DUNDEE WEALTH MANAGEMENT INC. REPORTS FINANCIAL RESULTS FOR 2002

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1 REPORTS FINANCIAL RESULTS FOR 2002 April 9, 2003, Toronto, Ontario - Dundee Wealth Management Inc. (DW TSX) Dundee Wealth is pleased to report its results to shareholders for the three months and the year ended December 31, During the fourth quarter, the positive effect of acquisitions completed earlier in the year began to impact operating results as EBITDA increased to $21.9 million from $7.7 million in the third quarter of 2002 and $9.2 million in the fourth quarter of Dundee Wealth completed the year with EBITDA of $53.2 million, an increase of over 30% from the $40.5 million earned in Net earnings for the year were $77.6 million or $1.35 per share compared with a loss of $7.1 million in Current year earnings include a dilution gain of $74.4 million resulting from the creation of DWM Inc., an 81.7% owned subsidiary of Dundee Wealth, in October While the dilution gain itself does not provide operating earnings to the organization, it does provide independent third party attestation that our operating subsidiaries are being carried in the consolidated statements of the Company at well below their true market values. Our team has worked hard throughout 2002 and as a result, even with poor capital market conditions, we have experienced a very eventful year. We enter 2003 filled with energy and momentum. We were generally astute in our investment prowess for our clients and fortunate to be able to identify and complete a number of strategic acquisitions that have made our Company more valuable. states Ned Goodman, Chairman, President and Chief Executive Officer of Dundee Wealth. Dundee Wealth s assets under management and administration grew from $13.1 billion at the end of 2001 to over $17.3 billion at the end of With the proposed acquisition of IPC Financial Network Inc., assets under management and administration will increase further to $24 billion. Assets Assets Under Under (in millions of dollars) Management Administration TOTAL Balance, January 1, 2002 $ 6,476 $ 6,640 $ 13,116 Assets acquired Canadian First Financial Group Inc. - 2,188 2,188 DynamicNova Inc. (formerly StrategicNova Inc.) 2,065-2,065 Net sales Market depreciation and other changes in assets (119) (102) (221) Assets, December 31, 2002 $ 8,632 $ 8,726 $ 17,358 Proposed acquisition of IPC Financial Network Inc. 6,500 PRO FORMA ASSETS UNDER MANAGEMENT AND ADMINISTRATION $ 23,858 We have already made significant strides towards integrating the operations of Canadian First Financial Group ( CFFG ), which we acquired in August 2002, with that of our other mutual fund dealer subsidiary, Dundee Private Investors Inc. and of DynamicNova Inc. ( DynamicNova ), which we acquired in October 2002, with the operations of Dynamic Mutual Funds. Following an integration period, this growth in assets under management and administration will afford Dundee Wealth higher revenues, significant operating synergies and improved EBITDA. 1

2 The DynamicNova acquisition was the catalyst behind the creation of DWM Inc. ( DWM ), an 81.7% owned subsidiary of Dundee Wealth, which now holds 100% of Dundee Wealth s operating subsidiaries. Dundee Wealth s partner in DWM is CDP Financial Services Inc. ( CDP ), the former majority shareholder of DynamicNova. CDP received shares in DWM as consideration for the transfer of their interest in DynamicNova. As a further condition to the acquisition of DynamicNova, CDP agreed to transfer $31 million of loans receivable from DynamicNova and cash of $15 million to DWM for shares of DWM. After the conclusion of these transactions, CDP held 18.3% of DWM. In accordance with Canadian generally accepted accounting principles, Dundee Wealth is considered to have disposed of 18.3% of its interest in DWM. Since the issuance of DWM shares to CDP occurred at prices significantly higher than the carried book value of DWM to the Company, this resulted in a dilution gain of $74.4 million for the year. The acquisition of DynamicNova was important as it allowed us to increase our assets under management by over 30% without significant incremental cost. The DynamicNova business currently generates EBITDA of approximately $15 million. Through operating synergies expected to be achieved during 2003, we expect to further improve EBITDA by up to $20 million annually. The acquisition of CFFG, which included the investment advisors of Ross Dixon Financial Services Limited ( Ross Dixon ) and Hewmac Investment Services Inc. ( Hewmac ), has expanded our network of investment advisors throughout Ontario. We also gained a large GIC operation that complements the list of products sold to our retail clients. The acquisition of CFFG, together with the proposed acquisition of IPC Financial, will give Dundee Wealth over 1,200 investment advisors operating through 340 independent branch offices across Canada. In addition, Dundee Wealth continues to deliver first class investment product solutions to financial advisors across Canada. The operating results for the fourth quarter of 2002, compared to the third quarter of 2002 and the fourth quarter of 2001 are summarized below. Operations relating to business acquisitions completed in 2002 have been included in the operations of Dundee Wealth only since the date of acquisition (in thousands of dollars) Fourth Quarter Third Quarter Fourth Quarter Total revenues $ 82,571 $ 54,708 $ 60,067 Total expenses 60,684 46,998 50,891 Earnings before interest, taxes and other non cash items 21,887 7,710 9,176 Earnings (loss) from operations 7,468 (1,569) (2,614) Net earnings (loss) $ 77,006 $ (1,387) $ (3,843) Note: Fourth quarter 2002 net earnings include a dilution gain of $74,403. Dundee Wealth will continue to focus on integration efforts throughout Even with the continuation of poor capital markets, we look forward to achieving the expected cost synergies providing increased margins and creation of shareholder value. 2

3 D U N D E E W E A L T H M A N A G E M E N T I N C. C O N S O L I D A T E D B A L A N C E S H E E T S As at December 31, 2002 and 2001 (expressed in thousands of dollars) December 31, 2002 December 31, 2001 ASSETS Cash and short term investments $ 103,071 $ 95,194 Securities owned 12,201 10,613 Accounts receivable 37,874 33,433 Client accounts receivable 230, ,172 Income taxes receivable 82 - Corporate investments 12,412 13,097 Deferred sales commissions 81,089 56,910 Capital and other assets 218,505 92,427 TOTAL ASSETS $ 695,964 $ 530,846 LIABILITIES Bank indebtedness $ 7,374 $ - Accounts payable and accrued liabilities 46,784 34,725 Securities sold short 4,845 2,094 Client deposits and related liabilities 260, ,615 Income taxes payable - 5,536 Amounts due to parent 9,216 12,587 Corporate debt 57,360 24,627 Future income tax liabilities 4,282 7, , ,982 NON CONTROLLING INTEREST 54,725 - SHAREHOLDERS' EQUITY Share capital Common and special shares 84,333 80,638 Preference shares 54,537 54,537 Contributed surplus 25,582 25,185 Retained earnings 86,215 13, , ,864 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 695,964 $ 530,846 3

4 D U N D E E W E A L T H M A N A G E M E N T I N C. C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S For the years ended December 31, 2002 and 2001 (expressed in thousands of dollars, except per share amounts) December 31, 2002 December 31, 2001 REVENUE Management fees $ 127,736 $ 110,479 Redemption fees 9,867 8,697 Financial services 124, , , ,055 Investment income 3,909 1, , ,316 EXPENSES Selling, general and administrative 113, ,623 Variable compensation 71,307 60,299 Distribution fees 5,510 6,374 Trailer fees 22,973 19, , ,862 EARNINGS BEFORE INTEREST, TAXES AND OTHER NON CASH ITEMS 53,176 40,454 Amortization of deferred sales commissions 34,571 33,120 Amortization of goodwill - 4,463 Depreciation 6,122 5,203 Interest expense 2,858 2,681 EARNINGS (LOSS) FROM OPERATIONS 9,625 (5,013) Dilution gain 74,403 - Income taxes Current 9,168 9,071 Future (3,863) (7,015) Non controlling interest 1,076 - NET EARNINGS (LOSS) $ 77,647 $ (7,069) NET EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share $ 1.35 $ (0.19) Diluted earnings (loss) per share $ 1.30 $ (0.19) 4

5 D U N D E E W E A L T H M A N A G E M E N T I N C. C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N S H A R E H O L D E R S ' E Q U I T Y For the years ended December 31, 2002 and 2001 (expressed in thousands of dollars) Share Capital Common and Contributed Retained Special Preference Surplus Earnings Total Balance, December 31, 2000 $ 79,625 $ 54,537 $ 25,185 $ 23,845 $ 183,192 Issuance of common shares for cash 1, ,415 Issuance of common shares for non-monetary consideration 1, ,325 Issuance of Series E Shares pursuant to business acquisitions Acquisition of Series A Shares for cancellation (1,224) (1,224) Acquisition of Series C Shares for cancellation (891) (891) Adjustment to tax on issue costs (212) (212) Preference share dividends (3,272) (3,272) Net loss for the year (7,069) (7,069) Balance, December 31, ,638 54,537 25,185 13, ,864 Issuance of common shares for cash 1, ,965 Issuance of common shares for non-monetary consideration 1, ,435 Issuance of common shares in settlement of preference share dividend Share based compensation Acquisition of common shares for cancellation (1) - (3) - (4) Acquisition of Series A Shares for cancellation (522) (522) Preference share dividends (3,272) (3,272) Common and special share dividends (1,664) (1,664) Net earnings for the year ,647 77,647 Balance, December 31, 2002 $ 84,333 $ 54,537 $ 25,582 $ 86,215 $ 250,667 5

6 D U N D E E W E A L T H M A N A G E M E N T I N C. C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S For the years ended December 31, 2002 and 2001 (expressed in thousands of dollars) December 31, 2002 December 31, 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 77,647 $ (7,069) Non cash items in earnings (loss): Depreciation and amortization 40,693 42,786 Net investment losses (gains) 868 (469) Future income taxes (3,863) (7,015) Dilution gain realized on reorganization (74,403) - Non controlling interest 1,076 - Other 1,835 1,351 43,853 29,584 Changes in: Accounts receivable 3, Securities owned, net of securities sold short 1,163 (5,575) Client accounts receivable, net of deposits and related liabilities (10,462) 48,341 Income taxes payable (4,549) (729) Bank indebtedness 7,374 - Accounts payable and accrued liabilities (6,659) (8,455) CASH PROVIDED FROM OPERATING ACTIVITIES 33,958 63,286 CASH FLOWS FROM INVESTING ACTIVITIES: Sales commissions paid on distribution of mutual funds (26,047) (18,238) Acquisition of corporate investments (1,455) (5,080) Proceeds on dispositions of corporate investments 2,038 2,382 Cash acquired in business combinations 1,065 - Additions to capital and other assets (7,824) (10,081) CASH USED IN INVESTING ACTIVITIES (32,223) (31,017) CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) increase in amounts due to parent (4,189) 1,912 Decrease in corporate debt (990) (21,025) Issuance of shares in subsidiary to non controlling interest 25,216 - Redemption of subsidiary shares from non controlling interest (12,556) - Issuance of common shares 1,965 1,415 Acquisition of common shares (4) - Dividends paid on common and special shares (1,664) - Dividends paid on preference shares (1,636) (3,272) CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES 6,142 (20,970) NET INCREASE IN CASH DURING THE YEAR 7,877 11,299 Cash, beginning of year 95,194 83,895 CASH, END OF YEAR $ 103,071 $ 95,194 Cash flows from operating activities include the following: Interest paid $ 2,537 $ 2,580 Taxes paid $ 15,277 $ 11,158 6

7 MANAGEMENT S DISCUSSION AND ANALYSIS (the Company or Dundee Wealth ) was created in 1999 to consolidate the existing Canadian wealth management business of its parent, Dundee Bancorp Inc. ( Dundee Bancorp ) and is now a fully integrated, Canadian-owned, financial service company. Dundee Wealth provides investment management, securities brokerage, and financial planning and investment advisory services to individuals, institutions, corporations and foundations. With over $17 billion in assets under management and administration, Dundee Wealth has a nationally dedicated group of investment professionals who have a history of building financial wealth for their clients. Dundee Wealth is an 84% owned subsidiary of Dundee Bancorp. Dundee Wealth s operations are conducted through DWM Inc. ( DWM ), an 81.7% owned subsidiary. CDP Financial Services Inc. ( CDP ), the former majority shareholder of DynamicNova Inc. (formerly StrategicNova Inc.) ( DynamicNova ) owns the remaining 18.3% of DWM. On October 2, 2002, Dundee Wealth transferred substantially all of its assets and liabilities to DWM in exchange for shares of DWM. At that point, Dundee Wealth became a parent company with its primary asset being its investment in DWM. DWM operates in two distinct operating segments, investment management and brokerage services. Brokerage services includes both retail distribution of financial products and capital markets. In 2002, Dundee Wealth completed two significant acquisitions, Canadian First Financial Group Inc. ( CFFG ) and DynamicNova. Since acquisition, the operations and corporate entities that comprised CFFG have all been integrated or amalgamated into the brokerage services division. Likewise, the operations and corporate entities that comprised DynamicNova have been integrated into the investment management division. The corporate entities that comprised DynamicNova were amalgamated with the Dynamic corporate entities on January 1, It is expected that complete integration of these acquisitions will be completed by July THE INVESTMENT MANAGEMENT DIVISION Dynamic Mutual Funds Ltd. ( Dynamic ) is a member of The Investment Funds Institute of Canada and manages over $8.6 billion in third-party assets, including the Dynamic and DynamicNova Mutual Funds, the Dynamic Power Mutual Funds, the Dynamic Focus+ Mutual Funds, the Hathaway Funds and the Viscount Wealth Management Program. Dynamic also manages Dundee Precious Metals Inc. and diversitrust, both closed end funds, Dynamic Venture Opportunities Fund Ltd., a labour sponsored venture capital fund and Dynamic CMP Resource Limited Partnerships and Canada Dominion Resources Limited Partnerships, a series of flow-through share limited partnerships. Through separate divisions, Goodman Private Wealth Management and Goodman Institutional Investments, Dynamic services and manages private client accounts including taxable foundations, estates and personal trusts and creates alternative investment products. More than 460,000 clients have entrusted Dynamic with over $8.6 billion in assets managed. The management contracts associated with these assets entitle the Company to a fee, generally calculated as a percentage of the current market value of the assets managed. Revenue levels are therefore largely dependent on levels of assets under management. Management fees earned from assets under management will depend on the nature and objective of each portfolio of assets, and will generally range between 0.5% to 2.25%. 7

8 Revenue levels may also change if there is a shift in the asset mix between portfolios earning different management fees. The Company may also earn performance fees on certain portfolios when the investment performance of these portfolios exceeds an applicable benchmark. ASSETS UNDER MANAGEMENT: Asset Mix Dynamic Balanced Funds Dynamic Focus+ Funds Dynamic Power Growth Funds Dynamic Hedge Funds Dynamic Income Funds Dynamic Money Market Funds Dynamic Specialty Funds Dynamic Value Funds Goodman Private Wealth Other Third-Party Assets Viscount Wealth Program DynamicNova ,000 1,500 2,000 2,500 Millions of Dollars Transactions for purchases of mutual fund units may be conducted on either a front-end load or deferred sales charge basis. Units purchased on a deferred sales charge basis may be acquired under a regular or short redemption schedule, at the option of the unitholder. Dynamic pays a commission to investment advisors who sell units on a deferred sales charge basis. Units sold are then subject to a fee on redemption, if such units are redeemed before a certain period. Redemption fees are generally calculated as a percentage of the value of the units redeemed, declining to zero at the end of a specified period. During 2002 and 2001, the Company financed these commissions internally, using operating cash flows generated by the investment management business. In previous years and in the case of certain of the DynamicNova assets, certain commissions were funded through alternative financing vehicles, including a distribution arrangement with Dundee Wealth s parent, Dundee Bancorp. When these units are redeemed, the redemption revenue is remitted directly to the appropriate financing vehicle. For a contractual period of time, the Company will pay distribution fees as a compensatory payment to these financing vehicles equal to between 0.15% and 1.4% of the underlying value of the units financed. Dynamic pays trailer fees to third-party brokers and dealers to assist them in providing ongoing service to clients in respect of assets managed by the Company. Trailer fees are calculated as a percentage of assets managed. Therefore, trailer expense will increase or decrease as a result of changes in asset levels. THE BROKERAGE DIVISION Dundee Securities Corporation ( Dundee Securities ) is a full service investment dealer and member of the Investment Dealers Association of Canada. With 227 investment advisors and $5.3 billion of client assets, Dundee Securities is engaged in retail distribution of financial products and is also engaged in institutional sales, trading, research and investment banking. 8

9 Dundee Securities has sister companies that complement the products and services offered to their clients: Dundee Private Investors Inc. ( Dundee Private ) is a financial planner and mutual fund dealer and a member of the Mutual Fund Dealers Association of Canada. With about 270 investment advisors, Dundee Private services approximately $3.3 billion of client assets; Dundee Insurance Agency Ltd. ( Dundee Insurance ), is a full service managing general agency providing access to the highest quality insurance and guaranteed products; and Dundee Mortgage Services Inc. ( Dundee Mortgage ), a mortgage broker. Dundee Securities, Dundee Private, Dundee Insurance and Dundee Mortgage, together, provide a full range of retail brokerage services to its client base of over 300,000 accounts representing $8.7 billion in assets under administration. Dundee Securities also provides investment banking and institutional brokerage services. Corporate finance revenue is earned from participation in equity financings and by providing financial advisory services, including mergers and acquisitions advice and valuations and fairness opinions, in a variety of industry sectors. Investment advisors, and investment banking and institutional sales professionals, are compensated by commission. These commissions are calculated as a percentage of revenue earned from retail or institutional commissions, trailer commissions, trading profits or corporate finance revenue. Compensation costs are directly related to financial service revenue and are expected to change in direct relation to financial services activity. ACQUISITIONS In August 2002, the Company completed the acquisition of all the issued and outstanding shares of CFFG, a financial services company with integrated business interests in the financial services sector. CFFG added almost 200 investment advisors and $2.1 billion in assets under administration to Dundee Wealth. The total acquisition price was $13.4 million including a cash payment of $10.7 million and the assumption of certain obligations and acquisition costs estimated at $2.7 million. Subsequent to the acquisition, Dundee Wealth integrated the mutual fund dealer operations of Ross Dixon and Hewmac, subsidiaries of CFFG, with Dundee Private. In October 2002, the Company completed the acquisition of all the issued and outstanding shares of DynamicNova, an investment management company with approximately $2.1 billion in assets under management. The total acquisition price was $88.1 million, net of debt, and was satisfied by the issuance of shares of DWM with a value of $84.2 million, additional obligations in the amount of $3.9 million and transaction costs of $2.6 million. On January 1, 2003, Dundee Wealth amalgamated several of the corporate entities and operations of DynamicNova with the operations of Dynamic. As a result of the acquisition of DynamicNova and the issuance of shares of DWM to DynamicNova s former majority shareholder, the Company recognized a dilution gain of $74.4 million during the fourth quarter of

10 RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2002 compared to DECEMBER 31, 2001 Earnings before interest, taxes, depreciation and amortization ( EBITDA ) for the year ended December 31, 2002, were $53.2 million or $0.90 per share compared with $40.5 million or $0.68 per share in 2001, a growth in EBITDA of over 30%. Net earnings for 2002 were $77.6 million or $1.35 per share compared with a net loss of $7.1 million or a loss of $0.19 per share in Current year earnings include a dilution gain of $74.4 million resulting from the creation of DWM, an 81.7% owned subsidiary of Dundee Wealth, in October REVENUES Total revenues for 2002 were $266 million, a 14% increase from 2001 revenues of $234 million. The major components of revenue are described below. Management Fees Management fee revenues for 2002 were $127.7 million including performance fees of $7.4 million. This compares to $110.5 million earned in 2001, including performance fees of $2.4 million. Performance fees earned in 2002 were primarily from resource related products, including Dundee Precious Metals Inc. and certain Dynamic CMP Resource Limited Partnerships. Despite slower growth in the mutual fund industry in general, Dynamic ended 2002 with net assets gathered of $297 million compared to $15 million in The acquisition of DynamicNova increased assets under management by $2.1 billion. Since acquisition, DynamicNova s assets have resulted in net redemptions of $87 million for Efforts are being made to reverse this redemption trend through manager changes, by implementing free switching between Dynamic and DynamicNova products, through merging certain funds that have similar investment objectives, and by other direct marketing efforts. General capital market conditions resulted in some depreciation in the value of assets. Nevertheless, the Company s growth in assets under management is significant, growing from $6.5 billion to $8.6 billion over the twelve month period. This contributed to an overall increase in management fees of $17.3 million. Average assets under management, before accounting for assets acquired pursuant to the DynamicNova transaction, have increased from $6.3 billion in 2001 to $6.6 billion in Since acquisition in October 2002, DynamicNova assets have added approximately $2.1 billion to our average assets throughout the fourth quarter of Growth in assets during 2002 reflected a trend towards asset categories paying lower than average management fees, reducing the average fee earned on Dynamic products from 1.706% during 2001 to 1.642% during Assets under management acquired from DynamicNova are expected to increase the average rate earned, as certain DynamicNova products earn higher fees than comparable Dynamic products. 10

11 Redemption Fees Gross redemptions during 2002 were approximately $1.4 billion of which $771 million or 57% were in respect of units originally purchased on a deferred sales charge basis. DynamicNova accounted for $159 million of these redemptions. Redemptions during 2002 generated fees of $11.0 million of which $9.9 million were retained by Dundee Wealth. By comparison, redemptions during 2001 were $959 million of which $659 million related to units originally purchased on a deferred sales charge basis generating redemption fees of $10.8 million. Dundee Wealth retained $8.7 million of these redemption fees. The decrease in the redemption rate reflects an aging of assets, the implementation of a short redemption schedule and a reduced proportion of funds being sold on a deferred sales charge basis. Financial Services Financial services revenue was $124.5 million in 2002 compared to $113.9 million in 2001, representing an increase of 9% when comparative industry statistics indicate an overall decrease in the securities industry of 3% throughout Retail commission and trailer revenue increased 16.3% year over year, 7.5% of which is attributable to revenues generated by CFFG since acquisition. A significant portion of assets under administration are mutual funds which provides the Company s brokerage division with an ongoing trailer fee. SOURCE OF ASSETS UNDER ADMINISTRATION Millions of Dollars Insurance Equity and fixed income securities Mutual Funds Guaranteed investment certificates Corporate finance and capital market activities also experienced strong growth in 2002 with revenues increasing over 64% compared to During 2002, Dundee Securities participated in 153 equity and financial advisory transactions, raising over $6.0 billion for clients. Institutional sales were approximately $1.8 million higher than similar revenues in 2001 but were offset by a decrease in pro trading revenues from $8.2 million in 2001 to $3.5 million in

12 EXPENSES Selling, General and Administrative Selling, general and administrative expenses were $113.1 million in 2002 compared with $107.6 million in (in thousands of dollars) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Investment Management Brokerage TOTAL First Quarter $ 8,234 $ 8,745 $ 16,925 $ 14,397 $ 25,159 $ 23,142 Second Quarter 10,640 11,139 17,813 15,536 28,453 26,675 Third Quarter 8,747 10,333 15,974 16,419 24,721 26,752 Fourth Quarter 13,334 12,801 18,648 16,637 31,982 29,438 $ 40,955 $ 43,018 $ 69,360 $ 62, , ,007 Corporate and other non segmented items 3,915 2,204 Intersegment expenses (1,141) (588) $ 113,089 $ 107,623 Costs of the investment management division decreased from $43.0 million in 2001 to $41.0 million in Selling, general and administrative costs incurred by DynamicNova since acquisition aggregated $3.6 million. This increase is offset by the investment management division s continued effort to control discretionary spending, especially in the marketing area, successfully reducing overall costs by $5.7 million. In the second quarter of 2002, the shareholders and unitholders of certain mutual funds approved an increase to the annual limit of the funds management expense ratio, offset by a reduction in the annual performance fee limit that the Company may earn, which amendments became effective July 1, As a result, during the remainder of 2002, costs being absorbed by the Company were reduced by approximately $0.9 million. Selling, general and administrative costs of the brokerage division increased during 2002 to $69.4 million from $63.0 million in Selling, general and administrative costs include reserves against certain delinquent margin client accounts in the brokerage division whose securities positions declined in value. In 2002, these reserves were increased by a further $3.4 million. After accounting for this additional reserve, and for adjustments of $3.9 million relating to certain accruals associated with the termination of a contract that occurred in 2001, selling, general and administrative expenses of the brokerage division increased by only $3.1 million. Of this amount, $1.4 million is directly attributable to additional costs of the CFFG entities since acquisition. Also contributing to the increase in expenditures is $0.6 million relating to the relocation of premises in the brokerage division. Variable Compensation Variable compensation costs totaled $71.3 million for 2002 compared with $60.3 million for 2001, a variance of $11.0 million year over year. Increased financial services revenue accounts for $8.4 million of this variance, while a change in business mix, decreasing margins retained from 39.1% in 2001 to 36.8% in 2002, accounted for the remaining $2.6 million. 12

13 Distribution Fees Distribution fees paid to certain entities that have financed mutual fund sales commissions in prior years have remained fairly consistent during 2002 at approximately $1.3 million per quarter, with a small increase in the fourth quarter representing distribution fees paid to financing vehicles inherited from DynamicNova. On a year to date basis, distribution fees of $4.7 million (2001 $5.8 million), were paid to Dundee Bancorp. Trailer Fees Trailer fees paid by the Company during 2002 were $23.0 million ( $19.6 million), representing 0.4% of the average assets managed which are subject to trailer fees or 23% of total management fee revenues from these assets. Interest Expense During 2002, the Company borrowed primarily using Corporate Bankers Acceptances with interest thereon ranging from 2.15% to 2.95% for 2002 compared with interest ranging from 2.24% to 5.85% in 2001, exclusive of stand-by fees. More favourable interest rates were offset by higher borrowing activities during 2002, resulting in an overall increase in interest expense from $2.7 million in 2001 to $2.9 million in Amortization Expense Dundee Wealth s amortization expense includes the amortization of deferred sales commissions, capital assets and goodwill and other intangible assets. During 2002, the investment management division paid an average commission rate of 4.3% on sales of units purchased on a deferred sales charge basis, for an aggregate of approximately $28 million. The average commission rate has decreased marginally on a year over year basis as the Company has experienced a larger portion of deferred sales charge transactions on a less costly, short-redemption fee basis. As part of the DynamicNova acquisition, Dundee Wealth acquired deferred sales commissions with a value of $32.7 million. After accounting for this acquisition, the carrying value of deferred sales commissions as at December 31, 2002 was $81.1 million. The contingent redemption fee payable if all assets sold on a deferred sales charge basis were redeemed on December 31, 2002, approximates $152 million (2001 $125 million). Dundee Wealth would be entitled to approximately $142 million (2001 $106 million) or 93% ( %) of this amount, with the balance payable to other financing vehicles. Amortization of deferred sales commissions increased marginally from $33.1 million in 2001 to $34.6 million in On January 1, 2002, the Company adopted CICA Handbook Section 3062, Goodwill and Other Intangible Assets. Under this section, goodwill and certain other intangible assets with an indefinite life are no longer amortized. Previously, these assets were amortized on a straight-line basis over 20 years. While amortization of these costs on a consistent basis is no longer required, the new section imposes a requirement to assess the carrying value of goodwill and other intangible assets for any impairment. This impairment testing must be completed, at least annually, by applying a fair-value-based test. Management has assessed its carrying value of goodwill and other intangible assets as at December 31, 2002 by applying such fair-value-based tests and determined that there is no impairment. The requirements of this section are applied prospectively. Therefore, while there is no amortization of goodwill and other intangible assets during the year, the comparative statements for the year ended 2001 continue to show the amortization of these costs, which amounted to $4.5 million, before any residual income tax effects. 13

14 Amortization of capital assets increased from $5.2 million in 2001 to $6.1 million in the current year. Most of this increase related to acquisitions completed in 2002 and to the relocation of premises completed by the brokerage division. Income Taxes The Company recognized a current income tax provision of $9.2 million during 2002, virtually all of which is related to the operating activities of the investment management division. On January 1, 2003, the operations of certain of the DynamicNova corporate entities were amalgamated with Dynamic. Accumulated loss carry forwards inherited from the DynamicNova acquisition are expected to provide a tax shelter against revenues that may be earned by the investment management division during In addition, the Company intends to continue financing commissions by internal means. The funding of commissions provides the Company with an immediate tax deduction, although these costs are deferred and amortized for financial reporting purposes. After a future income tax recovery of $3.9 million during 2002, the Company s future income tax liability at the end of 2002 is approximately $4.3 million. This represents future income tax assets of $23.3 million, offset by future income tax liabilities of $27.6 million. The largest components of the Company s future income tax balance includes a liability in respect of deferred sales commissions aggregating $25.9 million, offset by a future income tax benefit in respect of loss carry forwards aggregating $12.3 million. LIQUIDITY AND CAPITAL RESOURCES The Company and its subsidiaries have total cash and short term investments at December 31, 2002 of $103.1 million compared with $95.2 million at the end of The Company s main operating subsidiaries operate in a regulated environment and are therefore subject to requirements whereby they must maintain required levels of capital. This may restrict the Company s ability to flow cash between the Company and its subsidiaries. At December 31, 2002, all regulated entities complied with regulatory capital requirements and reported excess capital of over $30 million. The Company, along with Dundee Bancorp, have committed to finance the operations of DWM in the form of a revolving $50 million credit facility which has been made available to DWM and its subsidiaries. Significant transactions during 2002 that affected liquidity and capital resources include: In August 2002, the Company paid cash of $10.7 million to acquire all the issued and outstanding shares of CFFG. In October 2002, the Company settled the acquisition of DynamicNova in a share transaction. At acquisition, DynamicNova s cash position exceeded $11.8 million. Concurrent with the acquisition of DynamicNova, CDP subscribed for additional shares of DWM by investing net cash of $15 million and by transferring $31.0 million of amounts receivable from DynamicNova to DWM. DWM also paid $2.5 million to purchase the minority shareholders interest in DynamicNova. Sales commissions associated with the sale of new products were funded internally at a cash requirement of $26 million. This permits the Company to retain 100% of the management fees associated with these new assets and to receive the tax benefit associated with the commission expense. 14

15 Corporate Debt The Company has assumed additional indebtedness as a result of the acquisition of DynamicNova, which includes a $22.3 million credit facility from a Canadian chartered bank. Since acquisition, this credit facility has been renegotiated to become a 364-day revolving term facility maturing on January 1, The Company is in compliance with its financial covenants in respect of this facility. Infinity Income Trust, Multi-Fund Income Trust and Prime Trust were formed for the purpose of financing prior years deferred sales commissions. Total amounts outstanding to these financing vehicles at December 31, 2002 aggregated $15.2 million, although this amount may differ from amounts eventually paid to these vehicles as the Company s obligations are limited to a specified percentage of assets under management. The Company s corporate $20 million credit facility with a Canadian chartered bank will mature on April 30, At maturity, this credit facility will not be renewed, but will be replaced with a draw against the credit facility provided by Dundee Bancorp in an amount, and at equivalent cost, sufficient to repay all amounts outstanding under the current corporate facility. At December 31, 2002, this amount was approximately $19.5 million. Dundee Securities has established a call loan facility with a Canadian chartered bank which is secured by either unpaid client securities and/or securities borrowed or owned by Dundee Securities. Cash Requirements The Company will require cash resources to complete the proposed IPC transaction, which will be available from internal sources as well as from its credit lines at Dundee Bancorp. On an ongoing basis, the Company will require cash to support regulatory capital in its regulated subsidiaries and to finance the sales commissions associated with new products. The Company has certain restrictions imposed upon it through its existing debt covenants that may limit the availability of new financing in certain circumstances. Notwithstanding this, the Company believes that its existing credit facilities, along with cash flows from operations, will permit the Company to properly manage its resources in order to maintain sufficient liquidity to meet on going working capital requirements, ensure compliance with regulatory capital requirements, fund the expansion of its current operations and pursue new business opportunities. The Company continuously monitors cash flows and is examining the use of outside sources of capital to meet the potential demand to fund commission amounts that would result from a sharp upswing in its asset gathering activities. SHARE CAPITAL The Company has established a share incentive plan for employees, officers and directors of Dundee Wealth and its subsidiaries and a share incentive plan for independent financial advisors and service providers of, and consultants to Dundee Wealth. During 2002, the Company issued a total of 654,137 common shares and added $3.1 million to stated capital under the terms of these share incentive arrangements. 15

16 The Company s compensation committee has granted share compensation to employees and independent financial advisors pursuant to its share bonus plan and reserve share plan, whereby the issuance of shares to employees and independent financial advisors is contingent on certain conditions. The conditions that must be met vary from grant to grant, but are generally designed to encourage retention of employees over time, or to encourage the attaining of predetermined sales or production targets. During 2002, the Company implemented the requirements of CICA Handbook Section 3870, Stock Based Compensation. Pursuant to this new section, the compensation expense associated with such awards must be recognized evenly over the period in which these conditions are earned. Previously, associated compensation expense was only recognized in certain circumstances when all conditions of issuance were met. This has resulted in an increase in selling, general and administrative costs of $0.4 million during OUTLOOK The Company has achieved its prior year s goals of fostering growth, both by internal means and by acquisition opportunities. The Company was successful in both these fronts during We expect that 2003 will be challenging as the Company embarks on completing its integration plans of the acquired businesses and seeks to meet its growth targets in terms of asset growth, cost containment and profitability, in what appears to be a continuation of poor capital markets. This document contains certain forward-looking statements that reflect the current views and/or expectations of Dundee Wealth Management Inc. with respect to its performance, business and future events. Such statements, by their nature, involve a number of risks, uncertainties and assumptions. Actual results and events may vary materially from those expressed or implied in these statements. Dundee Wealth Management Inc. is a Canadian-owned, TSX listed, financial service company that provides a broad range of financial products and services to individuals, institutions, corporations and foundations, with its business conducted through several wholly-owned subsidiaries. With over $17 billion in assets under management and administration, Dundee Wealth has a nationally dedicated group of investment professionals who have a history of building financial wealth for their clients. Dundee Wealth is an 84% owned subsidiary of Dundee Bancorp Inc. FOR FURTHER INFORMATION PLEASE CONTACT: Dundee Wealth Management Inc. Dundee Wealth Management Inc. Ned Goodman Joanne Ferstman Chairman, President and Chief Executive Officer Vice President and Chief Financial Officer (416) (416)