and RCA plans
2005

2006

Discount rate
Rate of compensation increase
Expected long-term rate of return on plan assets

5.25%
4.00%
6.00%

6.25%
4.25%
6.25%

Other benefit plans

2006

5.40%
n/a
n/a

2005

5.25%
n/a
n/a

The assumed health care cost trend rate at December 31, 2006 was 7.0% (2005 – 7.3 %), decreasing to 4.6% (2005 – 4.6%)
over six years.

Increasing or decreasing the assumed health care cost trend rates by one percentage point would have the following effects for 2006:

Total of service and interest cost

Accrued benefit obligation

Increase

Decrease

601

3,443

(443)

(2,590)

In 2006, the Company contributed and expensed $1,884 (2005 - $1,783) to the defined contribution tier, which amounts are not
included in the recognized defined benefit costs above.

The average remaining service period of the active employees covered by the pension plans is 14 years (2005 – 12 years). The
average remaining service period of the active employees covered by the other retirement benefits plans is 19 years (2005 – 19 years).

8. INVESTMENT IN AFFILIATE:

On July 8, 2002, the Company paid $15,000 plus closing costs of $126, to acquire approximately 40% equity interest in CanDeal.ca
Inc. (“CanDeal”), which owns an electronic trading system for the institutional debt market. As part of the investment, the Company
and CanDeal entered into an agreement under which the Company would provide technological services in support of CanDeal’s
electronic trading system.

On April 10, 2003, CanDeal acquired for redemption, shares previously issued to Basis 100, a technology provider, resulting in the
Company’s equity interest increasing to approximately 45%. On March 24, 2006, CanDeal acquired for redemption, shares previ-
ously issued to Moneyline Inc., a service provider, resulting in the Company’s equity interest increasing to approximately 47%.

The other shareholders of CanDeal include its founders, Canada’s six largest investment dealers, which represent the majority of the
institutional debt trading market in Canada, and a service provider. The investment is accounted for using the equity method. The
purchase price exceeded the proportionate share of the fair value of tangible net assets acquired by $16,069. This amount represents
intangible assets and goodwill.

In 2006 the Company charged CanDeal $228 (2005 - $751) for technology services and remitted to CanDeal $642 (2005-$498) as
part of a revenue sharing arrangement and for the supply of technology development.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

9. NGX COLLATERAL ARRANGEMENTS AND CLEARING BACKSTOP FUND:

As part of its clearing operations, NGX becomes the counterparty to each transaction, thereby guaranteeing the fulfillment of every
contract that is executed on its electronic trading platform. To manage the risks associated with its clearing activities, NGX is fully
collateralized by the counterparty and maintains a $30,000 clearing backstop fund. The Company is the guarantor of this fund, and
has pledged $30,000 of marketable securities related to its obligations as guarantor.

NGX requires each counterparty (the “Contracting Party”) to provide collateral in the form of cash or letters of credit based on the
magnitude of its unsettled contractual obligations which may be accessed in the event of default by a Contracting Party. The collat-
eral provided in the form of cash (“the cash collateral deposits”) is segregated in individually designated bank accounts held by NGX
at a major Canadian chartered bank which acts as trustee for these funds. The collateral deposits, together with letters of credit
provided by all the Contracting Parties, exceed all of the outstanding credit exposure, as determined by NGX, for all its unsettled
contractual obligations at any time.

Restricted cash collateral deposits as at December 31, 2006 were $289,735 (2005-$391,966). Letters of credit held by NGX as of
December 31, 2006 were $2,087,175 (2005-$2,615,684).

10. NGX CLEARING RISK:

As an electronic exchange for energy products, NGX is a party to offsetting contracts for the physical delivery of energy products in
future periods at fixed prices for all energy products traded on NGX between buyers and sellers. Prices are determined by the elec-
tronic matching of bids and offers from NGX customers at the time the trade contracts are initiated. NGX is also a party to offset-
ting financial swap contracts with customers which call for the payment of the differential between fixed prices, as agreed through
the bid offer process, and specified market indices at future dates.

NGX does not participate in the price risk associated with these trading contracts and does not take physical delivery of energy
products traded on NGX. In the event of non-performance by one of the Contracting Parties in a trade, NGX has arranged for third
party physical backstopping on trades with all related costs payable by the non-performing customer. As NGX handles the clearing
of all payments related to trading contracts, it bears credit risk associated with customer obligations.

The terms of physical contracts traded on NGX range from same day to December 31, 2009 and the terms for swap contracts traded
on NGX range from near month to Calendar Year 2010 which ends December 31, 2010.

As the clearing counterparty to every trade, NGX is exposed to credit risk in the event that a buyer fails to pay the required funds
for energy products purchased and the market risk if buyers or sellers fail to take or deliver energy products which have been
contracted at prices less favourable than market prices at the time of the contract delivery period or if a customer fails to settle their
financial trade commitments. To mitigate these risks, NGX employs a customized energy market margining model secured by liquid
collateral deposits from all Contracting Parties with exposure.

NGX will provide the Contracting Party with an invoice on or before the 15th day of each calendar month for deliveries and
receipts of energy products during the prior calendar month pursuant to physical contracts which are payable in the same currency,
setting forth a net amount owing by or to the counterparty itemizing and applying set-off to each of any purchase amount payable
or receivable in respect of any such physical contracts, any amounts payable for fees to NGX, and any amounts payable for GST.
Physical and financial trading contracts which have not yet been settled, as well as the revenues and expenses related to the value of
energy products traded or swap differential payments made during the year, are not recognized in these consolidated financial state-
ments as NGX does not function as a principal in these trading activities. NGX energy contract receivable and payable positions
are recognized for all trading contracts where physical delivery has occurred prior to the period end but payments had not yet been
made.

NGX monitors and measures total potential exposure for each Contracting Party’s portfolio on a real-time basis as the aggregate of:

(i) outstanding accounts receivable positions;

(ii) “Variation Margin”, which is comprised of the aggregate “mark to market” exposure for all outstanding purchase and sale

contracts with a negative value from the perspective of the customer; and

(iii) “Initial Margin”, which is an amount expressed as a rate in dollars per unit of energy that estimates the worst expected loss

that a position might incur under normal market conditions during a liquidation period.

NGX maintains credit policies and practices with regard to its customers that management believes significantly minimize overall
clearing risk. These policies and practices include a continuous monitoring of aggregate margin requirements for each Contracting
Party to ensure that the Contracting Party has posted sufficient collateral in compliance with the Risk Management Policy of the
Contracting Party’s Agreement which is a standardized agreement that allows for netting of positive and negative exposures associ-
ated with a single customer. In addition, NGX monitors the Contracting Party’s (and its credit support providers, if any) financial
condition to ensure full compliance with the representations and warranties of the contracting party. In the event of default by any
Contracting Party, which includes a failure to take delivery of product, a failure to make delivery of product, failure to pay, failure to
deposit collateral, or insolvency, NGX will liquidate the defaulting Contracting Party’s open positions, draw down the collateral to
cover the liquidation, and terminate such Contracting Party from trading on NGX.

11. GOODWILL AND INTANGIBLE ASSETS:

Goodwill is tested for impairment at least annually. The impairment test is carried out in two steps. In the first step, the Company
compared the carrying amounts of its reporting units with their fair values. The tests were performed in the fourth quarter. The
measurement methodology used to determine whether impairment exists was recoverability based on discounted future cash flows.
The Company found that the fair values of its reporting units were not impaired. Therefore, the second step of the impairment test
was not required.

At the time of the respective purchases, the Company recorded intangible assets related to the customer bases of TSX Venture
Exchange Inc., NGX, Oxen, and Shorcan and the customer base and data licence of 2099242 Ontario Inc.

Intangible assets, beginning of year
Acquisition of intangible assets (note 2)
Less amortization of intangible assets

Intangible assets, end of year

12. LEASE COMMITMENTS:

The Company is committed under long-term leases as follows:

2006

30,700
34,435
(2,483)

62,652

2005

33,208
-
(2,508)

30,700

(a) The rental of office space, under various long-term operating leases with remaining terms of up to 12 years and a capital lease

for an initial term of 25 years with an additional 10-year renewal option.

(b) The rental of computer hardware and software for terms of one to three years.

Current lease obligations over the remaining terms of the operating leases are as follows:

Years ending December 31:

2007
2008
2009
2010
2011
Thereafter

13,006
7,976
7,128
6,397
6,049
29,216

69,772

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

The obligations under capital leases are as follows:

Total minimum lease payments
Less amounts representing interest

Less current portion

Interest on the obligations under capital leases amounted to $110 (2005 - $160).

Current lease obligations over the remaining terms of the capital leases are as follows:

Years ending December 31:

2007
2008
2009
2010
Thereafter

13. SEGMENTED INFORMATION:

2006

977
(54)

923

(778)

145

2005

1,893
(157)

1,736

(833)

903

830
143
4
–
–

977

The Company operates in two reportable segments. In the Capital Markets segment, the Company owns and operates Canada’s
two national stock exchanges, Toronto Stock Exchange and TSX Venture Exchange and operates Shorcan Brokers Limited, a fixed
income inter-dealer broker. The Energy Markets segment is engaged in trading and clearing natural gas and electricity contacts
through NGX.

2006
Total Revenue
Net Income
Goodwill
Total Assets

2005
Total Revenue
Net Income
Goodwill
Total Assets

* Includes results from dates of acquisition in the year.

Capital Markets*

Energy Markets*

Total

$ 332,764
126,817
38,587
653,374

272,541
99,192
5,963
531,056

20,083
4,707
21,279
919,464

17,423
4,161
18,978
1,027,169

352,847
131,524
59,866
1,572,838

289,964
103,353
24,941
1,558,225

14. OTHER LIABILITIES:

Other liabilities include amounts payable under the long term incentive plan (note 19), liabilities due to the contraction of office
space and amounts due on acquisitions made during the year.

15. DEFERRED REVENUE-INITIAL AND ADDITIONAL LISTING FEES:

Deferred revenue-initial and additional listing fees represents non-refundable fees received from listed issuers. This deferred
revenue will be recognized on a straight-line basis over an estimated service period of ten years.

16. SHAREHOLDERS’ EQUITY:

The authorized capital of the Company consists of an unlimited number of common shares and an unlimited number of preference
shares, issuable in series.

Each common share of the Company entitles its holder to one vote at all meetings of shareholders subject to certain restrictions with
respect to the voting rights and the transferability of the shares. No person or combination of persons acting jointly or in concert
is permitted to beneficially own or exercise control or direction over more than 10% of any class or series of voting shares of the
Company without the prior approval of the Ontario Securities Commission.

Each common share of the Company is also entitled to receive dividends if, as and when declared by the Board of Directors of
the Company. All dividends that the Board of Directors of the Company may declare and pay will be declared and paid in equal
amounts per share on all common shares, subject to the rights of holders of the preference shares. Holders of common shares will
participate in any distribution of the net assets of the Company upon liquidation, dissolution or winding-up on an equal basis per
share, but subject to the rights of the holders of the preference shares.

There are no pre-emptive, redemption, purchase or conversion rights attaching to the common shares, except for the compulsory
sale of shares or redemption provision described in connection with enforcing the restriction on ownership of voting shares of the
Company.

Details of capital transactions are as follows:

Balance, December 31, 2004
Net income
Dividends
Exercised options
Share option costs

Number
of common
shares

67,780,582
–
–
312,436
–

Balance, December 31, 2005

68,093,018

Net income
Dividends
Exercised options
Share option costs

–
–
328,246
–

Share
capital

375,765
–
–
5,160
–

380,925

–
–
6,576
–

Deficit

(247,911)
103,353
(61,241)
–
–

(205,799)

131,524
(90,213)
–
–

Share
option plan

Total
shareholders’
equity

1,662
–
–
–
1,007

2,669

–
–
–
1,273

129,516
103,353
(61,241)
5,160
1,007

177,795

131,524
(90,213)
6,576
1,273

Balance, December 31, 2006

68,421,264

387,501

(164,488)

3,942

226,955

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

17. EMPLOYEE SHARE PURCHASE PLAN:

The Company offers an employee share purchase plan for eligible employees of the Company and its subsidiaries. Under the
employee share purchase plan, contributions by the Company and by eligible employees will be used by the plan administrator,
CIBC Mellon Trust Company, to make purchases of common shares of the Company on the open market. Each eligible employee
may contribute up to 10% of the employee’s salary to the employee share purchase plan. The Company will contribute to the plan
administrator the funds required to purchase one common share of the Company for each two common shares purchased on behalf
of the eligible employee, up to a maximum annual contribution of $2.5. Shareholder approval is not required for this plan.

The Company accounts for its contribution as compensation expense when it is contributed to the plan. Compensation expense
related to this plan was $881 for the year ended December 31, 2006 (2005 - $829).

18. SHARE OPTION PLAN:

The Company established a share option plan in the year of its initial public offering. All employees of the Company and its affili-
ates are eligible to be granted options under the option plan. The plan provides that the number of shares reserved for issuance
pursuant to stock options granted to any one person under the plan and all other share compensation arrangements cannot exceed
5 % of the outstanding common shares of the Company. 4,678,918 common shares of the Company have been reserved for issu-
ance upon exercise of options granted under this plan, representing approximately 7% of the outstanding common shares of the
Company.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the
following assumptions used for grants in 2006: dividend yield of 2.75 percent; expected volatility of 25 percent; risk-free interest rate
of 3.960 percent and expected life of seven years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the
following assumptions used for grants in 2005: dividend yield of 2.5 percent; expected volatility of 25 percent; risk-free interest rate
of 4 percent and expected life of seven years.

Options granted in 2006 have strike prices in the range of $47.304 to $49.635. Options granted in 2005 had strike prices in the
range of $29.636 to $31.113.

Options granted will expire in 2011, 2012 and 2013.

Share options:

2006

2005

Number of
options

1,248,462
194,262
(17,828)
(328,246)

Weighted
average
exercise
price

18.980
49.490
23.630
16.130

Number of
options

1,331,900
384,482
(155,484)
(312,436)

Outstanding, beginning of year
Granted
Forfeited
Exercised

Outstanding, end of year

1,096,650

25.170

1,248,462

Weighted
average
exercise
price

13.937
29.660
16.140
13.270

18.980

296,188 options were fully vested and exercisable at strike prices in the range of $10.529 to $31.113 at December 31, 2006.
During 2006, the Company recognized compensation cost of $2,553 (2005 - $2,023) in respect of its share option plan.

19. LONG-TERM INCENTIVE PLAN:

Effective January 1, 2001, TSX Inc. introduced an interim bonus plan (in lieu of a long-term incentive plan) for officers and director
level employees of TSX Inc. and its affiliates. The interim bonus plan provided eligible employees with a deferred award based on
the annual financial performance of the Company. Amounts earned in 2001 were converted into deferred share units for execu-
tive officers and restricted share units for other participants in conjunction with the public offering of the Company, with each
deferred share unit or restricted share unit having an initial value equal to the price of one common share of the Company in the
public offering. Amounts earned in 2002 were converted into deferred share units or restricted share units based on the share value,
with each deferred share unit or restricted share unit having a value based on the value of one common share of the Company on
December 31, 2002.

Deferred share units vested over a three year period ended December 31, 2005, but can only be redeemed upon termination of
employment or retirement. No shares will be issued or transferred on redemption of deferred share units; only cash payments will
be made. Each participant may elect to receive their incentive compensation, in whole or in part, in the form of deferred share units.
Restricted share units were vested and were redeemed in cash by December 31, 2005.

In January, 2004 the Board approved a long-term incentive plan which provides for the granting of restricted share units (“RSUs”).
The amount of the award payable at the end of three years will be determined by the total shareholder return at the end of the three
year period. Total shareholder return represents the appreciation in share price plus dividends paid on a share, measured at the time
RSUs vest.

The Company records its obligation under the plan, if any, in the period in which the award is earned. As at December 31, 2006,
$22,889 (2005 - $18,398) has been accrued and is included in accounts payable and accrued liabilities and other liabilities. The
Company has purchased derivative financial instruments to economically hedge against the impact of its share price fluctuations on
the non-performance based portion of the long-term incentive plan (note 4).

20. EARNINGS PER SHARE:

2006

2005

131,524
68,329,758
1.92
68,998,718
1.91

103,353
68,025,907
1.52
68,649,533
1.51

Net income
Basic weighted average number of common shares outstanding
Basic earnings per share
Diluted weighted average number of common shares outstanding
Diluted earnings per share

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 2006 and 2005 (in thousands of dollars, except per share amounts)

21. INCOME TAXES:

Income tax expense attributable to income differs from the amounts computed by applying the combined federal and provincial
income tax rate of 35.06% (2005 – 35.52%) to pre-tax income from operations as a result of the following:

Income before income taxes

Computed expected tax expense
Non-deductible expenses
Share of affiliate loss
Deferred revenue not affecting tax
Impact of changes in substantively enacted income tax rates
Other

The income tax provisions for the years ended December 31, 2006 and 2005 are as follows:

Current tax expense
Future tax benefit

2006

218,894

76,744
948
29
(2,668)
11,047
1,270

2005

156,955

55,750
1,400
248
(3,385)
(301)
(110)

87,370

53,602

2006

99,978
(12,608)

87,370

2005

79,624
(26,022)

53,602

The tax effects of temporary differences that give rise to significant portions of the future tax asset at December 31, 2006 and 2005
are presented below:

2006

742
5,309
35,139
277
110,754
236

152,457

25,095
127,362

152,457

2005

1,434
5,660
34,131
710
93,110
8,544

143,589

16,532
127,057

143,589

Non-capital loss carryforwards
Premises and equipment
Cumulative eligible capital
Financing costs
Deferred listing revenue
Other temporary differences

Future tax asset:
Current
Long-term

22. REGULATORY SERVICES:

Since 2002, the Securities Commissions of Alberta, British Columbia, Manitoba, Ontario and Quebec (the commissions) have
recognized Market Regulation Services Inc. (“RS”) as a self-regulatory organization and approved the retention of RS to perform
certain market regulation functions formerly performed by TSX Inc. RS is a private corporation jointly owned by TSX Inc. and
the Investment Dealers Association of Canada and operated on a not-for-profit basis in accordance with its articles. RS provides
regulatory services to Canadian marketplaces (i.e., exchanges, alternative trading systems and quotation and trade reporting systems)
that contract with it, in consideration of fees to be paid by such marketplaces and their participants. TSX Inc. and TSX Venture
Exchange Inc. have retained RS to perform certain market regulation functions.

For the year ended December 31, 2006, $7,189 (2005 - $6,876) of business services revenue was earned for technology, payroll and
human resources services provided to RS and $3,407 (2005 - $3,485) was paid to RS for services provided by RS.

23. FINANCIAL INSTRUMENTS:

(a) Fair values of financial assets and financial liabilities:

The fair values of the Company’s cash, accounts receivable, and accounts payable and accrued liabilities approximate their
carrying amounts due to their short-term nature. The fair value of other assets and the obligation under capital lease is not
readily determinable.

(b) Foreign currency risk:

Accounts receivable include U.S. $ 5,246 (2005 - U.S. $3,483), which is exposed to change in the U.S. - Canadian dollar
exchange rate.

24. COMPARATIVE FIGURES:

Certain comparative figures have been reclassified to conform with the financial presentation adopted in the current year.
Specifically, as at December 31, 2005, deferred revenue – initial and additional listing fees of $41,238 have been reclassified as
current liabilities: deferred revenue – initial and additional listing fees and future tax asset of $11,961 have been reclassified as
current assets: future tax asset.

25. CONTINGENT LIABILITY:

From time to time in connection with its operations, the Company or its subsidiaries are named as a defendant in actions for
damages and costs sustained by plaintiffs, or as a respondent in court proceedings challenging the Company’s or its subsidiaries’
regulatory actions, decisions or jurisdiction.

During the first quarter of 2005, TSX Venture Exchange Inc. was named as a defendant in an action for unspecified damages.
The Company believes the claim is without merit and intends to vigorously defend the action. Accordingly, no provision has
been set up in the accounts.

THREE-YEAR REVIEW – FINANCIAL INFORMATION*

(in thousands of dollars)

Revenue:

Listing
Trading and related

Market data

Business services

Other

Expenses

Income from operations
Loss from investment in affiliate
Investment income
Income taxes

Net Income

Operating cash flow
Working capital
Total Assets
Shareholders’ Equity

20061

2005

20042

$ 108,483
146,253
86,941
9,395
1,775

87,724
125,532
67,430
7,910
1,368

75,022
99,629
58,793
8,367
1,619

$ 352,847

289,964

243,430

148,296

$ 204,551
(82)
14,425
(87,370)

$ 131,524

$ 189,528
267,065
1,572,838
226,955

139,192

150,772
(693)
6,876
(53,602)

103,353

167,126
212,901
1,557,225
177,795

144,531

98,899
(1,210)
4,772
(33,971)

68,490

127,021
120,631
1,036,294
129,516

* Certain comparative figures have been reclassified to conform with the financial presentation adopted in the current year.
1 The financial results of Oxen Inc., which owns Alberta Watt Exchange Limited, (acquired October 2, 2006), Scotia Capital Inc.’s** Fixed Income Indices, PC-Bond®

and related assets (acquired October 25, 2006) and Shorcan (acquired December 1, 2006), have been included in these results from and after acquisition.

** Registered trade-mark of The Bank of Nova Scotia. Used under license.

2 The financial results of Natural Gas Exchange have been included in these results from and after acquisition March 1, 2004.

THREE-YEAR REVIEW – MARKET STATISTICS*

(Unaudited)

Toronto Stock Exchange:
Volume (millions)
Value ($ billions)
Transactions (000s)
Issuers Listed

New Issuers Listed:
Number of Initial Public Offerings
Number of graduates from TSX Venture/NEX
New Equity Financing: ($ millions)

Initial Public Offering Financing ($ millions)
Secondary Offering Financings1 ($ millions)
Supplementary Financings ($ millions)

Market Cap of Listed Issuers ($ billions)
S&P/TSX Composite Index Close

TSX Venture Exchange2:
Volume (millions)
Value ($ billions)
Transactions (000s)
Issuers Listed

New Issuers Listed:
New Equity Financing: ($ millions)

Initial Public Offering Financing ($ millions)
Secondary Offering Financings1 ($ millions)

Market Cap of Listed Issuers ($ billions)
S&P/TSX Venture Composite Index Close

2006

2005

2004

82,049.9
1,416.1
85,651.9
1,598

197
108
67
41,793.4
9,927.2
19,513.4
12,352.8
2,061.3
12,908.4

37,674.5
33,277.9
6,487.2
2,244

186
8,047.8
369.7
7,678.1
55.3
2,987.1

64,167.3
1,075.2
55,158.3
1,537

223
137
46
46,162.8
15,226.0
14,956.6
15,980.2
1,830.7
11,272.3

21,545.7
15,696.3
3,477.0
2,221

165
6,163.9
257.5
5,906.4
34.0
2,236.6

61,278.0
833.9
40,267.0
1,421

204
115
58
46,515.6
15,633.2
22,201.0
8,681.4
1,546.9
9,246.7

17,087.2
10,940.2
2,877.1
2,209

142
4,205.6
194.2
4,011.4
25.3
1,825.5

1 Secondary Offering Financings includes prospectus offerings on both a treasury and secondary basis.

2 TSX Venture Exchange market statistics do not include data for debt securities. ‘New Issuers Listed’ and ‘S&P/TSX Venture Composite Index Close’ statistics exclude

data for issuers on NEX. All other TSX Venture Exchange market statistics include data for issuers on NEX, which is a board that was established on August 18, 2003

for issuers that have fallen below TSX Venture’s listing standards (164 issuers at December 31, 2006, 201 issuers at December 31, 2005).

DOUGLAS McGREGOR
Co-President and Managing Director
Head of Global Investment Banking and Equity Markets
RBC Capital Markets
Committees: n/a
Director since: 2006

JOHN P. MULVIHILL
Chairman
Mulvihill Capital Management Inc.
Committees: Governance (Chair)
Director since: 1996

RICHARD NESBITT
Chief Executive Officer
TSX Group Inc.
Committees: n/a
Director since: 2005

KATHLEEN M. O’NEILL
Corporate Director
Committees: Finance and Audit, Governance
Director since: 2005

GERRI B. SINCLAIR
Strategic Consultant
Committees: Human Resources, Public Venture Market
Director since: 2005

BOARD OF DIRECTORS
As of March 15, 2007

WAYNE C. FOX (CHAIR)
Corporate Director
Committees: Governance, Human Resources,
Public Venture Market (Chair)
Director since: 1997

TULLIO CEDRASCHI
President and Chief Executive Officer
CN Investment Division
Committees: Governance, Human Resources (Chair)
Director since: 2001

RAYMOND CHAN
President and Chief Executive Officer
Baytex Energy Trust
Committees: Finance and Audit
Director since: 2006

RAYMOND GARNEAU
Corporate Director
Committees: Governance, Human Resources
Director since: 2003

JOHN A. HAGG
Corporate Director
Committees: Human Resources, Public Venture Market
Director since: 2001

HARRY A. JAAKO
Chairman, Co-CEO and Principal
Discovery Capital Corporation
Committees: Finance and Audit, Public Venture Market
Director since: 2001

J. SPENCER LANTHIER
Corporate Director
Committees: Finance and Audit (Chair), Governance
Director since: 2000

JEAN MARTEL
Senior Partner
Lavery, de Billy
Committees: Finance and Audit, Public Venture Market
Director since: 1999

OWEN McCREERY
Consultant and Corporate Director
Committees: Finance and Audit
Director since: 2002

SENIOR MANAGEMENT OF TSX GROUP AND ITS SUBSIDIARIES
As of March 15, 2007

HARRY A. McLEAN
Vice President, Operations and Service Delivery
TSX Technologies

RICHARD NADEAU*
Senior Vice President
Toronto Stock Exchange

RIK PARKHILL*
President
TSX Markets

SHARON C. PEL*
Senior Vice President, Legal and Business Affairs
TSX Group

MICHAEL S. PTASZNIK*
Senior Vice President and Chief Financial Officer
TSX Group

ERIC SINCLAIR*
Senior Vice President
TSX Datalinx

RICHARD NESBITT*
Chief Executive Officer
TSX Group

DAVID ABLETT
Vice President, Public and Corporate Affairs
TSX Group

JOHN B. CIESLAK* +
Executive Vice President, Chief Information and
Administration Officer
TSX Group

KEVAN B. COWAN* +
Senior Vice President
TSX Venture Exchange
Senior Vice President, Business Development
Toronto Stock Exchange

CHRISTINE ELLISON
Vice President, Human Resources
TSX Group

ROBERT FOTHERINGHAM
Vice President, Trading
TSX Markets

BRENDA L. HOFFMAN* +
Vice President, Information & Trading Technology
Development
TSX Technologies

LINDA M.O. HOHOL* +
President
TSX Venture Exchange

PETER KRENKEL*
President
NGX

JAMES P. MAGEE*
President & Chief Executive Officer
Shorcan

JOHN MCKENZIE
Vice President
Corporate Strategy and Development
TSX Group

* Member of the Senior Management Team
+

Ms. Hohol is retiring from TSX Group and TSX Venture Exchange on April 30, 2007. Mr. Cowan will become President, TSX Venture Exchange on that date.

Mr. Cieslak is stepping down as Executive Vice President, Chief Information and Administration Officer, effective April 30, 2007. Ms. Hoffman will become Senior

Vice President and Chief Information Officer on that date.

SHAREHOLDER INFORMATION

STOCK LISTING
Toronto Stock Exchange
Share Symbol “X”

AUDITOR
KPMG LLP
Toronto, ON

REGISTERED OFFICE AND HEAD OFFICE OF TSX GROUP
The Exchange Tower
130 King Street West
Toronto, ON
M5X 1J2

HEAD OFFICE OF TSX VENTURE EXCHANGE
300 – 5th Avenue SW
10th Floor
Calgary, AB
T2P 3C4

HEAD OFFICE OF NGX
140 – 4th Avenue SW
Suite 2330
Calgary, AB
T2P 3N3

HEAD OFFICE OF SHORCAN
20 Adelaide Street East
Suite 1000
Toronto, Ontario
M5C 2T6

REGIONAL OFFICES

MONTREAL
1000 Sherbrooke Street West
Suite 1100
Montreal, QC
H3A 3G4

VANCOUVER
650 West Georgia Street
Suite 2700
Vancouver, BC
V6B 4N9

WINNIPEG
One Lombard Place
Suite 600
Winnipeg, MB
R3B 0X3

SHARE TRANSFER AGENT
Requests for information regarding share transfers
should be directed to the Transfer Agent:

CIBC Mellon Trust Company
PO Box 7010
Adelaide Street Postal Station
Toronto, ON
M5C 2W9
Tel:

(416) 643-5500 (Toronto Area)
1-800-387-0825 (North America)
Fax:
(416) 643-5501
E-mail: inquiries@cibcmellon.com

INVESTOR CONTACT INFORMATION
Investor Relations may be contacted at:
(416) 947-4277 (Toronto Area)
Tel:
1-888-873-8392 (North America)
(416) 947-4727
Fax:
E-mail: shareholder@tsx.com

ANNUAL AND SPECIAL MEETING
The Annual and Special Meeting of shareholders
will be held at 2 p.m. (Eastern Daylight Time)
on April 25, 2007 at:

LE WINDSOR
Salon Windsor
1170 Peel Street
Montreal, QC
H3B 4P2

TSX, TSX Group, Toronto Stock Exchange, TSX Venture Exchange, TSX Markets, TSX Datalinx,
Natural Gas Exchange, NGX, NEX, TSX Firm Order eXecution, FOX, Capital Pool Company, Toronto 35
Index, TIPS, TSE 300 Composite Index and TSXconnect are registered trade-marks of TSX Inc. PC-Bond
is a registered trade-mark of 2099242 Ontario Inc., a wholly-owned subsidiary of TSX Group Inc.

TSX Technologies, Equities News, CPC, TSX Alternative Trade eXecution, ATX, TSX Compliance
Automated Reporting System, CARS, TSX Direct, TSXPress and Public Venture Capital Campaign are
trade-marks of TSX Inc.

“S&P”, as part of the composite mark of S&P/TSX which is used in the name the S&P/TSX Composite
Index, the S&P/TSX 60 Index and other S&P/TSX indices, refers to a trade-mark of The McGraw-Hill
Companies, Inc. and is used under license.

Scotia Capital is a registered trade-mark of The Bank of Nova Scotia and is used under license. CNX

Marketlink is a registered trade-mark of CNW Group Ltd. and is used under license.