Canaccord Capital Inc. reports fiscal first quarter 2009 results



    (All dollar amounts are stated in Canadian dollars unless otherwise
    indicated)

    VANCOUVER, Aug. 8 /CNW/ - Canaccord Capital Inc.'s revenue for the first
quarter of fiscal year 2009, ended June 30, 2008, was $172.7 million, down
29.8% from the record quarter a year ago. Net income for the first quarter was
$16.5 million, down 57.8%, and diluted earnings per share ("EPS") of $0.31 was
down 61.3% from the same period a year ago. Commenting on the results, Paul
Reynolds, President and CEO said "We were pleased with the sequential
improvement over the fourth quarter of fiscal 2008, however, we expect the
business environment to remain challenging for the balance of the calendar
year. Our focus remains on building value for our shareholders. Several key
areas we plan to concentrate on are cutting or containing expenses, developing
strategies to unlock additional value in Canaccord's businesses, and
continuing to execute great ideas for our clients."

    Highlights of the fiscal first quarter 2009 results (three months ended
    June 30, 2008) compared to the fiscal first quarter 2008 results (three
    months ended June 30, 2007):

    
    -   Revenue of $172.7 million, down 29.8% or $73.2 million from
        $245.9 million
    -   Expenses of $149.2 million, down 20.3% or $38.0 million from
        $187.2 million
    -   Net income of $16.5 million, down 57.8% or $22.6 million from
        $39.0 million
    -   Diluted EPS of $0.31, down 61.3% or $0.49 from $0.80
    -   Return on Equity ("ROE") of 15.7%, down from 41.2%
    -   Working capital increased by 7.0% to $333.3 million from
        $311.4 million
    -   Book value per diluted common share for the period end was $7.66,
        down 3.8%, or $0.30, from $7.96
    -   The Board of Directors approved a quarterly dividend of $0.125 per
        share on August 7, 2008, payable on September 10, 2008 with a record
        date of August 29, 2008

    Highlights of the fiscal first quarter 2009 results (three months ended
    June 30, 2008) compared to the fiscal fourth quarter 2008 results
    excluding non-recurring asset-backed commercial paper ("ABCP") related
    charges(1) (three months ended March 31, 2008):

    -   Revenue of $172.7 million, up 20.4% or $29.3 million from
        $143.4 million
    -   Expenses of $149.2 million, up 13.4% or $17.6 million from
        $131.6 million
    -   Net income of $16.5 million, up 129.2% or $9.3 million from
        $7.2 million
    -   Diluted EPS of $0.31, up $0.16 from $0.15

    Highlights of Operations:

    -   Canaccord Adams, our capital markets team, led 33 transactions(2)
        globally to raise total proceeds of more than $907.4 million during
        Q1/09
    -   During Q1/09, Canaccord Adams led and co-led the following equity
        transactions:
        -   $172.4 million on TSX-V for Archangel Diamond Corporation
        -   $60.0 million on TSX for Aura Minerals Inc.
        -   $60.0 million on TSX-V for Lero Gold Corp.
        -   $54.0 million on AMEX for Cano Petroleum Inc.
        -   $46.2 million on TSX for Arise Technologies Corp.
    -   Including the led and co-led transactions referred to above,
        Canaccord Adams participated in a total of 68 transactions(2)
        globally to raise gross proceeds of more than $6.3 billion during
        Q1/09. Of this:
        -   Canada participated in 50 transactions, which raised $3.9 billion
        -   UK participated in 7 transactions, which raised $1.9 billion
        -   US participated in 11 transactions, which raised $0.5 billion
    -   Canaccord Adams acted as financial advisor in the following
        transactions:
        -   Advised Metallica Resources Inc. in its $1.6 billion business
            combination with New Gold Inc., and Peak Gold Ltd.
        -   Advised Oriel Resources Plc in its $1.5 billion acquisition by
            Mechel OAO
        -   Advised Lero Gold Corp. in its $65.1 million acquisition by
            European Minerals Corp.
        -   Advised Copley Controls Corp. in its $68.9 million acquisition by
            Analogic Corporation
    -   Assets under administration ("AUA") of $14.7 billion, down 6.4% from
        the same period a year ago, and up 2.8% from Q4/08
    -   Assets under management ("AUM") of $747.0 million, down 8.3% from the
        same period a year ago, and up 2.3% from Q4/08
    -   As of June 30, 2008, Canaccord had 354 Advisory Teams, down 19 from
        the same period a year ago, and unchanged from Q4/08. In Q4/08, we
        changed how we report the number of Investment Advisors to report
        them as Advisory Teams, and to exclude Advisory Teams that are led
        by, or only include, an Investment Advisor who has been licensed for
        less than three years
    -   As previously announced in May 2008, Canaccord issued 6,733,250
        common shares for total gross proceeds of $69.0 million, which will
        be used for business development and general corporate purposes

    -----------------------
    (1) In Q4/08, a $58.2 million charge for the Canaccord Relief Program and
        restructuring as well as a $4.2 million ABCP fair value adjustment
        related to the ABCP held by Canaccord in treasury were recorded. The
        Q4/08 results presented herein for comparative purposes exclude these
        non-recurring charges and adjustments.
    (2) Transactions over $1.5 million
    

    LETTER TO SHAREHOLDERS

    Given the challenges faced by many in the financial services industry
over the past year, we were generally pleased with Canaccord's performance for
the first three months of fiscal 2009. While the comparison of Canaccord's
current results with the same quarter in the prior year - one of Canaccord's
best three-month periods ever - is not attractive, it should not overshadow
the progress we are making in creating a Canaccord that is stronger, more
efficient and more competitive in our chosen markets.

    Financial Highlights

    Total revenues declined 29.8% to $172.7 million in the first three months
of fiscal 2009 compared to the same quarter of fiscal 2008. Significantly
lower activity in our capital markets operations in both Canada and the UK and
Private Client Services in Canada contributed to the year-over-year decline.
Higher agency revenue and new investment banking assignments helped our US
operations maintain revenue levels in demanding market conditions.
    Overall, though, we were pleased that we achieved a 20.4% increase in
revenues over Q4/08 in light of the market challenges that continued
throughout the quarter. This sequential increase was driven largely by higher
revenue in both commissions and investment banking. Revenues increased in all
of our geographies due to more corporate financings and advisory mandates. Net
income more than doubled, from $7.2 million in Q4/08 (excluding ABCP related
charges and adjustments) to $16.5 million in Q1/09.
    Lower incentive compensation led to a 20.3% decrease year over year in
total expenses, which declined to $149.2 million for the three months ended
June 30, 2008. There were no additional fair value adjustments to the ABCP
Canaccord holds in treasury. Net income declined 57.8% for the three months to
$16.5 million compared to the same quarter in the prior year. Diluted earnings
per share were $0.31, down 61.3% from the record $0.80 earned in Q1/08.
    Early in the quarter, we announced the widely publicized Canaccord Relief
Program that will provide our clients who hold $1 million or less of ABCP with
full recovery of principal, interest and costs on their investment. We believe
we are very near the end of this long process, during which protecting our
clients' interests has been our principal concern. A hallmark of that priority
is that the purchase agreements for eligible ABCP are in place and fully
funded, and we await only the final court approval of the restructuring
process. Once that is received, we expect a further five or six weeks will be
required for clients to receive their funds.

    Capital Markets Success

    One of the strengths of Canaccord's culture is a strong commitment to
create and execute great ideas in whatever business environment we find
ourselves. Despite the uncertainties that continued to impact the global
capital markets during the quarter, our M&A business was strong, with our
bankers advising on major resources transactions such as the three-way merger
of Metallica Resources, Peak Gold and New Gold and the combination of Lero
Gold and European Minerals. We also led more than $900 million in financings
globally during the three months, including Archangel Diamond, Aura Minerals
and Cano Petroleum.
    The Cano Petroleum transaction was our second bought deal in the US over
the past year, which speaks to the effectiveness of Canaccord Adams' expanded
investment banking team led by Jamie Brown, our new president of US
operations. Our US agency business is also benefiting from winning ideas and
closer integration with our Canadian operations: in June, the equity team
posted their best revenue month since we acquired Adams Harkness two and half
years ago. We also had success on the advisory side where we worked with
Copley Controls in their acquisition by Analogic.
    Revenue for the UK and Other Foreign Location revenues for the first
quarter of fiscal 2009 declined 33.4% compared to the record levels of Q1/08.
They were, however, significantly stronger than the last quarter of fiscal
2008. Our UK revenues tend to be variable in nature due to our emphasis on
banking and advisory assignments. In order to provide more stability to our
results in this geography, we have added to our capabilities in market making
and agency business and are integrating them more closely with our North
American operations. We also have a strong executive team in London, and they
remain committed to building Canaccord's presence and performance in this
important global market.

    Private Client Services Progression

    Private Client Services' revenue, while down 24.0% compared to last
year's strong first quarter, improved over the last quarter of fiscal 2008. We
have formed a small Retail Action Group to manage the day-to-day operations of
the division, to good effect. We're also pleased with the number and quality
of candidates who have expressed an interest in leading Private Client
Services into its next phase of growth and value creation. We expect to have
the position, and that of Head of Fixed Income, filled by early fall 2008.

    Our 120-day Plan

    Canaccord has built its culture and reputation on providing the best
ideas and service for clients. This will always remain at the core of our
values. Further we expect global financial markets to remain challenging, and
to create value for shareholders, we need to expand our commitment to great
ideas that balance the needs of clients but also the needs of our business.
    We initiated the 120-day plan mid-June with the goal of raising margins
and increasing Canaccord's profitability-ultimately creating further
shareholder value. The plan touches all aspects of the firm, from front to
back office, and is an evolutionary shift towards more sustainable business
operations. We are examining existing and new revenue sources; cost
containment; and, whenever feasible, cutting operational costs in order to
enable Canaccord to be more competitive in down markets and help position us
for further growth.
    Our 120-day plan currently involves employees at all levels of the
organization in identifying opportunities for us to operate more efficiently.
New policies have been implemented to cut or contain discretionary expenses
such as travel, entertainment, hiring and salaries, with a goal of lowering
the Company's structural expenses. In the medium term, we will be very intent
on unlocking the value of those parts of our business that are not currently
reflected in our share price. We also intend to enhance margins by ensuring
competitive market pricing of client services and by building recurring
revenues from wealth management services.
    We are a little less than halfway through the 120 days at this writing. I
can say that Canaccord's senior management is committed to realizing
substantial gains in value for shareholders, clients and employees from this
plan. We are all significant shareholders, and we know the tremendous
potential that exists in the Canaccord franchise.
    That potential resides in a culture steeped in great ideas and strong
values. It's given substance by a strong equity base of almost $440 million
and by a strong and growing share of investment banking assignments. Those are
the key building blocks of profitability and value in the financial services
industry, and we intend to use them for the benefit of all shareholders in
whatever market conditions we encounter.

    Paul D. Reynolds
    President & Chief Executive Officer


    ACCESS TO QUARTERLY RESULTS INFORMATION:

    Interested investors, the media and others may review this quarterly
earnings release and supplementary financial information at
canaccord.com/investor/financialreports.

    CONFERENCE CALL AND WEBCAST PRESENTATION:

    Interested parties can listen to our fiscal first quarter 2009 results
conference call with analysts and institutional investors, live and archived,
via the Internet and a toll free number. The conference call is scheduled for
Friday, August 8, 2008, at 8:30 a.m. (Pacific Time), 11:30 a.m. (Eastern
Time), and 4:30 p.m. (UK Time). At that time, senior executives will comment
on the results for the first quarter of fiscal 2009 and respond to questions
from analysts and institutional investors.
    The conference call may be accessed live and archived on a listen-only
basis via the Internet at: canaccord.com/investor/webcast

    
    Analysts and institutional investors can call in via telephone at:
    -   416-644-3423 (within Toronto)
    -   1-800-594-3615 (toll free outside Toronto)
    -   00-800-2288-3501 (toll free from the United Kingdom)
    

    A replay of the conference call can be accessed after 10:30 a.m. (Pacific
Time), 1:30 p.m. (Eastern Time) and 6:30 p.m. (UK Time) on August 8, 2008,
until 11:59 p.m. (Pacific Time), 2:59 a.m. (Eastern Time) and 7:59 a.m. (UK
Time) on August 15, 2008, at 416-640-1917 or 1-877-289-8525 by entering
passcode 21277855 followed by the pound (No.) sign.

    ABOUT CANACCORD CAPITAL INC.:

    Through its principal subsidiaries, Canaccord Capital Inc. (TSX & AIM:
CCI) is a leading independent, full service investment dealer in Canada with
capital markets operations in the United Kingdom and the United States of
America. Canaccord is publicly traded on both the Toronto Stock Exchange and
AIM, a market operated by the London Stock Exchange. Canaccord has operations
in two of the principal segments of the securities industry: capital markets
and private client services. Together, these operations offer a wide range of
complementary investment products, brokerage services and investment banking
services to Canaccord's private, institutional and corporate clients.
Canaccord has approximately 1,698 employees worldwide in 30 offices, including
23 Private Client Services offices located across Canada. Canaccord Adams, the
international capital markets division, has operations in Toronto, London,
Boston, Vancouver, New York, Calgary, Montreal, San Francisco, Houston and
Barbados.

    FOR FURTHER INFORMATION, CONTACT:

    North American media:
    Scott Davidson
    Managing Director, Global Head of Marketing & Communications
    Phone: 416-869-3875,
    email: scott_davidson@canaccord.com

    London media:
    Bobby Morse or Ben Willey
    Buchanan Communications (London)
    Phone: +44 (0) 207 466 5000,
    email: bobbym@buchanan.uk.com

    Investor relations inquiries:
    Katherine Young
    Vice President, Investor Relations
    Phone: 604-643-7013,
    email: katherine_young@canaccord.com

    Nominated Adviser and Broker:
    Tom Hulme or Simon Bridges
    Landsbanki Securities (UK) Limited
    Phone: +44-0-207-426-9000,
    email: tom.hulme@landsbanki.com

    -------------------------------------------------------------------------
    None of the information on Canaccord's Web site at canaccord.com should
    be considered incorporated herein by reference.
    -------------------------------------------------------------------------

    Management's Discussion and Analysis

    Fiscal first quarter 2009 for the three months ended June 30, 2008 - this
    document is dated August 8, 2008

    The following discussion of the financial condition and results of
operations for Canaccord Capital Inc. ("Canaccord") is provided to enable the
reader to assess material changes in our financial condition and to assess
results for the three-month period ended June 30, 2008 compared to the
corresponding period in the preceding fiscal year. The three-month period
ended June 30, 2008 is also referred to as first quarter 2009, Q1/09 and
fiscal Q1/09 in the following discussion. This discussion should be read in
conjunction with the unaudited interim consolidated financial statements for
the three-month period ended June 30, 2008, beginning on page 23 of this
report; our Annual Information Form dated June 30, 2008; and the 2008 annual
Management's Discussion and Analysis ("MD&A") including the audited
consolidated financial statements for the fiscal year ended March 31, 2008
("Audited Annual Consolidated Financial Statements") in Canaccord's Annual
Report dated July 8, 2008 ("the Annual Report"). There has been no material
change to the information contained in the annual MD&A for fiscal 2008 except
as disclosed in this MD&A. Canaccord's financial information is expressed in
Canadian dollars unless otherwise specified. The financial information
presented in this document is prepared in accordance with Canadian generally
accepted accounting principles ("GAAP") unless specifically specified. This
MD&A is based on unaudited interim and Audited Annual Consolidated Financial
Statements prepared in accordance with Canadian GAAP.

    Caution regarding forward-looking statements

    This document may contain certain forward-looking statements. These
statements relate to future events or future performance and reflect
management's expectations or beliefs regarding future events including
business and economic conditions and Canaccord's growth, results of
operations, performance and business prospects and opportunities. Such
forward-looking statements reflect management's current beliefs and are based
on information currently available to management. In some cases,
forward-looking statements can be identified by terminology such as "may",
"will", "should", "expect", "plan", "anticipate", "believe", "estimate",
"predict", "potential", "continue", "target", "intend" or the negative of
these terms or other comparable terminology. By their very nature,
forward-looking statements involve inherent risks and uncertainties, both
general and specific, and a number of factors could cause actual events or
results to differ materially from the results discussed in the forward-looking
statements. In evaluating these statements, readers should specifically
consider various factors that may cause actual results to differ materially
from any forward-looking statement. These factors include, but are not limited
to, market and general economic conditions, the nature of the financial
services industry and the risks and uncertainties detailed from time to time
in Canaccord's interim and annual consolidated financial statements and its
Annual Report and Annual Information Form filed on sedar.com. These
forward-looking statements are made as of the date of this document, and
Canaccord assumes no obligation to update or revise them to reflect new events
or circumstances.

    Non-GAAP measures

    Certain non-GAAP measures are utilized by Canaccord as measures of
financial performance. Non-GAAP measures do not have any standardized meaning
prescribed by GAAP and are therefore unlikely to be comparable to similar
measures presented by other companies.
    Canaccord's capital is represented by common shareholders' equity and,
therefore, management uses return on average common equity ("ROE") as a
performance measure.
    Assets under administration ("AUA") and assets under management ("AUM")
are non-GAAP measures of client assets that are common to the wealth
management aspects of the private client services industry. AUA is the market
value of client assets administered by Canaccord, for which Canaccord earns
commissions or fees. This measure includes funds held in client accounts, as
well as the aggregate market value of long and short positions. Canaccord's
method of calculating AUA may differ from the methods used by other companies
and therefore may not be comparable. Management uses this measure to assess
operational performance of the Private Client Services business segment. AUM
includes all assets managed on a discretionary basis under our programs
generally described as or known as the Alliance Program and Private Investment
Management. Services provided include the selection of investments and the
provision of investment advice. AUM are also administered by Canaccord and are
therefore included in AUA.

    OVERVIEW

    Through its principal subsidiaries, Canaccord Capital Inc. (TSX & AIM:
CCI) is a leading independent, full service investment dealer in Canada with
capital markets operations in the United Kingdom and the United States.
Canaccord is publicly traded on both the Toronto Stock Exchange and AIM, a
market operated by the London Stock Exchange. The Company has operations in
two of the principal segments of the securities industry: capital markets and
private client services.
    Canaccord's business is cyclical and experiences considerable variations
in revenue and income from quarter to quarter and year to year due to factors
beyond Canaccord's control. Our business is affected by the overall condition
of the North American and European equity markets, including the seasonal
variance in these markets.

    Business environment

    Global capital markets faced many challenges in the fiscal first quarter
of 2009. The ongoing credit crisis that emerged in the third quarter of
calendar 2007 sent global financial services shares to multi-year lows. The US
housing crisis deepened and raised concerns more recently about the ongoing
viability of two large US government sponsored enterprises. Crude oil prices
rose to all-time highs. The higher price of gasoline, job uncertainty and
escalating housing foreclosures lowered US consumer confidence. The economy
became the central focus for US government actions.
    The Canadian economy was hampered by weaker US consumer spending, most
notably auto industry output. The ongoing decline of manufacturing activity in
Central Canada kept Canadian growth contained. Emerging market demand for
materials and energy benefited many former economically depressed regions and
supported the value of the Canadian dollar.
    Inflation is a concern for central bankers of the advanced economies
despite weaker economic activity. Examples of the economic deceleration
include the UK, which is experiencing its own housing and financial services
crisis and Germany, which has been slowing due to accelerating producer
prices, higher interest rates and severely dampened business confidence.
Inflation is more prominent in the emerging economies but so far it has
invoked only a limited monetary response.
    Excessive liquidity provided for the US financing of government and
personal debt over the last several years is now being deleveraged. Over the
next year, global growth and inflation are expected to slow. Risks to this
outlook include: a widening credit crisis, further increases in commodity
prices and a new round of dissatisfaction with the US dollar causing currency
market disruption.
    Continued lower economic growth in the world economies will generally
have a negative impact on Canaccord's various businesses. As we think a global
recession is unlikely, we remain constructive towards the commodity area.
However, an area of opportunity, even in a slower growth environment, is
mergers and acquisitions advisory activity. This could result from well run
and financed businesses seeking to add productivity improvements through
technology and looking to strategic and accretive mergers to restore profit
margins and pricing power. Mergers and acquisitions advisory has been a growth
area for Canaccord, yet because of its transactional nature, tends to provide
an uneven revenue stream. Nonetheless, we would look to increased activity in
this area going forward.

    Market Data

    Year-over-year trading volumes of shares increased on the TSX Venture and
AIM, while trading volume stayed relatively neutral on the TSX, and declined
on the NASDAQ. Sequentially, trading volumes were mixed between North America
and the UK. Financing values on each of the TSX, TSX Venture, AIM and NASDAQ
experienced sharp declines over Q1/08, but were all higher compared to Q4/08.
The total financing value from each of Canaccord's focus sectors on the AIM
declined sharply year over year, while the majority showed increases
sequentially. Financing values on the Canadian exchanges were also lower for
Q1/09 when compared to Q1/08 for our focus sectors, while most sectors
increased sequentially from Q4/08 to Q1/09.

    
    Trading volume by exchange (billions of shares)
    -------------------------------------------------------------------------
                                                            Change    Change
                                                              from      from
                                                  Fiscal    fiscal    fiscal
                  April 08    May 08   June 08     Q1/09     Q1/08     Q4/08
    -------------------------------------------------------------------------
    TSX                8.3       8.5       8.1      24.9      0.4%    (2.4)%
    TSX Venture        4.2       4.5       5.2      13.9      3.7%     20.9%
    AIM               15.1      12.7      11.4      39.2      7.7%      2.9%
    NASDAQ            18.5      18.0      20.3      56.8    (5.8)%     18.7%
    -------------------------------------------------------------------------
    Source: TSX Statistics, LSE AIM Statistics, Thomson One


    Total financing value by exchange
    -------------------------------------------------------------------------
                                                            Change    Change
                                                              from      from
                                                  Fiscal    fiscal    fiscal
                  April 08    May 08   June 08     Q1/09     Q1/08     Q4/08
    -------------------------------------------------------------------------
    TSX and TSX
     Venture
     (C$ billions)     2.6       3.8       4.9      11.3   (37.3)%      9.5%
    AIM ((pnds stlg)
     billions)         0.6       0.4       1.0       2.0   (71.4)%     81.8%
    NASDAQ
     (US$ billions)    1.1       2.1       1.9       5.1   (67.5)%     75.9%
    -------------------------------------------------------------------------
    Source: TSX Statistics, LSE AIM Statistics, Equidesk


    Financing value for relevant AIM industry sectors
    -------------------------------------------------------------------------
    ((pnds stlg)
     millions,                                              Change    Change
     except for                                               from      from
     percentage                                   Fiscal    fiscal    fiscal
     amounts)     April 08    May 08   June 08     Q1/09     Q1/08     Q4/08
    -------------------------------------------------------------------------
    Oil and gas      162.1      92.8      53.5     308.4   (17.9)%     22.2%
    Mining           232.3      55.2     170.4     457.9   (48.7)%    117.6%
    Biotech           17.0      20.4       1.2      38.6   (42.6)%    181.8%
    Media              9.7       7.5       1.3      18.5   (97.3)%   (61.9)%
    Technology        11.5       6.5     116.3     134.3   (54.5)%  1,205.0%
                  -----------------------------------------------------------
    Total
     (of relevant
     sectors)        432.6     182.4     342.7     957.7   (58.6)%     78.9%
    -------------------------------------------------------------------------
    Source: LSE AIM Statistics


    Financing value for relevant TSX and TSX Venture industry sectors
    -------------------------------------------------------------------------
    ($ millions,                                           Change     Change
     except for                                              from       from
     percentage                                   Fiscal   fiscal     fiscal
     amounts)     April 08    May 08   June 08     Q1/09    Q1/08      Q4/08
    -------------------------------------------------------------------------
    Oil and gas      699.8   1,568.1   1,070.7   3,338.6  (28.4)%     289.8%
    Mining           250.3     212.1     915.6   1,378.0  (70.7)%    (68.0)%
    Biotech           59.3      33.9      25.5     118.7  (69.9)%      12.2%
    Media              0.0       0.0       0.0       0.0 (100.0)%       0.0%
    Technology         3.6       5.2      52.2      61.0  (80.2)%      19.6%
                  -----------------------------------------------------------
    Total
     (of relevant
     sectors)      1,013.0   1,819.3   2,064.0   4,896.3  (51.6)%     (7.9)%
    -------------------------------------------------------------------------
    Source: FP Infomart
    

    About Canaccord's operations

    Canaccord Capital Inc.'s operations are divided into two business
segments: Canaccord Adams (our capital markets operations) and Private Client
Services. Together, these operations offer a wide range of complementary
investment banking services, investment products, and brokerage services to
Canaccord's institutional, corporate and private clients. Canaccord's
administrative segment is referred to as Corporate and Other.

    Canaccord Adams

    Canaccord Adams offers mid-market corporations and institutional
investors around the world a seamlessly integrated platform for equity
research, sales and trading, and investment banking services that is built on
extensive operations in Canada, the United States and the United Kingdom.
    
    -   Canaccord's research analysts have deep knowledge of more than 550
        small to mid-cap companies across eight focus sectors: Mining and
        Metals, Energy, Technology, Life Sciences, Consumer, Real Estate,
        Industrial Growth and Sustainability.
    -   Our Sales and Trading desk executes timely transactions to more than
        1,500 institutional relationships around the world, operating as an
        integrated team on one common platform.
    -   With more than 100 skilled investment bankers, Canaccord Adams
        provides clients with deep sector expertise and broad equity
        transaction and M&A advisory experience.
    

    Revenue from Canaccord Adams is generated from commissions and fees
earned in connection with investment banking transactions and institutional
sales and trading activity, as well as trading gains and losses from
Canaccord's principal and international trading operations.

    Private Client Services

    As a leading independent investment dealer, Canaccord's private client
services has built its reputation on the quality of our investment ideas. We
recognize that the growing complexity of many clients' financial circumstances
demands experienced Advisory Teams who can provide solutions and ideas that
meet our clients' needs. Many of our Advisory Teams have completed the
training required for advanced industry designations such as Chartered
Financial Analyst or Certified Investment Manager. We continue to provide our
advisors with ongoing training opportunities, ensuring Canaccord clients
receive the most comprehensive investment advice available.
    Revenue from Private Client Services is generated through traditional
commission-based brokerage services; the sale of fee-based products and
services; client-related interest; and fees and commissions earned by Advisory
Teams in respect of investment banking and venture capital transactions by
private clients.

    Corporate and Other

    Canaccord's administrative segment, described as Corporate and Other,
includes correspondent brokerage services, bank and other interest, and
foreign exchange revenue and expenses not specifically allocable to either the
Canaccord Adams or Private Client Services divisions. Also included in this
segment are Canaccord's operations and support services, which are responsible
for front and back-office information technology systems, compliance and risk
management, operations, finance and all administrative functions.

    
    CONSOLIDATED OPERATING RESULTS
    First quarter and fiscal 2009 summary data(1)
    -------------------------------------------------------------------------
                                                                      Year-
                                           Three months ended      over-year
    (C$ thousands, except per share,             June 30            increase
     employee and % amounts)                2008         2007      (decrease)
    -------------------------------------------------------------------------
    Canaccord Capital Inc.
      Revenue
        Commission                         $71,996      $85,775      (16.1)%
        Investment banking                  76,147      128,625      (40.8)%
        Principal trading                    5,911        6,813      (13.2)%
        Interest                            12,329       16,310      (24.4)%
        Other                                6,325        8,347      (24.2)%
    -------------------------------------------------------------------------
    Total revenue                         $172,708     $245,870      (29.8)%
      Expenses
        Incentive compensation             $82,727     $121,406      (31.9)%
        Salaries and benefits               15,443       14,269         8.2%
        Other overhead expenses(2)          51,009       51,545       (1.0)%
    -------------------------------------------------------------------------
    Total expenses                        $149,179     $187,220      (20.3)%
    Income before income taxes              23,529       58,650      (59.9)%
    Net income                              16,459       39,029      (57.8)%
    Earnings per share ("EPS") - diluted      0.31         0.80      (61.3)%
    Return on average common equity ("ROE")  15.7%        41.2%    (25.5)p.p.
    Book value per share - period end         7.66         7.96       (3.8)%
    Number of employees                      1,698        1,657         2.5%
    -------------------------------------------------------------------------
    (1)   Data is considered to be GAAP except for ROE, book value per share
          and number of employees.
    (2)   Consists of trading costs, premises and equipment, communication
          and technology, interest, general and administrative, amortization
          and development costs.
    p.p.: percentage points


    Geographic distribution of revenue for the first quarter of
    fiscal 2009(1)
    -------------------------------------------------------------------------
                                           Three months ended         Year-
                                                 June 30           over-year
    (C$ thousands, except % amounts)        2008         2007       decrease
    -------------------------------------------------------------------------
    Canada                                $108,878     $162,093      (32.8)%
    UK                                      33,718       47,501      (29.0)%
    US                                      25,641       26,422       (3.0)%
    Other Foreign Location                   4,471        9,854      (54.6)%
    -------------------------------------------------------------------------
    (1) For a business description of Canaccord's geographic distribution
        please refer to the "About Canaccord's Operations" section on page 9.
    

    First quarter 2009 vs. first quarter 2008

    On a consolidated basis, revenue is generated through five activities:
commissions and fees associated with agency trading and private client wealth
management activity, investment banking, principal trading, interest and
other. Revenue for the three months ended June 30, 2008 was $172.7 million, a
decrease of 29.8% or $73.2 million compared to the same period a year ago.
    For the first quarter of fiscal 2009, revenue generated from commissions
decreased $13.8 million to $72.0 million compared to the same period a year
ago and was largely attributed to the commission revenue earned from the
Canadian operations which was down $15.5 million or 21.8% to $55.8 million in
the current quarter. This decrease was partially offset by an increase in
commission revenue in the US and UK operations. Q1/08 was a record quarter for
the Company and it was challenging to reach similar results in Q1/09
considering the volatility in the current market environment. This resulted in
a drop in commission revenue in the Canadian operations compared to Q1/08.
    Investment banking revenue was $76.1 million, down $52.5 million or
40.8%, primarily due to decreased activities from Canadian and UK equity
markets. Revenue derived from principal trading was $5.9 million, a decrease
of $0.9 million, or 13.2% due to the declining markets. Interest revenue was
$12.3 million, down $4.0 million or 24.4%, mainly due to lower interest rates
compared to the same quarter in the prior year. Other revenue decreased by
$2.0 million or 24.2% which was mainly attributed to lower foreign exchange
gains in the current quarter.
    First quarter revenue in Canada was $108.9 million, a decrease of 32.8%
or $53.2 million from the same period a year ago. Our operations were affected
by the weaker Canadian equity markets compared to Q1/08.
    Revenue in the UK was $33.7 million, a decrease of 29.0% or $13.8 million
compared to the same period a year ago. The UK operations had a record quarter
in Q1/08, which was not matched in the current period due to the volatility in
the capital markets. Revenue from Other Foreign Location was $4.5 million,
down 54.6% or $5.4 million, which was due to a decrease in corporate finance
revenue.
    Revenue in the US was $25.6 million, a decrease of $0.8 million or 3.0%,
from Q1/08. Despite the tough market conditions in the US, the US operations
maintained a consistent level of revenue compared to Q1/08.

    
    Expenses as a percentage of revenue
    -------------------------------------------------------------------------
                                                                      Year-
                                           Three months ended      over-year
                                                 June 30            increase
                                            2008         2007      (decrease)
    -------------------------------------------------------------------------
      Incentive compensation                 47.9%        49.4%     (1.5)p.p.
      Salaries and benefits                   8.9%         5.8%       3.1p.p.
      Other overhead expenses(1)             29.6%        20.9%       8.7p.p.
    -------------------------------------------------------------------------
    Total                                    86.4%        76.1%      10.3p.p.
    -------------------------------------------------------------------------
    (1)   Consists of trading costs, premises and equipment, communication
          and technology, interest, general and administrative, amortization
          and development costs.
    p.p.: percentage points
    

    First quarter 2009 vs. first quarter 2008

    Expenses for the three months ended June 30, 2008 were $149.2 million,
down 20.3% or $38.0 million from a year ago.
    Incentive compensation expense was $82.7 million for the quarter, a
decrease of 31.9% or $38.7 million, due to the decrease in incentive-based
revenue. Consolidated incentive compensation as a percentage of total revenue
was 47.9%, down 1.5 percentage points.
    Salaries and benefits expense was $15.4 million, an increase of 8.2% in
the first quarter of fiscal 2009 from the same period a year ago. The increase
was as a result of 41 additional staff employed firm-wide.
    The total compensation (incentive compensation plus salaries) payout as a
percentage of consolidated revenue for Q1/09 was 56.8%, an increase of 1.6
percentage points from 55.2 % in Q1/08.

    
    Other overhead expenses
    -------------------------------------------------------------------------
                                                                      Year-
                                           Three months ended      over-year
                                                 June 30            increase
    (C$ thousands, except % amounts)        2008         2007      (decrease)
    -------------------------------------------------------------------------
      Trading costs                         $6,321       $6,958       (9.2)%
      Premises and equipment                 5,785        5,259        10.0%
      Communication and technology           6,163        5,739         7.4%
      Interest                               3,959        6,168      (35.8)%
      General and administrative            19,277       18,271         5.5%
      Amortization                           2,042        1,977         3.3%
      Development costs                      7,462        7,173         4.0%
    -------------------------------------------------------------------------
    Total other overhead expenses          $51,009      $51,545       (1.0)%
    -------------------------------------------------------------------------
    

    First quarter 2009 vs. first quarter 2008

    Other overhead expenses decreased by 1.0% or $0.5 million from the prior
year to $51.0 million for the first quarter of fiscal 2009. Contributing to
the overall decrease in overhead expenses was trading costs, which decreased
9.2% or $0.6 million, consistent with the drop in commission revenue. Interest
expense also decreased by 35.8% or $2.2 million due to lower interest rates in
the current quarter compared to Q1/08.
    General and administrative expense was up 5.5% or $1.0 million. The
increase in general and administrative expense for Q1/09 was due to a
non-recurring expense for consultancy fees incurred to upgrade internal
infrastructure.
    Net income for Q1/09 was $16.5 million, a decrease of 57.8% or
$22.6 million from the same period a year ago. Diluted EPS was $0.31, down by
$0.49 or 61.3%. ROE for Q1/09 was 15.7 % compared to an ROE of 41.2% a year
ago. The decrease in EPS was largely due to the lower net income as well as
the issuance of 6,733,250 common shares in connection with the equity
financing in May 2008. Book value per diluted share for Q1/09 was down 3.8% to
$7.66.
    Income taxes were $7.1 million for the quarter, reflecting an effective
tax rate of 30.0%, a decrease of 3.5 percentage points from 33.5% a year ago.
The decrease in the rate reflects the reduction in the Canadian federal tax
rate from 22.1% to 19.0% as well as the UK tax rate from 30.0% to 28.0%.

    
    RESULTS OF OPERATIONS

    Canaccord Adams(1)
    -------------------------------------------------------------------------
                                                                      Year-
                                           Three months ended      over-year
    (C$ thousands, except                        June 30            increase
     employees and % amounts)               2008         2007      (decrease)
    -------------------------------------------------------------------------
    Canaccord Adams
      Revenue                             $104,793     $155,023      (32.4)%
      Expenses
        Incentive compensation             $52,529      $76,203      (31.1)%
        Salaries and benefits                4,223        4,019         5.1%
        Other overhead expenses             28,268       26,127         8.2%
                                        -------------------------------------
      Total expenses                        85,020      106,349      (20.1)%
      Income before income taxes(2)         19,773       48,674      (59.4)%
      Number of employees                      545          534         2.1%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for number of employees.
    (2) Income before income taxes excludes allocated overhead expenses that
        are included in Corporate and Other segment expenses.
    

    Revenue from Canaccord Adams is generated from commissions and fees
earned in connection with investment banking transactions and institutional
sales and trading activity, as well as trading gains and losses from
Canaccord's principal and international trading operations.

    First quarter 2009 vs. first quarter 2008

    Revenue for Canaccord Adams in Q1/09 was $104.8 million, a decrease of
32.4 % or $50.2 million from the same quarter a year ago, due to the weak
global capital markets across all geographies.

    Revenue from Canadian operations

    Canaccord Adams in Canada generated revenue of $42.0 million in Q1/09, a
decrease of 41.9% or $30.4 million from Q1/08. The decrease in revenue in this
geographic sector was largely due to the overall decrease in financing
activity for Canadian equities in Q1/09. Canadian revenue for Canaccord Adams
of $42.0 million represented 40.1% (Q1/08: 46.7%) of Canaccord Adams' total
revenue.

    Revenue from UK operations

    Operations related to Canaccord Adams Limited in the UK include
institutional sales and trading, investment banking and research. Revenue in
this business was $33.7 million, a decrease of 29.0% or $13.8 million from the
same period a year ago due to slower market activity during the quarter. UK
revenue of $33.7 million was 32.2% (Q1/08: 30.6%) of Canaccord Adams' total
revenue.

    Revenue from US operations

    The US operations reflect the US capital markets activities of Canaccord
Adams Inc. First quarter 2009 revenue for Canaccord Adams in the US was
$24.6 million (Q1/08: $25.3 million), representing 23.4% (Q1/08: 16.3%) of
Canaccord Adams' total revenue. The revenue from US operations remained stable
despite challenging market conditions in the US as a result of mergers and
acquisitions advisory services provided, expanded sector coverage and
enhancements to our equities group platform.

    Revenue from Other Foreign Location

    Revenue attributable to Other Foreign Location was derived in large part
from investment banking activity. Revenue in Q1/09 was $4.5 million (Q1/08:
$9.9 million), representing 4.3% (Q1/08: 6.4%) of Canaccord Adams' total
revenue. The revenue decrease was mainly attributed to a decrease in corporate
finance transactions.

    Expenses

    Expenses for Q1/09 were $85.0 million, down 20.1% or $21.3 million. The
lower expenses were mainly attributed to the decrease in incentive
compensation of $23.7 million or 31.1% due to lower incentive-based revenue in
the quarter. Salary and benefits expense for the quarter increased by
$0.2 million or 5.1%, which resulted from an increase in number of employees.
The total compensation expense payout as a percentage of revenue for the
quarter was 54.2%, an increase of 2.5 percentage points from 51.7% in Q1/08.
    The decrease in incentive compensation expense was offset by an increase
in professional fees of $0.6 million or 32.9% as a result of higher costs
incurred to upgrade internal infrastructure.
    Income before income taxes for the quarter was $19.8 million, a decrease
of $28.9 million or 59.4%, from the same quarter a year ago. The decrease in
income before taxes was mainly a result of reduced revenue as described above.

    
    Private Client Services(1)
    -------------------------------------------------------------------------
    (C$ thousands, except AUM and AUA,                                Year-
     which are in C$ millions; number      Three months ended      over-year
     of employees; number of Advisory            June 30            increase
     Teams and % amounts)                   2008         2007      (decrease)
    -------------------------------------------------------------------------
    Revenue                                $57,853      $76,083      (24.0)%
    Expenses
      Incentive compensation               $26,950      $37,680      (28.5)%
      Salaries and benefits                  3,781        4,049       (6.6)%
      Other overhead expenses               13,952       15,419       (9.5)%
                                        -------------------------------------
    Total expenses                         $44,683      $57,148      (21.8)%
    Income before income taxes(2)           13,170       18,935      (30.4)%
    Assets under management ("AUM")            747          815       (8.3)%
    Assets under administration ("AUA")     14,695       15,701       (6.4)%
    Number of Advisory Teams                   354          373       (5.1)%
    Number of employees                        760          757         0.4%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for AUM, AUA, number of Advisory
        Teams, and number of employees.
    (2) Income before income taxes excludes allocated overhead expenses that
        are included in Corporate and Other segment expenses.
    

    Revenue from Private Client Services is generated through traditional
commission-based brokerage services; the sale of fee-based products and
services; client-related interest; and fees and commissions earned by Advisory
Teams in respect of investment banking and venture capital transactions by
private clients.

    First quarter 2009 vs. first quarter 2008

    Revenue from Private Client Services was $57.9 million, a decrease of
$18.2 million or 24.0% mainly due to reduced trading activity relative to
Q1/08 as a result of the volatile market. AUA decreased by 6.4% or
$1.0 billion to $14.7 billion compared to Q1/08 due to lower market values.
AUM decreased by 8.3% year over year. There were 354 Advisory Teams at the end
of the first quarter of fiscal 2009, a decrease of 19 from a year ago.
Canaccord's fee-based revenue accounted for 15.7% of Private Client Services
in Q1/09, compared to 12.0% in Q1/08.
    Expenses for Q1/09 were $44.7 million, a decrease of 21.8% or
$12.5 million. For the current quarter, the largest decrease in expenses
related to incentive compensation expense, which was down 28.5% or
$10.7 million. This decrease was consistent with the lower revenue during this
period. In addition, interest expense decreased by 42.4% or $2.1 million due
to lower interest rates. This was partially offset by an increase in general
and administrative expense of 33.5% or $1.0 million related to an increase in
professional fees of $0.6 million.
    Income before income taxes for the quarter was $13.2 million, a decrease
of 30.4% from the same period a year ago. The decrease was due to reduced
revenue in Q1/09 compared to Q1/08 as described above.

    
    Corporate and Other(1)
    -------------------------------------------------------------------------
                                                                      Year-
                                           Three months ended      over-year
    (C$ thousands, except                        June 30            increase
     employees and % amounts)               2008         2007      (decrease)
    -------------------------------------------------------------------------
    Revenue                                $10,062      $14,764      (31.8)%
    Expenses
      Incentive compensation                $3,248       $7,523      (56.8)%
      Salaries and benefits                  7,439        6,201        20.0%
      Other overhead expenses                8,789        9,999      (12.1)%
                                        -------------------------------------
    Total expenses                         $19,476      $23,723      (17.9)%
    (Loss) before income taxes              (9,414)      (8,959)        5.1%
    Number of employees                        393          366         7.4%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for number of employees.
    

    Canaccord's administrative segment, described as Corporate and Other,
includes correspondent brokerage services, bank and other interest, and
foreign exchange revenue and expenses not specifically allocable to either the
Canaccord Adams or Private Client Services divisions. Also included in this
segment are Canaccord's operations and support services, which are responsible
for front and back office information technology systems, compliance and risk
management, operations, finance, and all administrative functions.

    First quarter 2009 vs. first quarter 2008

    Revenue for the three months ended June 30, 2008 was $10.1 million, a
decrease of 31.8% or $4.7 million from the same quarter a year ago. The change
was partially related to a decrease in foreign exchange gains compared to the
prior year. Foreign exchange gains decreased $1.5 million or 32.9% during the
quarter to $3.1 million. Interest revenue also decreased by $2.5 million or a
33.4% drop from the same period in the prior year. The decline in interest
revenue was due to lower interest rates in the current quarter compared to a
year ago.
    Expenses for Q1/09 were $19.5 million, a decrease of 17.9% or
$4.2 million. The most significant drop in expenses related to a decrease in
incentive compensation, down by 56.8% or $4.3 million, which resulted from a
decrease in the profitability of the consolidated group of companies. This was
offset by a $1.2 million or 20.0% increase in salaries and benefits during the
quarter due to the hiring of an additional 27 employees in the Corporate and
Other segment of the Canadian operations compared to the same period a year
ago. Most of the new employees were hired to enhance our operations and
support services. Other overhead expenses dropped by 12.1% or $1.2 million
mainly due to the recovery of commodity tax credits during the quarter.
    Overall, loss before income taxes is $9.4 million in the current quarter,
representing 5.1% or $0.5 million increase compared to the same quarter a year
ago.

    Financial condition

    Below are specific changes in selected balance sheet items.

    Assets

    Cash and cash equivalents were $555.0 million on June 30, 2008 compared
to $435.6 million on March 31, 2008. Refer to the Liquidity and Capital
Resources section below for more details.
    Securities owned were $117.0 million compared with $92.8 million on
March 31, 2008.
    Accounts receivable were $1.5 billion compared with $1.4 billion on
March 31, 2008. The change mainly related to an increase in client
receivables.
    Other assets decreased by $10.6 million compared to March 31, 2008 mainly
due to a decrease in future income taxes which was partially offset by an
increase in income taxes receivable.

    Liabilities

    Bank overdrafts and call loan facilities utilized by Canaccord may vary
significantly on a day-to-day basis and depend on securities trading activity.
On June 30, 2008 there was bank indebtedness of nil compared to $15.0 million
on March 31, 2008.
    Accounts payable were $1.8 billion compared to $1.7 billion at March 31,
2008, an increase of $0.1 billion mainly related to an increase in payables to
brokers and investment dealers.
    Other liabilities increased by $18.5 million compared to March 31, 2008
due to an increase in marketable securities sold short.

    OFF-BALANCE SHEET ARRANGEMENTS

    At June 30, 2008 Canaccord had credit facilities with banks in Canada,
the US and the UK in the aggregate amount of $492.5 million. These credit
facilities, consisting of call loans, letters of credit and daylight overdraft
facilities are collateralized when utilized by either unpaid securities and/or
securities owned by the Company. A subsidiary of the Company has also entered
into secured irrevocable standby letters of credit from a financial
institution totalling $2.3 million (US$2.3 million) as rent guarantees for its
leased premises in Boston, New York and San Francisco. As of June 30, 2008
there were no outstanding balances under these standby letters of credit.
    In connection with the Canaccord Relief Program the Company entered into
two letters of credit in April 2008 to facilitate the funding of the relief
program. Subject to certain terms and conditions, the letters of credit will
be drawn upon successful completion of the Canaccord Relief Program.

    LIQUIDITY AND CAPITAL RE

SOURCES Canaccord has a capital structure comprised of share capital, retained earnings and accumulated other comprehensive losses. On June 30, 2008 cash and cash equivalents net of call loans were $555.0 million, an increase of $134.4 million from $420.6 million as of March 31, 2008. During the quarter ended June 30, 2008 financing activities generated cash in the amount of $65.8 million, which was primarily due to the issuance of common shares from an equity financing in May 2008. Investing activities used cash in the amount of $0.7 million for the purchase of equipment and leasehold improvements. Operating activities provided cash in the amount of $70.2 million, which was due to net increases in non-cash working capital items, net income and items not affecting cash. A decrease in cash of $1.0 million was attributed to the effect of foreign exchange on cash balances. In total, there was an increase in net cash of $134.4 million compared to March 31, 2008. This increase is largely attributed to cash provided by operating activities and the equity financing that occurred during the first quarter of fiscal 2009. Canaccord's business requires capital for operating and regulatory purposes. The current assets reflected on Canaccord's balance sheet are highly liquid. The majority of the positions held as securities owned are readily marketable and all are recorded at their market value. The market value of these securities fluctuates daily as factors such as changes in market conditions, economic conditions and investor outlook affect market prices. Client receivables are secured by readily marketable securities and are reviewed daily for impairment in value and collectibility. Receivables and payables from brokers and dealers represent the following: current open transactions that generally settle within the normal three-day settlement cycle; collateralized securities borrowed and/or loaned in transactions that can be closed within a few days on demand; and balances on behalf of introducing brokers representing net balances in connection with their client accounts. Canaccord is committed to minimum lease payments for premises and equipment over the next five years. The following table summarizes the approximate amount of Canaccord's consolidated long-term contractual obligations as of June 30, 2008. ------------------------------------------------------------------------- Contractual obligation payments due by period Fiscal Fiscal 2011 - 2013 - Fiscal Fiscal Fiscal (C$ thousands) Total 2010 2012 2014 Thereafter ------------------------------------------------------------------------- Premises and equipment operating leases 138,681 22,023 36,208 31,196 49,254 ------------------------------------------------------------------------- OUTSTANDING SHARE DATA ------------------------------------------------------------------------- Outstanding shares as of June 30 ------------------------------------------------------------------------- 2008 2007 ------------------------------------------------------------------------- Issued shares excluding unvested shares(1) 50,068,905 45,183,714 Issued shares outstanding(2) 54,590,583 47,864,234 Issued shares outstanding - diluted(3) 57,465,952 48,872,327 Average shares outstanding - basic 47,518,618 45,170,532 Average shares outstanding - diluted 52,720,457 48,859,145 ------------------------------------------------------------------------- (1) Excludes 2,895,551 unvested shares that are outstanding relating to share purchase loans for recruitment and retention programs, 1,576,127 unvested shares purchased by employee benefit trust for the LTIP and 50,000 common shares held in treasury. (2) Includes 2,895,551 unvested shares that are outstanding relating to share purchase loans for recruitment and retention programs, 1,576,127 unvested shares purchased by employee benefit trust for the LTIP and 50,000 common shares held in treasury. (3) Includes 2,875,369 of share issuance commitments. At June 30, 2008 Canaccord had 54,590,583 common shares issued and outstanding, an increase of 6,726,349 common shares from June 30, 2007, due to the net effect of shares issued relating to the equity financing in May 2008, shares issued in connection with stock compensation plans and shares cancelled. On May 2, 2008 the Company closed a fully underwritten financing of 5,855,000 common shares at a price of $10.25 per share for total gross proceeds of $60.0 million. On May 22, 2008 the underwriters exercised an over-allotment option in connection with the financing to purchase an additional 878,250 common shares at a price of $10.25 per share for gross proceeds of $9.0 million. The net proceeds of the offering will be used for business development and general corporate purposes. The Company renewed its NCIB in December 2007 and is entitled to acquire, from December 31, 2007 to December 30, 2008 up to 2,391,753 of its shares, which represents 5% of its shares outstanding as of December 21, 2007. During the current quarter, 50,000 shares were purchased through NCIB and subsequently cancelled in July 2008. The employee benefit trust also purchased an aggregate of 468,529 shares for the Company's long term incentive plan ("LTIP") between December 21, 2007 and June 30, 2008, which reduces the number of shares allowable under the NCIB. The number of shares available for purchase under the NCIB as of June 30, 2008 is 1,873,224. In July 2008, the Company purchased an additional 50,000 shares through the NCIB that were cancelled. The Company had total common shares issued and outstanding of 54,490,583 as of August 8, 2008. STOCK-BASED COMPENSATION PLANS Adams Harkness In connection with the acquisition of Adams Harkness Financial Group Inc. ("Adams Harkness"), a retention plan was established. On January 3, 2006 Canaccord completed the acquisition of Adams Harkness (renamed Canaccord Adams Inc.) which was a privately held Boston, Massachusetts-based institutional investment bank. A retention plan was established, which provides for the issuance of up to 1,118,952 common shares after a three-year vesting period. The total number of shares to be vested is also based on revenue earned by Canaccord Adams Inc. subsequent to the date of acquisition. As revenue levels are achieved during the vesting period, the associated proportion of the retention payment will be recorded as a development cost, and the applicable number of retention shares will be included in weighted average diluted common shares outstanding. After forfeitures, the number of shares subject to the retention plan currently stands at 774,768. Stock options The Company granted stock options to purchase common shares of the Company to five independent directors on May 16, 2007 and June 14, 2008. Each of the independent directors has been granted the option to purchase up to 50,000 common shares of the Company. The stock options vest over a four-year period and expire seven years after the grant date. The weighted average exercise price of the stock options is $16.31. Long term incentive plan Under the LTIP, eligible participants are awarded restricted share units ("RSUs") which vest over three years. For employees in Canada, an employee benefit trust (the "Trust") has been established, and either (a) the Company will fund the Trust with cash which will be used by a trustee to purchase on the open market common shares of the Company that will be held in trust by the trustee until RSUs vest or (b) the Company will issue common shares from treasury to participants following vesting of RSUs. For employees in the United States and the United Kingdom, at the time of each RSU award, the Company will allot common shares and these shares will be issued from treasury at the time they vest for each participant. The shares issued as part of the LTIP will generally be offset by purchases under the Company's NCIB. INTERNATIONAL FINANCIAL CENTRE Canaccord is a member of the International Financial Centre Vancouver and International Financial Centre Montreal, which provide certain tax and financial benefits pursuant to the International Financial Business (Tax Refund) Act of British Columbia and the Act Respecting International Financial Centres of Quebec. Accordingly, Canaccord's overall income tax rate is less than the rate that would otherwise be applicable. FOREIGN EXCHANGE Canaccord manages its foreign exchange risk by periodically hedging pending settlements in foreign currencies. Realized and unrealized gains and losses related to these transactions are recognized in income during the year. On June 30, 2008 forward contracts outstanding to sell US dollars had a notional amount of US$18.0 million, a decrease of $19.3 million from a year ago. Forward contracts outstanding to buy US dollars had a notional amount of US$13.3 million, a decrease of US$18.8 million compared to a year ago. The fair value of these contracts was nominal. Some of Canaccord's operations in London, England are conducted in UK pounds sterling; however, any foreign exchange risk in respect of these transactions is generally limited, as pending settlements on both sides of the transaction are typically in UK pounds sterling. RELATED PARTY TRANSACTIONS Security trades executed for employees, officers and directors of Canaccord are transacted in accordance with terms and conditions applicable to all clients. Commission income on such transactions in the aggregate is not material in relation to the overall operations of Canaccord. CRITICAL ACCOUNTING ESTIMATES The following is a summary of Canaccord's critical accounting estimates. Canaccord's accounting policies are in accordance with Canadian GAAP and are described in Note 1 to the Audited Annual Consolidated Financial Statements. The accounting policies described below require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses recorded in the financial statements. Because of their nature, estimates require judgment based on available information. Actual results or amounts could differ from estimates, and the difference could have a material impact on the financial statements. Revenue recognition and valuation of securities Securities owned and sold short, including share purchase warrants and options, are categorized as held for trading as per Canadian Institute of Chartered Accountants ("CICA") Handbook Section 3855 "Financial Instruments - Recognition and Measurement", and are recorded at fair value with unrealized gains and losses recognized in net income. In the case of publicly traded securities, fair value is determined on the basis of market prices from independent sources, such as listed exchange prices or dealer price quotations. Adjustments to market prices are made for liquidity, relative to the size of the position, holding periods and other resale restrictions, if applicable. Investments in illiquid or non-publicly traded securities categorized as held for trading are measured at fair value determined by a valuation model. There is inherent uncertainty and imprecision in estimating the factors that can affect value and in estimating values generally. The extent to which valuation estimates differ from actual results will affect the amount of revenue or loss recorded for a particular security position in any given period. With Canaccord's security holdings consisting primarily of publicly traded securities, our procedures for obtaining market prices from independent sources, the validation of estimates through actual settlement of transactions and the consistent application of our approach from period to period, we believe that the estimates of fair value recorded are reasonable. Asset-backed commercial paper ("ABCP") There is a significant amount of uncertainty in estimating the amount and timing of cash flows associated with the Company's holdings in ABCP. The Company estimates the fair value of its ABCP holdings by discounting expected future cash flows on a probability weighted basis considering the best available data. Since the fair value of the ABCP is based on the Company's assessment of current conditions, amounts reported may change materially in subsequent periods. Refer to Note 7 in the Audited Annual Consolidated Financial Statements for further details. Provisions Canaccord records provisions related to pending or outstanding legal matters and doubtful accounts associated with client receivables, loans, advances and other receivables. Provisions in connection with legal matters are determined on the basis of management's judgment in consultation with legal counsel, considering such factors as the amount of the claim, the possibility of wrongdoing by an employee of Canaccord, and precedents. Client receivables are generally collateralized by securities and, therefore, any impairment is generally measured after considering the market value of the collateral. Provisions in connection with other doubtful accounts are generally based on management's assessment of the likelihood of collection and the recoverable amount. Provisions are also recorded utilizing discount factors in connection with syndicate participation. Tax Accruals for income tax liabilities require management to make estimates and judgments with respect to the ultimate outcome of tax filings and assessments. Actual results could vary from these estimates. Canaccord operates within different tax jurisdictions and is subject to their individual assessments. Tax filings can involve complex issues, which may require an extended period of time to resolve in the event of a dispute or re-assessment by tax authorities. Canaccord believes that adequate provisions for income taxes have been made for all years. Goodwill and other intangible assets As a result of the acquisitions of Adams Harkness Financial Group, Inc. and Enermarket Solutions Ltd. Canaccord acquired goodwill and other intangible assets. Goodwill is the cost of the acquired companies in excess of the fair value of their net assets, including other intangible assets, at the acquisition date. The identification and valuation of other intangible assets required management to use estimates and make assumptions. Goodwill is assessed for impairment at least annually, or whenever a potential impairment may arise as a result of an event or change in circumstances, to ensure that the fair value of the reporting unit to which goodwill has been allocated is greater than or at least equal to its carrying value. Fair value will be determined using valuation models that take into account such factors as projected earnings, earnings multiples, discount rates, other available external information and market comparables. The determination of fair value requires management to apply judgment in selecting the valuation models and assumptions and estimates to be used in such models and value determinations. These judgments affect the determination of fair value and any resulting impairment charges. Other intangible assets are amortized over their estimated useful lives and tested for impairment periodically or whenever a potential impairment may arise as a result of an event or change in circumstances. Management must exercise judgment and make use of estimates and assumptions in determining the estimated useful lives of other intangible assets and in periodic determinations of value. Consolidation of variable interest entities The Company consolidates variable interest entities ("VIEs") in accordance with the guidance provided by CICA Accounting Guideline 15, "Consolidation of variable interest entities" ("AcG-15"). AcG-15 defines a VIE as an entity which either does not have sufficient equity at risk to finance its activities without additional subordinated financial support or where the holders of equity at risk lack the characteristics of a controlling financial interest. The enterprise that consolidates a VIE is called the primary beneficiary of the VIE. An enterprise should consolidate a VIE when that enterprise has a variable interest that will absorb a majority of the entity's expected losses, or receive a majority of the entity's expected residual returns. The Company has established an employee benefit trust to fulfill obligations to employees arising from the Company's stock-based compensation plan. The employee benefit trust has been consolidated in accordance with AcG-15 as it meets the definition of a VIE and the Company is the primary beneficiary of the employee benefit trust. Stock-based compensation plans Stock-based compensation represents the cost related to stock-based awards granted to employees. The Company uses the fair value method to account for such awards. Under this method, the Company measures the fair value of stock-based awards as of the grant date and recognizes the cost as an expense over the applicable vesting period with a corresponding increase in contributed surplus. In the case where vesting is also dependent on performance criteria, the cost is recognized over the vesting period in accordance with the rate at which such performance criteria are achieved (net of estimated forfeitures). Otherwise, the cost is recognized on a graded basis. When stock-based compensation awards vest, contributed surplus is reduced by the applicable amount and share capital is increased by the same amount. RECENT ACCOUNTING PRONOUNCEMENTS Goodwill and intangible assets The CICA has issued a new accounting standard, CICA Handbook Section 3064 "Goodwill and Intangible Assets", which prescribes when expenditures qualify for recognition as intangible assets and provides increased guidance on the recognition and measurement of internally generated goodwill and intangible assets. The Company will adopt Section 3064 effective April 1, 2009. The Company is currently evaluating the impact of adopting this section. International financial reporting standards The Canadian Accounting Standards Board has now confirmed that the use of international financial reporting standards ("IFRS") will be required commencing in 2011 for publicly accountable, profit-oriented enterprises. IFRS will replace Canadian GAAP currently followed by the Company. The Company will be required to begin reporting under IFRS for its fiscal year ended March 31, 2012 and will be required to provide information that conforms to IFRS for the comparative periods presented. The Company is currently evaluating the impact of adopting IFRS. CHANGES IN ACCOUNTING POLICIES On April 1, 2008 the Company adopted the provisions of CICA Handbook Section 3862 "Financial Instruments - Disclosures", CICA Handbook Section 3863 "Financial Instruments - Presentations", CICA Handbook Section 1535 "Capital Disclosures", and CICA Handbook Section 1400 "General Standards on Financial Statement Presentation". Capital Disclosures This new standard requires the Company to disclose qualitative and quantitative information about the Company's capital and how it is managed. Additional note disclosure has been included in Note 14 of the June 30, 2008 interim consolidated financial statements. Financial Instruments - Disclosures and Presentations These two new standards require the Company to provide additional disclosure regarding the nature and extent of risk associated with financial instruments and how these risks are managed. Additional information has been provided in Note 4 of the June 30, 2008 interim consolidated financial statements, which includes a quantitative analysis on the risk of holding financial instruments including credit risk, liquidity risk and market risk. General Standards on Financial Statement Presentation CICA Handbook Section 1400 "General Standards on Financial Statement Presentation" prescribes additional requirements to assess and disclose a company's ability to continue as a going concern. This new standard was adopted by the Company beginning April 1, 2008, and there was no impact on the June 30, 2008 interim consolidated financial statements. ASSET-BACKED COMMERCIAL PAPER At June 30, 2008 the Company held ABCP with a par value of $42.7 million and an estimated fair value of $29.9 million. At the dates the Company acquired the ABCP it was rated R1 (High) by Dominion Bond Rating Services ("DBRS"), the highest credit rating issued for commercial paper. The ABCP did not settle as it matured as a result of liquidity issues in the ABCP market. There has been no active trading of the ABCP since mid-August 2007. A restructuring plan put together by the Pan-Canadian Investors Committee for Third-Party Structured ABCP has been approved by the majority of the note holders and the Ontario Superior Court and a sanction order was made. The decision is subject to a final decision by the Ontario Court of Appeal. The sanction order provides the Company with immunity from any ABCP related lawsuits except for claims based in fraud (as defined in the sanction order) and made in accordance with the procedure set out in the order. The Plan does not permit those clients of the Company who receive payment in accordance with the Canaccord Relief Program to bring such a claim against the Company. Based on the restructuring plan, the Company will receive certain notes, subordinated notes and tracking notes (see Note 7 of the Audited Annual Consolidated Financial Statements) in exchange for its current holdings in ABCP. The Company estimates the fair value of its ABCP by discounting expected future cash flows on a probability weighted basis considering the best available data. The assumptions used in determining the estimated fair value reflect the details included in the Information Statement issued by the Committee. There is a significant amount of uncertainty in estimating the amount and timing of cash flows associated with the ABCP. The Company recorded a fair value adjustment of $12.8 million during the fiscal year ended March 31, 2008. There has been no fair value adjustment for the quarter ended June 30, 2008. DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING Disclosure controls and procedures Canaccord's management, including the President & CEO and the Executive Vice President & CFO, has designed disclosure controls and procedures to provide reasonable assurance that all relevant information is identified to the Disclosure Committee to ensure appropriate and timely decisions are made regarding public disclosure. Changes in internal control over financial reporting There were no changes in internal control over financial reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, Canaccord's internal control over financial reporting. DIVIDEND POLICY Although dividends are expected to be declared and paid quarterly, the Board of Directors, in its sole discretion, will determine the amount and timing of any dividends. All dividend payments will depend on general business conditions, Canaccord's financial condition, results of operations and capital requirements and such other factors as the Board determines to be relevant. DIVIDEND DECLARATION For the first quarter fiscal 2009, the Board of Directors approved a quarterly dividend of $0.125 per share. Dividends are payable on September 10, 2008, to shareholders of record on August 29, 2008. The common share dividend payment to common shareholders will total approximately $6.6 million, or about 40.1%, of first quarter net income. Canaccord intends to pay a $0.125 regular quarterly common share dividend for each quarter in fiscal 2009. HISTORICAL QUARTERLY INFORMATION Canaccord's revenue from an underwriting transaction is recorded only when the transaction has closed. Consequently, the timing of revenue recognition can materially affect Canaccord's quarterly results. The expense structure of Canaccord's operations is geared towards providing service and coverage in the current market environment. If general capital markets activity were to drop significantly, Canaccord could experience losses. The following table provides selected quarterly financial information for the nine most recently completed financial quarters ended June 30, 2008. This information is unaudited, but reflects all adjustments of a recurring nature, which are, in the opinion of management, necessary to present a fair statement of the results of operations for the periods presented. Quarter-to-quarter comparisons of financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. ------------------------------------------------------------------------- (C$ thousands, except Fiscal 2009 Fiscal 2008 per share amounts) ----------- ----------- ------------------------------------------------------------------------- Q1 Q4 Q3 Q2 Q1 ------------------------------------------------------------------------- Revenue Canaccord Adams 104,793 77,965 109,583 89,071 155,023 Private Client Services 57,853 54,463 61,166 57,415 76,083 Corporate and Other 10,062 11,018 12,605 12,383 14,764 ------------------------------------------------------------------------- Total revenue 172,708 143,446 183,354 158,869 245,870 Net income 16,459 (35,154) 15,048 12,411 39,029 ---------------------------------------------- EPS - basic 0.35 (0.80) 0.34 0.28 0.86 EPS - diluted 0.31 (0.80) 0.31 0.26 0.80 ------------------------------------------------------------------------- ---------------------------------------------------------------- (C$ thousands, except Fiscal 2007 per share amounts) ----------- ---------------------------------------------------------------- Q4 Q3 Q2 Q1 ---------------------------------------------------------------- Revenue Canaccord Adams 130,151 101,427 93,033 125,106 Private Client Services 75,876 68,831 55,626 72,286 Corporate and Other 10,416 8,055 7,372 8,735 ---------------------------------------------------------------- Total revenue 216,443 178,313 156,031 206,127 Net income 26,016 23,692 17,806 25,942 ------------------------------------- EPS - basic 0.57 0.51 0.39 0.57 EPS - diluted 0.54 0.49 0.37 0.54 ---------------------------------------------------------------- RISKS The securities industry and Canaccord's activities are by their very nature subject to a number of inherent risks. Economic conditions, competition and market factors such as volatility in the Canadian and international markets, interest rates, commodity prices, market prices, trading volumes and liquidity will have a significant impact on Canaccord's profitability. An investment in the common shares of Canaccord involves a number of risks, including market, liquidity, credit, operational, legal and regulatory risks, which could be substantial and are inherent in Canaccord's business. Canaccord is also directly exposed to market price risk, liquidity risk and volatility risk as a result of its principal trading activities in equity securities and to specific interest rate risk as a result of its principal trading in fixed income securities. Private Client Services' revenue is dependent on trading volumes and, as such, is dependent on the level of market activity and investor confidence. Canaccord Adams' revenue is dependent on financing activity by corporate issuers and the willingness of institutional clients to actively trade and participate in capital markets transactions. There may also be a lag between market fluctuations and changes in business conditions and the level of Canaccord's market activity and the impact that these factors have on Canaccord's operating results and financial position. Furthermore, Canaccord may not achieve its growth plans associated with the acquisition and integration of Adams Harkness Financial Group, Inc. The Company has a capital management framework to maintain the level of capital that will: meet the firm's regulated subsidiaries' target ratios as set out by the respective regulators, fund current and future operations, ensure that the firm is able to meet its financial obligations as they come due, and support the creation of shareholder value. The regulatory bodies that certain of the Company's subsidiaries are subject to are listed in Note 14 of the June 30, 2008 interim consolidated financial statements. ADDITIONAL INFORMATION A comprehensive discussion of our business, strategies, objectives and risks is available in our Annual Information Form and Management's Discussion and Analysis, including our Audited Annual Consolidated Financial Statements in Canaccord's 2008 Annual Report, which are available on our Web site at canaccord.com/investor and on SEDAR at sedar.com.

For further information:

For further information: North American media: Scott Davidson, Managing
Director, Global Head of Marketing & Communications, Phone: (416) 869-3875,
email: scott_davidson@canaccord.com; London media: Bobby Morse or Ben Willey,
Buchanan Communications (London), Phone: +44 (0) 207 466 5000, email:
bobbym@buchanan.uk.com; Investor relations inquiries: Katherine Young, Vice
President, Investor Relations, Phone: (604) 643-7013, email:
katherine_young@canaccord.com; Nominated Adviser and Broker: Tom Hulme or
Simon Bridges, Landsbanki Securities (UK) Limited, Phone: +44-0-207-426-9000,
email: tom.hulme@landsbanki.com


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