Boralex Inc. — Management Reports 2020

Feb 28, 2020

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MANAGEMENT’S DISCUSSION & ANALYSIS

For the Year Ended December 31, 2019

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Table of Contents

Table of Contents
Presentation of Financial Information and Non-GAAP Measures	4
Forward-Looking Information	6
About GMP	8
Business Environment - 2019 Highlights - Outlook	11
Financial Highlights	13
Segment Results from Continuing Operations	16
Quarterly Results	19
Financial Condition	21
Liquidity and Capital Resources	22
Outstanding Share Data and Dividends	25
Related Party Transactions	27
Critical Accounting Policies and Estimates	27
Financial Instruments	28
Future Changes in Accounting Policies or Estimates	29
Risk Management	29
Controls and Procedures	33
Risk Factors	33
Supplemental Information - Richardson GMP	34

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ABOUT THIS MANAGEMENT’S DISCUSSION AND ANALYSIS

Management's discussion and analysis (MD&A) is provided to enable readers to assess the financial condition and results of operations of GMP Capital Inc. (GMP or the Company) as at and for the year ended December 31, 2019.

This MD&A has been prepared with an effective date of February 27, 2020, and should be read in conjunction with the audited annual consolidated financial statements and related notes of GMP for the year ended December 31, 2019 (2019 Annual Financial Statements). These documents as well as additional information relating to GMP, including GMP's annual information form (AIF), can be accessed at gmpcapital.com and at sedar.com. Certain comparative amounts have been reclassified to conform to the current year's presentation.

All references to we, our, us and GMP Group refer to GMP, together with its consolidated operations controlled by it. All references to shareholders refer collectively to holders of common shares of GMP (Common Shares), holders of Cumulative Five-Year Rate Reset Preferred Shares, Series B of GMP (Series B Preferred Shares), and Cumulative Floating Rate Preferred Shares, Series C of GMP (Series C Preferred Shares). References to Preferred Shares refer to the Series B Preferred Shares and Series C Preferred Shares, collectively.

GMP's audit committee (Audit Committee) has reviewed this document and, prior to its release, GMP's board of directors (Board of Directors or GMP Board) approved it, on the Audit Committee's recommendation.

Certain numbers contained in this MD&A are subject to rounding.

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PRESENTATION OF FINANCIAL INFORMATION AND NON-GAAP MEASURES

Presentation of Financial Information

Unless otherwise specified herein, financial results, including related historical comparatives, contained in this MD&A, are based on our 2019 Annual Financial Statements, which have been prepared by management in accordance with International Financial Reporting Standards (IFRS). The Canadian dollar is our functional and reporting currency for purposes of preparing GMP's consolidated financial statements and accordingly, all dollar references in this MD&A are in Canadian dollars, unless otherwise specified herein.

IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations

In accordance with IFRS 5, the sale of the company's U.S. fixed income business in January 2019 and the sale of substantially all of the assets of its capital markets business, are both accounted for as discontinued operations as at December 31, 2019.

As at December 31, 2019, the Company's continuing business is comprised of clearing broker operations and a 34.4% equity investment in Richardson GMP Limited (Richardson GMP), one of Canada's leading wealth management firms.

Reporting Segments

Commencing in third quarter 2019, in connection with the sale of the Company's capital markets business to Stifel Financial Corp. (Stifel) in December 2019, the Company changed the composition of its business segment disclosure to better reflect its go-forward organizational structure to provide readers enhanced understanding of management's views of GMP's core performance:

Previous Reporting Segments Current Reporting Segments Capital Markets Operations Clearing Wealth Management Wealth Management Corporate Corporate

The Operations Clearing segment includes the business of providing carrying brokers services to Richardson GMP and Stifel's Canadian capital markets operations.

The results for prior periods have been restated to conform with the changes to reporting segments.

Non-GAAP Measures

We use certain measures to assess our financial performance that are not generally accepted accounting principles (GAAP) measures under IFRS. These measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of GMP's performance, liquidity, cash flows, and profitability.

Annualized Return on Common Equity

We evaluate the performance of our consolidated operations using annualized return on common equity (ROE) which we calculate based on net income (loss) attributable to common shareholders divided by total average common shareholder equity for the period, which are measures derived from information contained in our 2019 Annual Financial Statements.

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Assets Under Administration

Assets under administration (AUA) is a non-GAAP financial measure of client assets that are common to the wealth management business. AUA represents the market value of client assets managed and administered by Richardson GMP from which it earns commissions and fees. This measure includes funds held in client accounts as well as the aggregate market value of long and short security positions. Richardson GMP's method of calculating may differ from the methods used by other companies and therefore may not be comparable to other companies. Management uses these measures to assess Richardson GMP’s operational performance.

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FORWARD-LOOKING INFORMATION

This MD&A contains “forward-looking information” as defined under applicable Canadian securities laws. This information includes, but is not limited to, statements made in “Business Environment - 2019 Highlights - Outlook” and “Liquidity and Capital Resources” and other statements concerning our objectives, our strategies to achieve those objectives as well as statements with respect to management’s beliefs, plans, estimates, projections, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information is not a guarantee of future performance and is subject to numerous risks and uncertainties, including those described in this MD&A. GMP's primary business activities are both competitive and subject to various risks. These risks include market, credit, liquidity, operational, legal and regulatory risks and other risk factors including, without limitation: variation in the market value of securities, volume of client trading, level of assets under administration, access to new financings, dependence on key personnel, and sustainability of fees. Other factors, such as general economic conditions, including interest rate and exchange rate fluctuations, may also have an effect on GMP's results of operations.

The forward-looking statements included in this MD&A, including statements regarding the RGMP Transaction (as defined herein), the nature of GMP’s growth strategy going forward and execution on any of its potential plans are not guarantees of future results and involve numerous risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements. In respect of the forward-looking statements and information concerning the RGMP Transaction, and the Company's strategy going forward, management has provided same based on reliance on certain assumptions it considers reasonable at this time including that a transaction involving Richardson GMP can be completed on acceptable terms and that any conditions precedent can be satisfied. There is no assurance that any transaction involving Richardson GMP will result from the discussions with Richardson Financial Group Limited or on what terms or structure any transaction may occur as proposed or at all, including the timing of the completion of any transaction involving Richardson GMP. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this MD&A.

Risks and uncertainties related to the RGMP Transaction include, but are not limited to: failure of the parties to enter into the RGMP Transaction on satisfactory terms, or at all; failure of GMP and RFGL to obtain the required shareholders and regulatory approvals for, or satisfy other conditions to effect, the RGMP Transaction; the risk that the RGMP Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to or as a result of the completion of the RGMP Transaction, the business of GMP and/or Richardson GMP may experience significant disruptions, including loss of clients or employees due to transaction related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk that legal proceedings may be instituted against GMP or Richardson GMP and/or others and the outcome of such proceedings; risks related to the diversion of management’s attention from GMP’s ongoing business operations. If the RGMP Transaction is not completed, and GMP continues in its current form, the dedication of substantial resources of GMP to the completion of the RGMP Transaction could have a material adverse impact on GMP’s share price, its current business relationships (including with future and prospective employees, clients and partners) and on the current and future operations, financial condition and prospects of GMP and Richardson GMP. In addition, GMP may incur substantial transaction and restructuring costs, which, in addition to other factors, may result in the Company’s working capital position to be lower than anticipated.

Many of these risks and uncertainties can affect GMP's actual results and could cause its actual results to differ materially from those expressed or implied in any forward-looking information disclosed by management or on its behalf. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect GMP’s operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website ( www.sedar.com ). For a description of additional risks that could cause our actual results to materially differ from our current expectations, see the “Risk Management”

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and "Risk Factors" sections of this MD&A and the “Risk Factors” section in GMP's Annual Information form (the “2019 AIF”). For additional information on the risk factors related to the RGMP Transaction, see “The Sale Transaction - Reasons for the Sale Transaction” and “The Sale Transaction - Risk Factors” in GMP's Notice of Special Meeting and Management Information Circular dated July 8, 2019 (the “July 2019 Circular”). The 2019 AIF and July 2019 Circular are filed under the Company’s profile on SEDAR at www.sedar.com .

These risks and uncertainties are not the only ones facing the GMP Group. Additional risks and uncertainties not currently known to us or that we currently consider immaterial, may also impair the operations of the GMP Group. Although forward-looking information contained in this MD&A is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information. Certain statements included in this MD&A may be considered a “financial outlook” for purposes of applicable Canadian securities laws and, as such, the financial outlook may not be appropriate for purposes other than this MD&A.

The forward-looking information contained in this MD&A is made as of the date of this MD&A, and should not be relied upon as representing GMP's views as of any date subsequent to the date of this MD&A. Except as required by applicable law, management and the Board of Directors undertake no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

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ABOUT GMP

GMP currently operates through two business segments: Operations Clearing and Wealth Management; and a corporate segment. Operations Clearing provides carrying broker services to Richardson GMP and to Stifel’s Canadian capital markets business, including trade execution, clearing, settlement, custody, and certain other middle- and back-office services. Wealth Management consists of GMP’s non-controlling ownership interest in Richardson GMP. Richardson GMP, one of Canada’s largest independent wealth management firm, is focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP’s Common Shares, Series B Preferred Shares, and Series C Preferred Shares are listed on the Toronto Stock Exchange (TSX) under the symbols GMP, GMP.PR.B, and GMP.PR.C, respectively.

Fourth Quarter and full year 2019 results highlight the successful completion of the sale of our capital markets business, the end of an era marked by a challenging period of declining opportunities in the resource, mining and specialty sectors in Canada and the significant one-time restructuring charges and professional fees incurred to transform the company to a pure play wealth management firm.

Wealth Management Strategy Update - Subsequent to Year-End

New Era of Aggressive Expansion in Wealth Management

The Sale Transaction was the first step in a wider strategy to transform the Company into a pure-play wealth management firm that can provide Common Shareholders the greatest potential for long term value creation through ownership in a business that is focused exclusively on serving the wealth management needs of a growing number of investment advisors and their high net worth clients looking for independent, non-bank points of access for advice. Following the completion of the sale of the capital markets business, the Company is now focused exclusively on opportunities in the $4.4 trillion wealth management industry in Canada.

On February 26, 2020, the Company announced that, based on the unanimous recommendation of the Special Committee following an extensive review and analysis, it has entered into a non-binding term sheet with Richardson Financial Group Limited (RFGL) in respect of a transaction (the RGMP Transaction) to consolidate the ownership of Richardson GMP. Pursuant to the terms of the RGMP Transaction, GMP will acquire all of the common shares of Richardson GMP that are not owned by the Company for a purchase price of two (2) Common Shares of GMP per common share of Richardson GMP (RGMP Common Share). The RGMP Transaction will proceed pursuant to the terms of the Shareholders’ Agreement governing Richardson GMP (the RGMP Shareholders Agreement) and in connection therewith, contemporaneously with the execution of the non-binding term sheet, all three of Richardson GMP’s shareholder groups, including GMP, RFGL and Richardson GMP's investment advisors, have jointly provided written notice to commence the liquidity mechanism process (the RGMP Liquidity Mechanism) under the RGMP Shareholders Agreement.

Transaction Rationale

The conclusions and recommendations of the Special Committee and the Board have been based on a number of factors, including the following:

• Wealth Management Strategy - The RGMP Transaction represents the next critical step in executing on the Board’s strategy of focusing on wealth management, which the Board believes offers the greatest potential for long-term value creation for shareholders. The first step of that process was the sale of the Company’s capital markets to Stifel Financial Corp. (“Stifel”). As of December 31, 2019, the Company has approximately $131 million of working capital (after the $21 million return of capital distribution and quarterly common and preferred dividends paid on December 31, 2019) , which together with the approximately $37 million of working capital at Richardson GMP as of December 31, 2019, and excluding the retention plan payments described below, will allow the Company to deploy considerable capital to accelerate the growth of the wealth management business following the completion of the RGMP Transaction.

• Partnership with the Richardson Family - By completing the RGMP Transaction, the Company is partnering with and leveraging the Richardson brand to create the destination of choice for Canada’s top advisors who share Richardson GMP’s entrepreneurial spirit, independent culture and philosophy to deliver unparalleled face-to-face advice to

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Canadians opting for non-bank points of access for wealth management advice. RFGL will own approximately 39.7% of the Common Shares of the Company upon closing of the RGMP Transaction.

• Growing Market Opportunity - With $4.4 trillion in retail financial wealth in Canada in 2018, which is expected to grow to $7.7 trillion by 2028, the opportunity in the market for an independent competitor or independent firm with national scale is significant. The Company believes that demographic trends driving a generational shift have created a growing degree of complexity and sophistication of wealth solutions, supporting the long-term value proposition. Firms and advisors that have embraced the evolution of wealth advice and have enhanced professional accreditation possess the expertise required to provide face-to-face advice across the entire household balance sheet.

• Leading Wealth Management Advisors - Richardson GMP is one of Canada’s leading wealth management firms with 162 highly qualified professional advisory teams serving over 33,000 high net worth families and businesses across Canada. With approximately $29 billion of assets under administration (“AUA”) as at December 31, 2019, Richardson GMP’s advisors have amongst the best practices in Canada with one of the highest AUA per advisory team and is recognized as one of Canada’s Best Workplaces[TM] . For the year ended December 31, 2019, Richardson GMP had revenues of $272 million and adjusted EBITDA of $50 million.

• Strong Management Team - Led by Kish Kapoor, Interim President and Chief Executive Officer of GMP, who has decades of experience at prominent wealth management firms, including having served as President of Wellington West Holdings Inc., Executive Vice-President Corporate Development of Loring Ward International Ltd., and Executive Vice President Corporate Development at Assante Corporation (a firm Mr. Kapoor co-founded), along with Andrew Marsh, President and Chief Executive Officer of Richardson GMP, who has over 30 years of wealth management experience, including as a founding executive of Richardson GMP, and other seasoned executives, following completion of the RGMP Transaction, the Company will have in place a strong management team to execute on its growth strategy.

• Special Committee Process - The RGMP Transaction is the result of an extensive process conducted by the Special Committee, consisting entirely of independent directors, to review and analyze the RGMP Transaction and available alternatives, and extensive negotiations with RFGL and other shareholders of Richardson GMP on the pricing and other terms of the RGMP Transaction.

• Fairness Opinion - The Special Committee and the Board received an opinion from RBC that, as of February 25, 2020, and subject to the assumptions, limitations and qualifications contained therein, the GMP Consideration to be paid by the Company pursuant to the RGMP Transaction is fair, from a financial point of view, to the Company.

• Procedural Protections - The RGMP Transaction is subject to a number of procedural protections under MI 61-101, including the requirement for approval by the holders of a majority of the Common Shares (excluding RFGL and any other shareholders required to be excluded under MI 61-101). In evaluating the RGMP Transaction, the Company’s shareholders will have the benefit of enhanced disclosure requirements under MI 61-101 and the independent formal valuation conducted by RBC, which will be included in the Company’s management information circular for the Special Meeting.

Transaction Details

Pursuant to the terms of the RGMP Transaction, GMP will acquire all of the RGMP Common Shares that are not owned by the Company for a purchase price of two (2) Common Shares per RGMP Common Share. In negotiating the RGMP Transaction, the Special Committee and RFGL mutually agreed to use $5.14 and $2.57 per share as reference values for the RGMP Common Shares and Common Shares, respectively. It is expected that the Company will issue to shareholders of Richardson GMP an aggregate of approximately 110.994 million Common Shares (the “Consideration Shares”). Upon closing of the RGMP Transaction, 10% of the Consideration Shares will be paid to Richardson GMP’s shareholders and the remaining 90% will be placed in escrow to be released in equal amounts on the first, second and third anniversaries of the closing subject to the satisfaction of certain conditions. The Consideration Shares will also be subject to downward adjustment if investor advisor departures over

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the first year following closing exceed a certain threshold, measured on the AUA associated with those investment advisors as of the closing date.

After giving effect to the RGMP Transaction, if completed, the Company will have an estimated 186.428 million Common Shares issued and outstanding. RFGL, GMP’s largest shareholder with an aggregate ownership stake of approximately 24.1% of Common Shares immediately prior to the RGMP Transaction, will have an estimated aggregate ownership position of approximately 39.7% following completion of the RGMP Transaction. Existing GMP shareholders (other than RFGL) and Richardson GMP investment advisors will hold 30.7% and 29.6%, respectively, of the Common Shares following completion of the RGMP Transaction.

Pursuant to the RGMP Transaction, GMP will also purchase for cash all of the preferred shares in the capital of Richardson GMP held by RFGL in consideration for a payment equal to the redemption price of such preferred shares, together with all accrued but unpaid dividends, and will purchase for cash outstanding indebtedness of current investment advisors and other employees of Richardson GMP and their affiliated entities and their related employees owing to RFGL and its affiliates for the aggregate principal amount thereof, together with all accrued but unpaid interest thereon.

Upon successful completion of the RGMP Transaction, RGMP intends to allocate $36 million toward a retention plan award program for existing investment advisors. Richardson GMP investment advisors, collectively representing over 75% of Richardson GMP’s assets under administration, have already indicated their support for the RGMP Transaction by entering into acknowledgment and support letters.

Name Changes - at GMP and Richardson GMP

In the coming months, GMP will change its name to a name that will be more aligned with the go-forward wealth management strategy of the Company. In addition, Richardson GMP will also change its name for the Anglophone and Francophone markets, respectively to:

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There can be no assurance that GMP and RFGL will enter into a definitive agreement for the RGMP Transaction or that the RGMP Transaction will occur as proposed or at all.

Sale of Capital Markets Business

Discontinued Operations

On December 6, 2019, the Company sold substantially all of its capital markets business to Stifel in an all cash transaction (the Sale Transaction). The entering into of the Sale Transaction followed a comprehensive strategic review process overseen by a special committee of the GMP Board comprised exclusively of independent directors (the Sale Transaction Special Committee). In its review, the Sale Transaction Special Committee considered numerous alternatives and recommended to the GMP Board that the Sale Transaction is in the best interest of the Company and its shareholders.

Pursuant to the terms of the Sale Transaction, Stifel acquired the bulk of GMP’s capital markets business for cash consideration based on the tangible book value of the business at closing (less cash) plus $40 million.

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In January 2019, GMP completed the sale of its U.S. fixed income business, which was conducted through its wholly owned U.S. subsidiary GMP Securities, LLC to a third party.

As required under IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations , the operating results of the above disposed capital markets businesses are reported as discontinued operations throughout this MD&A.

Certain previously reported figures have been retroactively restated to show the discontinued operations separately from continuing operations.

For further information relating to Discontinued Operations, please refer to Note 8 to the 2019 Annual Financial Statements.

Reporting Segments

GMP operates through the following two business segments and a Corporate segment:

Operations Clearing

This segment includes the business of continuing to provide trade execution, clearing and settlement of securities transactions, custody and other administrative services to both Richardson GMP and Stifel’s Canadian capital markets business. Effective December 6, 2019, GMP’s carrying broker business was re-named RF Securities Clearing LP (formerly GMP Securities L.P.).

Wealth Management

Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited (Richardson GMP), one of Canada's largest independent wealth management firm. GMP’s non-controlling ownership interest in Richardson GMP as at December 31, 2019, was approximately 34.4% (December 31, 2018 - 33%).

Richardson GMP is considered an associate of GMP under IFRS and, accordingly, GMP’s share of Richardson GMP’s results are accounted for using the equity method. Wealth Management also includes dividend revenue recognized by GMP on its preferred share investments in Richardson GMP following dividend declarations made by Richardson GMP from time to time.

For further descriptions of our business segments and our Corporate segment, refer to “Segment Results” in this MD&A.

BUSINESS ENVIRONMENT - 2019 HIGHLIGHTS - OUTLOOK

Business Environment

Global equity markets posted strong returns in 2019, boosted largely by further aggressive central bank stimulus and easing trade tensions between the U.S. and China. After raising rates in 2018, many central banks around the globe, including the Bank of Canada, abruptly changed course and made further rate cuts in 2019. In Canada, the S&P/TSX Composite Index rose 22.9%, while, in the U.S., the S&P 500 Index was up 31.5% in 2019.

As we start 2020, financial markets valuations are at all-time highs, and central banks are already highly accommodative. If the global economic growth re-accelerates, equities markets should rise, although higher starting valuations might limit the extent of the upside. However, the on-again/off-again U.S./China trade war remains the biggest economic risk facing the market.

Outlook

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Management's highest priority is to complete the consolidation of 100% of the ownership of Richardson GMP under GMP in the first half of 2020. If successful, Richardson GMP will become a wholly-owned subsidiary of GMP and serve as the foundational centerpiece of a strategy to leverage the Richardson brand to create the destination of choice for Canada's top advisors. The Company is focused exclusively on deploying considerable resources toward accelerating growth in wealth management through aggressive recruitment of investment advisors, selective and complementary acquisitions, and forming alliances to help it grow faster and better serve clients. The recruitment pipeline for Canada’s top investment advisors remains fairly robust and we expect to continue building on that growth momentum in 2020, with the addition of new advisory teams with average practice sizes of $170 million and a high proportion of fee-based assets. Management will also be focused on enhancing margins and managing expenses by leveraging technology and utilizing existing capacity. Richardson GMP is also committed to technology investment spending to enable its advisors to spend less time on routine activities that can be largely automated, freeing up more time that can be better spent building and strengthening client relationships.

2019 Highlights

The following are key 2019 highlights:

GMP Highlights

• On February 26, 2020, the Company entered into a non-binding term sheet with RFGL in respect of a transaction (the RGMP Transaction) to consolidate the ownership of Richardson GMP. Pursuant to the terms of the RGMP Transaction, GMP will acquire all of the common shares of Richardson GMP that are not owned by the Company for a purchase price of two (2) common shares of GMP per common share of RGMP.

• In December 2019, GMP completed the sale of substantially all of the assets of its capital markets business to Stifel in an all cash transaction.

• On December 31, 2019, the Company paid a one-time return of capital distribution to Common Shareholders, following the declaration by GMP’s Board, in the amount of $0.275 per common share. The one-time return of capital distribution was paid on December 31, 2019, to common shareholders of record on December 16, 2019.

• Effective December 6, 2019, following the the closing of the sale of its capital markets business to Stifel, GMP renamed its carrying broker business RF Securities Clearing LP (formerly GMP Securities L.P.).

• On August 9, 2019, the GMP Boards appointed Mr. Kapoor as Interim President and Chief Executive Officer of GMP Capital Inc. Mr. Kapoor remains a director of GMP’s Board.

• In January 2019, GMP completed the sale of its U.S. institutional fixed income trading business, which was conducted through its wholly owned U.S. subsidiary GMP Securities, LLC (GMP USA), to U.S.-based INTL FCStone Inc.

Richardson GMP Highlights

• Remains one of Canada's dominant wealth management firms providing face to face advice to high net worth Canadians and their families.

• Generated adjusted EBITDA[1] of $50.3 million in 2019 on total revenue of $272.3 million.

• Ended the year with $28.6 billion of AUA and 162 advisor teams; with an average AUA per team of approximately $176.3 million.

• For the second consecutive year, Richardson GMP was recognized as one of Canada's Best Workplaces[TM] .

• Awarded top ranking in the latest Investment Executive Annual Brokerage Report Card for products and services dedicated to high net worth investors.

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FINANCIAL HIGHLIGHTS

Selected Financial Information

Full year 2019 results highlight the successful completion of the sale of our capital markets business, the end of an era marked by a challenging period of declining opportunities in the resource, mining and specialty sectors in Canada, and the significant one-time restructuring charges and professional fees incurred to transform the company to a pure-play wealth management firm.

Unless otherwise noted, all results in this MD&A reflect only continuing operations, including the results of GMP's Operations Clearing and Wealth Management segments and the Corporate segment.

($000, except as otherwise noted) 2019 2018 2017	2019 vs. 2018 2018 vs. 2017
	% increase/(decrease)
(Restated) (Restated) Revenue 36,840 31,231 44,078 18 (29) Investment banking 1,919 3,739 4,723 (49) (21) Principal transactions 2,066 1,849 3,091 12 (40) Interest 18,683 10,978 9,081 70 21 Other 14,172 14,665 27,208 (3) (46) Expenses 46,012 39,520 40,389 16 (2) Employee compensation and benefits 14,241 12,764 13,149 12 (3) Non-compensation expenses 31,771 26,756 27,240 19 (2) Share of net income of associate 2,272 2,949 2,578 (23) 14 (Loss) income before income taxes (6,900) (5,340) 6,267 (29) n.m. Net (loss) gain from continuing operations (13,710) (2,386) 2,285 n.m. n.m. Net (loss) gain from discontinued operations (39,448) 4,931 (49,697) n.m. 110 Net (loss) income (53,158) 2,545 (47,412) n.m. 105 Net loss attributable to common shareholders from continuing operations (18,111) (6,668) (1,828) (172) (265) Net loss attributable to common shareholders (57,559) (1,737) (51,525) n.m. 97 Net loss per Common Share (dollars) from continuing operations: Basic $ (0.26) $ (0.10) 0.03 (160) (433) Diluted $ (0.26) $ (0.10) 0.03 (160) (433) Net loss per Common Share (dollars): Basic (0.82) (0.03) (0.75) n.m. 96 Diluted (0.82) (0.03) (0.75) n.m. 96 Cash dividends declared per Common Share (dollars) 0.10 0.20 — ROE1 (41.9)% (1.0)% (26.4)% n.m. 96 Total assets 1,357,862 1,723,420 1,978,040 (21) (13)

n.m. = not meaningful

1. Considered to be non-GAAP financial measures. These measures do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. This data should be read in conjunction with the “Presentation of Financial Information and Non-GAAP Measures” section of this MD&A.

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Financial Performance

2019 vs. 2018

Continuing Operations

Revenue from continuing operations for the year ended 2019 was $36.8 million, up 18% compared with 2018. Net loss and diluted loss per share for the year ended 2019 from continuing operations was $13.7 million and $0.26, compared with a net loss of $2.4 million and a diluted loss per share of $0.10 in 2018. The $11.3 million increase in net loss is largely due to an $8.0 million non-cash write-down of deferred tax asset in 2019, $3.1 million ($2.8 million after-tax) in professional fees and restructuring costs related to consolidating the ownership of Richardson GMP, a $1.8 million tax expense recorded in fourth quarter 2019 in connection with Part V1 tax relating to GMP's preferred shares, partly offset by a net increase in stock borrowing and lending activity in 2019.

Share of net income of associate reflects our share of Richardson GMP’s net income attributable to common shareholders. For more information on Richardson GMP's 2019 financial performance, refer to the "Supplemental Information" section within this MD&A.

Discontinued Operations

Net loss from discontinued operations was $39.4 million in 2019 on total revenue of $59.5 million compared with net income of $4.9 million and revenue of $165.8 million in 2018. The increase in year-over-year net loss of $44.4 million is mainly due to non-cash impairment charges of $30.5 million to the carrying value of goodwill and other intangibles, a $15.5 million loss on sale of the capital markets business, which included included $34.4 million in transaction and restructuring charges in connection with the sale of the capital markets business, including restructuring charges, advisory costs and other professional fees, and $2.9 million in non-cash charges in connection with the acceleration of expenses in connection with certain incentive arrangement concurrent with the sale of capital markets. These charges were partly offset by an $8.3 million non-cash gain in connection with the sale of the Company's U.S. fixed income business in first quarter 2019.

For further information, please refer to Note 8 to the 2019 Annual Financial Statements.

2018 vs. 2017

Continuing Operations

Continuing operations is comprised of the new Operations Clearing segment, the Wealth Management and Corporate segments. Prior period results have been re-stated to conform to new reporting segments.

Net loss from continuing operations of $2.4 million in 2018 compared with net income of $2.3 million in 2017. The $4.7 million year-over-year decrease was largely due to $12.2 million in lower dividends received on our preferred share investments in Richardson GMP, a net decrease in stock borrowing and lending activity in 2018, and lower investment banking revenue in certain jurisdictions not being acquired as part of the Sale Transaction. These decreases were partly offset by $2.6 million in deferred tax asset recognized in fourth quarter 2018.

Share of net income of associate reflects our share of Richardson GMP’s net income attributable to common shareholders. For more information on Richardson GMP's 2018 financial performance, refer to the "Supplemental Information" section within this MD&A.

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Discontinued Operations

Net income from discontinued operations was $4.9 million in 2018 compared with a net loss of $49.7 million in 2017. The year-over-year increase of $54.6 million in net income is mainly due to a $52.0 million non-cash goodwill impairment charge recorded in second quarter of 2017, higher investment baking revenue compared with 2017 resulting largely from improved client activity in the cannabis and blockchain sectors; lower share-based compensation in connection with the expiration of certain incentive arrangements in 2017, and lower non-compensation expense due to lower transaction-related expenses commensurate with lower commission revenue compared with 2017. This was partly offset by a cost rationalization charge of $4.1 million (after-tax) recorded in our former capital markets business in 2018, and higher variable compensation commensurate with improved investment banking revenue.

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SEGMENT RESULTS FROM CONTINUING OPERATIONS

The following section highlights the financial results of our two business segments and the Corporate segment, on a continuing basis, for the years ended December 31, 2019, and 2018. These segments are based upon the products and services provided and the types of customers served and reflect the manner in which financial information is evaluated by management.

Operations Clearing

Segment Description

Operations Clearing (through RF Securities Clearing LP) provides carrying broker services to Richardson GMP and Stifel's Canadian capital markets business, including trade execution, clearing, settlement, custody, and certain other middle- and backoffice services.

Competitive Landscape

The financial services industry is extremely competitive. Independent firms face the challenges of high and rising compliance costs, mounting administrative issues and systemic technology challenges. In order to remain competitive, the independent channel rely on carrying dealers to provide the necessary support for back-office functions. The benefits of using a carrying broker include cost efficiencies, economies of scale and risk mitigation. In addition, carrying brokers allow introducing brokers to focus on their core competencies, including client relationship management, asset accumulation, portfolio management.

Financial Performance

The following table shows the financial results of the Operations Clearing segment for the periods presented:

			%
			increase/
($000, except as otherwise noted)	2019	2018	(decrease)
Revenue	30,660	24,449	25
Principal transactions	1,643	1,393	18
Interest	18,524	10,744	72
Other	10,493	12,311	(15)
Expenses	34,077	29,101	17
Employee compensation and benefits	6,789	6,569	3
Selling, general and administrative	12,015	14,585	(18)
Interest	13,717	6,894	99
Depreciation and amortization	1,556	1,053	48
Loss before income taxes	(3,417)	(4,652)	27

2019 vs. 2018

Operations Clearing reported a net loss before income taxes of $3.4 million in 2019 compared with a net loss before income taxes of $4.7 million in 2018.

Operations Clearing revenue increased 25% in 2019 compared with 2018 primarily driven by higher interest revenue, which increased 72% in connection with increased stock borrowing and lending activity. Partly offsetting the increase was lower other revenue, which decreased 15% largely due to reduced carrying broker and other administrative service fee charges to Richardson GMP amid lower retail client trading activity, with a corresponding decrease in clearing and settlement costs.

Total expenses increased 17% in 2019 compared with 2018 led largely by higher interest expense, which increased 99% in 2019 compared with 2018 in connection with increased stock borrowing and lending activity this year. Partly offsetting this increase

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was lower selling, general and administrative expense, which decreased 18% in 2019 compared with 2018 largely due to lower clearing and settlement costs in connection with reduced retail client trading volumes at Richardson GMP.

Wealth Management

Segment Description

Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP, one of Canada's leading wealth management firms.

GMP’s non-controlling ownership interest in Richardson GMP as at December 31, 2019, was approximately 34.4% (December 31, 2018 - 33%). Richardson GMP is considered an associate of GMP under IFRS and, accordingly, GMP’s share of Richardson GMP’s results are accounted for using the equity method. Wealth Management also includes dividend revenue recognized by GMP on its preferred share investments in Richardson GMP following dividend declarations made by Richardson GMP from time to time.

Richardson GMP was formed in 2009 through the merger of Richardson Partners Financial Ltd. (RPFL) and GMP Private Client LP. In 2013, Richardson GMP acquired Macquarie Private Wealth Inc. (MPW). Through its predecessor firms, Richardson GMP has a 90-year history in financial services. Today, Richardson GMP is recognized as one of Canada's leading wealth management firms providing exclusive and innovative investment solutions, including investment advisory, tax and estate planning, charitable giving, risk management, and the intergenerational transfer of wealth for high net worth businesses and families. Business transition counsel and intergenerational transfer of wealth are an important part of the value proposition that it offers clients.

Competitive Landscape

Competition in the wealth/asset management industry is based on a wide range of factors, including brand recognition, investment performance, the types of products offered, business reputation, financial strength, continuity of institutional, management and sales relationships, and quality of service and face-to-face advice. Richardson GMP's competitors include mutual fund companies, private client investment managers, financial advisors, investment dealers, and the wealth management divisions of banks and insurance companies. The wealth management industry is highly correlated to equity market valuations, global economic conditions and investor demand for wealth management services and solutions.

There has been considerable consolidation among independent wealth managers in Canada, with fewer independent wealth managers since 2015. This decrease is driven largely by the need for scale in order to drive profitability, compete for talent and having the financial strength to absorb rising onerous regulatory costs. Competition among the firms with greater scale has also intensified over the past decade. Further industry consolidation is likely, whether by acquisition or aggressive recruitment of investment advisors. This will result in fewer, but larger and stronger industry players capturing growth in financial wealth.

Strong independents with scale play a pivotal role in the wealth management ecosystem, providing Canadians with choice and non-banks points of access in selecting the best holistic wealth management service provider to help them achieve their longterm financial goals. Richardson GMP is focused on providing a comprehensive suite of products and services across the entire household balance sheet and believes the opportunities to grow its business aggressively are compelling.

Financial wealth has grown considerably in Canada over the last decade, in large part due to rising equity markets worldwide and a prolonged period of global economic growth. In particular, Canadian retail financial wealth totaled $4.4 trillion in 2018, which is held across 16 million households, and is expected to grow to $7.7 trillion by 2028.

Financial Performance

The following shows the financial results of the Wealth Management segment for the periods presented:

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			% increase/
($000, except as otherwise noted)	2019	2018	(decrease)
Revenue	2,384	2,345	2
Expenses	61	80	(24)
Share of net income of associate1	2,272	2,949	(23)
Income before income taxes	4,595	5,214	(12)

1. GMP’s non-controlling ownership interest in Richardson GMP as at December 31, 2019, was approximately 34.4% (December 31, 2018 - 33%). Richardson GMP is considered an associate of GMP under IFRS and, accordingly, GMP’s share of Richardson GMP’s results are accounted for using the equity method.

2019 vs. 2018

Wealth Management reported income before income taxes of $4.6 million in 2019 compared with income before income taxes of $5.2 million in 2018. Results in 2019 included $2.4 million in dividends received on our preferred share investments in Richardson GMP, compared with $2.3 million in 2018.

Share of net income of associate reflects our share of Richardson GMP’s net income attributable to common shareholders. For more information on Richardson GMP's 2019 financial performance, refer to the "Supplemental Information" section within this MD&A.

Corporate

The Corporate segment primarily comprises enterprise-wide items.

The following table shows the financial results for the Corporate segment for the periods presented:

			% increase/
($000, except as otherwise noted)	2019	2018	(decrease)
Revenue	3,796	4,438	(14)
Expenses	11,875	10,338	15
Employee compensation and benefits	7,452	6,195	20
Non-compensation expenses	4,423	4,143	7
Loss before income taxes - reported	(8,079)	(5,900)	(37)

Financial Performance

2019 vs. 2018

Total revenue from continuing operations of $3.8 million in 2019 decreased 14% compared with 2018 largely due to lower investment banking revenue in certain jurisdictions that were not acquired in connection with the Sale Transaction and lower foreign exchange translation gains. Expenses from continuing operations increased 15% primarily due to $3.1 million in professional and other fees in connection with GMP's intention to consolidate the ownership of Richardson GMP and restructuring charges recorded during 2019.

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QUARTERLY RESULTS

The following table shows selected quarterly financial information for the eight most recently completed quarters:

($000, except as otherwise noted)		2019	2019			2018
	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Revenue	8,367	10,556	8,736	9,180	6,978	7,398	9,461	7,395
Investment banking	130	473	884	432	103	69	2,882	685
Principal transactions	403	525	643	494	316	849	365	320
Interest	4,575	6,360	4,007	3,741	2,836	2,792	2,512	2,838
Other	3,259	3,198	3,203	4,513	3,723	3,688	3,702	3,552
Expenses	11,248	14,219	10,383	10,162	9,889	10,042	9,902	9,687
Share of income of associate	603	587	137	945	541	476	1,133	799
(Loss) income before income taxes from continuing operations	(2,278)	(3,076)	(1,510)	(37)	(2,370)	(2,168)	692	(1,493)
Net (loss) income from continuing operations	(5,288)	(8,124)	(464)	165	1,106	(2,345)	522	(1,669)
Net (loss) income from discontinued operations	(3,175)	(17,283)	(3,345)	(15,645)	(6,057)	5,233	(6)	5,761
Net (loss) income	(8,463)	(25,407)	(3,809)	(15,480)	(4,951)	2,888	516	4,092
Net (loss) income per Common Share (dollars) from
continuing operations:
Basic	(0.09)	(0.13)	(0.02)	(0.01)	—	(0.05)	(0.01)	(0.04)
Diluted	(0.09)	(0.13)	(0.02)	(0.01)	—	(0.05)	(0.01)	(0.04)
Net (loss) income per Common Share (dollars):
Basic	(0.13)	(0.38)	(0.07)	(0.24)	(0.09)	0.03	(0.01)	0.04
Diluted	(0.13)	(0.38)	(0.07)	(0.24)	(0.09)	0.02	(0.01)	0.04

Quarterly Trend and Analysis

GMP’s revenues and expenses from continuing operations are generated primarily by our Operations Clearing segment, which includes stock borrowing and lending activity and carrying broker and other administrative services.

Specified items affecting our reported results from continuing operations

• Fourth quarter 2019 includes $1.1 million in professional and other fees in connection with the RGMP Transaction and a $1.8 million tax expense recorded in fourth quarter 2019 in connection with Part V1 tax relating to GMP's preferred shares outstanding.

• Third quarter 2019 includes $2.0 million in restructuring charges recorded in the Corporate segment.

• Fourth quarter 2018 included a recognition of a deferred tax asset of $2.6 million in connection with previously unrecognized losses.

Interest revenue in our Operations Clearing segment has generally benefited from increased stock borrowing and lending activity over the past two years. Other revenue largely reflects lower carrying broker and administrative support fees charged largely to Richardson GMP and also includes dividends received from our preferred share investment in Richardson GMP. Commencing December 2019, GMP provides carrying broker and administrative support fees charged to Stifel's Canadian capital markets business,

Total expenses in 2019 reflect one time charges in connection with restructuring of continuing operations, and professional and other fees incurred in connection with RGMP Transaction. Fixed salaries have also decreased over the past two years largely reflecting the benefit of operational efficiencies.

Share of net income of associate reflects our share of Richardson GMP's net income (loss) attributable to common shareholders.

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Fourth Quarter 2019 Financial Performance From Continuing Operations

Fourth Quarter 2019 vs Fourth Quarter 2018

Revenue from continuing operations was $8.4 million in fourth quarter 2019; up 8% from $7.0 million reported in fourth quarter 2018. Net loss from continuing operations was $5.3 million in fourth quarter 2019 compared with net income of $1.1 million in fourth quarter 2018. The $6.4 million change from fourth quarter last year was due to several factors including a $2.6 million in deferred tax asset recognized in fourth quarter 2018, a $1.8 million tax expense recorded in fourth quarter 2019 in connection with Part V1 tax relating to GMP's preferred shares, and $1.1 million in costs incurred this quarter to consolidate the ownership of Richardson GMP.

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FINANCIAL CONDITION

The table below shows select consolidated balance sheet items as at the dates presented and is followed by a discussion of the change in these balances:

			$	%
	December 31,	December 31,	increase/	increase/
($000)	2019	2018	(decrease)	(decrease)
TOTAL ASSETS	1,357,862	1,723,420	(365,558)	(21)
Selected asset balances:
Cash and cash equivalents	516,601	515,955	646	—
Assets held for sale	—	18,042	(18,042)	n.m.
Securities Owned	65,441	110,392	(44,951)	(41)
Receivable from:
Clients	256,075	421,902	(165,827)	(39)
Brokers	67,876	70,494	(2,618)	(4)
Other assets	365,277	446,097	(80,820)	(18)
Investment in associate	82,853	78,953	3,900	5
Goodwill and intangible assets	—	51,416	(51,416)	(100)
TOTAL LIABILITIES	1,155,002	1,433,390	(278,388)	(19)
Selected liability balances:
Liabilities held for sale	—	7,625	(7,625)	(100)
Payable to:
Clients	958,354	1,216,385	(258,031)	(21)
Brokers	124,308	113,565	10,743	9
Issuers	—	7,736	(7,736)	(100)
Promissory Note	15,603	28,699	(13,096)	(46)

n.m.= not meaningful

Total assets decreased $365.6 million or 21% in 2019. The decrease primarily relates to lower client receivables and lower other assets related to a decrease in funds deposited in trust. Lower securities owned largely reflects lower equity securities held to facilitate client transactions and lower equity securities acquired in connection with investment banking mandates in the former capital markets business, which was sold in December 2019. The reduction in goodwill reflects impairment charges recorded in the former Capital Markets segment in the first quarter 2019, subsequently reclassified as discontinued operations in the third quarter of 2019, and the elimination of goodwill in connection with the Sale Transaction. As at December 31, 2018, the assets of GMP USA were presented as held for sale, prior to their sale in early January 2019, and were recorded at the lesser of their carrying value amount and their fair value less cost to sell. For further details on discontinued operations, please refer to Note 8 to the 2019 Annual Financial Statements.

The receivable from clients balance as at December 31, 2019, included loans receivable from clients of $192.7 million (December 31, 2018 - $335.6 million) and open security transactions of $63.3 million (December 31, 2018 - $86.3 million). The level of open security transactions pending settlement with clients may fluctuate significantly on a day-to-day basis based on client trading activity and the balance represents the level of unsettled transactions outstanding.

Total liabilities decreased $278.4 million or 19% in 2019 compared with 2018. Amounts payable to clients decreased 21% compared with the prior year while amounts payable to brokers increased 9%. As at December 31, 2019, amounts payable to clients included client deposits of $0.9 billion (December 31, 2018 - $1.1 billion) and open security transactions of $0.1 billion (December 31, 2018 - $0.1 billion). The level of open security transactions pending settlement with brokers and clients may fluctuate significantly on a day-to-day basis based on trading activity and the balance represents the level of unsettled transactions outstanding.

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During the year ended December 31, 2019, GMP repaid $6.8 million of principal on the promissory note and recorded accretion expenses of $1.6 million. In connection with the closing of the Sale Transaction, GMP transferred $7.8 million of principal on the promissory note to Stifel. As at December 31, 2019, the promissory note balance was $15.6 million, which includes $2.8 million in promissory notes held by former FirstEnergy U.K. shareholders that require the noteholders consent to assign recorded as a receivable from Stifel in other assets. The net amount of promissory notes outstanding is $12.8 million.

LIQUIDITY AND CAPITAL RESOURCES

GMP requires capital and liquidity to fund existing and future operations, future cash payments to our shareholders and to satisfy regulatory requirements. GMP’s policy is to maintain sufficient and appropriate levels of capital and liquidity through a variety of sources, at a reasonable cost. This serves to maintain balance sheet strength under normal market conditions and through periods of financial stress. Capital and balance sheet strength are always key priorities for GMP.

GMP currently derives liquidity from its working capital and its credit facilities. As at December 31, 2019, GMP has credit facilities with Canadian Schedule I banks of approximately $710.9 million (December 31, 2018 - $754 million) that are used to facilitate the day-to-day securities settlement process primarily for client transactions. These facilities are collateralized by either unpaid client securities and/or securities owned and do not represent a source of cash to GMP for payment of dividends, or funding of business initiatives. There were no amounts outstanding under these facilities as at December 31, 2019, and December 31, 2018.

GMP holds its cash and cash equivalent balances with a number of financial institutions with high credit ratings. All cash and cash equivalent balances are short term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less. GMP considers Canadian federal government debt (such as treasury bills) with original maturities from three to six months as highly liquid investments. Although these securities are not classified as cash equivalents on the consolidated balance sheets, they form an important part of GMP's overall cash management practices to address liquidity risk. There were no significant changes made to GMP's cash management practices during 2019. GMP's inventory of trading assets is recorded at market value. Receivables and payables from brokers and dealers represent open transactions which generally settle within the normal two-day settlement cycle and also include collateralized securities borrow and/or lend transactions that can be closed on demand within a few days. Client receivables are secured by securities and are reviewed on an ongoing basis for impairment in value and collectability.

Management believes GMP's working capital provides it with an appropriate level of liquidity and capital for existing operating and regulatory purposes for the reasonably foreseeable future assuming no significant adverse changes in the markets in which we operate. We continually assess our dividend policy, initiatives and expense structure. If capital markets deteriorate, adversely impacting our ability to generate cash flow, we will need to assess and potentially make changes to our dividend policy, initiatives, and expense structure. We may also seek borrowings and/or equity financing to maintain or increase our productive capacity. There can be no assurance that such borrowings and/or equity financing will be available to GMP or available on terms and in an amount sufficient to meet our needs.

During the year ended December 31, 2019, GMP repaid $6.8 million of principal on the promissory note (2018 - $11.9 million). In connection with the closing of the Sale Transaction, GMP transferred $7.8 million of principal on the promissory note to Stifel. As at December 31, 2019, the promissory note balance was $15.6 million, which includes $2.8 million in promissory notes held by former FirstEnergy U.K. shareholders that require the noteholders consent to assign recorded as a receivable from Stifel in other assets. The net amount of promissory notes outstanding is $12.8 million.

Concurrent with and subject to the successful closing of the RGMP Transaction, including receipt of all required shareholders and regulatory approvals, the Company intends to allocate $36 million toward a recognition plan award program for certain existing investment advisors. Eligible investment advisors will enter into retention agreements with Richardson GMP and will receive a retention award in the form of an interest-free forgiveable loan. Upon satisfaction of certain conditions, including continued employment, the loan will be forgiven over three years on each applicable anniversary date from the initial advance of the loan.

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Subordinated Loans

Subordinated loans can be used to provide additional regulatory capital to support business activities in GMP Securities. GMP Securities has in place an unsecured committed standby facility in the amount of $17.5 million with a Schedule I Canadian chartered bank. The facility is repayable on demand subject to certain conditions. Financial covenants require that regulatory risk-adjusted capital be a minimum of $45 million on the day prior to the draw down request date and a minimum of $50 million, including the drawdown amount, on the drawdown date and each day thereafter. Also, the required shareholder capital to subordinated debt ratio is 3.25:1. Management funds interest costs associated with the subordinated loan facility, which are calculated at the prime rate of interest plus 4%, when drawn, through cash generated by operations. The facility was undrawn as at December 31, 2019, and December 31, 2018.

Subsidiary Capital Requirements

Certain of GMP’s subsidiaries are subject to regulatory capital requirements designed to provide notice to the relevant regulatory authority of possible liquidity concerns. Regulatory capital levels fluctuate daily based on margin requirements in respect of outstanding trades, underwriting deal requirements and/or working capital requirements. Compliance with these requirements may require GMP to keep sufficient cash and other liquid assets on hand to maintain regulatory capital requirements rather than using these liquid assets in connection with its business or paying them out in the form of a cash dividend. During 2019 and as at December 31, 2019, GMP's subsidiaries were in compliance with all regulatory capital requirements.

Cash Flow Summary

The following table summarizes the statement of cash flows as presented within our 2019 Annual Financial Statements:

($000)	2019	2018
Operating activities	2,830	(87,563)
Financing activities	(41,626)	(39,239)
Investing activities	37,880	1,707
Effect of foreign exchange on cash balances	(207)	744
Net decrease in cash and cash equivalents	(1,123)	(124,351)

Operating Activities

Cash provided by operating activities was $2.8 million in 2019 compared with cash consumed by operating activities of $87.6 million in 2018 and largely relates to changes in non-cash operating items. Excluding non-cash operating items, cash consumed by operations was $39.6 million and cash provided by operations was $20.4 million in 2019 and 2018, respectively. For further detail on non-cash operating items, refer to Note 27 to the 2019 Annual Financial Statements.

Financing Activities

Financing activities consumed $41.6 million and $39.2 million of cash in 2019 and 2018, respectively. Financing activities in 2019 included a $20.7 million return of capital distribution paid on December 31, 2019, $7.5 million in dividends paid on Common Shares, an $6.8 million repayment of principal of the promissory note related to the acquisition of GMP FirstEnergy, and $4.4 million in dividends paid on the Preferred Shares. Financing activities in 2018 included an $11.9 million repayment of principal of the promissory note related to the acquisition of GMP FirstEnergy and $19.6 million in dividends on common and preferred shares. In 2018, GMP repurchased for cancellation $7.7 million in common shares under its approved normal course issuer bid.

Investing Activities

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Investing activities provided $37.9 million of cash in 2019 largely due to proceeds from the sale of discontinued operations of $42.2 million, a common share dividend of $2.7 million on our equity investment in Richardson GMP, partly offset by a $4.4 million equity investment in Richardson GMP pursuant to a Richardson GMP internal liquidity process.

Contractual Obligations

In the normal course of business, GMP enters into contracts that give rise to commitments of future minimum payments that affect our liquidity. The table below provides a summary of our future contractual funding commitments. Management expects to fund these commitments through cash generated by operations.

		Payments	due by period
($000)	Total	Less than 1 year	1-3 years	4-5 years	After 5 years
Lease commitments1	3,603	1,377	2,226	—	—
Buyer Note2	15,603	—	15,603	—	—
Total	19,206	1,377	17,829	—	—

1. Our obligations under operating leases reflect lease arrangements for our continuing operations globally.

2. The timing of the Buyer Note repayment is based upon certain GMP and GMP FirstEnergy financial metrics and other conditions pursuant to the terms of the Purchase Agreement.

Investment commitments and financial guarantees are discussed in Notes 21 and 22 to the 2019 Annual Financial Statements.

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OUTSTANDING SHARE DATA AND DIVIDENDS

GMP is authorized to issue an unlimited number of Common Shares. GMP is also authorized to issue an unlimited number of preferred shares (other than the Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares), issuable at any time and from time to time in one or more series.

The following table shows GMP’s outstanding equity and securities convertible into equity as of the dates presented:

(# 000)	December 31, 2019	December 31, 2018
Common Shares	74,162	72,721
Common Shares held by the SIP Trust	1,272	2,725
Share options – vested	753	1,684
Share options – non-vested	—	—
Series B Preferred Shares	3,565	3,565
Series C Preferred Shares	1,035	1,035

As of the date hereof, the number of vested share options are 0.753 million. There have been no other changes to the above table since December 31, 2019.

Common Shares

Common Share Issuance in Connection with FirstEnergy Acquisition

On September 30, 2016, GMP issued 11.2 million Common Shares to former FirstEnergy shareholders in connection with the acquisition of FirstEnergy, to be released over a four-year period pursuant to the terms of the Purchase Agreement. As at December 31, 2019, 1.1 million of such shares remain subject to an escrow agreement.

Repurchases, Cancellations, and Forfeitures

During 2019, GMP did not purchase for cancellation any Common Shares under its approved normal course issuer bid programs (NCIB). GMP's NCIB expired on May 4, 2019, and was not renewed by the Company. During 2018, GMP purchased for cancellation 2.7 million Common Shares under its normal course issuer bids.

Share-Based Compensation

Share Incentive Plan Trust

In connection with the SIP, GMP established the SIP Trust for the purpose of purchasing Common Shares in the open market and delivering them to the SIP participants upon vesting. GMP consolidates the SIP Trust in accordance with IFRS 10, Consolidated Financial Statements. Consideration paid for GMP Common Shares held by the SIP Trust is deducted from shareholders' equity and the Common Shares are treated as cancelled in GMP's basic earnings per share calculation. During 2019, the SIP Trust did not purchase any Common Shares.

Options

During 2019, GMP did not grant any options to purchase Common Shares (2018 - nil). No options were exercised in 2019 or 2018. During 2019, 0.931 million options were forfeited or expired unexercised (2018 - 0.965 million).

For more information, refer to Note 20 to the 2019 Annual Financial Statements.

Preferred Shares

Rating of Preferred Shares

In September 2019, in connection with the completion of the Sale Transaction and GMP's intention to consolidate 100% of the ownership of Richardson GMP under GMP, DBRS Limited (DBRS) announced the rating for GMP’s Cumulative Preferred Shares, currently at Pfd-4 (high), was placed "Under Review with Developing Implications". The continuation of the current

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rating status takes into consideration that the future ownership and corporate structure of GMP is still contingent upon the successful completion of the consolidation of 100% of the ownership in Richardson GMP.

The DBRS rating of Pfd-4 (high) is the highest sub-category within the fourth highest rating of the five standard categories of ratings utilized by DBRS for preferred shares. According to the DBRS preferred share rating scale, preferred shares rated Pfd-4 “are speculative, where the degree of protection afforded to dividends and principal is uncertain, particularly during periods of economic adversity. Companies with preferred shares rated Pfd-4 generally coincide with entities that have senior bond ratings ranging from the lower end of the BBB category through the BB category.” DBRS further subcategorizes each rating by the designation of “high” and “low” to indicate where an entity falls within the rating category. The absence of either a “high” or “low” designation indicates the rating is in the middle of the category. The rating trend indicates the direction in which DBRS considers the rating is headed should present tendencies continue, or in some cases, unless challenges are addressed. A rating trend that is “Positive” or “Negative” acts as a signal indicating that there is a greater likelihood that the rating could change in the future that would be the case if a “Stable” trend was assigned to the security.

Ratings are intended to provide investors with an independent assessment of the credit quality of an issue or issuer of securities and do not speak to the suitability of particular securities for any particular investor. The foregoing rating assigned to Preferred Shares may not reflect the potential impact of all risks on the value of the Preferred Shares. A rating is therefore not a recommendation to buy, sell or hold securities (including the Preferred Shares) and may be subject to revision or withdrawal at any time by the rating organization. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be withdrawn or revised entirely by a rating organization at any time if in its judgment circumstances so warrant.

Dividends

GMP's philosophy is to return excess capital to its shareholders. The declaration and payment of dividends are at the sole discretion of the Board of Directors. The Board of Directors reviews GMP's dividend policy periodically in the context of the firm's overall profitability, free cash flow, regulatory capital requirements, legal requirements and other such factors that the Board of Directors determines to be relevant. On November 8, 2018, the Board of Directors approved the reinstatement of a quarterly cash dividend of $0.025 per Common Share.

Dividends, when declared on the Common Shares and Preferred Shares, are designated as “eligible dividends” for purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation unless indicated otherwise. For more information on dividends, refer to Note 19 to the 2019 Annual Financial Statements.

Special Cash Dividends

On March 1, 2018, the Board of Directors declared a special cash dividend of $0.10 per Common Share, payable on April 2, 2018, to common shareholders of record on March 15, 2018. On November 8, 2018, the Board of Directors declared an additional special cash dividend of $0.075 per Common Share, payable on December 3, 2018, to common shareholders of record on November 19, 2018. These special cash dividends represent excess capital arising from GMP's improved financial performance.

Return of Capital

On December 6, 2019, the Board of Directors approved a one-time return of capital distribution in the amount of $0.275 per common share, payable on December 31, 2019, to common shareholders of record on December 16, 2019. The return of capital distribution was approved on August 6, 2019, by GMP's shareholders who voted 98.4% in favour of the one-time return of capital distribution at a special meeting of common shareholders held that day to consider the Sale Transaction and return of capital distribution.

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RELATED PARTY TRANSACTIONS

Our related parties include the following persons and/or entities: associates, or entities which are controlled or significantly influenced by GMP, which currently include Richardson GMP; and key management personnel, which are comprised of directors and/or officers of GMP and those persons having authority and responsibility for planning, directing and controlling the activities of GMP.

Related party transactions with Richardson GMP include amounts due to or from Richardson GMP arising from the general services agreement and GMP Securities' role as carrying broker to Richardson GMP. GMP also makes available to Richardson GMP a subordinated loan facility and has made preferred share investments in Richardson GMP.

Transactions with key management personnel include security trades executed for key management personnel of GMP on either a cash or margin basis. Commission income on such transactions, in the aggregate, is not material in relation to our overall operations. Related party transactions for key management personnel also include loans associated with the executive common share loan plans and other employee loans, Common Share options, the SIP and other compensation provided for employment services rendered by key management personnel.

For further details on related party transactions, see Note 14 to the 2019 Annual Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the 2019 Annual Financial Statements in accordance with IFRS required management to make estimates and exercise judgment that affects reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and judgments are made based on information available as at the date of issuance of financial statements. Accordingly, actual results may differ from these amounts. Accounting policies that require management's estimates and judgments are discussed below.

Impairment of Goodwill

We review goodwill for potential impairment annually, or more frequently if events or circumstances indicate that impairment may have occurred. An impairment is required if the recoverable value of a cash-generating unit (CGU) is less than its carrying value. The recoverable value of a CGU is determined from internally developed valuation models that consider various factors and assumptions including revenue performance compared with forecast, cash earnings, growth rates, price-earnings multiples, discount rates, and terminal multiples. Management is required to use judgment in estimating the recoverable value of a CGU or a group of CGUs. The use of different assumptions and estimates could influence the determination of the existence of impairment and the valuation of goodwill. Management believes that the assumptions and estimates used are reasonable. Any impairment of goodwill is expensed in the period in which the impairment is identified.

In first quarter 2019, GMP recorded a non-cash goodwill impairment charge of $28.5 million. Following a review of the above factors and the recoverability of intangible assets, and in connection with the Sale Transaction, including the fact that the former Capital Markets business was the only group of Cash Generating Units to which goodwill had been previously allocated, the remaining balance was allocated to discontinued operations and eliminated following the completion of the Sale Transaction.

For further details regarding goodwill, please refer to Note 13 to the 2019 Annual Financial Statements.

Income Taxes

We compute an income tax provision in each of the tax jurisdictions in which we operate. Actual amounts of income tax expense only become final upon filing and acceptance of the tax return by the relevant tax authorities, which occurs subsequent to the issuance of the financial statements. Additionally, the estimation of income taxes includes evaluating the recoverability of deferred tax assets against future taxable income based on an assessment of the ability to use the underlying future tax deductions before they expire. To the extent estimates of future taxable income differ from the tax return, earnings would be affected in a subsequent period.

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Share-Based Compensation

We use estimates and judgment when determining the share-based compensation expense during a reporting period. The determination of the share-based compensation expense resulting from GMP's granting of employee share options and other deferred share-based awards depends on the use of option pricing models, which by their nature are subject to measurement uncertainty. These models require the use of subjective assumptions, including expected stock price volatility and the use of historical data that may not be reflective of future performance.

Provisions

We are involved in a number of legal proceedings, including regulatory investigations, in the ordinary course of business. Contingent litigation loss provisions are recorded by GMP when it is probable that GMP will incur a loss and the amount of the loss can be reasonably estimated. Management and GMP's external experts are involved in assessing the likelihood and in estimating any amounts involved. While there is inherent difficulty in predicting the outcome of such matters, based on current knowledge and consultation with legal counsel, we do not expect that the outcome of any of these matters, individually or in aggregate, would have a material adverse effect on GMP's consolidated financial position or results of operations.

Fair Value of Financial Assets and Financial Liabilities

Securities owned are measured at fair value through profit and loss requiring the use of judgment to estimate fair values when quoted market prices are not available. Where the market for a financial instrument is not active, fair value is established using a valuation technique. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument's complexity and the availability of market-based data. GMP's securities owned include equity and debt securities and derivative financial assets which are comprised primarily of broker warrants. The majority of GMP's debt and equity securities and obligations related to securities sold short comprise or relate to actively traded securities, which are carried at fair value based on quoted market prices in an active market. Management believes its estimates of fair value are reasonable given its process for obtaining external market prices, consistent application of its approach from period to period and the validation of estimates through the actual settlement of transactions. Fair value is estimated on the basis of pricing models or other appropriate methods. GMP's investments in preferred shares issued by Richardson GMP are measured at fair value through other comprehensive income. These securities do not have a quoted market price and fair value is estimated on the basis of pricing models or other appropriate methods. For further information regarding the fair value disclosure of GMP's financial assets and financial liabilities, refer to Note 25 to the 2019 Annual Financial Statements.

FINANCIAL INSTRUMENTS

A significant portion of the GMP Group's assets and liabilities are composed of financial instruments. GMP uses financial instruments for both trading and non-trading activities. GMP engages in trading activities which include the purchase and sale of securities in the course of facilitating client trades and, less frequently, taking principal trading positions with the objective of earning a profit. Non-trading activities generally include the business of investing in equity securities and hedging through the use of derivatives (see below discussion).

The use of financial instruments may either introduce or mitigate exposures to market, credit and/or liquidity risks. See “Risk Management” in this MD&A for details on how these risks are managed. For significant assumptions made in determining the valuation of financial and other instruments, refer to “Critical Accounting Policies and Estimates” in this MD&A. For additional information regarding GMP's financial instruments, refer to Note 25 to the 2019 Annual Financial Statements.

Derivative Financial Instruments

GMP and its subsidiaries selectively utilize derivative instruments to manage financial risks, including foreign exchange, interest rate, and fair value risks. GMP's derivatives are carried at fair value with realized and unrealized gains and losses arising from changes in fair value recognized in the consolidated statements of income, recorded in principal transactions revenue. Fair values of exchange-traded derivatives are obtained from quoted market prices. Fair values of over-the-counter derivatives are obtained using valuation techniques and other pricing models which include market-based data as inputs.

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FUTURE CHANGES IN ACCOUNTING POLICIES OR ESTIMATES

GMP monitors continuously the potential changes proposed by the International Accounting Standards Board and analyzes the effect that changes in the standards may have on GMP. For a summary of future changes in accounting policies or estimates, refer to Note 3 to the 2019 Annual Financial Statements.

RISK MANAGEMENT

Oversight and Monitoring

The financial services industry is, by its nature, subject to numerous and substantial risks, particularly in volatile, uncertain or illiquid markets. Additional risks and uncertainties not currently known to GMP, or that GMP currently considers immaterial, may also impair the operations of GMP and its affiliates. In many cases, risks which are inherent to our industry and our activities are beyond our control and are not easily detected or mitigated. If any such risks occur, the business, financial condition, or liquidity and results of operations of the GMP Group, and the ability of GMP to pay dividends could be materially adversely affected. Management believes that effective risk management is of primary importance to the ongoing success of the GMP Group. We have risk management processes in place to monitor, evaluate and manage the principal risks we assume in conducting our activities. We seek to monitor and control our risk exposure through a variety of separate but complementary financial, credit, operational, strategic and legal and compliance processes. Segregation of duties and management oversight are fundamental elements of our risk management process.

In addition to risks described below, "Forward-Looking Information" and "Risk Factors" in this MD&A and "Risk Factors" in GMP's AIF dated February 27, 2020, should be given careful consideration.

The Board of Directors and GMP’s CEO support our risk management processes through involvement in the assessment of principal risks. Key risk metrics are reported regularly to the Board of Directors and executive management. Oversight and monitoring of risk are accomplished through a comprehensive committee structure which seeks to identify, measure, control and report on the significant risks facing the GMP Group.

Key Risks

No Certainty That a Definitive Agreement Will Be Entered Into in Respect of the Potential Richardson GMP Transaction

Although the Corporation has entered into the Term Sheet, no definitive agreement has been entered into by the Corporation in respect of the Potential Richardson GMP Transaction. There can be no certainty nor can the Corporation provide any assurance that a definitive agreement, or any binding commitment at all, in respect of the Potential Richardson GMP Transaction will be entered into and no representation is made to that effect. If the Corporation fails to enter into a definitive agreement in respect of the Potential Richardson GMP Transaction, the Corporation could suffer adverse consequences.

No Certainty That the Potential Richardson GMP Transaction Will Be Consummated

Even if the Corporation and RFGL enter into a definitive agreement in respect of the Potential Richardson GMP Transaction, there can be no certainty nor can the Corporation provide any assurance that the Potential Richardson GMP Transaction will be consummated in a timely manner or at all. The Potential Richardson GMP Transaction will be dependent upon the satisfaction of various closing conditions, including obtaining necessary regulatory and shareholder approvals. There can be no assurance that these conditions will be satisfied or that the Potential Richardson GMP Transaction will be completed as currently contemplated in the Term Sheet or at all. If, for any reason, the Potential Richardson GMP Transaction is not completed or its completion is substantially delayed, the Corporation’s share price may be materially adversely effected and consequently, its business, financial condition or results of operations could also be subject to material adverse consequences.

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The Potential Richardson GMP Transaction may Divert the Attention of Management

The pendency of the Potential Richardson GMP Transaction could cause the attention of Management to be diverted from the day-to-day operations and clients may seek to modify or terminate their business relationships with the Corporation. These disruptions could be exacerbated by a delay in the consummation of the Potential Richardson GMP Transaction and could have an adverse effect on the Corporation regardless of whether the Potential Richardson GMP Transaction is ultimately completed.

GMP and RFGL May Be the Targets of Legal Claims and Such Claims May Delay or Prevent the Potential Richardson GMP Transaction from Being Completed

GMP and RFGL may be the target of securities class actions and derivative lawsuits which could result in substantial costs and may delay or prevent the Potential Richardson GMP Transaction from being completed. Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into an agreement to acquire a company or to be acquired. Third parties may also attempt to bring claims against the Corporation and RFGL seeking to restrain the Potential Richardson GMP Transaction or seeking monetary compensation or other remedies. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting the consummation of the Potential Richardson GMP Transaction, then that injunction may delay or prevent the Potential Richardson GMP Transaction from being completed.

The Success of Our Wealth Management Segment (through our non-controlling interest in Richardson GMP) Depends on Growing, Accumulating and Retaining AUA

The Wealth Management segment, which includes GMP’s non-controlling ownership interest in Richardson GMP, is subject to a number of the same risks that are applicable to all of our GMP businesses including changes in global economic, political and market conditions, dependence on the ability to retain and recruit personnel, regulation and capital requirements, significant competition, litigation and potential securities laws liability, reputational risk, failure to maintain adequate insurance coverage on favourable economic terms, risk management policies and procedures, significant fluctuations in results, credit risk and exposure to losses, and dependence on systems. The profitability of Richardson GMP is directly related to its ability to grow, accumulate and retain AUA. The level of AUA is influenced by several factors, including investment performance, mix of assets being managed, additions and withdrawals of assets by clients and successful recruitment and retention of investment advisors. Richardson GMP devotes considerable resources to recruiting new investment advisors, which may involve a lengthy recruitment process. There can be no assurance that the steps Richardson GMP has taken or will take to recruit new investment advisors will be sufficient in light of, among other things, the intense and increasing competition for experienced professionals in the wealth management industry or that Richardson GMP will be able to recruit new investment advisors with the desired qualifications on terms that are consistent with Richardson GMP’s hiring strategy. As well, the market for investment advisors is increasingly characterized by the movement of investment advisors among different firms. Individual independent investment advisors of Richardson GMP have regular direct contact with clients, which can lead to a strong and personal client relationship based on the client’s trust in the individual investment advisor. The loss of investment advisors could lead to the loss of client accounts, which may reduce AUA. Although Richardson GMP uses a combination of competitive compensation structures, including equity incentive arrangements, as a means of seeking to retain investment advisors, there can be no assurance that investment advisors will remain with Richardson GMP. Significant declines in AUA may have a material adverse effect on Richardson GMP’s financial results and would also adversely impact our Wealth Management segment through our non-controlling interest in Richardson GMP.

Our Wealth Management Business Faces Significant Competition

The wealth management industry is highly competitive and our ability to compete effectively directly impacts revenues and profitability. We compete with the wealth management divisions of major chartered banks in Canada, national independent wealth managers, insurance companies, mutual fund companies, private equity, investment management firms and boutique wealth managers. Some of these competitors have, and potential future competitors may have, greater technical, financial, marketing, distribution or other resources than Richardson GMP. Many of these competing entities have a greater number of

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personnel and easier access to capital than we do. Larger competitors may have a greater number and variety of distribution outlets for their products and services. Considerable consolidation in the wealth management industry has resulted in fewer but stronger competitors. Competition could have a material adverse effect on our profitability and there can be no assurance that Richardson GMP will maintain its competitive standing or market share, which may adversely affect its business, financial condition or operating results.

In addition, there are uncertainties involved in the introduction of new products and services, including technical requirements, operational controls and procedures, compliance with regulatory requirements and shifting market preferences. The development and introduction of new products and services may require ongoing support and investment. A failure to manage the risks involved in the implementation of new products and services may lead to operational lapses, increased capital requirements, and competitive alternatives, which could adversely affect Richardson GMP’s business, financial condition or operating results.

We Do Not Control Richardson GMP and there are Restrictions on the Transfer of our Non-Controlling Interest in Richardson GMP

As at December 31, 2019, we own a non-controlling interest in Richardson GMP of approximately 34.4% and, accordingly, we do not control, and if the RGMP Transaction is not completed, will not control Richardson GMP. Further, the RGMP Shareholders Agreement requires, among other things, the prior written consent of JRSL (which consent may be withheld in JRSL’s sole and absolute discretion) if we wish to transfer all or any portion of our interest in Richardson GMP to any person other than certain affiliates, subject to certain limited exceptions. The board of directors and senior management of Richardson GMP retain responsibility for the management, control and direction of the business and operations of Richardson GMP. As such, we must rely on the management expertise of the board and senior management of Richardson GMP. The restriction on our ability to transfer our non-controlling interest in Richardson GMP may limit or prevent us from dealing with our interest in Richardson GMP in the manner we see fit, and may have an adverse effect on our ability to realize on our investment in Richardson GMP. Additionally, to the extent that the board and senior management of Richardson GMP do not fulfill their obligations to manage the business and operations of Richardson GMP or are not effective in doing so, our non-controlling interest may be materially adversely affected.

Market Risk - Risk of Loss From Changes in Interest Rates, Securities Prices, Commodities Prices, and Currency Exchange Rates

We are exposed to market risk through our trading activities from our market-making, facilitation trading and investing activities and through our underwriting activities. The level of market risk to which we are exposed varies depending on market conditions, the movement in commodity prices, expectations of future price and yield movements and the composition of our security holdings. GMP segregates market risk into three categories: fair value risk, interest rate risk and currency risk. GMP seeks to manage market risks by diversifying exposures and controlling position sizes. The GMP Group does not take substantial principal positions in any one security or make large directional “bets” on the market. Capital limits for liability trading are recommended by senior management, approved by the Board of Directors and communicated to the executives responsible. Trading desk managers have the first line of responsibility for managing risk within prescribed limits. These managers have in-depth knowledge of the primary sources of risk in their respective markets and the instruments available to hedge their exposures. Trading activity and related capital usage are continually monitored by the GMP Group's compliance and finance personnel, respectively, and reviewed regularly by senior management.

The GMP Group uses a disciplined approval and risk management process to determine its participation in underwritten deals, imposing guidelines, approved by the Board of Directors, on maximum capital exposure on any given deal and requiring senior management approval on all transactions. In addition, the GMP Group limits its maximum risk exposure by limiting the deal size and participating in most financings on a syndicated basis.

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Operational Risk - Risk of Loss Due to Inadequate or Failed Internal Processes, People and Systems or External Events

Operational risk is embedded in all of our activities, including the practices and controls used to manage other risks. Failure to manage operational risk can lead to failure in the management of other risks such as credit, market or regulatory risk.

We manage operational risk through the application of long-standing, but continuously evolving, firm-wide control standards: the training, supervision and development of our people; the active participation and commitment of senior management in a continuous process of identifying and mitigating key operational risks across the firm; and a framework of strong and independent control personnel that monitor operational risk on a daily basis. Together, these elements form a strong firm-wide control culture that serves as the foundation of our efforts to minimize events that create operational risk and the damage they can cause.

Legal and Regulatory Risk - Risk of Loss Due to Adverse Legal Developments and Regulatory Non-Compliance

The GMP Group is subject to extensive regulation under securities laws of the jurisdictions in which we operate. Compliance with such regulations involves a number of risks, particularly in areas where applicable regulations may be subject to interpretation. Our regulatory compliance philosophy is to manage regulatory and legal risks through the promotion of a strong compliance culture and the integration of strong controls within the business and support areas. The GMP Group's compliance department directly supports our management of regulatory, compliance and legal risk through approval of our ethics and compliance program, which includes our code of conduct and enterprise compliance management framework, as well as specific policies and procedures in areas such as anti-money laundering, privacy and information protection, conflicts of interest, insider trading, corporate finance and sales and trading practices. It serves as the senior management focal point in initiating a response to and action on new and changing regulatory and compliance risks.

GMP's subsidiaries in the normal course of business are involved in legal proceedings, including regulatory investigations. An adverse resolution of any lawsuits against the GMP Group could materially affect the GMP Group's operating results and financial condition. While there is inherent difficulty in predicting the outcome of such matters, based on current knowledge and consultation with legal counsel, we do not expect that the outcome of any of these matters, individually or in aggregate, would have a material adverse effect on GMP's consolidated financial position or results of operations.

There is a risk that the Company could be the subject of third-party proceedings, which may have a material adverse effect on the Company's business, revenue, operating results and financial condition as well as the Company’s reputation, even if such proceedings were concluded successfully in favour of the Company. The Company has determined that any such proceedings are unlikely and, accordingly, has not recorded a provision in respect of such matters.

Credit Risk - Risk of Loss Associated with the Inability of a Third Party to Fulfill its Payment Obligation

GMP is exposed to the risk that third parties that owe it money, securities or other assets, will not perform their obligations. These parties include trading counterparties, customers, clearing agents, stock exchanges, clearing houses and other financial intermediaries. A primary source of credit risk to GMP arises when GMP extends credit to its clients or to clients of its introducing broker, Richardson GMP, to purchase securities by way of margin lending. Margin loans are due on demand and are collateralized by the financial instruments in the client's account. GMP faces a risk of financial loss in the event a client fails to meet a margin call if market prices for securities held as collateral decline and GMP is unable to recover sufficient value from the collateral held. Credit risk is managed in a number of ways. For margin lending, management has established limits that are generally more restrictive than those required by applicable regulatory policies. Additionally, GMP manages its credit risk in certain types of trading activities through the establishment of aggregate limits by individual counterparty, reviewing security and loan concentrations, and marking to market collateral provided on certain transactions. Policies authorized by GMP prescribe the level of approval and the amount of credit exposure GMP may assume to a counterparty taking into account collateral or other credit risk mitigants where applicable. GMP did not incur material loss arising from a counterparty default in 2019 or 2018.

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Liquidity Risk - Risk of Failure to Meet a Demand for Cash or Fund Obligations as They Become Due

Management oversees GMP's liquidity to ensure access to enough readily available funds to cover its financial obligations as they come due and sustain and grow its assets and operations both under normal and stress conditions. For further discussion regarding liquidity risk and how we ensure such risks are minimized, refer to “Liquidity and Capital Resources” in this MD&A.

For further information refer to Note 25 to the 2019 Annual Financial Statements.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management has designed disclosure controls and procedures to provide reasonable assurance that material information relating to GMP is accumulated and communicated to GMP’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) to allow for timely decisions regarding required disclosure and to ensure that information required to be disclosed in GMP’s annual and interim filings and other reports filed or submitted under Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified therein.

As of December 31, 2019, management evaluated the effectiveness of our disclosure controls and procedures as defined under the Canadian Securities Administrators’ National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings . This evaluation was performed under the supervision of, and with the participation of, the CEO and CFO. Based on the evaluation conducted as at December 31, 2019, the CEO and CFO concluded that GMP’s disclosure controls and procedures were effective as of December 31, 2019.

Internal Control over Financial Reporting

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management is responsible for establishing and maintaining adequate internal control over financial reporting for GMP.

As of December 31, 2019, management evaluated the effectiveness of GMP's internal control over financial reporting taking into account the nature and size of GMP's business and using the framework and criteria established in the Internal Control - Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that GMP's internal control over financial reporting was effective as of December 31, 2019, and that there were no material weaknesses that have been identified in our internal control over financial reporting as of December 31, 2019.

Changes in Internal Control over Financial Reporting

To the best of the knowledge and belief of the CEO and CFO, no changes were made in GMP's internal control over financial reporting in 2019 that have materially affected or are reasonably likely to have a material affect on GMP's internal control over financial reporting.

RISK FACTORS

An investment in securities of GMP involves a number of risks in addition to those described under “Forward-Looking Information” and “Risk Management” in this MD&A. These risks and uncertainties are not the only ones facing the GMP Group. In many cases, risks which are inherent to our industry and our activities are beyond our control and are not easily detected or mitigated. In addition to other information contained or incorporated by reference in this MD&A, the “Risk Factors” section in our AIF dated February 27, 2020, should be given careful consideration. Additional risks and uncertainties not currently known to GMP, or that GMP currently considers immaterial, may also impair the operations of the GMP Group. If any such risks actually occur, the business, financial condition, or liquidity and results of operations of the GMP Group, and the ability of GMP to pay dividends could be materially adversely affected.

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SUPPLEMENTAL INFORMATION - RICHARDSON GMP

The following supplemental information reflects how Richardson GMP's management assesses the financial performance of Richardson GMP.

Richardson GMP's management assesses performance on both a reported and an adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Presenting results on both bases also permits readers to assess the impact of specified items on financial results. Richardson GMP's management uses certain measures to assess the financial performance of Richardson GMP that are not GAAP measures under IFRS. Richardson GMP presents earnings before interest, income tax, depreciation and amortization (EBITDA) which excludes:

• Interest expense recorded primarily in connection with subordinated loan financing arrangements.

• Income tax expense (benefit) recorded.

• Depreciation and amortization expense recorded primarily in connection with equipment and leasehold improvements.

• Transition assistance loan amortization in connection with investment advisor loan programs. Richardson GMP views these loans as an effective recruiting and retention tool, the cost of which is assessed by management upfront when the loan is provided rather than over its term.

Richardson GMP also presents an adjusted EBITDA[1] which excludes the following (adjusted EBITDA[1] ):

• Share-based compensation costs recorded in connection with awards granted to employees and investment advisors of Richardson GMP.

EBITDA[1] and adjusted EBITDA[1] do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of Richardson GMP's performance, liquidity, cash flows, and profitability. Richardson GMP's management believes adjusting results by excluding the impact of the specified items is more reflective of ongoing financial performance and cash generating capabilities and provides readers with an enhanced understanding of how management views Richardson GMP's core performance.

The following table sets forth an overview of the consolidated financial results of Richardson GMP for the periods indicated, on a 100% basis; noting, however, that GMP owns an approximate 34.4% non-controlling interest of Richardson GMP as at December 31, 2019.

The following table shows the consolidated financial results of Richardson GMP for the periods indicated.

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			%
			increase/
($000, except as otherwise noted)	2019	2018	(decrease)
Revenue	272,282	290,079	(6)
Commissions	30,402	46,304	(34)
Investment management and fee income	201,575	202,040	—
Principal Transactions	348	(1,347)	126
Interest	25,471	28,152	(10)
Other	14,486	14,930	(3)
Expenses	254,809	269,968	(6)
Employee compensation and benefits	181,796	190,337	(4)
Non-compensation expenses	73,013	79,631	(8)
Income before income taxes	17,473	20,111	(13)
Income tax expense	6,179	6,459	(4)
Net income - reported	11,294	13,652	(17)
Pre-tax impact of adjusting items
Interest	8,095	7,067	15
Income tax	6,179	6,459	(4)
Depreciation and amortization	13,127	5,205	152
Transition assistance loan amortization	8,132	10,402	(22)
EBITDA1	46,827	42,785	9
Share-based compensation	3,431	2,580	33
Adjusted EBITDA1	50,258	45,365	11
Number of advisory teams	162	166	(2)
AUA at period-end ($ millions)	28,564	27,408	4

1. Considered to be a non-GAAP financial measure. This measure does not have any standardized meaning prescribed by GAAP under IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers.

Financial Performance

2019 vs. 2018

Richardson GMP reported net income of $11.3 million in 2019 compared with $13.7 million in 2018. Net income attributable to common shareholders was $6.5 million in 2019 compared with $9.0 million in 2018. On an adjusted basis, Richardson GMP reported adjusted EBITDA of $50.3 million and $45.4 million in 2019 and 2018, respectively. Total revenues decreased 6% primarily due to lower commission revenue.

Adjusted EBITDA[1 ] in 2019 includes the favourable impact of adopting IFRS 16.

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The following table is Richardson GMP's balance sheet without adjusting for GMP's proportionate interest:

As at December 31,	2019	2018
Assets
Cash	67,901	61,694
Securities owned	997	546
Due from carrying broker	10,328	11,051
Other assets	7,310	7,764
Total current assets	86,536	81,055
Deposit with carrying broker	496	496
Equipment and leasehold improvements, net	14,418	12,658
Right-of-use asset	24,949	—
Advisor loans receivable	30,858	27,167
Deferred Tax Asset	28,494	34,475
Goodwill and intangible assets, net	145,267	145,482
Total assets	331,018	301,333
Liabilities and shareholders' equity
Accounts payable and accrued liabilities	49,742	48,711
Leased liability	27,404	—
Subordinated loans	71,000	71,000
Total liabilities	148,146	119,711
Shareholders' equity
Share capital:
Common shares	134,891	132,152
Preferred shares	61,517	61,527
Share capital	196,408	193,679
Contributed surplus	2,793	2,958
Accumulated retained earnings	(16,329)	(15,015)
Total shareholders' equity	182,872	181,622
Total liabilities and shareholders' equity	331,018	301,333

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