TMX GROUP INC. GROUP TMX 2011 ANNU 2011 A L REPOR L T THE FACTORS TMX GROUP INC. 2011 ANNUAL REPORT The TMX Factors Four key factors contribute to TMX Group’s success. Together they enable the company to deliver strong results, drive innovation and create growth. 1Critical Economic Infrastructure 2Commitment to Innovation Exchanges and clearing houses play unique and central The market demands that our company remain roles in the economy: exchanges facilitate capital technologically innovative as well as proactive with formation, enhance market efficiency and provide our product and service offerings. TMX Group teams vital risk management tools; clearinghouses provide work continuously to ensure that we anticipate, meet an important infrastructure that mitigates risk and and exceed our clients’ needs for speed, functionality, strengthens the market. TMX Group operates exchanges global connectivity and investment choice. in equities, derivatives and energy, and provides clearing services in derivatives and energy – all are essential to the efficiency of the Canadian capital markets. 3SME and Resources Specialization 4Canada’s Strength Canada’s economy, while broadly diversified, has Canada has a strong and well-developed economy particular strengths in natural resources and small- with a top-tier credit rating, the lowest net debt-to- to-medium sized enterprises (SMEs). Toronto Stock GDP ratio in the G7, well-regulated financial markets Exchange and TSX Venture Exchange are global leaders and a sound banking system. Our country’s strong in mining, energy and clean technology and have economic fundamentals make our market attractive significant expertise in supporting the growth of to international investors. TMX Group travels the globe SMEs. Natural Gas Exchange also provides a platform to promote Canada as an investment opportunity and for trading and clearing underlying commodities, our exchanges as listing and trading venues. including natural gas and crude oil. Delivering results The TMX Factors provide a foundation for our past, present and future operational success. Diversified for strength 2011 KEY PERFORmaNCE MEasURES $263M $3.17 TRadiNG, CLEARING, AND RELatED DILUTED EPS • Cash Markets (equities & fixed income) • Derivatives Markets • Energy Markets $3.57 ADJUstED DILUTED EPS $231M IssUER SERVICES $304M • Initial Listing Fees CasH FLOWS FROM OPERatiNG ACtiVitiES • Sustaining Listing Fees • Additional Listing Fees $674M • Other Issuer Services $490M REVENUE 2011 CasH ON HaND $165M INFORmatiON SERVICES • Real-Time (equities) • Real-TIme (derivatives) • Online/historical/3rd party data/other • Fixed income • Data Delivery Solutions/co-location $15M TECHNOLOGY SERVICES AND OTHER Driving innovation TMX Group is focused on anticipating our clients evolving needs and on creating products and services to meet them. In 2011, all areas of TMX Group delivered on our commitment to deliver innovative solutions. Customer needs Product and Service Solutions • Increase capacity • Enterprise Expansion Phase II completed • Dark order types introduced • Decrease latency • TMX Select launched • Enhance functionality • S&P/TSX 60 Mini Futures contract launched • London and Beijing offices opened • Risk management • 10 new NGX hubs added in the US • Co-location services expanded • Global networking • TMXnet NA implemented • Investment choices • TSX InfoSuite launched Creating growth TMX Group’s overall strategy is to enhance our core business domestically and to expand horizontally, vertically and geographically by offering innovative products and services across asset classes. Enhance multi-asset class trading to secure the foundation 2012 INitiatiVES of our core business: • Maintain superior technology, identify new means and sources of order • Work toward implementation of flow, and develop and sell innovative new products and services; TMX Quantum XA, our new equities • Continue to enhance relationships with market participants and trading system other stakeholders. • Leverage our derivatives over-the-counter Diversify revenue base, both organically and through clearing services corporate development: • Enhance our energy clearing capabilities • Expand horizontally to achieve a leadership position in all exchange • Expand our fixed income trading network tradable asset classes and product types in Canada, especially in • Introduce innovative product and services derivatives and commodities; across the company • Expand vertically into additional issuer services, new clearing services, • Promote the strengths of our markets risk management services, execution and information services, and internationally software solutions. Leverage our competitive advantages to become the leading global exchange group for small to medium sized enterprises and resource issuers: • Attract issuers, investors and intermediaries to Canada; • Sell data, technology and other services. Contents Letter from the Chair 6 Letter from the CEO 7 Statement of Corporate Governance Practices 9 2011 Management’s Discussion and Analysis 12 Management Statement 62 Auditors’ Report to the Shareholders 63 Consolidated Financial Statements 64 Notes to the Consolidated Financial Statements 69 Board of Directors 114 TMX Group Executive Committee 115 Shareholder Information 116 Forward-Looking Information This annual report contains forward-looking statements, which are not historical facts but are based on certain assumptions and reflect TMX Group’s current expectations. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. We have no intention to update this forward looking information, except as required by applicable securities law. Letter from the Chair I am pleased to report to you on behalf of TMX Group’s Board of Directors as we look back on an eventful 2011. In a year of global economic unrest and modest growth, we were able to achieve solid operating results. The support agreement with Maple Group Acquisition Corporation, signed at the end of October 2011, represents a promising step forward for TMX Group and the Board unanimously supports the transaction. We continue to work closely with Maple as part of the process to obtain the required regulatory approvals. It was a particularly busy year in terms of the number of Board meetings. I would like to thank my fellow TMX Group Directors for their valuable contributions during our deliberations last year, as well as for their ongoing dedication and insight. Working together with the executive management committee, we remain dedicated to enhancing Canada’s premier integrated exchange group in order to better serve Canadian capital markets. On behalf of the Board of Directors, I would also like to thank Laurent Verreault and Jean Turmel who stepped down in 2011 for their years of diligent service to TMX Group. In closing, I would like to acknowledge the committed efforts of TMX Group management and employees throughout 2011 and beyond. The company continues to evolve and deepen its excellent worldwide reputation through the hard work of its team. Wayne Fox Chair, Board of Directors TMX Group Inc. March 1, 2012 6 TMX Group Annual Report | 2011 Letter from the CEO I am pleased to report on an exceptionally active year for TMX Group. Corporate development activity, technology initiatives, regulatory changes, international expansion, new products and services and much more made not only for a very interesting year in 2011, but also marked an important stage in our company’s evolution. 2011 in Review In terms of our performance, we are pleased that we were able to achieve top and bottom line growth with revenue up 8% and adjusted earnings per share up 11% over 2010. Although there were signs of economic strength in Canada as advanced economies around the world worked to regain balance and restore investor faith, we were not immune to the effects of global uncertainty. Capital markets activity, including equities financings and volumes, slowed in the latter part of the year. However, TMX Group’s 2011 results were fortified by our long-term diversification strategy. In particular, our derivatives markets were up sharply in terms of volumes and open interest compared with 2010. Macroeconomic factors continue to impact our revenue drivers and the exchange industry remains highly competitive. We compete internationally for investment capital and order flow, and continue to face significant domestic competition in a fragmented equities marketplace. As the number of Alternative Trading Systems (ATSs) increases, our competitive response remains focused on enhancing our products and services and bringing technological innovation to our markets. In 2011, we delivered new on-book Dark Order types to our markets and launched our own ATS called TMX Select. These important initiatives are designed to provide additional execution opportunities and increase the efficiency of our markets. We also implemented multiple changes to our equity trading fee schedule in 2011 to reduce costs for all market participants. In terms of financings, according to the most recent data from the World Federation of Exchanges, we ranked sixth in the world in total financings amongst our exchange peers, up from eighth in 2010. In 2011, for the third year in a row, we listed more new issuers than any other exchange group in the world. We were also pleased to see that the number of graduates from TSX Venture Exchange to Toronto Stock Exchange