PERFORMANCE

Industry BruIsed But not Beaten In 2008

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Tel.: 416.364.2754 Fax: 416.364.4861

www.iiac.ca

In the wake of the global economic and financial crisis of 2008, industry operating revenues fell 15% from the previous year while operating profits plunged to $3.9 billion, the lowest level since 2004 and 39% below the 2007 level. Most business lines within the Canadian securities industry experienced major setbacks with investment banking and equity trading hardest hit, down 32% and 102% respectively from the previous year. The steep sell-off in equity markets during the second half of the year also proved challenging for the wealth management business which saw a 17% decrease in mutual fund revenues for the year while revenues earned from retail fee-based programs saw no growth from 2007.

Revenues and Profits

Market conditions in the fourth quarter were more challenging than the year’s preceding three quarters with the S&P/TSX Composite falling 24% during the final three months of 2008 and deteriorating economic conditions causing investor confidence to fall. As a result, revenues for the final quarter of 2008 were $3.3 billion, the lowest level since Q2 of 2005. It also represented a 7% drop from the previous quarter and 23% from the same period in 2007. The inability to adjust costs in tandem with the collapse in revenue resulted in operating profits falling more sharply than revenue. On the year, operating revenues totalled $14.6 billion, $2.5 billion less than 2007 and falling by 45% on the quarter and 39% on the year. (Chart 1)

Investment Banking

Investment banking revenues increased 28% in Q4 as a result of large scale equity offerings from several financial institutions. Canadian equity financings ended 2008 by posting their largest quarterly issuance for the year with $12.7 billion in equity capital raised during the final three months – 75% of which originated from financial institutions. On the year however, investment banking revenues were one-third below 2007’s levels and the lowest since 2003 as debt and equity underwriting fell short of prior years’ pace (Chart 2).

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Operating revenues

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Chart 1: Operating profits and revenues

seCurItIes Industry

PERFORMANCErePort for the fourth quarter

• Operating revenues and profits fall 7% and 46% respectively from previous quarter and 15% and 39% from 2007.

• Margin borrowing hits five year low as client debt margin outstanding falls to $8.8 billion at year end

• Investment banking revenues drops back 33% for the year.

hIghlIghts

2 of 12IIaC seCurItIes Industry PerforManCe q4 08

The number of equity underwritings in 2008 were 32% below 2007’s level while the number of debt underwritings were 39% below. Corporate advisory revenues, another component of investment banking, were 26% below 2007’s level as mergers and acquisition activity also slowed.

Principal Trading

Mixed results were witnessed in the principal trading business– while fixed-income desks experienced recent high revenue, their equity counterparts suffered a recent record low. Bond traders were successful in re-balancing inventory positions in advance of changing credit market conditions and were able to earn trading profits in 2008. Equity trading however suffered trading losses of $11 million on the year, the worst showing

since 1990.

Wealth Management

The level of mutual fund redemptions in 2008, particularly equity funds, is symptomatic of the loss of confidence among investors. According to statistics from the Investment Funds Institute of Canada, in 2008 investors redeemed approximately $14 billion (net) from mutual funds (excluding money market funds). Equity funds were hardest hit, suffering $12 billion in net redemptions. As a result, for the securities industry mutual fund revenues in the fourth quarter fell 21% from Q3 and totalled $369 million, the lowest showing since the fourth quarter of 2004. On the year, the industry earned $1.9 billion from mutual fund sales and trailers, 17% less than 2007 but still the third highest earnings on record. Mutual funds represented 13% of

total industry revenues in 2008, demonstrating their continued importance to the industry (Chart 3).

Industry commission revenues were down 3% on the quarter and 11% on the year as investors pulled back to the sidelines given the uncertainty about equity markets. Margin borrowing hit a five year low as client debt margin outstanding fell to $8.8 billion at year end, a 37% reduction from the previous year (Chart 4). Conversely, client cash holdings in the securities industry were at a new record high.

The wealth management business benefited from its gradual transition over the last several years to fee-based compensation. This transition has helped insulate the industry from some of the market cyclicality experienced during 2008. Industry fee-based revenues were up 8% in the fourth quarter and totalled $2.6 billion on the year, at par with 2007’s level. Fee-based revenues accounted for 18% of

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Chart 2: Investment banking revenues

Source: IIAC

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Chart 4: Client Margin Debt Outstanding

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total industry revenues in 2008 as compared to 11% just five years ago when the revenues stood at

$1.1 billion (Chart 5).

Sector Performance

Performance among all three industry sectors suffered due to the 2008 economic climate. However, the institutional firms experienced the largest drop in operating revenues during the year (24%), while the retail firms saw the biggest deterioration in operating profits (60%) as retail firms were unable to reduce operating costs in line with collapsing revenue. Integrated firms were the least battered, suffering only a 12% drop in operating revenues and a 32% plunge in operating profits. Integrated firms were also able to increase their share of industry operating profits to 69% as compared to 63% the prior year (Chart 6).

While the industry experienced a significant fall off in revenue and operating profits in 2008, performance was respectable in relative terms, with operating revenue and profits representing the third and fourth best years on record respectively. However, 2008’s results were buoyed by good first half finances. If conditions that prevailed in the latest fourth quarter persist through this year, profit will be half the 2008 level and total revenue down 20% year-over-year.

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Chart 5: Quarterly fee based revenue

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Chart 6: 2008 Operating profits by sector

Integrated firms

Retail firmsInstitutional firms

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Q4 2008 INDUSTRY HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year

($ millions unless otherwise noted) Quarters % Change Years % Change

Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 202 201 203 0.5% -0.5% 202 203 198 -0.5% 2.5%Number of employees 40,836 41,397 42,329 -1.4% -3.5% 40,836 42,329 40,919 -3.5% 3.4%

Revenue Commissions 1,298 1,336 1,526 -2.8% -14.95% 5,592 6,315 5,995 -11.4% 5.3% Mutual fund only commissions 369 466 538 -20.8% -31.4% 1,860 2,249 1,966 -17.3% 14.4%

Investment banking 800 626 1,130 27.8% -29.2% 3,077 4,546 3,950 -32.3% 15.1% New issues equity 434 248 618 75.0% -29.8% 1,580 2,589 2,224 -39.0% 16.4% New issues debt 86 94 144 -8.5% -40.3% 483 581 590 -16.9% -1.5% Corporate advisory fees 279 285 368 -2.1% -24.2% 1,014 1,376 1,136 -26.3% 21.1%

Fixed income trading 387 166 95 133.1% 307.4% 1,045 698 806 49.7% -13.4% Equity trading 51 55 37 -7.3% 37.8% -11 460 811 -102.4% -43.3% Net interest 460 508 463 -9.4% -0.6% 1,894 1,794 1,571 5.6% 14.2% Fees 664 614 787 8.1% -15.6% 2,624 2,636 2,146 -0.5% 22.8% Other -342 260 243 -231.5% -240.7% 371 674 600 -45.0% 12.3%

Operating revenue 3,317 3,566 4,281 -7.0% -22.5% 14,593 17,123 15,879 -14.8% 7.8%Operating expenses1 1,743 1,600 1,663 8.9% 4.8% 6,528 6,279 5,711 4.0% 9.9%Operating profit 544 1,000 1,461 -45.6% -62.8% 3,914 6,382 5,765 -38.7% 10.7%Net profit (loss) 281 580 564 -51.6% -50.2% 1,875 2,771 2,515 -32.3% 10.2%

Shareholders’ equity 13,507 13,357 12,655 1.1% 6.7% 13,507 12,655 11,103 6.7% 14.0%Regulatory capital 27,197 29,561 23,413 -8.0% 16.2% 27,197 23,413 19,804 16.2% 18.2%Client cash holdings 33,677 29,995 28,500 12.3% 18.2% 33,677 28,500 25,281 18.2% 12.7%Client debt margin outstanding 8,846 14,374 14,001 -38.5% -36.8% 8,846 14,001 11,710 -36.8% 19.6%

Productivity ($ thousands)2 325 345 405 -5.7% -19.7% 357 405 388 -11.7% 4.3%

Annual return3 (%) 8.3% 17.4% 17.8% -9.0% -9.5% 13.9% 21.9% 22.7% -8.0% -0.8% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.


Integrated firms Firms that are national in scope and have extensive retail and institutional operations; includes dealers of the six major chartered banks.


Q4 2008 INTEGRATED FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 11 11 11 0.0% 0.0% 11 11 11 0.0% 0.0%Number of employees 25,973 26,233 26,925 -1.0% -3.5% 25,973 26,925 26,477 -3.5% 1.7%

Revenue Commissions 871 881 996 -1.1% -12.6% 3,675 4,145 4,036 -11.3% 2.7% Mutual fund only commissions 284 358 400 -20.7% -29.0% 1,414 1,665 1,454 -15.1% 14.5%

Investment banking 559 334 645 67.4% -13.3% 1,874 2,642 2,425 -29.1% 8.9% New issues equity 333 112 331 197.3% 0.6% 967 1,421 1,286 -31.9% 10.5% New issues debt 71 80 117 -11.3% -39.3% 405 461 494 -12.1% -6.7% Corporate advisory fees 155 142 196 9.2% -20.9% 502 758 644 -33.8% 17.7%

Fixed income trading 301 117 66 157.3% 356.1% 782 514 586 52.1% -12.3% Equity trading 49 246 45 -80.1% 8.9% 106 184 387 -42.4% -52.5% Net interest 359 417 361 -13.9% -0.6% 1,488 1,399 1,251 6.4% 11.8% Fees 481 436 511 10.3% -5.9% 1,877 1,857 1,529 1.1% 21.5% Other -423 184 164 -329.9% -357.9% -1 436 311 -100.2% 40.2%

Operating revenue 2,196 2,614 2,788 -16.0% -21.2% 9,801 11,177 10,525 -12.3% 6.2%Operating expenses1 1,137 1,022 1,066 11.3% 6.7% 4,145 4,029 3,740 2.9% 7.7%Operating profit 328 890 923 -63.1% -64.5% 2,722 3,985 3,725 -31.7% 7.0%Net profit (loss) 182 645 480 -71.8% -62.1% 1,502 2,006 1,854 -25.1% 8.2%

Shareholders’ equity 8,637 8,486 7,761 1.8% 11.3% 8,637 7,761 6,730 11.3% 15.3%Regulatory capital 19,334 20,975 15,669 -7.8% 23.4% 19,334 15,669 13,425 23.4% 16.7%Client cash holdings 28,157 24,948 23,811 12.9% 18.3% 28,157 23,811 21,322 18.3% 11.7%

Productivity ($ thousands)2 338 399 414 -15.1% -18.3% 377 415 398 -9.1 4.4%

Annual return3 (%) 8.4% 30.4% 24.7% -22.0% -16.3% 17.4% 25.8% 27.5% -8.5% -1.7% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.

Q4 2008 INSTITUTIONAL FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 69 67 68 3.0% 1.5% 69 68 65 1.5% 4.6%Number of employees 2,926 3,024 2,988 -3.2% -2.1% 2,926 2,988 2,698 -2.1% 10.7%

RevenueCommissions 180 188 196 -4.3% -8.2% 777 783 652 -0.8% 20.1%

Investment banking revenues 174 240 384 -27.5% -54.7% 938 1,425 1,108 -34.2% 28.6% New issues equity 70 99 206 -29.3% -66.0% 438 767 594 -42.9% 29.1% New issues debt 9 6 15 50.0% -40.0% 42 76 56 -44.7% 35.7% Corporate advisory fees 95 135 163 -29.6% -41.7% 458 581 459 -21.2% 26.6%

Fixed income trading 28 7 7 300.0% 300.0% 94 82 137 14.6% -40.1%Equity trading 37 -143 -22 125.9% 268.2% -61 199 220 -130.7% -9.5%Net interest 61 41 52 48.8% 17.3% 212 201 135 5.5% 48.9%Fees 16 20 24 -20.0% -33.3% 79 85 55 -7.1% 54.5%Other 37 45 40 -17.8% -7.5% 174 126 163 38.1% -22.7%

Operating revenue 534 398 681 34.2% -21.6% 2,214 2,901 2,469 -23.7% 17.5%Operating expenses1 273 234 247 16.7% 10.5% 990 889 728 11.4% 22.1%Operating profit 192 105 340 82.9% -43.5% 947 1,790 1,485 -47.1% 20.5%Net profit (loss) 120 -25 86 580.0% 39.5% 382 660 527 -42.1% 25.2%

Shareholders’ equity 3,803 3,805 3,768 -0.1% 0.9% 3,803 3,768 3,263 0.9% 15.5%Regulatory capital 6,118 6,851 5,937 -10.7% 3.0% 6,118 5,937 4,867 3.0% 22.0%Client cash holdings 1,326 1,052 1,034 26.0% 28.2% 1,326 1,034 828 28.2% 24.9%

Productivity ($ thousands)2 730 526 912 38.7% -19.9% 757 971 915 -22.1% 6.1%

Annual return3 (%) 12.6% -2.6% 9.1% 15.2% 3.5% 10.0% 17.5% 16.2% -7.5% 1.4% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.


Q4 2008 RETAIL FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 122 123 124 -0.8% -1.6% 122 124 122 -1.6% 1.6%Number of employees 11,937 12,140 12,416 -1.7% -3.9% 11,937 12,416 11,744 -3.9% 5.7%

Revenue Commissions 247 268 334 -7.8% -26.0% 1,140 1,387 1,307 -17.8% 6.1% Mutual fund only commissions 84 106 136 -20.8% -38.2% 440 577 509 -23.7% 13.4%

Investment banking 67 53 102 26.4% -34.3% 265 481 417 -44.9% 15.3% New issues equity 31 36 81 -13.9% -61.7% 176 400 343 -56.0% 16.6% New issues debt 7 8 12 -12.5% -41.7% 36 43 40 -16.3% 7.5% Corporate advisory fees 29 8 9 262.5% 222.2% 54 36 33 50.0% 9.1%

Fixed income trading 28 42 7 -33.3% 300.0% 139 88 78 58.0% 12.8% Equity trading 37 -48 -22 177.1% 268.2% 17 40 258 -57.5% -84.5% Net interest 40 50 50 -20.0% -20.0% 194 195 185 -0.5% 5.4% Fees 166 158 252 5.1% -34.1% 667 694 563 -3.9% 23.3% Other 44 31 38 41.9% 15.8% 198 111 127 78.4% -12.6%

Operating revenue 587 554 812 6.0% -27.7% 2,578 3,045 2,832 -15.3% 7.5%Operating expenses1 334 344 351 -2.9% -4.8% 1,394 1,361 1,243 2.4% 9.5%Operating profit 24 6 198 300.0% -87.9% 245 606 554 -59.6% 9.4%Net profit (loss) -21 -41 -3 48.8% -600.0% -8 104 134 -107.7% -22.4%

Shareholders’ equity 1,067 1,066 1,126 0.1% -5.2% 1,067 1,126 1,109 -5.2% 1.5%Regulatory capital 1,744 1,734 1,807 0.6% -3.5% 1,744 1,807 1,512 -3.5% 19.5%Client cash holdings 4,194 3,995 3,655 5.0% 14.7% 4,194 3,655 3,105 14.7% 17.7%


Annual return3 (%) -7.9% -15.4% -1.1% 7.5% -6.8% -0.7% 9.2% 12.1% -10.0% -2.8% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.

IIaC seCurItIes Industry PerforManCe q4 08 7 of 12

Q4 2008 DOMESTIC INSTITUTIONAL FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of Firms 49 47 48 4.3% 2.1% 49 48 47 2.1% 2.1%Number of Employees 2,146 2,206 2,048 -2.7% 4.8% 2,146 2,048 1,869 4.8% 9.6%

Revenue Commission 112 124 137 -9.7% -18.2% 517 537 415 -3.7% 29.3%

Investment banking 116 171 225 -32.2% -48.4% 635 956 746 -33.6% 28.2% New issues equity 64 97 167 -34.0% -61.7% 389 670 505 -42.0% 32.7% New issues debt 1 2 4 -50.0% -75.0% 9 12 10 -26.6% 22.6% Corporate advisory fees 50 72 54 -30.6% -7.4% 237 274 231 -13.4% 18.5%

Fixed income trading 14 -1 2 1500.0% 600.0% 25 6 16 297.3% -60.7% Equity trading -32 -60 10 46.7% -420.0% -127 25 53 -602.4% -52.3% Net interest 10 13 14 -23.1% -28.6% 50 51 45 -2.3% 13.7% Fees 13 16 14 -18.8% -7.1% 64 66 47 -3.4% 40.9% Other 24 14 15 71.4% 60.0% 57 23 63 146.1% -63.2%

Operating revenue 256 277 417 -7.6% -38.6% 1,222 1,664 1,386 -26.6% 20.1%Operating expenses1 132 132 114 0.0% 15.8% 502 428 361 17.3% 18.5%Operating profit 70 93 220 -24.7% -68.2% 484 1,000 795 -51.6% 25.8%Net profit (loss) 21 -16 75 231.3% -72.0% 137 386 316 -64.5% 22.1%

Shareholders’ Equity 1,563 1,596 1,686 -2.1% -7.3% 1,563 1,686 1,414 -7.3% 19.2%Regulatory Capital 1,900 1,931 2,008 -1.6% -5.4% 1,900 2,008 1,754 -5.4% 14.5%Client cash holdings 768 712 519 7.9% 48.0% 768 519 344 48.0% 50.9%

Productivity ($ thousands)2 477 502 814 -5.0% -41.4% 569 813 742 -29.9% 9.6%

Annual return3 (%) 5.4% -4.0% 17.8% 9.4% -12.4% 8.8% 22.9% 22.3% -14.1% 0.5% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.

Domestic institutionalFirms that generate most of their revenues from servicing institutional clients and have their head office located in Canada.


Q4 2008 FOREIGN INSTITUTIONAL FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 20 20 20 0.0% 0.0% 20 20 18 0.0% 11.1%Number of employees 780 818 940 -4.6% -17.0% 780 940 829 -17.0% 13.4%

Revenue Commissions 68 63 59 7.9% 15.3% 260 246 236 5.6% 4.3%

Investment banking 59 68 158 -13.2% -62.7% 303 467 362 -35.1% 29.0% New issues equity 6 2 38 200.0% -84.2% 49 96 89 -49.2% 8.3% New issues debt 8 3 11 166.7% -27.3% 33 64 46 -48.1% 38.2% Corporate advisory fees 45 63 109 -28.6% -58.7% 220 308 228 -28.5% 35.0%

Fixed income trading 13 9 5 44.4% 160.0% 69 76 121 -9.1% -37.2% Equity trading 69 -83 -32 183.1% 315.6% 66 173 167 -61.9% 3.8% Net interest 51 28 38 82.1% 34.2% 162 150 90 8.1% 66.5% Fees 3 4 10 -25.0% -70.0% 15 19 7 -20.2% 168.4% Other 14 31 25 -54.8% -44.0% 118 103 100 14.4% 3.1%

Operating revenue 278 121 264 129.8% 5.3% 992 1,237 1,083 -19.8% 14.2%Operating expenses1 140 103 133 35.9% 5.3% 488 463 367 5.4% 26.1%Operating profit 122 11 120 1009.1% 1.7% 463 790 691 -41.4% 14.4%Net profit (loss) 99 -9 11 1200.0% 800.0% 245 274 211 -10.7% 30.1%

Shareholders’ equity 2,239 2,209 2,082 1.4% 7.5% 2,239 2,082 1,849 7.5% 12.6%Regulatory capital 4,218 4,920 3,929 -14.3% 7.4% 4,218 3,929 3,113 7.4% 26.2%Client cash holdings 493 275 334 79.3% 47.6% 493 334 432 47.6% -22.7%

Productivity ($ thousands)2 1,426 592 1,123 140.9% 26.9% 1,272 1,316 1,306 -3.4% 0.7%

Annual return3 (%) 17.7% -1.6% 2.1% 19.3% 15.6% 10.9% 13.2% 11.4% -2.2% 1.8% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.

Foreign institutional

Firms that generate most of their revenues from servicing institutional clients and have their head office located offshore.


Q4 2008 FULL SERVICE RETAIL FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 34 34 36 0.0% -5.6% 34 36 36 -5.6% 0.0%Number of employees 6,018 6,156 6,517 -2.2% -7.7% 6,018 6,517 6,381 -7.7% 2.1%

Revenue Commissions 142 153 195 -7.2% -27.2% 659 810 763 -18.6% 6.1% Mutual fund only commissions 50 65 61 -23.1% -18.0% 268 298 294 -10.1% 1.4%

Investment banking 26 33 77 -21.2% -66.2% 156 334 264 -53.3% 26.6% New issues equity 17 24 45 -29.2% -62.2% 107 249 211 -57.0% 17.8% New issues debt 6 5 10 20.0% -40.0% 27 33 30 -18.2% 10.0% Corporate advisory fees 3 5 5 -40.0% -40.0% 22 23 23 -4.8% 0.5%

Fixed income trading 48 35 10 37.1% 380.0% 136 56 60 143.1% -6.8% Equity trading -30 -31 2 3.2% -1600.0% -50 40 73 -226.6% -45.9% Net interest 23 27 27 -14.8% -14.8% 104 108 101 -3.4% 6.6% Fees 71 73 78 -2.7% -9.0% 292 294 247 -0.5% 18.8% Other 15 11 16 36.4% -6.3% 58 59 57 -2.4% 4.3%

Operating revenue 295 301 388 -2.0% -24.0% 1,356 1,670 1,565 -18.8% 6.7%Operating expenses1 180 192 200 -6.3% -10.0% 780 778 711 0.2% 9.4%Operating profit -30 -3 39 -900.0% -176.9% 29 267 211 -89.1% 26.6%Net profit (loss) -27 -12 9 -125.0% -400.0% -29 80 64 -136.4% 24.3%

Shareholders’ equity 894 900 899 -0.7% -0.6% 894 899 747 -0.6% 20.3%Regulatory capital 1,094 1,115 1,104 -1.9% -0.9% 1,094 1,104 910 -0.9% 21.3%Client cash holdings 2,745 2,659 2,608 3.2% 5.3% 2,745 2,608 2,190 5.3% 19.1%


Annual return3 (%) -12.1% -5.3% 4.0% -6.7% -16.1% -3.2% 8.9% 8.6% -12.1% 0.3% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.

Full serviceFirms that generate most of their revenues from servicing retail clients and have their own front and back offices.


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Q4 2008 RETAIL INTRODUCER FIRM HIGHLIGHTS Quarter-over-Quarter Annual Year-over-Year


Q4 08 Q3 08 Q4 07 Q4/Q3 08 Q4 08/07 2008 2007 2006 08/07 07/06

Number of firms 88 89 88 -1.1% 0.0% 88 88 86 0.0% 2.3%Number of employees 5,919 5,984 5,899 -1.1% 0.3% 5,919 5,899 5,363 0.3% 10.0%

Revenue Commissions 105 115 139 -8.7% -24.5% 480 577 544 -16.8% 6.1% Mutual fund only commissions 34 41 59 -17.1% -42.4% 172 251 215 -31.4% 16.6%

Investment banking 41 20 41 105.0% 0.0% 110 175 153 -37.0% 14.1% New issues equity 14 13 35 7.7% -60.0% 69 151 133 -54.2% 13.2% New issues debt 1 4 2 -75.0% -50.0% 9 11 10 -19.6% 12.0% Corporate advisory fees 25 3 4 733.3% 525.0% 32 14 10 133.5% 37.0%

Fixed income trading 10 6 12 66.7% -16.7% 34 46 23 -26.8% 101.9% Equity trading -6 -16 12 62.5% -150.0% -6 36 131 -116.7% -72.6% Net interest 17 24 23 -29.2% -26.1% 89 87 83 2.7% 4.4% Fees 95 85 174 11.8% -45.4% 375 401 316 -6.6% 27.0% Other 29 20 22 45.0% 31.8% 140 51 70 174.3% -27.1%

Operating revenue 292 254 425 15.0% -31.3% 1,222 1,376 1,320 -11.2% 4.2%Operating expenses1 154 245 150 -37.1% 2.7% 614 582 532 5.5% 9.4%Operating profit 54 8 159 575.0% -66.0% 216 339 343 -36.3% -1.1%Net profit (loss) 6 -29 -12 120.7% 150.0% 21 23 70 -8.0% -67.4%

Shareholders’ equity 173 166 227 4.2% -23.8% 173 227 363 -23.8% -37.5%Regulatory capital 650 619 703 5.0% -7.5% 650 703 603 -7.5% 16.6%Client cash holdings 1,448 1,336 1,319 8.4% 9.8% 1,448 1,319 940 9.8% 40.3%

Productivity ($ thousands)2 197 170 288 16.2% -31.5% 206 233 246 -11.5% -5.3%

Annual return3 (%) 13.9% -69.9% -21.1% 83.8% 35.0% 12.1% 10.1% 19.3% 2.1% -9.2% 1 Operating expenses reflect the underlying cost of running the securities firm and exclude commissions, bonuses and other compensation to brokers.2 Annual revenue per employee.3 Annual return is calculated as net profit/shareholder’s equity.

Retail introducers

Firms that generate most of their revenues from servicing retail clients and typically do not have back offices (use a “carrier” firm


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Securities Industry Performance is produced quarterly by the Investment Industry Association of Canada. We want to hear from you. Send suggestions for future editions and feedback to [email protected].

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TJ Jeyandran, Financial Analyst – Capital [email protected] Tel: (416) 687-5480

Addresses Toronto (Head Office) 11 King St West, Suite 1600Toronto, ON M5H 4C7Tel: (416) 364-2754 Fax: (416) 364-4861

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Jack Rando, Director – Capital [email protected] Tel: (416) 687-5477

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