Fellow Shareholders:

In the last five years, we have grown Canaccord Financial to become a leading global, mid-market investment bank. In the process, we have developed a strong platform that delivers exceptional service to our corporate, institutional and private clients. We have also taken significant steps to diversify our revenue streams both functionally and geographically. Most importantly, we have differentiated ourselves competitively by providing our clients with access to global markets, perspectives and opportunities.

CONSTRUCTING A GLOBALLY INTEGRATED PLATFORM

Our primary focus during fiscal 2013 was on achieving the revenue synergies and cost savings identified during the acquisition of Collins Stewart (CSHP), and ensuring our clients receive the full benefit of our global services. Integral to achieving these goals were our efforts to enhance internal communication and collaboration. Introducing new global leadership roles for our investment banking and research divisions was essential to promoting this type of teamwork. Clients across multiple geographies now have access to our highly regarded research coverage of over 1,000 companies globally. Our agency market share in the US and UK continues to grow, as does our commission impact at the large voting accounts. And most importantly, we are participating in record levels of cross-border M&A and in a significantly improved environment for underwriting activity in markets outside of Canada.

DELIVERING VALUE TO SHAREHOLDERS

During fiscal 2013, Canaccord earned $797 million in revenue, an increase of 32% compared to the previous year due largely to our expanded operations and revenue growth outside of Canada. Meaningful growth in advisory and commission revenue drove much of this increase.

During the year, we eliminated approximately $48 million of operating costs from the combined platforms of Canaccord and CSHP. While expenses grew proportionately with our growing business, they were significantly lower than the historical blended operating costs of both businesses prior to integration and the implementation of our cost saving initiatives. Excluding acquisition-related costs, restructuring costs and other significant items⁽¹⁾, total expenses for the year were $767 million. We’re committed to continuing our cost containment initiatives in the year ahead, as we see further opportunities to increase the efficiency of our business.

Excluding significant items⁽¹⁾, the Company earned $25.6 million of net income, or $0.14 per diluted share, during fiscal 2013.

STRONG BALANCE SHEET

With $491 million of cash and cash equivalents, and $394 million of working capital, our balance sheet remains strong and liquid, and well capitalized for growing business levels. We distributed $0.20 in dividends per common share to shareholders during the fiscal year – a testament to our board’s confidence in the direction and outlook of the Company.

GLOBAL CAPITAL MARKETS CAPABILITIES

On a global basis, Canaccord Genuity generated $538 million of revenue, an increase of 44% compared to the previous year. This division continues
to be a primary driver of our business, earning more than 67% of the Company’s total revenue. The success of this division was due largely to its successful, and growing, M&A and advisory practice. At $179 million, Canaccord Genuity recorded its third consecutive year of record advisory revenue.

The impact of our expansion efforts was demonstrated this year in a number of key geographies. In the UK, we led more equity transactions during calendar 2012⁽²⁾ than any other investment bank. In Asia, we’ve established Canaccord Genuity as the market-leading investment bank on the junior Singapore stock exchange. And in the US, we’re taking a lead-manager mentality to grow our investment banking business, and have significantly enhanced our trading volumes and commissions.

While challenging markets continued to suppress resource sector investment banking activity, our broader platform, with its diversification into other sectors, continued to perform well. During fiscal 2013, Canaccord Genuity led or co-led 111 transactions worldwide⁽³⁾, raising over $3.7 billion for corporate issuers. Including these transactions, the Company participated in 382 transactions, with gross proceeds of $31.4 billion.

STRENGTHENING OUR WEALTH MANAGEMENT DIVISION

Fiscal 2013 was a pivotal year for our global wealth management division. We increased our assets under management in the UK and Europe by 22% through organic growth and the acquisition of Eden Financial. We grew our Australian business through targeted recruitment and the appointment of a new head of wealth management. But most significantly, we implemented an important strategic change within our Canadian wealth management business, in order to strengthen our operations in this changing market and better align our service offering with the shifting needs of Canadian investors.

As part of our goal to better integrate aspects of our global operations, we undertook a global rebranding of our wealth management business subsequent to quarter end. On May 1, 2013, all wealth management operations were branded Canaccord Genuity Wealth Management.

On a global basis, Canaccord Genuity Wealth Management generated $235 million in revenue during fiscal 2013, a meaningful increase from the year earlier due to the addition of our UK platform at the end of last year. Worldwide, Canaccord Genuity Wealth Management now manages and administers over $26.8 billion of client assets.

THE VIEW AHEAD

We believe the pressure on global commodity prices will continue this year, particularly in precious metals. We also expect that regulatory burdens will continue to increase in all of our geographies. Most importantly, we have taken the right steps to prepare our business to contend with its varied challenges. Canaccord Genuity will continue to diversify its business with an increased emphasis on global service and global opportunities.

In Canada, Canaccord Genuity Wealth Management (CGWM) will be focused on returning to profitability by improving fee-based revenue streams through enhanced sales management and training. CGWM in the UK and Channel Islands will continue to pursue organic asset growth and will also be opportunistic for accretive, bolt-on acquisitions. And we will also look to markets like Singapore and Australia for additional expansion of our global wealth management presence.

TO US THERE ARE NO FOREIGN MARKETS

As our new slogan says, “to us there are no foreign markets”. This means that we are committed to providing each of our clients, regardless of geography or business type, with a global perspective and service orientation. It also demands significant amounts of effort, co-operation and focus from our people.

Fiscal 2013 saw us seamlessly integrate the largest acquisition in our company’s history. The success of this initiative would not be possible without the dedication and hard work of our talented employees – most of whom are fellow shareholders. I want to take this opportunity to thank them for their efforts this year, and for the contributions they continue to make in helping us establish Canaccord Financial as the leading mid-market investment bank globally.

Kind regards,

Paul D. Reynolds
President & Chief Executive Officer
May 2013

⁽¹⁾ Figures excluding significant items are non-IFRS measures and include costs recognized in relation to both prospective and completed acquisitions, amortization of intangible assets and restructuring costs. See page 23 of the fiscal 2013 MD&A for detailed information.

⁽²⁾ Transactions over $1.5 million. Company information.

⁽³⁾ Thomson Reuters. Bookrunners: 1/1/2012–31/12/2012. Includes all domestic and international deals and rights issues. SDC code C4c1r.