Canaccord Capital Inc. reports fiscal third quarter results



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

    VANCOUVER, Feb. 7 /CNW/ - Canaccord Capital Inc.'s (TSX & AIM: CCI)
revenue for the three months ended December 31, 2007 was $183.3 million, up
2.8% from the same quarter a year ago. Net income for the same period was
$15.0 million, down 36.5% and diluted earnings per share (EPS) were
$0.31, down 36.7% from the same period a year ago. Included in these results
is the third party asset-backed commercial paper (ABCP) fair value adjustment
of $4.2 million. Excluding the ABCP fair value adjustment, net income for the
quarter was $17.8 million, down 24.7% from the same period a year ago and EPS
were $0.36, down 26.5%. Commenting on the quarter, Paul Reynolds, President
and CEO said, "It was again a challenging quarter marked by volatile global
markets, so we're pleased to have emerged profitably and successfully. That
said, we're definitely cautious in our current outlook for the near term."
    An adjustment of $4.2 million related to ABCP held in treasury has been
recorded at December 31, 2007 to reflect management's view of current market
conditions and the limited liquidity for these notes. In total, $8.6 million
has been recorded as an ABCP fair value adjustment in Q2 and Q3 of fiscal
2008. The fair value was estimated by management and the adjustment has been
recorded as an "ABCP fair value adjustment". The incremental adjustment of
$4.2 million booked this quarter is based on current market conditions, and on
management's assessment of the best available information.
    Revenue for the nine months ended December 31, 2007 was $588.1 million,
up 8.8% from the same period a year ago. Net income was $66.5 million for the
nine-month period representing a decrease of 1.4% from the same period a year
ago. Diluted earnings per share were $1.37, down 2.1% from $1.40 for the same
period a year ago. Excluding the ABCP fair value adjustment, net income was
$72.2 million, up 7.0% compared to the same period a year ago, and EPS were
$1.48, up 5.7%.

    
    Financial highlights: impact of ABCP fair value adjustment

    -------------------------------------------------------------------------
    (C$ thousands,                    Three months
     except EPS in $)            ended December 31, 2007
    -------------------------------------------------------------------------
                                             Net income
                                               before
                         Revenue   Expenses      tax    Net income     EPS
    -------------------------------------------------------------------------
    Including ABCP
     fair value
     adjustment         $183,354   $159,043   $ 24,311   $ 15,048   $   0.31
    ABCP fair value
     adjustment                -   $  4,226   $  4,226   $  2,785   $   0.05
    -------------------------------------------------------------------------
    Excluding ABCP
     fair value
     adjustment(1)      $183,354   $154,817   $ 28,537   $ 17,833   $   0.36
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (C$ thousands,                  Nine months ended
     except EPS in $)           ended December 31, 2007
    -------------------------------------------------------------------------
                                             Net income
                                               before
                       Revenue(2)  Expenses      tax    Net income     EPS
    -------------------------------------------------------------------------
    Including ABCP
     fair value
     adjustment         $588,093   $486,004   $102,089   $ 66,488   $   1.37
    ABCP fair value
     adjustment                -   $ 8,625(2) $  8,625   $  5,684   $   0.11
    -------------------------------------------------------------------------
    Excluding ABCP
     fair value
     adjustment(1)      $588,093   $477,379   $110,714   $ 72,172   $   1.48
    -------------------------------------------------------------------------

    (1) Excluding ABCP fair value adjustment refers to results excluding the
        ABCP fair value adjustment recorded in Q2/08 and Q3/08. Data is
        considered to be non-GAAP; for more details see MD&A.
    (2) Revenue for Q2/08 has been adjusted to add back the $4.4 million of
        the ABCP fair value adjustment. The adjustment has been recategorized
        as an expense on the income statement for Q2/08, which is consistent
        with the treatment of the Q3/08 ABCP fair value adjustment.

    Highlights for the three months ended December 31, 2007 compared to the
    three months ended December 31, 2006:

    -   Revenue of $183.3 million, up 2.8% or $5.0 million from
        $178.3 million
    -   Expenses of $159.0 million, up 9.9% or $14.4 million from
        $144.7 million
    -   Net income of $15.0 million, down 36.5% or $8.7 million from
        $23.7 million
    -   Diluted EPS of $0.31, down 36.7% or $0.18 from $0.49
    -   Return on equity (ROE) of 16.2%, down from 27.6%
    -   Working capital down by 5.5% to $267.3 million from $283.0 million
    -   Book value per diluted common share for the period end was $7.95, up
        7.0% or $0.52 from $7.43
    -   The Board of Directors approved a quarterly dividend of $0.125 per
        share on February 6, 2008, payable on March 10, 2008 with a record
        date of February 22, 2008
    -   Excluding the ABCP fair value adjustment, net income of
        $17.8 million, down 24.7% or $5.9 million from $23.7 million
    -   Excluding the ABCP fair value adjustment, diluted EPS of $0.36, down
        26.5% or $0.13 from $0.49

    Highlights for the nine months ended December 31, 2007 compared to the
    nine months ended December 31, 2006:

    -   Revenue of $588.1 million, up 8.8% or $47.6 million from
        $540.5 million
    -   Expenses of $486.0 million, up 9.9% or $43.6 million from
        $442.4 million
    -   Net income of $66.5 million, down 1.4% or $0.9 million from
        $67.4 million
    -   Diluted EPS of $1.37, down 2.1% or $0.03 from $1.40
    -   ROE of 23.3%, down from 28.1%
    -   Excluding the ABCP fair value adjustment, net income of
        $72.2 million, up 7.0% or $4.8 million from $67.4 million
    -   Excluding the ABCP fair value adjustment, diluted EPS of $1.48, up
        5.7% or $0.08 from $1.40

    Highlights of Operations:

    -   Canaccord Adams led over $7.3 billion(1) in transactions globally
        from January 1 to December 31, 2007
    -   Canaccord Adams ranked number one by the National Post and number
        three by the Globe and Mail for equity proceeds raised in Canada from
        January 1 to December 31, 2007
    -   Canaccord Adams ranked seventh in Canada for block trading market
        share(2) of 4.6% in Q3/08, up from 3.1% in Q3/07
    -   Canaccord Adams ranked number one(3) for 52 completed Private
        Investment in Public Equity (PIPE) transactions in North America that
        raised over $1.1 billion in proceeds
    -   Canaccord Adams led 46 transactions globally to raise total proceeds
        of more than $2 billion during Q3/08
    -   During Q3/08, Canaccord Adams acted as a financial advisor for Yamana
        Gold in its $4.6 billion acquisition of Meridian Gold and Northern
        Orion Resources
    -   During Q3/08, Canaccord Adams led or co-led the following equity
        transactions:
        -   $363.0 million on TSX for Heritage Oil Corp.
        -   $267.0 million on TSX and AIM for First Calgary Petroleum Ltd.
        -   $225.0 million on TSX-Venture for Rusoro Mining BVI Ltd.
        -   $110.8 million on TSX-Venture for Peak Gold
        -   $100.0 million on TSX-Venture for B2Gold Corp.
        -   $75.1 million on TSX and AIM for Artis REIT
        -   $44.9 million on AIM for Anglesey Mining PLC/Labrador Iron Mines
        -   $34.5 million on TSX for Arise Technologies Corp.
        -   $28.0 million on AMEX for PetroResources
    -   Including the led and co-led transactions referred to above,
        Canaccord Adams participated in a total of 105 transactions globally
        to raise gross proceeds of more than $5.5 billion during Q3/08.
        Included in these totals:
        -   Canada participated in 82 transactions, which raised $3.7 billion
        -   UK participated in 13 transactions, which raised $1.1 billion
        -   US participated in 10 transactions, which raised $676.0 million
    -   Assets under administration (AUA) of $14.9 billion, up 5.2% from the
        same period a year ago and down 2.8% from Q2/08
    -   Canaccord's Private Client Services group had 456 Investment Advisors
        as of December 31, 2007, up 24 from the same period a year ago and up
        three from Q2/08

    -----------------------
    (1) Source: FP Infomart and Company information. Transactions over
        $1.5 million
    (2) Source: Canada Equity
    (3) Source: PlacementTracker as of December 31, 2007; includes placements
        for companies incorporated in Canada and the US
    

    LETTER TO SHAREHOLDERS

    We said in our second quarter report to shareholders that the summer of
2007 was one of the "most challenging" in memory. Unfortunately, these same
challenges continued into Canaccord's third quarter of fiscal 2008.
Disclosures about the depth and breadth of problems related to the US sub-
prime mortgage markets continued to dominate credit markets and the financial
services industry, and added unwelcome volatility to equity markets around the
world. The sharp decline in some housing markets, particularly in the United
States, also stimulated concerns about the likelihood of an economic slowdown
in the world's largest economy.
    Given this context, we were generally pleased with Canaccord's operating
performance for the three months, which continued to demonstrate the strength
of our global platform, the diversification of our businesses and the
franchise we have built in the small- and mid-cap markets. Our businesses
showed themselves capable of generating consistent levels of revenue and
profitability in a very uncertain business environment - a testimonial to the
quality of our ideas and our service we deliver to our clients.

    Update on the third party asset-backed commercial paper market

    Following the restructuring of Skeena Capital Trust, Canaccord clients
hold approximately $269 million of third party asset-backed commercial paper
(ABCP) notes in accounts with Canaccord. Canaccord also holds a fair value of
approximately $34.5 million in ABCP.
    On December 23, 2007, the Pan-Canadian Investors Committee for ABCP
announced an agreement in principle for a comprehensive restructuring of ABCP
between all parties. The approval of the restructuring is subject to votes by
all investors. While complex, the restructuring - expected to take place by
the end of March - will move all ABCP into three master conduits with short-
term and long-term components. Portions of these will likely begin trading
shortly after the restructuring is finalized. This agreement is intended to
provide investors with some near-term liquidity as well as the opportunity to
recover most or all of their principal over the longer term.
    We have adjusted the fair value of the ABCP Canaccord holds to reflect
the present value of expected future cash flows. We recorded a $4.4 million
adjustment in the second quarter of fiscal 2008, and during this quarter made
a further $4.2 million adjustment to the fair value. This brings our total
adjustment to $8.6 million or $0.11 per share.
    More detail can be found in the "Critical accounting estimates" section
of Management's Discussion and Analysis of the quarter, on page 22.

    Financial highlights

    The volatility of global credit and equity markets continued to have a
significant impact on investor confidence in small and mid-market growth
equities, Canaccord's primary market segment. Third quarter revenues from
principal trading, capital markets and Private Client Services were down in
Canada, in contrast to solid gains in our UK and US capital markets
operations. Total revenue was $183.3 million, an increase of 2.8% from the
third quarter of fiscal 2007. Expenses increased 10% due primarily to the ABCP
fair value adjustment, increased general and administrative costs and interest
expense, and ongoing investments in the business. Net income for the three
months declined 36.5% to $15 million. Diluted earnings per share were $0.31,
down 36.7%. Excluding the ABCP fair value adjustment, net income was
$17.8 million, down 24.7% year over year, earnings per share were $0.36, down
26.5%.

    Solid performance in capital markets

    Given the market context, Canaccord Adams' year-over-year performance was
solid during the third quarter. Revenue advanced 8% to $109.6 million compared
to the third quarter of the prior year, due to higher underwriting and
advisory fees. Our teams in Canada, the US and the UK led 39 transactions
globally during the quarter that raised total proceeds of $1.0 billion,
including a $363 million financing for Heritage Oil Corporation on the TSX.
    In Canada, revenue declined 11.4%, to $52 million, from a year ago. The
decrease was driven by lower, more volatile Canadian equity markets during the
three-month period, which reduced trading revenues and investment banking
activity. Calendar 2007, however, provides a better view of Canaccord Adams'
momentum in Canada. According to the National Post rankings for equity
proceeds raised during the year, Canaccord Adams was first overall, with
$4.55 billion raised in 414 transactions. This is an exceptional achievement
for an independent investment firm in Canada. In total, we led more than
$7.3 billion worth of transactions globally during calendar 2007.
    In the UK, year-over-year revenues for the quarter advanced 66% to
$34.6 million on renewed strength in investment banking mandates. Our team
participated in eight transactions, which raised $215 million, as we took
advantage of our reputation as a leading broker and Nominated Adviser (Nomad).
    Canaccord Adams' momentum continues to build in the United States.
Despite volatile markets and considerable uncertainty, revenue rose nearly 27%
to $22.4 million for the third quarter compared to a year ago, driven by
stronger investment banking business. Private Investment in Public Equity
(PIPE) transactions continue to be an attractive opportunity for us. For
calendar 2007, Canaccord Adams was the leading North American investment firm
in these vehicles, completing 52 transactions in the US and Canada that raised
over $1.1 billion in proceeds(1).

    Private Client Services - operating in challenging markets

    Despite the uncertainty surrounding the direction of the volatile North
American equity markets, Private Client Services maintained a good level of
revenue and profitability for the quarter. As Private Client Services is based
in Canada, the more volatile Canadian markets had an impact on this segment's
revenue, which declined by 11% quarter-over-quarter. The main declines in
revenue were in principal trading revenue down 3.6% and in unrealized losses
on mark-to-market adjustments down 4.2%. A drop in compensation expense was
partially offset by increased interest expense due to higher average cash
balances in client accounts. Income before income taxes and corporate
allocations for the quarter was $13.0 million, down $5.6 million or 30.1% from
the same period a year ago.
    At quarter end, Canaccord had 456 Investment Advisors (IAs), an increase
of 24 from the same period a year ago and a net addition of three since the
end of our second quarter. We have been successful during previous market
downturns in building our roster of experienced IAs. We will continue our
recruitment activity by being aggressive in communicating the substantial
advantages that a move to Canaccord can provide to prospective advisors and
their clients.
    Assets under administration (AUA) in Private Client Services was
$14.9 billion, a 5.2% increase over the same period a year ago and down 2.8%
sequentially, versus a general TSX decline of 2.2%. At quarter end, our assets
under management (AUM) were $760 million, down 6.6% from the same period a
year ago and down 2.2% sequentially. Following a six-year period in which our
assets grew at a 23% compound annual growth rate, it is clear that we have
slowing momentum in both AUA and AUM growth. Our senior management team is
currently developing strategies and objectives to grow our AUA and AUM, and we
have every confidence that with a refined strategy and renewed investment,
Private Client Services will retain its strong growth history.

    Business outlook

    We see the word "unprecedented" in many descriptions of the current state
of global markets. Given the uncertainty that comes with major dislocations
such as those affecting the credit markets, we will tread carefully until the
cycle and the challenges work themselves out.
    That is not to say Canaccord will move to the sidelines. We are now even
more focused on those things we do well. Our business pipelines remain strong
even though transaction timing is uncertain. We have strong franchises in
underwriting and advisory services, and we are a more competitive, better
diversified firm than we were a year ago. More importantly, we have a strong,
coordinated and consensus-driven team that is committed to thriving in any
market that confronts us. These will be the real drivers of value - for
clients, for shareholders and for fellow employees - as we move through the
challenges ahead.

    Paul D. Reynolds
    President & Chief Executive Officer

    -----------------------
    (1) Includes placement for companies incorporated in Canada and the US


    ACCESS TO QUARTERLY RESULTS INFORMATION:

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

    CONFERENCE CALL AND WEBCAST PRESENTATION:

    Interested parties can listen to our fiscal third quarter 2008 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
Thursday, February 7, 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 third quarter of fiscal 2008 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 www.canaccord.com/investor/webcast

    
    Analysts and institutional investors can call in via telephone at:
    -  416-644-3414 (within Toronto)
    -  1-800-733-7571 (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 February 7, 2008,
until 9:00 p.m. (Pacific Time), 12:00 a.m. (Eastern Time) and 5:00 a.m. (UK
Time) on February 21, 2008, at 416-640-1917 or 1-877-289-8525 by entering
passcode 21256997 followed by the number 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: private client
services and capital markets. 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 1,676 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.

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

    Management's Discussion and Analysis

    Fiscal third quarter 2008 for the three months and nine months ended
    December 31, 2007 - this document is dated February 7, 2008

    The following discussion of the financial condition and results of
operations for Canaccord Capital Inc. is provided to enable the reader to
assess material changes in such financial condition and to assess results for
the three- and nine-month periods ended December 31, 2007 compared to the
corresponding periods in the preceding fiscal year. The three- and nine-month
periods ended December 31, 2007 are also referred to as the third quarter
2008, Q3/08 and fiscal Q3/08 in the following discussion. This discussion
should be read in conjunction with the unaudited interim consolidated
financial statements for the three- and nine-month periods ended December 31,
2007 beginning on page 28 of this report; our Annual Information Form dated
June 26, 2007; and the 2007 annual Management's Discussion and Analysis
(annual MD&A) including the audited consolidated financial statements for the
fiscal year ended March 31, 2007 in Canaccord's Annual Report dated June 26,
2007 (the Annual Report). Unless otherwise indicated or the context otherwise
requires, the "Company" refers to Canaccord Capital Inc. "Canaccord" and the
"Canaccord group" refers to the Company and its direct and indirect
subsidiaries. "Canaccord Adams" refers to the international capital markets
division of the Company. The Annual Information Form and the Annual Report
have been filed on sedar.com. There has been no material change to the
information contained in the annual MD&A for fiscal 2007 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 noted. All the financial data
below is unaudited except for certain fiscal year data from our 2007 audited
financial statements.

    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 from which Canaccord earns commissions
or fees. This measure includes the aggregate market value of long and short
positions and funds held in client accounts. Canaccord's method of calculating
AUA may differ from the methods used by other companies and therefore may not
be comparable to other companies. Management uses this measure to assess
operational performance of the Private Client Services business segment. In
Q1/08, our AUM definition was expanded to include all assets managed on a
discretionary basis under our programs generally described as or known as the
Independence Accounts, Separately Managed Accounts, and Advisor Managed
Accounts. AUM including all these programs have been reclassified commencing
in Q1/07 on this basis. Services under these programs include the selection of
investments and the provision of investment advice. AUM are also administered
by Canaccord and are included in AUA.

    Overview

    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. In addition to general economic conditions and
international market factors, 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

    Widespread economic and financial uncertainties have heightened the
volatility of global markets since October 2007. Recent economic data for the
period of October to December 2007 is evidence of the high volatility
displayed in the capital markets. Sub-prime mortgage market conditions in the
US deteriorated and this accelerated the risk pricing for commercial paper and
all asset-backed debt. Pending merger and acquisition deals were questioned
and fewer deals were initiated. During this last quarter, financial firms
holding investments in sub-prime mortgages, structured investment vehicles and
third party asset-backed commercial paper (ABCP) have taken billions of
dollars in write-downs.
    Market conditions and fears of a US recession prompted central banks in
North America, the UK and Europe to either lower interest rates or inject
market liquidity. Many economists forecast lowered US economic activity for
2008, and believe that the US could already be in a recession. The US fiscal
and monetary authorities have made significant rate cuts and are expected to
continue to take aggressive action.
    Emerging nation development should support commodity prices at their
current levels. The global infrastructure expansion may slow in the US but
activity is expected to remain elevated in the rest of the world. Currency
volatility and the decidedly bearish action of the US dollar prompted
investors to move gold to a new high in early calendar 2008. Oil prices are
expected to remain at levels that produce high profitability for the energy
sector.
    Canada has maintained relatively strong economic fundamentals. High
commodity prices, healthy corporate balance sheets, a federal budget surplus,
and low inflation and interest rates have all been factors contributing to
this strength. Equity markets will continue to be volatile until credit issues
are meaningfully resolved. The current crunch has forced many financial
services companies to raise capital at very high long-term costs. These
elevated new capital costs will prompt businesses to seek other forms of
capital.
    The impact of these conditions was generally unfavourable for our various
businesses and geographies during fiscal Q3/08 relative to Q3/07, and we
remain cautious in our outlook going forward. Canaccord's strength in the
resources sector will continue to be an asset if the strong resource market
continues.

    Market data

    While trading volumes were higher on each of the TSX, TSX-Venture, AIM
and NASDAQ for fiscal Q3/08 relative to Q3/07, the financing values declined
for each exchange. However, when compared to Q2/08, the TSX, TSX-Venture and
NASDAQ experienced considerable growth in financing values which was mainly
due to a few unusually large transactions that skewed the data during this
period. In Canaccord's focus sectors on the AIM, financing values for oil and
gas and mining increased, while biotech, media and technology decreased year
over year.

    
    Trading volume by exchange (billions of shares)
    -------------------------------------------------------------------------
                                                                    Increase
                                                       Increase    (decrease)
               October  November  December  Fiscal  from fiscal  from fiscal
                    07        07        07   Q3/08        Q3/07        Q2/08
    -------------------------------------------------------------------------
    TSX            9.1       8.7       6.9    24.7         13.0%         8.0%
    TSX-Venture    6.3       5.1       3.7    15.1         60.0%        37.6%
    AIM           18.8      13.0      10.3    42.1         16.0%        31.6%
    NASDAQ        22.8      23.8      17.3    63.9         11.4%       (1.9)%
    -------------------------------------------------------------------------


    Total financing value by exchange
    -------------------------------------------------------------------------
                                                                    Increase
                                                       Increase    (decrease)
               October  November  December  Fiscal  from fiscal  from fiscal
                    07        07        07   Q3/08        Q3/07        Q2/08
    -------------------------------------------------------------------------
    TSX and
     TSX-Venture
     (C$ billions) 3.4       5.4       5.8    14.6        (3.6)%        45.4%
    AIM
     ((pnds stlg)
     billions)     0.4       1.3       1.4     3.1       (42.0)%       (6.0)%
    NASDAQ
     (US$
     billions)     6.0       7.3       2.9    16.2       (14.5)%        54.2%
    -------------------------------------------------------------------------


    Financing value for relevant AIM industry sectors
    -------------------------------------------------------------------------
    ((pnds stlg)                                       Increase     Increase
     millions,                                        (decrease)   (decrease)
     except for                                            from         from
     percentage   October  November  December   Fiscal   fiscal       fiscal
     amounts)          07        07        07    Q3/08    Q3/07        Q2/08
    -------------------------------------------------------------------------
    Oil and gas      26.7     138.6     181.8    347.1     12.7%        79.6%
    Mining           58.3      90.0     227.3    375.6    139.1%         7.5%
    Biotech           2.0      32.5       8.7     43.2   (45.7)%         0.4%
    Media            10.7      36.5      33.7     80.9   (26.6)%      (58.6)%
    Technology       31.7      25.2      33.9     90.8   (18.0)%      (32.4)%
                   ----------------------------------------------------------
    Total           129.4     322.8     485.4    937.6     22.5%         2.4%
    -------------------------------------------------------------------------
    Source: TSX Statistics, LSE AIM Statistics, Thomson One, and Equidesk
    

    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.
    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.
    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
Investment Advisors (IAs) in respect of investment banking and venture capital
transactions by private clients.
    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
Private Client Services or Canaccord Adams 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
    Third quarter and year-to-date 2008 summary data(1)
    -------------------------------------------------------------------------
                            Three        Year-           Nine         Year-
    (C$ thousands,      months ended     over-       months ended     over-
     except per          December 31     year         December 31     year
     share, employee    ------------   increase      -------------  increase
     and % amounts)     2007    2006  (decrease)     2007     2006 (decrease)
    -------------------------------------------------------------------------
    Canaccord
     Capital Inc.
      Revenue
        Commission $ 74,959 $ 74,380        0.8% $226,462 $215,990       4.8%
        Investment
         banking     84,910   78,177        8.6%  287,266  251,135      14.4%
        Principal
         trading        387    9,035        n.m.  3,275(2)  22,209       n.m.
        Interest     16,011   14,355       11.5%   48,594   42,252      15.0%
        Other         7,087    2,366      199.5%   22,496    8,885     153.2%
    -------------------------------------------------------------------------
    Total revenue   183,354 $178,313        2.8% $588,093 $540,471       8.8%
    Expenses
      Incentive
       compensation  90,778   89,466        1.5%  283,600  269,395       5.3%
      Salaries and
       benefits      12,658   11,610        9.0%   39,576   34,746      13.9%
      Other
       overhead
       expenses(3)   51,381   43,601       17.8%  154,203  138,269      11.5%
      ABCP fair
       value
       adjust-
       ment(4)        4,226        -        n.m.  8,625(2)       -       n.m.
    -------------------------------------------------------------------------
    Total expenses $159,043 $144,677        9.9% $486,004 $442,410       9.9%
    Income before
     income taxes    24,311   33,636     (27.7)%  102,089   98,061       4.1%
    Net income       15,048   23,692     (36.5)%   66,488   67,440     (1.4)%
    Earnings per
     share (EPS)
     - diluted         0.31     0.49     (36.7)%     1.37     1.40     (2.1)%
    Return on
     average common
     equity (ROE)      16.2%    27.6% (11.4)p.p.     23.3%    28.1% (4.8)p.p.
    Book value per
     share - period
     end              $7.95    $7.43        7.0%
    Number of
     employees        1,676    1,575        6.4%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for ROE, book value per share
        and number of employees.
    (2) The ABCP fair value adjustment has been recategorized in Q2/08 from
        principal trading revenue to an expense. This is consistent with the
        treatment of the Q3/08 adjustment.
    (3) Consists of trading costs, premises and equipment, communication and
        technology, interest, general and administrative, amortization and
        development costs.
    (4) Represents the ABCP fair value adjustment for ABCP held by the
        Company.
    p.p.: percentage points
    n.m.: not meaningful


    Third quarter and year-to-date fiscal 2008 adjusted data
    -------------------------------------------------------------------------
    (C$ thousands, except                      Three months
     EPS in $)                           ended December 31, 2007
    -------------------------------------------------------------------------
                                                     Net
                                                  income
                                                  before       Net
                             Revenue  Expenses       tax    income       EPS
    -------------------------------------------------------------------------
    Including ABCP fair
     value adjustment       $183,354  $159,043  $ 24,311  $ 15,048  $   0.31
    ABCP fair value
     adjustment                    -  $  4,226  $  4,226  $  2,785  $   0.05
    -------------------------------------------------------------------------
    Excluding ABCP fair
     value adjustment(1)    $183,354  $154,817  $ 28,537  $ 17,833  $   0.36
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    (C$ thousands, except                       Nine months
     EPS in $)                           ended December 31, 2007
    -------------------------------------------------------------------------
                                                     Net
                                                  income
                                                  before       Net
                             Revenue  Expenses       tax    income       EPS
    -------------------------------------------------------------------------
     Including ABCP fair
      value adjustment      $588,093  $486,004  $102,089  $ 66,488  $   1.37
     ABCP fair value
      adjustment                   -  $8,625(2) $  8,625  $  5,684  $   0.11
    -------------------------------------------------------------------------
     Excluding ABCP fair
      value adjustment(1)   $588,093  $477,379  $110,714  $ 72,172  $   1.48
    -------------------------------------------------------------------------
    (1) Excluding ABCP fair value adjustment refers to results excluding the
        ABCP fair value adjustment recorded in Q2/08 and Q3/08. Data is
        considered to be non-GAAP.
    (2) Revenue for Q2/08 has been adjusted to add back the $4.4 million ABCP
        fair value adjustment. The adjustment has been recategorized as an
        expense on the income statement for Q2/08, which is consistent with
        the treatment of the Q3/08 adjustment.



    Geographic distribution of revenue(1)
    -------------------------------------------------------------------------
                            Three        Year-           Nine         Year-
                        months ended     over-       months ended     over-
                         December 31     year         December 31     year
    (C$ thousands,                     increase                     increase
     except % amounts) 2007     2006  (decrease)     2007     2006 (decrease)
    -------------------------------------------------------------------------
    Canada         $125,102 $134,705      (7.1)% $404,470 $376,363       7.5%
    UK               34,644   20,865       66.0%  102,952   91,400      12.6%
    US               23,135   18,613       24.3%   70,294   61,343      14.6%
    Other Foreign
     Location           473    4,130        n.m.   10,377   11,365     (8.7)%
    -------------------------------------------------------------------------
    Total          $183,354 $178,313        2.8% $588,093 $540,471       8.8%
    -------------------------------------------------------------------------
    (1) For a business description of Canaccord's geographic distribution
        please refer to the "About Canaccord's operations" section on
        page 10.
    n.m.: not meaningful
    

    Third quarter 2008 vs. third quarter 2007

    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 December 31, 2007 was $183.3 million, up 2.8% compared to
the same period a year ago.
    For the third quarter of fiscal 2008, revenue generated from commissions
was $74.9 million, up 0.8% compared to the same period a year ago and is
largely due to strength in market activity early in the quarter. Investment
banking revenue was $84.9 million, up $6.7 million largely due to increased
activity in the UK. Principal trading revenue was $0.4 million compared to
$9.0 million during the same period a year ago. The primary focus of
Canaccord's principal trading activity is in small- to mid-cap equities, which
experienced significant valuation challenges during the quarter due to the
credit contraction and its related impact on the equity markets. The
year-over- year decline is due to the challenging market conditions during the
quarter. Interest revenue was $16.0 million, up 11.5% mainly due to higher
interest revenue from client accounts and bank balances. Other revenue was
$7.1 million, up $4.7 million due to increases in foreign exchange and
correspondent services revenue.
    Third quarter revenue in Canada was $125.1 million, down 7.1% or
$9.6 million from the same period a year ago. This decline was due to a
decrease in activity in the Canadian equity markets. Revenue in the UK was
$34.6 million, up $13.8 million from the same period a year ago. In the US,
revenue was $23.1 million, up 24.3% from Q3/07.

    Year-to-date fiscal year 2008 vs. year-to-date fiscal year 2007

    Year-to-date revenue for December 31, 2007 was $588.1 million, up 8.8% or
$47.6 million compared to the same period a year ago. Revenue generated from
commissions increased by $10.5 million to $226.5 million compared to the same
period a year ago largely due to healthier market conditions in Q1/08 and in
the early parts of the following two quarters. Investment banking revenue was
$287.3 million, up $36.1 million primarily due to increased financing activity
in the UK and Canadian equity markets and from higher merger and acquisition
fees. Principal trading revenue was $3.3 million compared to $22.2 million
last year, down $18.9 million from the same period a year ago. Principal
trading revenue in Q2/08 has been recategorized to exclude the ABCP fair value
adjustment. This adjustment is now included as an expense item for both Q2/08
and Q3/08. Canaccord has re-focused its principal trading operations to reduce
certain market exposures through rebalancing internal capital allocations.
Interest revenue was $48.6 million, up $6.3 million for the same reasons
mentioned above. Other revenue was $22.5 million, up $13.6 million due to
foreign exchange and correspondent services revenue. Year to date revenue in
Canada was $404.5 million, up 7.5% or $28.1 million from the same period a
year ago. Our operations in Canada benefited from greater activity in fiscal
Q1/08 and in the early part of the subsequent two quarters in the Canadian
equity markets, largely due to the continued global demand for commodities and
related equities. Year-to-date fiscal 2008 revenue in the UK was
$102.9 million, up $11.5 million from the same period a year ago. Revenue from
Other Foreign Location was $10.4 million, down $1.0 million year-over-year,
and in the US revenue was $70.3 million, up $8.9 million from the same period
a year ago.

    
    Expenses as a percentage of revenue
    -------------------------------------------------------------------------
                            Three       Year-            Nine         Year-
                        months ended    over-        months ended     over-
                         December 31    year          December 31     year
                                      increase                      increase
                       2007     2006 (decrease)      2007     2006 (decrease)
    -------------------------------------------------------------------------
      Incentive
       compensation   49.5%    50.2%  (0.7)p.p.     48.2%    49.8%  (1.6)p.p.
      Salaries and
       benefits        6.9%     6.5%    0.4p.p.      6.7%     6.4%    0.3p.p.
      Other overhead
       expenses(1)    28.0%    24.4%    3.6p.p.     26.2%    25.6%    0.6p.p.
      ABCP fair value
       adjustment(2)   2.3%       -        n.m.      1.5%       -        n.m.
    -------------------------------------------------------------------------
    Total             86.7%    81.1%    5.6p.p.     82.6%    81.9%    0.7p.p.
    -------------------------------------------------------------------------
    (1) Consists of trading costs, premises and equipment, communication and
        technology, interest, general and administrative, amortization and
        development costs.
    (2) Represents the ABCP fair value adjustment for ABCP held by the
        Company.
    p.p.: percentage points
    n.m.: not meaningful
    

    Third quarter 2008 vs. third quarter 2007

    Expenses for the three months ended December 31, 2007 were
$159.0 million, up 9.9% or $14.4 million from a year ago. The overall increase
in expenses is largely due to the ABCP fair value adjustment of $4.2 million;
general and administrative expenses, up $3.0 million; interest expense, up
$1.6 million; and development costs, up $1.5 million. Incentive compensation
expense was $90.8 million for the quarter, up 1.5%. For the quarter, incentive
compensation expense as a percentage of total revenue decreased 0.7 percentage
points to 49.5% compared to the same period a year ago.
    Salaries and benefits expense was $12.6 million in the third quarter of
fiscal 2008, up 9.0% from the same period a year ago largely due to the
increased contribution by the firm towards the Employee Stock Purchase Plan
(ESPP), which is discussed in our fiscal year 2007 Annual Report. In May 2007
the matching contribution by the firm increased from a maximum of $1,500 per
eligible employee to a maximum contribution of $3,000. Also contributing to
the increase in salaries and benefits expense is the overall increase of 101
net new employees across the firm. The total compensation (incentive
compensation plus salaries) payout as a percentage of consolidated revenue for
Q3/08 was 56.4%, down from 56.7% in Q3/07.

    Year-to-date fiscal year 2008 vs. year-to-date fiscal year 2007

    Expenses for the nine months ended December 31, 2007 were $486.0 million,
up $43.6 million or 9.9% from a year ago. Expenses for Q2/08 have been
recategorized to include the $4.4 million the ABCP fair value adjustment that
was previously included in principal trading revenue. Year-to-date expenses
include the $8.6 million ABCP fair value adjustment. Incentive compensation
expense was $283.6 million, up 5.3% due to the increase in incentive-based
revenue. Consolidated incentive compensation as a percentage of total revenue
was 48.2%, down 1.6 percentage points primarily due to the implementation of
our long term incentive plan (LTIP) in Q1/08.
    Salaries and benefits expense was $39.6 million, up $4.8 million for the
year to date of fiscal 2008 compared to the same period a year ago for the
same reasons mentioned above. The total compensation (incentive compensation
plus salaries) payout as a percentage of consolidated revenue was 54.9%, down
from 56.3% the prior year.

    
    Other overhead expenses
    -------------------------------------------------------------------------
                            Three        Year-           Nine         Year-
                        months ended     over-       months ended     over-
                         December 31     year         December 31     year
    (C$ thousands,                     increase                     increase
     except % amounts)  2007     2006 (decrease)     2007     2006 (decrease)
    -------------------------------------------------------------------------
      Trading costs $  7,054 $  6,056      16.5% $ 21,261 $ 20,734       2.5%
      Premises and
       equipment       5,781    5,810     (0.5)%   16,775   17,561     (4.5)%
      Communication
       and technology  5,611    5,352       4.8%   17,163   15,802       8.6%
      Interest         6,574    4,926      33.5%   19,155   15,310      25.1%
      General and
       administrative 17,390   14,413      20.7%   51,416   47,807       7.5%
      Amortization     2,197    1,797      22.3%    6,320    6,152       2.7%
      Development
       costs           6,774    5,247      29.1%   22,113   14,903      48.4%
      ABCP fair
       value
       adjustment(1)   4,226        -       n.m.    8,625        -       n.m.
    -------------------------------------------------------------------------
    Total other
     overhead
     expenses       $ 55,607 $ 43,601      27.5% $162,828 $138,269      17.8%
    -------------------------------------------------------------------------
    (1) Represents the ABCP fair value adjustment for ABCP held by the
        Company.
    

    Third quarter 2008 vs. third quarter 2007

    Other overhead expenses increased 27.5% to $55.6 million for the third
quarter of fiscal 2008 compared to the same period a year ago. Contributing to
the overall increase in other overhead expenses were trading costs, which
increased by 16.5% in Q3/08 due to security rebates received in Q3/07 which
lowered trading costs in Q3/07. Development costs increased by 29.1% largely
due to Canaccord's growth across all geographies. Interest expense was up
33.5% due to larger cash balances in client accounts and subordinated debt
entered into on March 30, 2007. Also entered during Q3/08 was the ABCP fair
value adjustment of $4.2 million.
    General and administrative expense was up $3.0 million in Q3/08. This was
largely due to an increase in client expenses, and promotion and travel
expense largely due to increased business development costs such as corporate
conferences.
    Development costs, which include hiring incentives and systems
development costs, were $6.8 million, up 29.1% or $1.5 million from the prior
year. Hiring incentives are one of our tools to recruit new IAs and capital
markets professionals. Hiring incentives also include retention costs related
to the acquisition of Adams Harkness Financial Group, Inc. During Q3/08,
hiring incentives increased by 37.4% largely due to recruitment and retention
costs of Canaccord Adams' professionals in the US. Systems development costs
are expenditures to enhance our information technology platform, and increased
by 4.7% due to enhancements to our technological platform associated with our
growth initiatives.
    Net income for Q3/08 was $15.0 million, down $8.7 million from a year
ago. Diluted EPS were $0.31, down $0.18 or 36.7%. ROE for Q3/08 was 16.2%
compared to an ROE of 27.6% a year ago. The decrease in EPS and ROE is largely
due to the decline in net income resulting from investments made across our
global operations and from the ABCP fair value adjustment booked. Book value
per common share for Q3/08 was up 7.0% year over year to $7.95.
    Income taxes were $9.3 million for the quarter reflecting an effective
tax rate of 38.1%, up from 29.6% a year ago. The increase in the effective tax
rate in Q3/08 relative to Q3/07 is a result of our reduction of future income
tax assets which increased our overall tax provision. The reduction of future
income tax assets is due to a reduction in Canadian federal tax rates from
2008 to 2012.

    Year-to-date fiscal year 2008 vs. year-to-date fiscal year 2007

    Other overhead expenses for the nine months ended December 31, 2007 were
up 17.8% or $24.5 million to $162.8 million from the same period a year ago.
Contributing to the overall increase in other overhead expenses were
development costs, which increased by 48.4% or $7.2 million to $22.1 million
and interest expense which was up $3.8 million due to higher client interest
rates, larger cash balances in client accounts and subordinated debt entered
into on March 30, 2007. These increases are largely related to Canaccord's
growth across all geographies. For the year to date, the ABCP fair value
adjustment of $8.6 million was recorded.
    General and administrative expense was up $3.6 million largely due to an
increase in promotion and travel expense. Promotion and travel increased by
20.6%, which is largely due to an increase in business development costs and
business travel. This increase was offset by decreases in reserve expenses.
    Development costs were $22.1 million, up 48.4% or $7.2 million from the
previous year. A large portion of the 55.9% increase in hiring incentives is
for the recruitment of Canaccord Adams' professionals and for the retention
plan associated with the acquisition of Adams Harkness Financial Group, Inc.
Overall systems development costs for the year to date of fiscal 2008
increased by 25.3% due to enhancements to our technological platform
associated with our growth.
    Net income for the year to date of fiscal 2008 was $66.5 million, down
1.4% or $0.9 million from the same period a year ago. Diluted EPS were $1.37,
down $0.03 and ROE was 23.3% compared to an ROE of 28.1% a year ago. The
decrease in EPS and ROE is largely due to the decline in net income resulting
from the ABCP fair value adjustment, and the investments made across our
global operations. Book value per common share was up 7.0% to $7.95. Income
taxes were $35.6 million for the year to date of fiscal 2008 reflecting an
effective tax rate of 34.9%, up from 31.2% a year ago due to the same reasons
mentioned above.

    
    Results of operations
    Canaccord Adams
    -------------------------------------------------------------------------
                            Three        Year-           Nine         Year-
                        months ended     over-       months ended     over-
    (C$ thousands,       December 31     year         December 31     year
     except employees                  increase                     increase
     and % amounts)     2007     2006 (decrease)     2007     2006 (decrease)
    -------------------------------------------------------------------------
    Canaccord Adams
      Revenue
        Canada -
         Investment
         Banking
         and
         Equities   $ 42,952 $ 48,897    (12.1)% $144,711 $130,180      11.2%
        Canada -
         Intern-
         ational
         Trading,
         Registered
         Traders and
         Fixed
         Income        9,126    9,884     (7.7)% $28,141(1) 28,663     (1.8)%
    -------------------------------------------------------------------------
        Total
         Canada     $ 52,078 $ 58,781    (11.4)% $172,852 $158,843       8.8%
        UK            34,644   20,865      66.0%  102,952   91,400      12.6%
        US            22,388   17,651      26.8%   67,496   57,958      16.4%
        Other
         Foreign
         Location        473    4,130       n.m.   10,377   11,365     (8.7)%
    -------------------------------------------------------------------------
      Total revenue $109,583 $101,427       8.0% $353,677 $319,566      10.7%
      Expenses
        Incentive
         compens-
         ation        57,933   51,546      12.4%  176,341  162,799       8.3%
        Salaries
         and
         benefits      3,275    3,158       3.7%   10,488    8,574      22.3%
        Other
         overhead
         expenses     25,140   20,613      22.0%   78,850   66,169      19.2%
        ABCP fair
         value
         adjustment(2) 1,101        -       n.m.  2,247(1)       -       n.m.
    -------------------------------------------------------------------------
      Total
       expenses     $ 87,449 $ 75,317      16.1% $267,926 $237,542      12.8%
      Income before
       income
       taxes(3)       22,134   26,110    (15.2)%   85,751   82,024       4.5%
      Income before
       ABCP fair
       value
       adjustment
       and taxes      23,235   26,110    (11.0)%   87,998   82,024       7.3%
      Number of
       employees         531      502       5.8%
    -------------------------------------------------------------------------
    (1) Fixed income revenue has been recategorized in Q2/08 to exclude the
        ABCP fair value adjustment.  This is included as an expense for Q2/08
        and Q3/08.
    (2) Represents the ABCP fair value adjustment for ABCP held by the
        Company.
    (3) Income before income taxes excludes allocated overhead expenses that
        are included in Corporate and Other segment expenses.
    n.m.: not meaningful
    

    Revenue from Canaccord Adams (our capital markets segment) 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.

    Third quarter 2008 vs. third quarter 2007

    Total revenue for Canaccord Adams in Q3/08 was $109.6 million, up
$8.1 million from the same quarter a year ago largely due to increases in
investment banking revenue and higher merger and acquisition fees. Canadian
operations generated fiscal third quarter revenue of $52.1 million, down 11.4%
compared to a year ago. Within this revenue, $42.9 million is derived from
Investment Banking and Equities activity while $9.1 million is derived from
our International Trading, Registered Traders and Fixed Income operations. The
decline in Canadian revenue is largely due to a decrease in Canadian equity
markets compared to the same period a year ago. Our Canadian revenue
represents 47.5% of Canaccord Adams' total revenue. Revenue from our UK
operations was $34.6 million, up 66.0% from the same period a year ago. This
increase in revenue is largely due to higher investment banking revenue. UK
revenue of $34.6 million represents 31.6% of Canaccord Adams' total revenue.
In the US, revenue was $22.4 million, up 26.8% from a year ago, and represents
20.4% of Canaccord Adams' total revenue. This increase in revenue is also due
to the higher investment banking revenue. Revenue in Other Foreign Location
declined to $473 thousand in Q3/08, down from $4.1 million a year ago. In any
quarter, revenue in this region represents a small number of transactions and
is therefore very irregular.
    Expenses for Q3/08 were $87.4 million, up $12.1 million. The largest
increase in non-compensation expenses were in development costs, up
$1.5 million, and general and administrative expense, up $1.4 million. Within
general and administrative expense, promotion and travel increased by 31.7%
largely due to higher business development costs. The increase in general and
administrative expense was offset by a decrease in premises and equipment
expense. Also included in expenses during Q3/08 was the ABCP fair value
adjustment of $1.1 million of the $4.2 million total ABCP fair value
adjustment. The increase in incentive compensation for the quarter of
$6.4 million is largely attributable to the increase in incentive-based
revenue in the UK during the quarter. Salary and benefits expense for the
quarter was up 3.7% to $3.3 million compared to a year ago. The total
compensation expense payout as a percentage of revenue for the quarter was
55.9%, which is up 2.0 percentage points from Q3/07.
    Income before income taxes and corporate overhead allocations for the
quarter was $22.1 million, down $4.0 million or 15.2% from the same quarter a
year ago.

    Year-to-date fiscal year 2008 vs. year-to-date fiscal year 2007

    Revenue for Canaccord Adams for the year to date of fiscal 2008 was
$353.7 million, up $34.1 million from the same period last year due to
relatively strong capital markets in all geographies, particularly during the
early months of fiscal 2008. In Canada, revenue was $172.8 million, up 8.8%
from the same period a year ago. Within Canada, $144.7 million is derived from
Investment Banking and Equities activity while $28.1 million is from our
International Trading, Registered Traders and Fixed Income operations. Fixed
Income revenue for Q2/08 has been recategorized to exclude the ABCP fair value
adjustment, which is now classified as an expense. The overall growth in
Canada is largely due to our growing market share and from the continued
global demand for commodities and for Canadian equities relative to the same
period a year ago. Overall, our Canadian revenue represents 48.9% of Canaccord
Adams' total revenue. Our UK revenue was $102.9 million, up $11.5 million from
the same period a year ago due to increased revenue from investment banking
activities. UK revenue of $102.9 million represents 29.3% of Canaccord Adams'
total revenue. In the US, revenue was $67.5 million, and represents 19.2% of
Canaccord Adams' total revenue. Revenue from Other Foreign Location was
$10.4 million, and represents 3.0% of Canaccord Adams' total revenue.
    Year-to-date expenses were $267.9 million, up $30.4 million. The largest
increases in non-compensation expenses were in development costs, up
$6.7 million, and general and administrative expense, up $4.5 million. Within
general and administrative expense, promotion and travel was up 33.2% or
$4.3 million. Also included in expenses was the ABCP fair value adjustment of
$2.2 million from the total $8.6 million ABCP fair value adjustment for the
year to date of fiscal 2008.
    The increase of $13.5 million in incentive compensation for the period is
mainly attributable to the increase in incentive-based revenue for the year to
date of fiscal 2008. Salary and benefits expense was up $1.9 million from a
year ago. The total compensation expense payout as a percentage of revenue for
the year to date of fiscal 2008 was 52.8%, down 0.8 percentage points from
53.6% for the same period a year ago.
    Income before income taxes and corporate overhead allocations for the
period was $85.7 million, up $3.7 million from the same period a year ago.

    
    Private Client Services
    -------------------------------------------------------------------------
    (C$ thousands,
     except assets under
     administration
     and assets under
     management, which
     are in C$ millions;    Three        Year-           Nine         Year-
     employees;         months ended     over-       months ended     over-
     Investment          December 31     year         December 31     year
     Advisors; and                     increase                     increase
     % amounts)         2007     2006 (decrease)     2007     2006 (decrease)
    -------------------------------------------------------------------------
    Revenue          $61,166  $68,831    (11.1)% $194,664 $196,743     (1.1)%
    Expenses
      Incentive
       compensation   28,443   31,848    (10.7)%   91,474   90,101       1.5%
      Salaries and
       benefits        3,272    3,039       7.7%   10,831    9,323      16.2%
      Other overhead
       expenses       16,417   15,291       7.4%   47,014   47,317     (0.6)%
    -------------------------------------------------------------------------
    Total expenses   $48,132  $50,178     (4.1)% $149,319 $146,741       1.8%
    Income before
     income taxes(1)  13,034   18,653    (30.1)%   45,345   50,002     (9.3)%
    Assets under
     management (AUM)    760      814     (6.6)%
    Assets under
     administration
     (AUA)            14,860   14,121       5.2%
    Number of
     Investment
     Advisors (IAs)      456      432       5.6%
    Number of
     employees           772      725       6.5%
    -------------------------------------------------------------------------
    (1) 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 IAs in
respect of investment banking and venture capital transactions by private
clients.

    Third quarter 2008 vs. third quarter 2007

    Revenue from Private Client Services was $61.2 million, down $7.7 million
mainly due to challenging market conditions during the quarter. AUA of
$14.9 billion was up by $0.7 billion compared to Q3/07. AUM was $760 million,
down 6.6% year over year. There were 456 IAs at the end of the third quarter
of fiscal 2008, up 5.6% from a year ago. Fee-related revenue as a percentage
of total Private Client Services revenue was up 6.8 percentage points to 29.6%
from the same period last year.
    Expenses for Q3/08 were $48.1 million, down $2.0 million. For the
quarter, the largest decrease in expenses was in incentive compensation
expense, down $3.4 million due to lower revenue. This decrease was offset by
an increase in interest expense which was up 20.2% this quarter largely due to
larger cash balances in our client accounts this year versus last year. The
total compensation expense payout as a percentage of revenue for the quarter
was 51.9%, up 1.2 percentage points from 50.7% for the same period a year ago.
    Income before income taxes and corporate allocations for the quarter was
$13.0 million, down $5.6 million or 30.1% from the same period a year ago.

    Year-to-date fiscal year 2008 vs. year-to-date fiscal year 2007

    Revenue from Private Client Services was $194.7 million, down
$2.1 million mainly due to less favourable market conditions in North America
for the year to date of fiscal 2008 compared to the same period a year ago.
Fee-related revenue as a percentage of total Private Client Services revenue
was up 3.6 percentage points to 26.5% compared to the same period last year.
    Expenses for the nine months ended December 31, 2007 were $149.3 million,
up $2.6 million. The largest increase in expenses was in interest expense, up
$2.7 million due to higher interest rates and larger cash balances in our
client accounts this year versus last year, salary and benefits up
$1.5 million, and incentive compensation expense up $1.4 million due to higher
incentive-based revenue as a percentage of total revenue for the year to date
of fiscal 2008 compared to the same period a year ago. These increases were
offset by a decrease in general and administrative expense, down $2.2 million
largely related to lower provisions made in Q3/08 versus Q3/07. The total
compensation expense payout as a percentage of revenue for the year to date of
fiscal 2008 was 52.6%, up 2.1 percentage points from 50.5% for the same period
a year ago.
    Income before income taxes and corporate allocations for the year to date
of fiscal 2008 was $45.3 million, down 9.3% from the same period a year ago.

    
    Corporate and Other
    -------------------------------------------------------------------------
                            Three        Year-           Nine          Year-
                        months ended     over-       months ended      over-
    (C$ thousands,       December 31     year         December 31      year
     except employees                  increase                     increase
     and % amounts)     2007     2006 (decrease)     2007     2006 (decrease)
    -------------------------------------------------------------------------
    Revenue          $12,605  $ 8,055    56.5% $39,752(1) $ 24,162      64.5%
    Expenses
      Incentive
       compensation    4,402    6,072  (27.5)%     15,785   16,495     (4.3)%
      Salaries and
       benefits        6,111    5,413    12.9%     18,257   16,849       8.4%
      Other overhead
       expenses        9,824    7,697    27.6%     28,339   24,783      14.3%
      ABCP fair value
       adjustment(2)   3,125        -     n.m.    6,378(1)       -       n.m.
    -------------------------------------------------------------------------
    Total expenses   $23,462  $19,182    22.3%    $68,759  $58,127      18.3%
    Loss before
     income taxes    (10,857) (11,127)  (2.4)%    (29,007) (33,965)   (14.6)%
    Loss before ABCP
     fair value
     adjustment and
     income taxes     (7,732) (11,127) (30.5)%    (22,629) (33,965)   (33.4)%
    Number of
     employees           373      348     7.2%
    -------------------------------------------------------------------------
    (1) Revenue for Q2/08 has been recategorized to exclude the ABCP fair
        value adjustment. It has been included as an expense for Q2/08 and
        Q3/08.
    (2) Represents the ABCP fair value adjustment for ABCP held by the
        Company.
    

    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
Private Client Services or Canaccord Adams 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.

    Third quarter 2008 vs. third quarter 2007

    Revenue for the three months ended December 31, 2007 was $12.6 million,
up $4.5 million from the same quarter a year ago largely due to increases in
interest rates and foreign exchange revenue.
    Fiscal 2008 third quarter expenses were $23.5 million, up $4.3 million.
Included in expenses is the ABCP fair value adjustment of $3.1 million of the
total $4.2 million ABCP fair value adjustment during the quarter related to
the corporately held ABCP originally in treasury. Loss before income taxes was
$10.8 million, representing a $0.3 million improvement from the same quarter a
year ago.

    Year-to-date fiscal year 2008 vs. year-to-date fiscal year 2007

    Revenue was $39.7 million, up $15.6 million from the same period a year
ago for the same reasons mentioned above. Revenue in Q2/08 has been
recategorized to exclude the ABCP fair value adjustment.
    Expenses for the year to date of fiscal 2008 were $68.7 million, up
$10.6 million. The largest increase in expenses is the ABCP fair value
adjustment of $6.4 million of the $8.6 million total ABCP fair value
adjustment related to the corporately held ABCP originally in treasury. This
includes the Q2/08 ABCP fair value adjustment that was previously booked in
revenue. Interest expense increased by $1.5 million, largely attributable to
our subordinated debt facility. Salary and benefits expense increased by
$1.4 million and general and administrative expense increased by $1.3 million.
    Loss before income taxes was $29.0 million representing a $4.9 million
improvement from the same period a year ago.

    Financial condition

    Below are specific changes in selected balance sheet items.

    Cash and cash equivalents

    Cash and cash equivalents were $421.8 million on December 31, 2007
compared to $506.6 million on March 31, 2007. Operating activities used cash
of $6.4 million due to net changes in non-cash working capital items
comprising mostly a decrease in accounts receivable of $366.9 million offset
by a decrease in accounts payable and accrued liabilities of $631.8 million.

    Accounts receivable

    Client security purchases are entered into on either a cash or a margin
basis. When securities are purchased on margin, Canaccord extends a loan to
the client, using securities purchased and/or securities in the client's
account as collateral. Client accounts receivable were $499.7 million on
December 31, 2007 compared to $694.1 million on March 31, 2007. These
receivables vary significantly on a day-to-day basis, as they are based on
trading volumes. On December 31, 2007 total accounts receivable were
$1.3 billion compared with $1.7 billion on March 31, 2007 mainly due to
increases in brokers', dealers' and clients' accounts at fiscal quarter end.

    Call loans

    Loan facilities utilized by Canaccord may vary significantly on a day-to-
day basis and depend on securities trading activity. The amounts borrowed
pursuant to call loan facilities on December 31, 2007 and on March 31, 2007
were nil.

    Off-balance sheet arrangements

    At December 31, 2007 Canaccord has credit facilities with Canadian, US
and UK banks in an aggregate amount of $521.1 million. These credit
facilities, consisting of call loans, letters of credit and daylight overdraft
facilities are collateralized by unpaid securities and/or securities owned by
the Company. Canaccord Capital Corporation has provided a bank letter of
credit in the amount of $1.2 million as a guarantee for lease obligations of
Canaccord Adams Limited. Canaccord Adams Inc. has also entered into
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 December 31, 2007 there were no
outstanding balances under these standby letters of credit.

    Liquidity and capital resources

    Canaccord has a capital structure comprising share capital, retained
earnings and accumulated other comprehensive income (losses). On December 31,
2007 cash and cash equivalents net of call loans were $421.8 million, down
$84.8 million from $506.6 million as of March 31, 2007. During the quarter
ended December 31, 2007 financing activities used cash in the amount of
$10.1 million, which was primarily due to dividend payments of $5.9 million
and the purchase of common shares related to Canaccord's LTIP of $5.0 million.
Investing activities used cash in the amount of $2.1 million for the purchase
of equipment and leasehold improvements. Operating activities provided cash in
the amount of $105.7 million for the quarter, which was due to net change in
non-cash working capital items, net income and items not affecting cash.
    Canaccord's business requires capital for operating and regulatory
purposes. The majority of 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.
    The addition of subordinated debt at the end of fiscal 2007 provides
additional regulatory capital to support business activities across our global
platform. Subordinated debt supports regulatory capital in our operating
subsidiaries. Therefore, this addition of leverage to our balance sheet
supports our ongoing growth initiatives.
    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 December 31, 2007.

    
    -------------------------------------------------------------------------
                Contractual obligation payments due by period

                                                Fiscal     Fiscal
                                                2010 -     2012 -
    (C$ in                           Fiscal     Fiscal     Fiscal
     thousands)            Total       2009       2011       2013  Thereafter
    -------------------------------------------------------------------------
    Premises and
     equipment
     operating leases   $163,142    $20,814    $38,518    $32,833    $70,977
    -------------------------------------------------------------------------


    Outstanding share data
    -------------------------------------------------------------------------
                                        Outstanding shares as of December 31
    -------------------------------------------------------------------------
                                                     2007            2006
    -------------------------------------------------------------------------
    Issued shares excluding unvested shares(1)    44,191,145      46,320,542
    Issued shares outstanding(2)                  47,835,051      47,831,203
    Diluted shares(3)                             49,095,816      48,045,762
    Average shares outstanding - basic            44,670,881      46,273,768
    Average shares outstanding - diluted(4)       48,420,575      48,045,762
    -------------------------------------------------------------------------
    (1) Excludes 2,390,540 unvested shares that are outstanding relating to
        share purchase loans for recruitment and retention programs and
        1,253,366 unvested shares purchased by employee benefit trust for the
        LTIP.
    (2) Includes 2,390,540 unvested shares that are outstanding relating to
        share purchase loans for recruitment and retention programs and
        1,253,366 unvested shares purchased by employee benefit trust for the
        LTIP.
    (3) Includes dilutive earned shares under our stock-based compensation
        plans.
    (4) This is the diluted share number used to calculate diluted EPS.
    

    At December 31, 2007 Canaccord had 47,835,051 common shares issued and
outstanding, an increase of 3,848 common shares from December 31, 2006 due to
the net effect of shares issued and shares cancelled.
    The Company renewed its normal course issuer bid (NCIB) and is entitled
to acquire, from December 31, 2007 to December 30, 2008, up to 2,391,753 of
its shares, which represent 5% of its shares outstanding as of December 21,
2007. There were no share transactions under the NCIB between March 31, 2007
and December 31, 2007.  However, the employee benefit trust has purchased
1,253,366 shares for the LTIP, and the Company, through wholly owned
subsidiaries, acquired 79,149 shares in exempt offers to former employees in
accordance with pre-existing contractual agreements; and the Company acquired
6,121 shares as an adjustment of the consideration for the acquisition of
Adams Harkness Financial Group, Inc., which reduced the number of shares
allowable under the NCIB to 1,053,244.
    On January 3, 2006 Canaccord completed the acquisition of Adams Harkness
Financial Group, Inc., which was a privately held Boston-based institutional
investment bank. The consideration consisted of US$8.0 million in cash and the
issuance of 1,342,696 common shares from treasury valued at US$12.0 million.
On closing, these shares were delivered into escrow, subject to annual
releases of one-third per year beginning on June 30, 2006 and ending on
June 30, 2008.
    In connection with the acquisition of Adams Harkness Financial Group,
Inc. a retention plan was established, which provides for the issuance of up
to 1,118,952 common shares after a three-year vesting period ending on
December 31, 2008. The total number of shares to be vested is also based on
revenue earned by Canaccord Adams Inc. subsequent to the date of acquisition.
The aggregate number of common shares that will vest and will therefore be
issued at the end of the vesting period will be the number that is equal to
the revenue earned by Canaccord Adams Inc. during the vesting period, divided
by US$250.0 million, multiplied by the number of common shares subject to the
retention plan (804,012 common shares after forfeitures as of December 31,
2007). As such 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.

    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 December 31, 2007 forward contracts outstanding to sell US dollars had a
notional amount of US$7.0 million, down from US$12.9 million a year ago.
Forward contracts outstanding to buy US dollars had a notional amount of
US$11.0 million, up from US$2.5 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.

    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 consolidated financial statements for the
year ended March 31, 2007. 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 held, 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 market value recorded are reasonable.

    ABCP fair value adjustment
    --------------------------
    The third party asset-backed commercial paper (ABCP) last traded on an
active market on August 13, 2007 and there are currently no market quotations
available for this ABCP. The Montreal Proposal was unveiled in August by a
group of major financial institutions, spearheaded by the Caisse de depot et
placement du Quebec.
    Subsequently, on September 6, 2007 we announced our support for the Pan-
Canadian Investors Committee for ABCP, with Canaccord participating on the
committee. This committee has convened to seek options for the equitable
restructuring of ABCP conduits. The committee includes investors who were
signatories to the Montreal Proposal plus other significant holders.
    On December 23, 2007, a comprehensive restructuring of the ABCP was
agreed to in principle. The approval of the restructuring is subject to votes
by all investors, and is anticipated to close by March 2008. The Company
believes the majority of its ABCP holdings will be eligible for restructuring.
    At December 31, 2007, Canaccord held as principal ABCP with a par value
of $43.2 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. As it matured, the ABCP did not settle as a
result of liquidity issues in the ABCP market. The ABCP in which the Company
has invested continues to be rated R1 (High, Under Review with Developing
Implications) by DBRS.
    There is a significant amount of uncertainty in estimating the amount and
timing of cash flows associated with the ABCP. The Company estimates the fair
value of its ABCP by discounting expected future cash flows 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.
    The ABCP was classified as held for trading on initial adoption of
Section 3855. An adjustment of $4.2 million and $8.6 million has been recorded
for the three and nine months ended December 31, 2007 to reflect the lack of
liquidity in the ABCP market. The adjustment of $4.2 million for the three
months ended December 31, 2007 reflects changes in market conditions. As a
result of the proposed restructuring, the Company has also concluded that the
most probable outcome is that the ABCP will not be realized within a year and
has accordingly reclassified the ABCP from securities owned to long-term
investments.

    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.

    Recent accounting pronouncements

    The CICA has issued a new accounting standard, Section 1535, "Capital
Disclosures", which establishes standards for disclosing qualitative and
quantitative information about an entity's capital and how it is managed. This
new standard applies to interim and annual financial statements relating to
fiscal years beginning on or after October 1, 2007. The Company will adopt
Section 1535 effective April 1, 2008.
    In addition, the CICA issued two accounting standards related to the
disclosure and presentation of financial instruments. CICA Handbook Section
3862, "Financial Instruments - Disclosure" and CICA Handbook Section 3863,
"Financial Instruments - Presentation" apply to interim and annual financial
statements relating to fiscal years beginning on or after October 1, 2007. The
Company will adopt these new standards effective April 1, 2008.

    Retention plans

    Stock-based compensation

    In connection with the acquisition of Enermarket Solutions Ltd.,
Canaccord agreed to issue common shares to key employees of Enermarket and its
senior management over two years. These shares have all been issued as of
December 31, 2007. Similarly, in connection with the acquisition of Adams
Harkness Financial Group, Inc., Canaccord agreed to issue common shares to
certain key employees of Adams Harkness upon the expiry of a three-year
vesting period with the numbers of common shares to be adjusted in the event
that certain revenue targets are not achieved.

    Long term incentive plan

    The long term incentive plan (LTIP) is a new plan implemented in the
first quarter of fiscal 2008. Under the LTIP eligible participants are awarded
restricted share units which vest over three years.

    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.

    Changes in accounting policies

    On April 1, 2007 the Company adopted the provisions of CICA Handbook
Section 3855, "Financial Instruments - Recognition and Measurement", CICA
Handbook Section 3865, "Hedges" and CICA Handbook Section 1530, "Comprehensive
Income".

    Financial Instruments - Recognition and Measurement

    Section 3855 prescribes the recognition and measurement of financial
instruments. It requires all financial assets and liabilities (including
derivatives) to be measured at fair value on initial recognition except for
certain related-party transactions. Measurement in subsequent periods depends
on the classification of the instruments. All financial instruments must be
classified as one of the following: held for trading, held to maturity, loans
and receivables, available for sale assets, and other.
    The financial assets categorized as held for trading are measured at fair
value with unrealized gains and losses recognized in net income. Section 3855
permits an entity to designate any financial instrument as held for trading on
initial recognition or adoption of this standard even if that instrument would
not otherwise meet the definition of held for trading as specified in Section
3855. The Company's financial instruments classified as held for trading
include commercial paper and bankers' acceptances, marketable securities owned
and sold short, forward contracts and broker warrants. The Company has
historically measured these instruments at fair value and any unrealized gains
and losses have been included in income. The Company's accounting treatment of
these instruments remains unchanged as a result of adoption of the new
accounting standards.
    Available for sale financial assets are measured at fair value with
unrealized gains and losses recognized in other comprehensive income. The
Company's investment to develop a new Alternative Trading System has been
classified as available for sale. The investment has been carried at cost as
there is no available quoted market price in an active market.
    The financial assets classified as loans and receivables and held to
maturity are measured at amortized cost. There is no change in accounting
treatment for these financial instruments as a result of adoption of Section
3855.

    Hedges

    Section 3865 sets out the criteria of when hedge accounting is applied
and how it is applied. It provides the option of designating qualifying
transactions as hedges for accounting purposes. The qualifying hedging
relationships include fair value hedges, cash flow hedges and hedges of
foreign currency exposures of net investments in self-sustaining foreign
operations. The changes in the fair value of the hedging derivatives will be
recognized in net earnings or other comprehensive income depending on the
nature of the hedging relationships. Any gains and losses resulting from any
ineffectiveness in hedging relationships are recognized in net income
immediately. The Company does not currently apply hedge accounting and as a
result Section 3865 does not apply to the Company at this time.

    Comprehensive Income

    Section 1530 establishes standards for the reporting and disclosure of
other comprehensive income (OCI) in a new category, Accumulated Other
Comprehensive Income (Losses), which will be added to shareholders' equity on
the consolidated balance sheet. Comprehensive income includes all changes in
equity of the Company during a period except those resulting from investments
by shareholders and distributions to shareholders. The major components
included in Accumulated Other Comprehensive Income (Losses) are unrealized
gains and losses on financial assets classified as available for sale, and
unrealized foreign exchange gains and losses arising on translation of the
financial statements of self-sustaining foreign operations.
    As a result of adopting Section 1530, the Company has disclosed the OCI
in a new category, Accumulated Other Comprehensive Income (Losses), which has
been added to shareholders' equity on the consolidated balance sheet. The OCI
comprises the cumulative translation adjustment arising on the translation of
the financial statements of self-sustaining foreign operations. The Company
has reclassified $6.3 million of cumulative translation adjustments to the
opening balance of Accumulated Other Comprehensive Income (Losses).

    Controls and procedures

    Disclosure controls and procedures

    Canaccord's management, including the 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 December 31, 2007 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, capital
requirements and such other factors as the Board determines to be relevant.

    Dividend declaration

    For the third quarter of fiscal 2008, the Board of Directors approved a
quarterly dividend of $0.125 per share. Dividends are payable on March 10,
2008 to shareholders of record on February 22, 2008. The common share dividend
payment to common shareholders will total approximately $5.8 million or about
38.7% of third quarter net income. Canaccord intends to pay a $0.125 regular
quarterly common share dividend for each quarter in fiscal 2008.

    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 December 31, 2007.
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 EPS             Fiscal 2008            Fiscal 2007
    in $)                                 -----------            -----------
    -------------------------------------------------------------------------
                                      Q3       Q2       Q1       Q4       Q3
    -------------------------------------------------------------------------
    Revenue
      Canaccord Adams            109,583   87,925  155,023  130,151  101,427
      Private Client Services     61,166   57,415   76,083  $75,876   68,831
      Corporate and Other         12,605    9,130   14,764   10,416    8,055
    -------------------------------------------------------------------------
    Total revenue                183,354  154,470  245,870  216,443  178,313
    Net income                    15,048   12,411   39,029   26,016   23,692
    EPS - basic                     0.34     0.28     0.86     0.57     0.51
    EPS - diluted                   0.31     0.26     0.80     0.54     0.49
    -------------------------------------------------------------------------


    ----------------------------------------------------------------
    (C$ thousands, except EPS         Fiscal 2007       Fiscal 2006
    in $)                             -----------       -----------
    ----------------------------------------------------------------
                                      Q2       Q1       Q4       Q3
    ----------------------------------------------------------------
    Revenue
      Canaccord Adams             93,033  125,106  120,243   98,918
      Private Client Services     55,626   72,286   78,422   54,731
      Corporate and Other          7,372    8,735    8,409    5,021
    ----------------------------------------------------------------
    Total revenue                156,031  206,127  207,074  158,670
    Net income                    17,806   25,942   30,070   24,248
    EPS - basic                     0.39     0.57     0.66     0.55
    EPS - diluted                   0.37     0.54     0.63     0.52
    ----------------------------------------------------------------
    

    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 risks, 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.

    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 financial statements in Canaccord's
2007 Annual Report, which are available on our Web site at
canaccord.com/investor and on SEDAR at sedar.com.

    
    Interim Consolidated Financial Statements

    Canaccord Capital Inc.
    Unaudited
    For the three and nine months ended December 31, 2007
    (Expressed in Canadian dollars)


                           Canaccord Capital Inc.

               INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited)


                                            (in thousands of dollars)
    As at                            December 31,     March 31,  December 31,
                                           2007          2007          2006
                                             $             $             $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents            421,783       506,640       371,525
    Securities owned, at market
     (note 3)                            164,388       348,764       146,030
    Accounts receivable
     (notes 5 and 12)                  1,260,869     1,672,035     1,204,371
    Income taxes recoverable               2,758             -             -
    -------------------------------------------------------------------------
    Total current assets               1,849,798     2,527,439     1,721,926
    Investment (note 6)                    5,000             -             -
    Investment in asset-backed
     commercial paper (note 7)            34,501             -             -
    Equipment and leasehold
     improvements                         39,939        37,549        33,566
    Future income taxes                   10,630        11,021        11,782
    Goodwill and other intangible
     assets (note 8)                      32,873        33,933        26,869
    -------------------------------------------------------------------------
                                       1,972,741     2,609,942     1,794,143
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Securities sold short, at market
     (note 3)                             96,383        41,176        54,467
    Accounts payable and accrued
     liabilities (notes 5 and 12)      1,461,130     2,156,540     1,380,767
    Income taxes payable                       -        15,035         3,681
    Subordinated debt (note 9)            25,000        25,000             -
    -------------------------------------------------------------------------
    Total current liabilities          1,582,513     2,237,751     1,438,915
    -------------------------------------------------------------------------
    Commitments and contingencies
     (note 14)
    Shareholders' equity
    Share capital (note 10)              141,370       156,296       159,520
    Retained earnings                    263,571       213,659       192,425
    Accumulated other comprehensive
     income (losses) (note 2)            (14,713)        2,236         3,283
    -------------------------------------------------------------------------
    Total shareholders' equity           390,228       372,191       355,228
    -------------------------------------------------------------------------
                                       1,972,741     2,609,942     1,794,143
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


                           Canaccord Capital Inc.

    INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

                                             (in thousands of dollars,
                                             except per share amounts)
                                        For the three         For the nine
                                         months ended         months ended
                                   --------------------- --------------------
                                    December   December   December   December
                                    31, 2007   31, 2006   31, 2007   31, 2006
                                      $          $          $          $
    ---------------------------------------------------- --------------------

    REVENUE
    Commission                       74,959     74,380    226,462    215,990
    Investment banking               84,910     78,177    287,266    251,135
    Principal trading                   387      9,035      3,275     22,209
    Interest                         16,011     14,355     48,594     42,252
    Other                             7,087      2,366     22,496      8,885
    ---------------------------------------------------- --------------------
                                    183,354    178,313    588,093    540,471
    ---------------------------------------------------- --------------------

    EXPENSES
    Incentive compensation           90,778     89,466    283,600    269,395
    Salaries and benefits            12,658     11,610     39,576     34,746
    Trading costs                     7,054      6,056     21,261     20,734
    Premises and equipment            5,781      5,810     16,775     17,561
    Communication and technology      5,611      5,352     17,163     15,802
    Interest                          6,574      4,926     19,155     15,310
    General and administrative       17,390     14,413     51,416     47,807
    Amortization                      2,197      1,797      6,320      6,152
    Development costs                 6,774      5,247     22,113     14,903
    Asset-backed commercial paper
     fair value adjustment (note 7)   4,226          -      8,625          -
    ---------------------------------------------------- --------------------
                                    159,043    144,677    486,004    442,410
    ---------------------------------------------------- --------------------
    Income before income taxes       24,311     33,636    102,089     98,061
    Income tax expense (recovery)
      Current                        10,395      8,973     37,775     31,634
      Future                         (1,132)       971     (2,174)    (1,013)
    ---------------------------------------------------- --------------------
                                      9,263      9,944     35,601     30,621
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------
    Net income for the period        15,048     23,692     66,488     67,440
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    Basic earnings per share
     (note 10 (vi))                    0.34       0.51       1.49       1.46
    Diluted earnings per share
     (note 10 (vi))                    0.31       0.49       1.37       1.40
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    See accompanying notes


                           Canaccord Capital Inc.

                INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN
                      SHAREHOLDERS' EQUITY (Unaudited)


    As at and for the nine months           (in thousands of dollars)
     ended December 31, 2007         December 31,     March 31,  December 31,
     and 2006 and for the year             2007          2007          2006
     ended March 31, 2007                    $             $             $
    -------------------------------------------------------------------------

    Common shares, opening               147,900       152,705       152,705
    Shares issued                            495           194           122
    Shares cancelled                        (127)          (45)          (23)
    Acquisition of common shares for
     long term incentive plan
     (note 11)                           (23,335)            -             -
    Unvested share purchase loans         (9,285)       (4,954)        1,759
    -------------------------------------------------------------------------
    Common shares, closing               115,648       147,900       154,563
    -------------------------------------------------------------------------

    Contributed surplus, opening           8,396         4,939         4,939
    Excess on redemption of common
     shares (note 10(iii))                  (369)          (38)          (38)
    Excess (shortfall) on distribution
     of acquired common shares
     (note 10 (v))                           (29)        1,623         1,623
    Stock-based compensation (note 11)    14,841             -             -
    Unvested share purchase loans          2,883         1,872        (1,567)
    -------------------------------------------------------------------------
    Contributed surplus, closing          25,722         8,396         4,957
    -------------------------------------------------------------------------
    Share capital                        141,370       156,296       159,520
    -------------------------------------------------------------------------

    Retained earnings, opening           213,659       136,463       136,463
    Net income for the period             66,488        93,456        67,440
    Cash dividends                       (16,576)      (16,260)      (11,478)
    -------------------------------------------------------------------------
    Retained earnings, closing           263,571       213,659       192,425
    -------------------------------------------------------------------------

    Accumulated other comprehensive
     income (losses), opening              2,236        (6,277)       (6,277)
    Other comprehensive income (loss)    (16,949)        8,513         9,560
    -------------------------------------------------------------------------
    Accumulated other comprehensive
     income (losses), closing            (14,713)        2,236         3,283
    -------------------------------------------------------------------------

    Shareholders' equity                 390,228       372,191       355,228
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



           INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (Unaudited)

                                            (in thousands of dollars)
                                        For the three         For the nine
                                         months ended         months ended
                                   --------------------- --------------------
                                    December   December   December   December
                                    31, 2007   31, 2006   31, 2007   31, 2006
                                      $          $          $          $
                                   --------------------- --------------------
    Net income for the period        15,048     23,692     66,488     67,440
    Other comprehensive income
     (loss), net of taxes
      Net change in unrealized
       gains (losses) on
       translation of
       self-sustaining foreign
       operations                    (3,149)     8,242    (16,949)     9,560
    -------------------------------------------------------------------------
    Comprehensive income for the
     period                          11,899     31,934     49,539     77,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



                           Canaccord Capital Inc.

          INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                                             (in thousands of dollars)
                                        For the three         For the nine
                                         months ended         months ended
                                   --------------------- --------------------
                                    December   December   December   December
                                    31, 2007   31, 2006   31, 2007   31, 2006
                                      $          $          $          $
    ---------------------------------------------------- --------------------
    OPERATING ACTIVITIES
    Net income for the period        15,048     23,692     66,488     67,440
    Items not affecting cash
      Amortization                    2,197      1,797      6,320      6,152
      Future income tax expense
       (recovery)                    (1,132)       971     (2,174)    (1,013)
      Stock option expense               41          -        123          -
    Changes in non-cash working
     capital
      Decrease (increase) in
       securities owned              28,165    (25,299)   148,239     58,128
      Decrease in accounts
       receivable                   521,844     13,274    366,895    396,218
      Increase in securities sold
       short                         47,602     28,529     55,216     17,298
      Increase (decrease) in
       accounts payable and
       accrued liabilities         (504,737)    14,772   (631,797)  (513,239)
      Increase (decrease) in
       income taxes payable          (3,322)     1,674    (15,710)   (12,694)
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------
    Cash provided by (used in)
     operating activities           105,706     59,410     (6,400)    18,290
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    FINANCING ACTIVITIES
    Issuance of shares                   48        122        495        122
    Decrease (increase) in
     unvested common share
     purchase loans                   1,214     (1,879)    (6,402)      (489)
    Redemption of share capital        (497)       (61)      (497)       (61)
    Acquisition of common shares
     for long term incentive plan    (5,040)         -    (23,335)         -
    Dividends paid                   (5,856)    (3,826)   (16,576)   (11,478)
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------
    Cash used in financing
     activities                     (10,131)    (5,644)   (46,315)   (11,906)
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    INVESTING ACTIVITIES
    Purchase of equipment and
     leasehold improvements          (2,116)    (8,608)    (9,506)   (13,046)
    Acquisition of investment             -          -     (5,000)         -
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------
    Cash used in investing
     activities                      (2,116)    (8,608)   (14,506)   (13,046)
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    Effect of foreign exchange on
     cash balances                   (3,226)    10,484    (17,636)    12,364
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    Increase (decrease) in cash
     position                        90,233     55,642    (84,857)     5,702
    Cash position, beginning of
     period                         331,550    315,883    506,640    365,823
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------
    Cash position, end of period    421,783    371,525    421,783    371,525
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    Supplemental cash flow
     information
    Interest paid                     6,579      4,897     19,130     15,181
    Income taxes paid                13,458      3,927     54,334     38,608
    ---------------------------------------------------- --------------------
    ---------------------------------------------------- --------------------

    See accompanying notes
    

    Through its principal subsidiaries, Canaccord Capital Inc. (the
"Company") is a leading independent, full-service investment dealer in Canada
with capital markets operations in the United Kingdom and the United States of
America. The Company has operations in each of the two principal segments of
the securities industry: private client services and capital markets.
Together, these operations offer a wide range of complementary investment
products, brokerage services and investment banking services to the Company's
private, institutional and corporate clients.
    The Company's business is cyclical and experiences considerable
variations in revenue and income from quarter to quarter and year to year due
to factors beyond the Company'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.


    
    1. SIGNIFICANT ACCOUNTING POLICIES

    Basis of presentation and principles of consolidation

    These interim unaudited consolidated financial statements have been
    prepared by the Company in accordance with Canadian generally accepted
    accounting principles ("GAAP") with respect to interim financial
    statements, applied on a consistent basis. These interim unaudited
    consolidated financial statements follow the same accounting principles
    and methods of application as those disclosed in Note 1 to the Company's
    audited consolidated financial statements as at and for the year ended
    March 31, 2007 ("Audited Annual Consolidated Financial Statements").
    Accordingly, they do not include all the information and footnotes
    required for compliance with Canadian GAAP for annual financial
    statements. These interim unaudited consolidated financial statements and
    notes thereon should be read in conjunction with the Audited Annual
    Consolidated Financial Statements.

    The preparation of these interim unaudited consolidated financial
    statements and the accompanying notes requires management to make
    estimates and assumptions that affect the amounts reported. In the
    opinion of management, these interim unaudited consolidated financial
    statements reflect all adjustments necessary to state fairly the results
    for the periods presented. Actual results could vary from these estimates
    and the operating results for the interim periods presented are not
    necessarily indicative of results that may be expected for the full year.

    Consolidation of variable interest entities

    The Company consolidates variable interest entities ("VIEs") in
    accordance with the guidance provided by the Canadian Institute of
    Chartered Accountants ("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 (Note 11) 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.

    Recent accounting pronouncements

    The CICA has issued a new accounting standard, Section 1535 "Capital
    Disclosures", which establishes standards for disclosing qualitative and
    quantitative information about an entity's capital and how it is managed.
    This new standard applies to interim and annual financial statements
    relating to fiscal years beginning on or after October 1, 2007. The
    Company will adopt Section 1535 effective April 1, 2008.

    In addition, the CICA issued two accounting standards related to the
    disclosure and presentation of financial instruments. CICA Handbook
    Section 3862 "Financial Instruments - Disclosure" and CICA Handbook
    Section 3863 "Financial Instruments - Presentation" apply to interim and
    annual financial statements relating to fiscal years beginning on or
    after October 1, 2007. The Company will adopt these new standards
    effective April 1, 2008.

    2. CHANGE IN ACCOUNTING POLICIES

    On April 1, 2007 the Company adopted the provisions of CICA Handbook
    Section 3855 "Financial Instruments - Recognition and Measurement", CICA
    Handbook Section 3865 "Hedges" and CICA Handbook Section 1530
    "Comprehensive Income".

    Financial Instruments - Recognition and Measurement

    This standard prescribes the recognition and measurement of financial
    instruments. Section 3855 requires that all financial assets and
    liabilities (including derivatives) be measured at fair value on initial
    recognition except for certain related party transactions. Measurement in
    subsequent periods depends on the classification of the instruments. All
    financial instruments must be classified as one of the following
    categories: held for trading, held to maturity, loans and receivables,
    available for sale assets and other liabilities.

    The financial assets categorized as held for trading are measured at fair
    value with unrealized gains and losses recognized in net income. Section
    3855 permits an entity to designate any financial instruments as held for
    trading on initial recognition or adoption of this standard even if that
    instrument would not otherwise meet the definition of held for trading as
    specified in Section 3855. The Company's financial instruments classified
    as held for trading include commercial paper and bankers' acceptances,
    marketable securities owned and sold short, forward contracts and broker
    warrants. The Company has historically measured these instruments at fair
    value and any unrealized gains and losses had been included in income.
    Consequently, the Company's accounting treatment of these instruments
    remains unchanged as a result of adoption of the new accounting
    standards.

    Available for sale financial assets are measured at fair value with
    unrealized gains and losses recognized in other comprehensive income. The
    Company's investment (Note 6) has been classified as available for sale.
    The investment has been carried at cost as there is no available quoted
    market price in an active market.

    The financial assets and liabilities classified as loans and receivables,
    held to maturity and other liabilities are measured at amortized cost.
    There is no change in accounting treatment for these financial
    instruments as a result of adoption of Section 3855.

    Hedges

    This standard sets out the criteria of when hedge accounting is applied
    and how it is applied. It provides the option of designating qualifying
    transactions as hedges for accounting purposes. The qualifying hedging
    relationships include fair value hedges, cash flow hedges and hedges of
    foreign currency exposures of net investments in self-sustaining foreign
    operations. The changes in the fair value of the hedging derivatives will
    be recognized in net earnings or other comprehensive income depending on
    the nature of the hedging relationships. Any gains and losses resulting
    from any ineffectiveness in hedging relationships are recognized in net
    income immediately. The Company does not currently apply hedge accounting
    and as a result Section 3865 does not apply to the Company at this time.

    Comprehensive Income

    This section establishes standards for the reporting and disclosure of
    other comprehensive income ("OCI") in a new category, Accumulated Other
    Comprehensive Income (Losses), which will be included in shareholders'
    equity on the consolidated balance sheet. Comprehensive income includes
    all changes in equity of the Company during a period except those
    resulting from investments by shareholders and distributions to
    shareholders. The major components included in Accumulated Other
    Comprehensive Income (Losses) are unrealized gains and losses on
    financial assets classified as available for sale, and unrealized foreign
    exchange gains and losses arising on translation of the financial
    statements of self-sustaining foreign operations.

    As a result of adopting Section 1530, the Company has disclosed the OCI
    in a new category, Accumulated Other Comprehensive Income (Losses), which
    has been included in shareholders' equity on the consolidated balance
    sheet. The OCI is comprised of the cumulative translation adjustment
    arising on the translation of the financial statements of self-sustaining
    foreign operations. The Company has reclassified $6.3 million of
    cumulative translation adjustments to the opening balance of Accumulated
    Other Comprehensive Income (Losses).


    3. SECURITIES OWNED AND SECURITIES SOLD SHORT

                  December 31, 2007     March 31, 2007    December 31, 2006
                 ------------------- ------------------- -------------------
                              Secur-              Secur-              Secur-
                    Secur-    ities     Secur-    ities     Secur-    ities
                    ities     sold      ities     sold      ities     sold
                    owned     short     owned     short     owned     short
                      $         $         $         $         $         $
    -------------------------------------------------------------------------
    Corporate and
     government
     debt           98,274    84,484    23,786     5,313    50,438    39,484
    Equities and
     convertible
     debentures     66,114    11,899   324,978    35,863    95,592    14,983
    -------------------------------------------------------------------------
                   164,388    96,383   348,764    41,176   146,030    54,467
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at December 31, 2007, corporate and government debt maturities range
    from 2008 to 2054 (March 31, 2007 - 2007 to 2054 and December 31, 2006 -
    2007 to 2037) and bear interest ranging from 2.85% to 11.60% (March 31,
    2007 - 2.75% to 11.50% and December 31, 2006 - 2.60% to 11.50%).

    The security positions are classified as held for trading under CICA
    Handbook Section 3855 "Financial Instruments - Recognition and
    Measurement". Unrealized gains and losses are included in net income in
    the period incurred.

    At December 31, 2007, the Company reclassified third party asset-backed
    commercial paper ("ABCP") with a par value of $43.2 million and a fair
    value of $34.5 million from securities owned to long-term investment
    (Note 7) based on management's assessment of current market conditions.

    4. FOREIGN EXCHANGE RISK

    Foreign exchange risk arises from the possibility that changes in the
    price of foreign currencies will result in losses. The Company
    periodically trades certain foreign exchange contracts to manage and
    hedge foreign exchange risk on pending settlements in foreign currencies.
    As the Company does not currently apply hedge accounting, these contracts
    are classified as held for trading.  Consequently, realized and
    unrealized gains and losses related to these contracts are recognized in
    income during the year.

    Forward contracts outstanding at December 31, 2007:

               Notional amounts   Average price                Fair value
               (millions of USD)    (CAD/USD)    Maturity   (millions of USD)
    -------------------------------------------------------------------------
    To sell
     US dollars      $7.00            $0.99     January 3,        $0.1
                                                  2008
    To buy
     US dollars     $11.00            $0.99     January 3,       ($0.1)
                                                  2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Forward contracts outstanding at March 31, 2007:

               Notional amounts   Average price                Fair value
               (millions of USD)    (CAD/USD)    Maturity   (millions of USD)
    -------------------------------------------------------------------------
    To sell
     US dollars     $12.90            $1.16      April 30,        $0.1
                                                   2007
    To buy
     US dollars     $ 2.50            $1.16       April 3,       ($0.1)
                                                   2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Forward contracts outstanding at December 31, 2006:

               Notional amounts   Average price                Fair value
               (millions of USD)    (CAD/USD)    Maturity   (millions of USD)
    -------------------------------------------------------------------------
    To sell
     US dollars     $ 5.25            $1.16     January 2,        $0.1
                                                  2007
    To buy
     US dollars     $ 8.00            $1.16     January 3,       ($0.1)
                                                  2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
    Accounts receivable
                                       December 31,   March 31,  December 31
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------
    Brokers and investment dealers         383,120      571,461      384,328
    Clients                                499,739      694,123      459,522
    RRSP cash balances held in trust       331,902      349,932      318,661
    Other                                   46,108       56,519       41,860
    -------------------------------------------------------------------------
                                         1,260,869    1,672,035    1,204,371
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable and accrued liabilities

                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------
    Brokers and investment dealers         391,091      442,828      347,127
    Clients                                902,226    1,212,464      877,284
    Other                                  167,813      501,248      156,356
    -------------------------------------------------------------------------
                                         1,461,130    2,156,540    1,380,767
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable to clients include $331.9 million (March 31, 2007 -
    $349.9 million and December 31, 2006 - $318.7 million) payable to clients
    for RRSP cash balances held in trust.

    Client security purchases are entered into on either a cash or a margin
    basis. In the case of a margin account, the Company extends a loan to a
    client for the purchase of securities, using securities purchased and/or
    other securities in the client's account as collateral. Amounts loaned to
    any client are limited by margin regulations of the Investment

    Dealers Association of Canada and other regulatory authorities and are
    subject to the Company's credit review and daily monitoring procedures.

    Amounts due from and to clients are due by the settlement date of the
    trade transaction. Margin loans are due on demand and are collateralized
    by the assets in the client accounts. Interest on margin loans and
    amounts due to clients is based on a floating rate (December 31, 2007 -
    8.00% - 9.25% and 1.13%-3.00%, respectively; March 31, 2007 - 8.00%-
    10.25% and 2.27%-3.00%, respectively; and December 31, 2006 - 8.00% -
    10.25% and 2.25% -3.00%, respectively).

    6. INVESTMENT

                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------
    Available for sale                       5,000            -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company has invested $5 million in a limited partnership as part of
    its initiative to develop a new Alternative Trading System.  The
    investment is carried at cost as there is no available quoted market
    price in an active market.

    7. INVESTMENT IN ASSET- BACKED COMMERCIAL PAPER

                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------
    Investment in asset-backed
     commercial paper                       34,501            -            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    At December 31, 2007 the Company held ABCP with a par value of
    $43.2 million and a fair value of $34.5 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 and no market quotations are currently available. The ABCP
    in which the Company has invested continues to be rated R1 (High, Under
    Review with Developing Implications) by DBRS.

    On December 23, 2007, a comprehensive restructuring of the ABCP was
    agreed to in principle between all parties. The approval of the
    restructuring is subject to votes by all investors, and is anticipated to
    close in March 2008. The Company believes the majority of its ABCP
    holdings will be eligible for restructuring.

    There is a significant amount of uncertainty in estimating the amount and
    timing of cash flows associated with the ABCP. The Company estimates the
    fair value of its ABCP by discounting expected future cash flows
    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.

    The ABCP was classified as held for trading on initial adoption of
    Section 3855. An adjustment of $4.2 million and $8.6 million has been
    recorded for the three and nine months ended December 31, 2007 to reflect
    the lack of liquidity in the ABCP market. The additional adjustment of
    $4.2 million for the three months ended December 31, 2007 reflects
    changes in market conditions. As a result of the proposed
    restructuring, the Company has also concluded that the most probable
    outcome is that the ABCP will not be realized within a year and has
    accordingly reclassified the ABCP from securities owned to long-term
    investments.

    8. GOODWILL AND OTHER INTANGIBLE ASSETS

                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------

    Goodwill                                30,070       30,070       22,653
    -------------------------------------------------------------------------

    Other intangible assets
      Balance at beginning of period         3,863        5,276        5,276
      Amortization                           1,060        1,413        1,060
    -------------------------------------------------------------------------
      Balance at end of period               2,803        3,863        4,216
    -------------------------------------------------------------------------
                                            32,873       33,933       26,869
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other intangible assets reflect assigned values related to acquired brand
    names, customer relationships and technology and are amortized on a
    straight-line basis over their estimated useful life of four years.
    Goodwill and other intangible assets relate to the Canaccord Adams
    operating segment.

    In March 2007, the Company completed its assessment of the net assets
    acquired in connection with the purchase price allocation for the
    acquisition of Adams Harkness Financial Group, Inc. in January 2006, and
    goodwill was increased to $30.1 million to reflect finalization of the
    fair value assessment of future income tax benefits.

    9. SUBORDINATED DEBT

                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------

    Loan payable, interest payable
     monthly at prime + 2% per annum,
     due on demand                          25,000       25,000            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The loan payable is subject to a subordination agreement and may only be
    repaid with the prior approval of the Investment Dealers Association of
    Canada.

    10. SHARE CAPITAL
                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------
    Share capital
      Common shares                        173,799      173,431      173,381
      Unvested share purchase loans        (34,816)     (25,531)     (18,818)
      Acquisition of common shares for
       long term incentive plan (note 11)  (23,335)           -            -
    Contributed surplus                     25,722        8,396        4,957
    -------------------------------------------------------------------------
                                           141,370      156,296      159,520
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Share capital of Canaccord Capital Inc. is comprised of the following:

    (i) Authorized

    Unlimited common shares without par value
    Unlimited preferred shares without par value

    (ii) Issued and fully paid

    Common shares
                                                      Number of       Amount
                                                         shares          $
    -------------------------------------------------------------------------
    Balance, December 31, 2006                       47,831,203      173,381
    Shares issued in connection with stock
     compensation plans (note 11)                         6,879           72
    Shares cancelled                                     (6,121)         (22)
    -------------------------------------------------------------------------
    Balance, March 31, 2007                          47,831,961      173,431
    Shares issued for cash                               25,000          350
    Shares issued in connection with stock
     compensation plan (note 11)                         13,217          145
    Shares cancelled                                    (35,127)        (127)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, December 31, 2007                       47,835,051      173,799
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company renewed its normal course issuer bid ("NCIB") on December 24,
    2007 and is entitled to acquire from December 31, 2007 to December 30,
    2008, up to 2,391,753 of its shares, which represented 5% of its shares
    outstanding as of December 21, 2007. There were no share transactions
    under the NCIB between March 31, 2007 and December 31, 2007. However,
    the employee benefit trust purchased 1,253,366 shares for the long term
    incentive plan (Note 11) and the Company acquired 6,121 shares as an
    adjustment of the consideration for the acquisition of Adams Harkness
    Financial Group, Inc. and 79,149 shares in exempt offers to former
    employees in accordance with pre-existing contractual arrangements, which
    reduced the number of shares allowable under the NCIB to 1,053,244.

    (iii) Excess on redemption of common shares

    The excess on redemption of common shares represents amounts paid to
    shareholders, by the Company and its subsidiaries, on redemption of their
    shares in excess of the book value of those shares at the time of
    redemption. The excess on redemption of common shares has been charged
    against contributed surplus.

                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
    -------------------------------------------------------------------------
    Redemption price        497             61            497             61
    Book value              128             23            128             23
    -------------------------------------------------------------------------
    Excess on
     redemption of
     common shares          369             38            369             38
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (iv) Common share purchase loans

    The Company provides forgivable common share purchase loans to employees
    in order to purchase common shares. The unvested balance of forgivable
    common share purchase loans is presented as a deduction from share
    capital. The forgivable common share purchase loans are amortized over
    the vesting period. Contributed surplus includes the amortization of
    unvested forgivable common share purchase loans.

    (v) Distribution of acquired common shares

    In December 2007, the Company repurchased 79,149 common shares for
    $1.1 million from departed employees as settlement of the unvested
    portion of forgivable loans. A total of 44,022 common shares were
    subsequently distributed to existing employees at the market price of
    $14.01 per share for cash proceeds of $0.6 million. The shortfall on
    distribution of $29 has been charged against contributed surplus. The
    Company has cancelled the remaining 35,127 common shares.

    In December 2006, the Company repurchased 195,968 common shares for
    $1.9 million from departed employees as settlement of the unvested
    portion of forgivable loans. A total of 189,567 common shares were
    subsequently distributed to existing employees at the market price of
    $18.20 per share for cash proceeds of $3.5 million. The excess on
    distribution of $1.6 million has been credited to contributed surplus.
    The Company has cancelled the remaining 6,401 common shares.

    (vi) Earnings per share

                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
    -------------------------------------------------------------------------
    Basic earnings
     per share
    Net income for
     the period         $15,048        $23,692        $66,488        $67,440
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of
     common shares
     (number)        44,442,253     46,273,768     44,670,881     46,152,802
    Basic earnings
     per share            $0.34          $0.51          $1.49          $1.46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings
     per share
    Net income for
     the period         $15,048        $23,692        $66,488        $67,440
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of
     common shares
     (number)        44,442,253     46,273,768     44,670,881     46,273,768
    Dilutive effect
     of unvested
     shares (number)  2,390,540      1,557,435      2,390,540      1,557,435
    Dilutive effect
     of share
     issuance
     commitment
     in connection
     with retention
     plan (number)
     (note 11)          420,359        214,559        420,359        214,559
    Dilutive effect
     of unvested
     shares purchased
     by employee
     benefit trust
     (number)
     (note 11)        1,023,043              -        796,063              -
    Dilutive effect
     of share
     issuance
     commitment in
     connection with
     long term
     incentive plan
     (number)
     (note 11)           48,158              -        142,732              -
    -------------------------------------------------------------------------
    Adjusted weighted
     average number
     of common
     shares (number) 48,324,353     48,045,762     48,420,575     48,045,762
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings
     per share            $0.31          $0.49          $1.37          $1.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. STOCK-BASED COMPENSATION PLANS

    Retention plans

    As described in the Audited Annual Consolidated Financial Statements, the
    Company established two retention plans in connection with the
    acquisitions of Enermarket and Adams Harkness.

    The plan for Enermarket consisted of the issuance of up to 25,210 common
    shares of the Company over two years. The Company issued 10,254 common
    shares and 3,949 common shares under this plan in December 2006 and
    December 2007, respectively (Note 10(ii)). The remaining shares have been
    forfeited.

    The plan for Adams Harkness provides for the issuance of up to 1,118,952
    common shares of the Company after a three-year vesting period. The total
    number of shares which will vest is also based on revenue earned by
    Canaccord Adams Inc. during the vesting period. The aggregate number of
    common shares which vest will be that number which is equal to the
    revenue earned by Canaccord Adams Inc. during the vesting period divided
    by US$250.0 million multiplied by the number of common shares subject to
    the retention plan (804,012 common shares as of December 31, 2007 and
    1,004,750 common shares as of December 31, 2006). As such 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 diluted common
    shares outstanding (Note 10 (vi)). The Company has expensed $672 and
    $2,611 for the three and nine months ended December 31, 2007 ($517 and
    $1,670 for the three and nine months ended December 31, 2006). The
    Company issued 9,268 common shares for the nine months ended December 31,
    2007 and 6,879 common shares in February 2007 to employees who have
    ceased their employment in circumstances where the retention plan
    provides for a partial vesting of the shares awarded under the plan (Note
    10 (ii)). Under the fair value method the aggregate costs of the grants
    made under the Adams Harkness retention plan are estimated to be
    $11.7 million (US $10.0 million).

    The following table details the activity under the Company's retention
    plans and employee treasury stock purchase plan:


                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
    -------------------------------------------------------------------------
    Number of common
     shares subject
     to the
     Enermarket
     retention plan:
      Beginning of
       period            10,254         25,210         10,254         25,210
      Issued             (3,949)       (10,254)        (3,949)       (10,254)
      Adjustments
       and
       forfeitures       (6,305)        (4,200)        (6,305)        (4,200)
    -------------------------------------------------------------------------
      End of period           -         10,756              -         10,756
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Shares vested
       during the
       period             3,949         10,254          3,949         10,254
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Number of common
     shares subject
     to the Adams
     Harkness
     retention plan:
      Beginning of
       period           818,889      1,004,750        953,107      1,046,219
      Grants                  -              -              -         72,733
      Issued                  -              -         (9,268)             -
      Forfeitures       (14,877)             -       (139,827)      (114,202)
    -------------------------------------------------------------------------
      End of period     804,012      1,004,750        804,012      1,004,750
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Shares vested
       during the
       period                 -              -              -              -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Number of common
     shares subject
     to the
     employee
     treasury stock
     purchase plan:
      Beginning of
       period                 -        184,517              -        276,776
      Issued                  -              -              -        (92,259)
      Buyback                         (184,517)                     (184,517)
    -------------------------------------------------------------------------
      End of period           -              -              -              -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The costs of the retention plans have been recognized in the financial
    statements of the Company in accordance with the vesting terms of the
    respective plans.

    Stock options

    On May 16, 2007 the Company granted stock options to five independent
    directors. Each of the directors has been granted the option to purchase
    up to 25,000 common shares of the Company with an exercise price of
    $23.13 and a vesting period of four years. The term of the options is
    seven years. The fair value of the stock options has been estimated on
    grant date using the Black-Scholes option pricing model with the
    following assumptions:

                                        May 2007
                                           grant
    ---------------------------------------------
    Dividend yield                         1.80%
    Expected volatility                   30.00%
    Risk-free interest rate                4.25%
    Expected life                        5 years

    Compensation expense of $41 and $123 has been recognized for the three
    and nine months ended December 31, 2007.

    A summary of stock options outstanding is as follows:

                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
                   ----------------------------------------------------------
    Beginning of
     period             125,000              -              -              -
    Grants                    -              -        125,000              -
    -------------------------------------------------------------------------
    End of period       125,000              -        125,000              -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Long term incentive plan

    The long term incentive plan ("LTIP") is a new plan implemented in the
    first quarter of fiscal 2008. Under the LTIP, eligible participants are
    awarded restricted share units 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 restricted share
    units vest or (b) the Company will issue common shares from treasury to
    participants following vesting of restricted share units. For employees
    in the United States and the United Kingdom, at the time of each
    restricted share unit 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 normal course issuer bid.

    On June 5, 2007 the Board approved the award of 475,168 restricted common
    share units in lieu of cash compensation to employees. There were an
    additional 732,160 and 419,896 restricted common share units granted in
    lieu of cash compensation to employees on August 31, 2007 and
    November 30, 2007, respectively. The Trust has purchased $5.0 million and
    $23.3 million of common shares for the three and nine months ended
    December 31, 2007 (Note 10).

    The cost of the restricted share units is amortized over the vesting
    period of three years. Compensation expense of $5.1 million and
    $11.1 million has been recognized for the three and nine months ended
    December 31, 2007.


                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
                   ----------------------------------------------------------

    Awards
     outstanding,
     beginning of
     period           1,207,328              -              -              -
    Grants              419,896              -      1,627,224              -
    Vested                    -              -              -              -
    -------------------------------------------------------------------------
    Awards
     outstanding,
     end of period    1,627,224              -      1,627,224              -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
                   ----------------------------------------------------------

    Common shares
     held by Trust,
     beginning of
     period             937,102              -              -              -
    Acquired            316,264              -      1,253,366              -
    Released on
     vesting                  -              -              -              -
    -------------------------------------------------------------------------
    Common shares
     held by Trust,
     end of period    1,253,366              -      1,253,366              -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. RELATED PARTY TRANSACTIONS

    Security trades executed by the Company for employees, officers and
    directors are transacted in accordance with the 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 the
    Company.

    Accounts receivable and accounts payable and accrued liabilities include
    the following balances with related parties:

                                       December 31,   March 31,  December 31,
                                           2007         2007         2006
                                            $            $            $
    -------------------------------------------------------------------------
    Accounts receivable                     55,348       49,694       49,789
    Accounts payable and accrued
     liabilities                            68,272       85,795      101,368
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    13. SEGMENTED INFORMATION

    The Company has two operating segments:

       Private Client Services - provides brokerage services and investment
       advice to retail or private clients.

       Canaccord Adams - includes investment banking, research and trading
       activities on behalf of corporate, institutional and government
       clients as well as principal trading activities in Canada, the United
       Kingdom and the United States of America.

    The Corporate and Other segment includes correspondent brokerage
    services, interest and foreign exchange revenue and expenses not
    specifically allocable to Private Client Services and Canaccord Adams.

    The Company's industry segments are managed separately because each
    business offers different services and requires different personnel and
    marketing strategies. The Company evaluates the performance of each
    business based on income (loss) before income taxes.

    The Company does not allocate total assets or equipment and leasehold
    improvements to the segments. Amortization is allocated to the segments
    based on square footage occupied.  There are no significant inter-segment
    revenues.

    For the three months ended December 31,

                                                      2007
                                  -------------------------------------------
                                               Private  Corporate
                                  Canaccord     Client        and
                                      Adams   Services      Other      Total
                                          $          $          $          $
    -------------------------------------------------------------------------

    Revenues                        109,583     61,166     12,605    183,354
    Expenses                         82,529     46,087     21,456    150,072
    Amortization                        984        495        718      2,197
    Development costs                 3,936      1,550      1,288      6,774
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    22,134     13,034    (10,857)    24,311
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      2006
                                  -------------------------------------------
                                               Private  Corporate
                                  Canaccord     Client        and
                                      Adams   Services      Other      Total
                                          $          $          $          $
    -------------------------------------------------------------------------

    Revenues                        101,427     68,831      8,055    178,313
    Expenses                         72,069     48,135     17,429    137,633
    Amortization                        785        380        632      1,797
    Development costs                 2,463      1,663      1,121      5,247
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    26,110     18,653    (11,127)    33,636
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the nine months ended December 31,
                                                      2007
                                  -------------------------------------------
                                               Private  Corporate
                                  Canaccord     Client        and
                                      Adams   Services      Other      Total
                                          $          $          $          $
    -------------------------------------------------------------------------

    Revenues                        353,677    194,664     39,752    588,093
    Expenses                        251,236    143,659     62,676    457,571
    Amortization                      2,880      1,397      2,043      6,320
    Development costs                13,810      4,263      4,040     22,113
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    85,751     45,345    (29,007)   102,089
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                      2006
                                  -------------------------------------------
                                               Private  Corporate
                                  Canaccord     Client        and
                                      Adams   Services      Other      Total
                                          $          $          $          $
    -------------------------------------------------------------------------

    Revenues                        319,566    196,743     24,162    540,471
    Expenses                        227,456    140,830     53,069    421,355
    Amortization                      3,026      1,210      1,916      6,152
    Development costs                 7,060      4,701      3,142     14,903
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes                    82,024     50,002    (33,965)    98,061
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company's business operations are grouped into four geographic
    segments as follows:

                    For the three months ended     For the nine months ended
                   ----------------------------------------------------------
                    December 31,   December 31,   December 31,   December 31,
                           2007           2006           2007           2006
                              $              $              $              $
    -------------------------------------------------------------------------
    Canada
      Revenue           125,102        134,705        404,470        376,363
      Equipment and
       leasehold
       improvements      24,400         21,936         24,400         21,936
      Goodwill and
       other
       intangible
       assets             4,144          4,396          4,144          4,396

    United Kingdom
      Revenue            34,644         20,865        102,952         91,400
      Equipment and
       leasehold
       improvements       8,273          9,154          8,273          9,154

    United States
      Revenue            23,135         18,613         70,294         61,343
      Equipment and
       leasehold
       improvements       7,266          2,476          7,266          2,476
      Goodwill and
       other
       intangible
       assets            28,729         22,473         28,729         22,473

    Other Foreign
     Location
      Revenue               473          4,130         10,377         11,365
    -------------------------------------------------------------------------


    14. COMMITMENTS AND CONTINGENCIES

    Commitments

    Subsidiaries of the Company are committed to minimum lease payments for
    premises and equipment over the next five years and thereafter as
    follows:

                                                                        $
    -------------------------------------------------------------------------
    2009                                                              20,814
    2010                                                              20,117
    2011                                                              18,401
    2012                                                              16,784
    2013                                                              16,049
    Thereafter                                                        70,977
    -------------------------------------------------------------------------
                                                                     163,142
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the period, there have been no material changes to the Company's
    contingencies from those described in Note 16 of the March 31,2007
    Audited Annual Consolidated Financial Statements.

    15. SUBSEQUENT EVENT

    Dividend

    On February 6, 2008 the Board of Directors declared a common share
    dividend of $0.125 per share payable on March 10, 2008, with a record
    date of February 22, 2008.

    16.  COMPARATIVE FIGURES

    Certain comparative figures have been reclassified to conform to the
    December 31, 2007 interim consolidated financial statement presentation.
    




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: Mark Dickenson,
Landsbanki Securities (UK) Limited, Phone: +44 (0) 207 426 7713, email: 
Mark.Dickenson@landsbanki.com


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