Letter from the President & CEO

In fiscal 2021, we delivered our strongest financial performance on record, with revenue of $2.0 billion, reflecting record contributions from both our capital markets and wealth management segments.

We also reached several important valuation milestones, a testament to our improved market position and the breadth and quality of our earnings. Client assets in our wealth management businesses reached a new record of $89 billion, and our capital markets businesses are among the league table leaders in each of our key geographies. During the year, the market capitalization of our Company surpassed $1 billion, and CF common shares were added to the TSX Composite Index.

What is equally impressive is the breadth of the operating performance that was achieved across our Company. Over the fiscal year, we operated at a higher level than in any other period in our history when measured by employee productivity, revenue, net income, profit margins and earnings per share. Excluding significant items⁽¹⁾, we earned firm-wide pre-tax net income of $386 million, an amount that exceeds all prior fiscal year results. This translated to diluted earnings per share of $2.48, our highest on record.

Without a doubt, the extraordinary market opportunity that benefited small- and mid-cap industries and investors was an important driver of our revenue and profitability growth over the year, but perhaps more importantly, we continued to capture market share across regions and verticals, further entrenching our position as a leading mid-market investment bank and wealth management firm in each of our key geographies.

Our global capital markets business earned revenue of $1.3 billion for the fiscal year, half of which was attributable to investment banking activities. The breadth of our equity capital markets capabilities – including mid-market IPOs, follow-ons and SPACs – positioned us to capture a meaningful share of the strong levels of market issuance over the 12-month period. Over the fiscal year, we helped raise proceeds of $86 billion for growth companies, with continued strong activity levels in the life sciences, mining and technology sectors – all historic areas of CG strength, where we are also differentiated by our globally aligned capabilities.

Our US, Canadian and Australian capital markets businesses all earned record revenues, with year-over-year increases of 69%, 117% and 376%, respectively.

When heightened volatility created difficult business conditions for advisory activities, our trading teams outperformed, helping to offset that weakness. Trading revenue increased by 126% compared to the prior fiscal year, primarily driven by contributions from our US International Equities Desk. The second half of the fiscal year presented an opportunity for us to deliver on a strong pipeline of higher margin advisory activity – most notably in our US and Canadian operations. As a result, firm-wide revenue from this segment for the fiscal year was just 6% lower than the previous year’s record result, notwithstanding the COVID-related impacts in the first half of the year.

The outstanding performance delivered from across our global capital markets division contributed to a record pre-tax profit margin⁽¹⁾ of 25% for the fiscal year. While margins in this segment will fluctuate with the pace of activities in our core sectors and geographies, we remain focused on generating a greater portion of our long-term earnings from higher margin offerings, as well as developing ancillary products and services that complement our mid-market strengths and support continued market share growth.

Excluding significant items⁽¹⁾, our combined wealth management businesses contributed pre-tax net income of $135 million, an increase of 69% compared to the prior fiscal year, and the pre-tax profit margin for this segment increased to 20%, reflecting margin growth from all regions.

The exceptional backdrop for capital raising activities helped to drive a landmark performance for our Canadian wealth management business. Client assets grew to a record $32 billion and the average book per Investment Advisory Team increased by 75% over the fiscal year. This team also achieved impressive growth in its discretionary assets under management, which grew by 57% compared to last year. The unparalleled advantages and opportunities provided by our platform have been consistently evidenced in the multi-year growth of this business, making CG the most profitable independent wealth management business in the country, and this has supported our recruiting activities.

Our wealth management business in the UK & Crown Dependencies has been a steady contributor of growth and profitability through a range of market environments, and fiscal 2021 was no exception. During the year, we were very pleased to announce a significant investment from HPS, which adds a partner to help fund the future growth of this business at the regional level. While 78% of the net income contribution from this business will be allocated to group results going forward, we expect that this development will ultimately drive stronger net income contributions to our overall results. In April, we announced the acquisition of the investment management business of Adam & Company, marking our entry into the Scottish market with a deeply established and strong brand. We look forward to increasing our presence in this market and expanding on the success we have achieved to date.

And finally, our Australian wealth management business has been an increasingly positive contributor of revenue and net income since we expanded this business with a transformational acquisition in 2019. Having paid $23 million for this asset, we are very pleased to report annual revenue of $62 million. With CG gaining momentum as a premier brand for small- and mid-cap investors in the region, managed client assets in this business increased by 76% year over year, and this growth is helping to drive compelling recruiting opportunities in key Australian markets.

Critical investments to advance our technology offering and infrastructure have been instrumental to our ability to support the growth of our wealth management businesses. We will continue to develop our technology and product offering to meet the increasingly complex needs of our clients, and improve the advisor experience. We will also continue to pursue targeted growth in each of these businesses, and we are optimistic that this segment will generate sustainable margin growth as we increase contributions from stable and recurring revenue sources.

The dynamic nature of the global capital markets requires us to maintain a healthy level of capital flexibility to support our business activities, and this was especially important in a year where we experienced record levels of underwriting and trading activity. Having said that, we have made it a strong priority to deploy capital in ways that will provide increased returns for our shareholders. During the year, we increased our full-year common share dividend payout by 25% compared to the prior fiscal year. We also announced the planned redemption of our unsecured senior subordinated convertible debentures, which were set to mature in 2023, resulting in a 15% year-over-year reduction in our average fully diluted common shares. Factoring in the redemption of our convertible debentures, our fiscal 2021 capital deployment initiatives will result in a return of $192 million to CF shareholders and debenture holders.

With a defensive revenue mix and a relentless drive to be the very best in our areas of focus, we are structured to deliver stability in times of stress, and increased value when markets are active.

We expect that certain market tailwinds could moderate in coming quarters, but several factors point towards the continuance of a supportive marketplace for growth and value stocks in our core mid-market sectors. The increasing momentum of global vaccine rollouts has also given business leaders and market participants good reason for optimism.

Our strong financial position provides us the flexibility to operate effectively and harness opportunities for growth as we help our clients manage through any new market challenges. Perhaps most importantly, we are very pleased to be entering our new fiscal year with a substantially stronger global wealth management franchise and fewer common shares outstanding on a fully diluted basis, factors that we expect will contribute to enhanced earnings in any market backdrop.

I am confident that the strategic decisions we have made to transform our business mix and intensify our focus on our core capabilities, coupled with disciplined investments in our growth, will continue to deliver outstanding results for our shareholders.

In closing, I would like to thank our Board of Directors for their wise counsel and support as we navigated the unique confluence of challenges and opportunities throughout this historic period. And to my fellow shareholders, thank you for your continued support. In everything we do, we are driven to increase the long-term value of our business and create enduring value for our shareholders.

Wishing you continued safety and health,