Canaccord Capital Inc. reports fiscal second quarter 2010 results

Reporting profitable quarter and reinstatement of dividend

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

VANCOUVER, Nov. 5 /CNW/ - Canaccord Capital Inc.'s revenue for the second quarter of fiscal year 2010, ended September 30, 2009, was $123.7 million, up 11.6% from the same quarter last year, but down 10.0% from the previous quarter. Net income for the second quarter was $6.7 million, up compared to a net loss of $5.4 million during the same quarter last year, but down 26.0% compared to the previous quarter. Diluted earnings per share (EPS) for fiscal Q2/10 were $0.12, compared to diluted loss per share of $0.11 in Q2/09 and diluted EPS of $0.16 the previous quarter. Commenting on the quarter, Paul Reynolds, President and CEO, said, "After another profitable quarter, we are pleased to be reinstating our dividend in order to share the rewards of our strong performance. As part of our continued evolution as Canaccord Financial Inc., we will remain committed to putting our clients first, controlling our costs and delivering superior value for all our shareholders."

    
    Second quarter 2010 vs. second quarter 2009

    -   Revenue of $123.7 million, up 11.6% or $12.9 million from $110.8
        million

    -   Expenses of $115.9 million, up 0.1% or $0.1 million from $115.8
        million

    -   Net income of $6.7 million compared to net loss of $5.4 million

    -   Annualized return on equity (ROE) of 6.9%, up from (5.0)%

    -   Diluted EPS of $0.12 compared to diluted loss per share of $0.11

    Second quarter 2010 vs. first quarter 2010

    -   Revenue of $123.7 million, down 10.0% or $13.8 million from $137.5
        million

    -   Expenses of $115.9 million, down 4.6% or $5.6 million from $121.5
        million

    -   Net income of $6.7 million compared to net income of $9.1 million

    -   Annualized ROE of 6.9%, down from 9.7%

    -   Diluted EPS of $0.12 compared to diluted EPS of $0.16 in the first
        quarter of 2010

    First-half of fiscal 2010 (six months ended September 30, 2009) vs.
first-half of fiscal 2009 (six months ended September 30, 2008)

    -   Revenue of $261.2 million, down 7.9% or $22.3 million from $283.5
        million

    -   Expenses of $237.4 million, down 10.4% or $27.6 million from $265.0
        million

    -   Net income of $15.9 million compared to net income of $11.1 million

    -   Annualized ROE of 8.3%, up from 5.3%

    -   Diluted EPS of $0.28 compared to diluted EPS of $0.21 in the first
        half of fiscal 2009

    Financial condition at end of second quarter 2010 vs. second quarter 2009

    -   Cash and cash equivalents balance of $709.5 million, up $188.2
        million from $521.3 million

    -   Working capital of $307.2 million, down $1.2 million from $308.4
        million

    -   Total shareholders' equity of $388.2 million, down $26.1 million from
        $414.3 million

    -   Book value per diluted common share for the period end was $6.78,
        down 5.2% or $0.37 from $7.15

    -   On November 4, 2009 the Board of Directors considered the dividend
        policy and approved a quarterly dividend of $0.05 per share payable
        on December 10, 2009 with a record date of November 20, 2009. The
        reinstatement of the quarterly dividend is an indication of the
        Board's confidence in Canaccord's improved business environment.

    Highlights of Operations:

    -   Canaccord Adams led or co-led 33 transactions globally to raise total
        proceeds of $735.6 million(2) during fiscal Q2/10.

    -   Canaccord Adams participated in a total of 77 transactions globally
        to raise total proceeds of $9.1 billion(1) during fiscal Q2/10.

    -   During Q2/10, Canaccord Adams led or co-led the following equity
        fundraising transactions:

        -  US$336.0 million for Green Mountain Coffee Roasters Inc. on the
           NASDAQ

        -  C$125.1 million for Aura Minerals on the TSX

        -  C$105.0 million for Bayou Bend Petroleum Ltd. on the TSX Venture

        -  US$86.3 million for Orexigen Therapeutics, Inc. on the NASDAQ

        -  US$84.5 million for Horsehead Holding Corp. on the NASDAQ

        -  (pnds stlg) 35.0 million for Xchanging Plc. on the LSE.

    -   Canaccord continued to rank first in Canada for block trading market
        share on the TSX Venture, with 15.4% of market share in Q2/10, up
        from 6.5% in Q2/09.(3)

    -   Canaccord Adams completed four Private Investment in Public Equity
        (PIPE) transactions in the U.S. that raised US$202.4 million in
        proceeds during fiscal Q2/10.(4)

    -   Assets under administration of $11.4 billion, down 1.7% from $11.6
        billion at the end of Q2/09, and up 10.1% from $10.3 billion at the
        end of Q1/10.

    -   Assets under management of $453 million, down 25.6% from $609 million
        at the end of Q2/09, and up 2.3% from $443 million at the end of
        Q1/10.

    -   At the end of fiscal Q2/10 (September 30, 2009), Canaccord had 334
        Advisory Teams(4), down 7 from 341 Advisory Teams as of September 30,
        2008, and down one Advisory Team from 335 teams as of June 30, 2009.
        The decrease is largely due to a strategic review of our Wealth
        Management division.

    -   On September 23, 2009, Canaccord Adams Limited (Canaccord's UK
        subsidiary) announced the acquisition of Intelli Partners Limited and
        its wholly owned subsidiary, Intelli Corporate Finance Limited - a
        corporate advisory and broking boutique focused on investment
        companies and the asset management sector. As a result of this
        acquisition, which closed October 1, Canaccord Adams now has an
        office in Edinburgh, Scotland.

    -   On September 29, 2009, Canaccord Capital Inc. announced the Company's
        Board of Directors approved the change of its name to Canaccord
        Financial Inc., effective December 1, 2009. This new company name
        better reflects the broad scope and diversity of Canaccord's
        operations and positions our brand to accommodate future growth.

    Subsequent to September 30, 2009:

    -   On October 2, 2009, Canaccord announced the rebranding of the Private
        Client Services division as Canaccord Wealth Management. This new
        brand more accurately describes the scope and focus of Canaccord's
        offerings for individual investors.

    -   Canaccord Wealth Management welcomed three new branches operating
        under the Independent Wealth Management(5) operating model: Gatineau,
        Quebec; Eglinton (Toronto), Ontario; and a second branch in Prince
        George, B.C.. Additional branches are in the process of joining
        Canaccord Wealth Management under this model.

    ------------------------------
    (1) Source: FPinfomart and Company information
    (2) Source: Canada Equity. Market share by trade volume
    (3) Source:  Placement Tracker.
    (4) Advisory Teams are normally comprised of one or more Investment
        Advisors (IAs) and their assistants and associates, who together
        manage a shared set of client accounts.  Advisory Teams that are led
        by, or only include, an IA who has been licenced for less than three
        years are not included in our Advisory Team count, as it typically
        takes a new IA approximately three years to build an average-sized
        book.
    (5) Independent Wealth Management is a strategically complementary
        segment of Canaccord's Wealth Management division that enables
        advisors to operate as agents of Canaccord, while running their
        offices independently.
    

LETTER TO SHAREHOLDERS

I am pleased to report another profitable quarter for Canaccord. We achieved this good result despite decreased market activity during the summer months, and finished the second quarter of fiscal 2010 with growing momentum in both our businesses. Our confidence in Canaccord's financial strength, even in challenging market conditions, encouraged the Board to reinstate the Company's quarterly dividend at $0.05 per share for shareholders of record on November 4, 2009. We had suspended the dividend last year in order to protect Canaccord's capital and are pleased to again share the rewards of our performance with shareholders.

Financial overview

Revenue for the three months ended September 30, 2009 was $124 million, an 11.6% increase from the second quarter of fiscal 2009. Ongoing cost containment enabled us to hold expenses effectively flat at $116 million. Of note, however, was a significant increase in year-over-year incentive compensation as a percentage of revenue. This increase was largely attributable to a substantial decrease in interest revenue compared to fiscal Q2 2009, which effectively increased the proportionate amount of revenue that forms the basis for incentive compensation.

Net income for the three months was $6.7 million compared to a net loss of $5.4 million for the same period last year. Diluted earnings per share were $0.12 for the quarter, a meaningful turnaround from the net loss of $0.11 for the same quarter last year. Our annualized return on equity at 6.9% for the second quarter of fiscal 2010 remains well below our business-cycle target of 20%, but is still a significant improvement from the negative 5% for the comparable quarter last year.

With this quarter's results, we are enhancing the transparency of Canaccord's Supplementary Financial Information by disclosing the impact of allocated costing on each division's income. This is intended to provide a broader view of our operating performance to all Canaccord employees and shareholders. The outcome of this evolving supplemental financial reporting is that our Capital Markets operations were profitable in the second quarter while Wealth Management was not profitable after intersegment cost allocations from Corporate and Other.

Canaccord Adams

Our capital markets and trading teams combined to deliver solid results for the three months ending September 30, 2009. Canaccord Adams posted total revenues of $78.5 million, a 34.5% gain over the prior year result. After intersegment cost allocations from Corporate and Other, Canaccord Adams' income was $12.3 million for the second fiscal quarter, an increase of $17.1 million from the loss of the comparable quarter.

In Canada, Canaccord Adams delivered a solid quarter despite the seasonal decrease in business activity. Our teams led or co-led 33 transactions globally that raised total proceeds of $736 million for our clients. Notable among the highlights on page two of this report are three equity transactions: C$125 million for Aura Minerals on the TSX; C$105 million for Bayou Bend Petroleum on the TSX Venture; and US$86 million for Orexigen Therapeutics on the NASDAQ exchange. Additionally, several large transactions closed just after quarter end and many others remain in the pipeline, suggesting that the resurgence of momentum we saw in September will continue for the balance of the calendar year.

European markets have yet to recover with the same energy as those in North America, resulting in a very slow, and unprofitable, three months for Canaccord Adams' UK operations. The division's new president, Giles Fitzpatrick, is continuing to focus on renewing our sales, trading and research in London, which we expect to enhance the strength of our banking operations with improved global distribution. During the quarter, we worked on acquiring Intelli Partners Limited, a team of professionals based in London and Edinburgh with recognized expertise in investment companies and the asset management sector. The purchase closed on October 1 and we expect the group to round out Canaccord Adams' established sales trading and market-making capabilities in this sector under the direction of Angelo Sofocleous. In addition, this acquisition provides a platform for growth in the strategically significant Scottish market.

Canaccord Adams had a terrific quarter in the US, with strong business volumes through most of the three months. As a result, the unit turned in its best-ever quarterly performance, beating prior year revenue by nearly 70%. Canaccord Adams was the lead advisor on a significant joint venture between Metagenics and Alticor, two leaders in the branded supplement and medical food sector. We also co-led a US$336 million equity deal for Green Mountain Coffee. Both assignments indicate the growing diversification of our business beyond sectors Canaccord has traditionally served and the strength of our relationships and expertise in the US market. These and other transactions listed in the quarterly highlights added substantially to Canaccord Adams' income for the quarter.

Canaccord Wealth Management

We are committed to ensuring that Canaccord Wealth Management becomes a consistently profitable, value-creating division within the Canaccord family; admittedly, we are not there yet. Revenue for the three months ended September 30 totaled $40.1 million, a $3.7 million or 8.5% decline from the comparative quarter. After intersegment cost allocations from Corporate and Other, the quarterly loss in Canaccord Wealth Management was $3.3 million.

We are continuing to make investments in our quality improvement strategy at Canaccord Wealth Management. John Rothwell and his team have recently launched a dynamic, multi-faceted growth plan to ensure that Canaccord appeals to the increasing needs of more Canadian investors. The division's recent rebranding as Canaccord Wealth Management more accurately communicates our commitment to providing investors with the tools and advice they need to help manage all aspects of their wealth.

The new Complete Canaccord platform is our commitment to both our clients and our Investment Advisors to deliver tailored investment products and solutions that help achieve their goals for wealth creation, management and transfer. Along with enhancing our in-house wealth management expertise, we are also ensuring that IAs have an opportunity to deepen their own knowledge at Canaccord University through programs in areas such as practice management, product knowledge, and tools and technology.

While assets under administration (AUA) declined marginally year-over-year, compared to the first three months of the current fiscal year AUA advanced 10% to $11.4 billion. This is a good improvement, but still below the scale we need for profitable operations in the division. We have successfully recruited 32 teams of IAs over the past 10 months, and we are actively working to transition their client assets. We are aggressively recruiting IAs for both our conventional full-service model and for the new Independent Wealth Management (IWM) platform we announced last quarter. Subsequent to quarter end, we welcomed the first three branches under the IWM umbrella: Gatineau, Quebec; Toronto (Eglinton), Ontario; and a second branch in Prince George, B.C.

Looking ahead

At the end of the quarter, the Board approved a new name for our Company - Canaccord Financial Inc. The rebranding better reflects the broad scope of our operations, now and in the future, and it is an important step in the continual evolution of the firm. Evolution is a key concept at Canaccord. All of the initiatives currently underway - our growing share in the US, the expansion of our UK platform, the strategic realignment of our wealth management business, our undiminished focus on controlling costs - speak to Canaccord's commitment to evolve to serve the needs of our clients and to meet the expectations of our shareholders. We are optimistic about the direction of these changes and about Canaccord's ability to be a strong competitor in each of the markets and sectors we serve. And we are grateful to the dedicated men and women of Canaccord who are driving this evolution forward. It is only through their continuing efforts that we can sustain the very real gains that we are beginning to see.

Paul D. Reynolds

President & Chief Executive Officer

ACCESS TO QUARTERLY RESULTS INFORMATION:

Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at canaccordfinancial.com.

CONFERENCE CALL AND WEBCAST PRESENTATION:

Interested parties can listen to our fiscal second quarter 2010 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, November 5, 2009 at 5:00 a.m. (Pacific Time), 8:00 a.m. (Eastern Time) and 1:00 p.m. (UK Time). At that time, senior executives will comment on the results for the second quarter of fiscal 2010 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.canaccordfinancial.com

Analysts and institutional investors can call in via telephone at:

    
    -   416-646-3096 (within Toronto)
    -   1-800-731-6941 (toll free outside Toronto)
    -   0800-358-0857 (toll free from the United Kingdom)
    

A replay of the conference call can be accessed after 7:00 a.m. (Pacific Time), 10:00 a.m. (Eastern Time) and 3:00 p.m. (UK Time) on November 5, 2009 until December 20, 2009 at 416-640-1917 or 1-877-289-8525 by entering passcode 4171691 followed by the pound (No.) sign.

ABOUT CANACCORD FINANCIAL INC.:

An evolution of our Company

On September 29, 2009 we announced a rebranding initiative for Canaccord Capital Inc. As of December 1, 2009, we will emerge as Canaccord Financial Inc., listed under the stock symbols CF on the TSX and CF. on AIM.

Through its principal subsidiaries, Canaccord Capital Inc. (CCI) is a leading independent, full-service financial services firm, with operations in two principal segments of the securities industry: wealth management and global capital markets. Since its establishment in 1950, Canaccord has been driven by an unwavering commitment to building lasting client relationships. We achieve this by generating value through comprehensive investment solutions, brokerage services and investment banking services for our individual, institutional and corporate clients. Canaccord has 32 offices worldwide, including 24 Wealth Management offices located across Canada. Canaccord Adams, the international capital markets division, operates in the US, UK, Canada and Barbados. Canaccord Capital Inc. is publicly traded on both the Toronto Stock Exchange and AIM, a market operated by the London Stock Exchange.

    
    FOR FURTHER INFORMATION, CONTACT:

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

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

    Investor relations inquiries:
    Joy Fenney
    Vice President,
    Investor Relations
    Phone: 416-869-3515
    Email: joy_fenney@canaccord.com

    Nominated Adviser and Broker:
    Marc Milmo or Jonny Franklin-Adams
    Fox-Pitt, Kelton Limited
    Phone: +44 (0) 207 663 6000
    Email: corporatebroking@fpk.com

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

Management's Discussion and Analysis

Fiscal second quarter 2010 for the three months and six months ended September 30, 2009 - this document is dated November 5, 2009

The following discussion of the financial condition and results of operations for Canaccord Capital Inc. (Canaccord) is provided to enable the reader to assess material changes in our financial condition and to assess results for the three- and six-month periods ended September 30, 2009 compared to the corresponding periods in the preceding fiscal year. The three- and six-month periods ended September 30, 2009 are also referred to as second quarter 2010, Q2/10, fiscal Q2/10 and first-half fiscal year 2010 in the following discussion. This discussion should be read in conjunction with the unaudited interim consolidated financial statements for the three- and six-month periods ended September 30, 2009, beginning on page 30 of this report; our Annual Information Form dated May 26, 2009; and the 2009 annual Management's Discussion and Analysis (MD&A) including the audited consolidated financial statements for the fiscal year ended March 31, 2009 (Audited Annual Consolidated Financial Statements) in Canaccord's Annual Report dated May 20, 2009 (the Annual Report) as filed on SEDAR on May 26, 2009. There has been no material change to the information contained in the annual MD&A for fiscal 2009 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. This MD&A is based on unaudited interim and Audited Annual Consolidated Financial Statements prepared in accordance with Canadian GAAP.

Caution regarding forward-looking statements

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

Non-GAAP measures

Certain non-GAAP measures are utilized by Canaccord as measures of financial performance. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Non-GAAP measures included are return on average common equity (ROE), assets under administration (AUA), assets under management (AUM), expenses as a % of revenue, and book value per diluted share.

Canaccord's capital is represented by shareholders' equity and, therefore, management uses ROE as a performance measure.

AUA and 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 funds held in client accounts as well as the aggregate market value of long and short security positions. 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 Wealth Management business segment. AUM includes all assets managed on a discretionary basis under our programs generally described as or known as the Complete Canaccord Investment Counseling Program and Complete Canaccord Managed Accounts(1). Services provided include the selection of investments and the provision of investment advice. AUM are also administered by Canaccord and are included in AUA.

    
    ------------------------------
    (1) Previously known as Canaccord's Alliance Accounts and Private
        Investment Management.
    

BUSINESS OVERVIEW

Through its principal subsidiaries, Canaccord Capital Inc. (TSX & AIM: CCI) is a leading independent, full-service investment dealer in Canada with capital markets operations in the United Kingdom and the United States. Canaccord is publicly traded on both the Toronto Stock Exchange (TSX) and AIM, a market operated by the London Stock Exchange (LSE). The Company has operations in two of the principal segments of the securities industry: capital markets and wealth management. Together, these operations offer a wide range of complementary investment banking services, investment products and brokerage services to Canaccord's institutional, corporate and private clients.

Canaccord's business is cyclical and experiences considerable variations in revenue and income from quarter to quarter and year to year due to factors beyond Canaccord's control. Our business is affected by the overall condition of the North American and European equity markets, including seasonal fluctuations.

Business environment

The profit-taking retreat in both the commodity and global equity prices of late June to early July was sharply reversed by the many positive earnings surprises and a resumption of US dollar weakness. A very strong relationship developed throughout the quarter, as a weak US dollar equalled higher commodity and equity prices to aggressive traders.

Consumer spending, especially in the US, remained an ongoing concern as the job picture showed only mild improvement. Corporations were able to raise record debt at very cheap interest levels in September, leading to renewed M&A activity. Many US corporations saw earnings benefit from severe job cuts and foreign currency gains; however, the real challenge was revenue growth.

The advance of many markets and sustained low interest rate levels were a result of the massive liquidity injected by central banks and governments. Risk tolerance was raised and credit markets returned to near normalcy. As more news on the US economy emerged, investors and the media focused on more positive future outcomes. The consensus view was that the worst was over for the economy and the markets. By mid-August, markets had so vigorously advanced that many markets experienced a pull-back.

The economies of many emerging nations recovered during the quarter, and in the case of China, growth resumed strongly. By quarter end many institutional investors underperformed and held too little exposure to equities. This sets the tone for a very interesting final quarter of calendar 2009.

Market Data

The TSX, TSX Venture, and AIM all experienced year-over-year gains in trading volumes during fiscal Q2/10; however volume on the NASDAQ fell by 24.1%. Compared to the previous quarter, the TSX Venture and AIM recorded an increase in trading volumes; however, the TSX and NASDAQ experienced a decline.

Financing values were up significantly on the TSX and TSX Venture and the NASDAQ compared to the same quarter last year, with increases of 268.5% and 240.0%, respectively. Compared to the previous quarter, financing values for the TSX and TSX-Venture were up 37.2%, while the NASDAQ was up 70%. The AIM also experienced increases in financings compared to both the previous quarter and the same quarter last year.

    
    Trading volume by exchange (billions of shares)
    -------------------------------------------------------------------------
                      July    August September    Fiscal    Change    Change
                        09        09        09     Q2/10      from      from
                                                            fiscal    fiscal
                                                             Q2/09     Q1/10
    -------------------------------------------------------------------------
    TSX                8.7       8.6      11.0      28.3     10.1%   (14.5)%
    TSX Venture        3.2       3.9       5.3      12.4     55.0%     11.7%
    AIM               13.9      17.5      28.4      59.8    100.7%      8.1%
    NASDAQ            15.2      13.5      15.1      43.8   (24.1)%    (9.7)%
    -------------------------------------------------------------------------
    Source: TSX Statistics, LSE AIM Statistics, Thomson One


    Total financing value by exchange
    -------------------------------------------------------------------------
                      July    August September    Fiscal    Change    Change
                        09        09        09     Q2/10      from      from
                                                            fiscal    fiscal
                                                             Q2/09     Q1/10
    -------------------------------------------------------------------------
    TSX and TSX
     Venture
     (C$ billions)     5.5       3.0      11.4      19.9    268.5%     37.2%
    AIM ((pnds stlg)
     billions)         0.9       0.2       0.4       1.5     66.7%     36.4%
    NASDAQ
     (US$ billions)    2.9       5.9      11.6      20.4    240.0%     70.0%
    -------------------------------------------------------------------------
    Source: TSX Statistics, LSE AIM Statistics, Equidesk


    Financing value for relevant AIM industry sectors
    -------------------------------------------------------------------------
    ((pnds stlg)      July    August September    Fiscal    Change    Change
     millions,          09        09        09     Q2/10      from      from
     except for                                             fiscal    fiscal
     percentage                                              Q2/09     Q1/10
     amounts)
    -------------------------------------------------------------------------
    Oil and gas      121.9      54.1     149.7     325.7     21.3%     15.9%
    Mining           105.1      20.1      82.9     208.1    149.2%     75.6%
    Pharmaceutical
     and Biotech      23.0       6.9       0.9      30.8    104.0%   (52.3)%
    Media             35.4      14.1       3.2      52.7      n.m.    126.2%
    Technology        15.3      18.4       4.2      37.9      3.6%   (34.3)%
                   ----------------------------------------------------------
    Total (of
     relevant
     sectors)        300.7     113.6     240.9     655.2     61.5%     20.2%
    -------------------------------------------------------------------------
    Source: LSE AIM Statistics
    n.m.: not meaningful


    Financing value for relevant TSX and TSX Venture industry sectors
    -------------------------------------------------------------------------
    ($ millions,      July    August September    Fiscal    Change    Change
     except for         09        09        09     Q2/10      from      from
     percentage                                             fiscal    fiscal
     amounts)                                                Q2/09     Q1/10
    -------------------------------------------------------------------------
    Oil and gas      948.5     558.3     762.9   2,269.7    115.1%    (0.8)%
    Mining           363.1     267.1   5,816.5   6,446.7      n.m.      n.m.
    Biotech            4.1         -         -       4.1   (89.5)%    100.0%
    Media                -      57.5         -      57.5    100.0%    100.0%
    Technology        20.2       2.9       6.8      29.9     70.9%   (28.6)%
                   ----------------------------------------------------------
    Total (of
     relevant
     sectors)      1,335.9     885.8   6,586.2   8,807.9      n.m.     72.1%
    -------------------------------------------------------------------------
    Source: FPinfomart
    n.m.: not meaningful
    

ABOUT CANACCORD FINANCIAL INC.

An evolution of our Company

On September 29, 2009 we announced a rebranding initiative for Canaccord Capital Inc. As of December 1, 2009, we will emerge as Canaccord Financial Inc., listed under the stock symbols CF on the TSX and CF. on AIM.

Through its principal subsidiaries, Canaccord Capital Inc. (CCI) is a leading independent, full-service financial services firm, with operations in two principal segments of the securities industry: wealth management and global capital markets. Since the establishment of its business in 1950, Canaccord has been driven by an unwavering commitment to building lasting client relationships. We achieve this by generating value through comprehensive investment solutions, brokerage services and investment banking services for our individual, institutional and corporate clients. Canaccord has 32 offices worldwide, including 24 Wealth Management offices located across Canada. Canaccord Adams, the international capital markets division, operates in the US, UK, Canada and Barbados. Canaccord Capital Inc. is publicly traded on both the Toronto Stock Exchange and AIM, a market operated by the London Stock Exchange.

Canaccord Adams

Canaccord Adams offers mid-market corporations and institutional investors around the world an integrated platform for equity research, sales and trading, and investment banking services that is built on extensive operations in Canada, the United States and the United Kingdom.

    
    -   Canaccord's research analysts have deep knowledge of more than 600
        companies across eight primary focus sectors: Mining and Metals,
        Energy, Technology, Life Sciences, Consumer, Real Estate,
        Infrastructure and Sustainability.
    -   Our Sales and Trading desk executes timely transactions for more than
        1,500 institutional relationships around the world, operating as an
        integrated team.
    -   With more than 65 skilled investment bankers, Canaccord Adams
        provides clients with sector expertise, intimate knowledge and
        insight, and broad equity transaction and M&A advisory experience.
    -   Our Fixed Income Operations in Canada and the UK cover a wide range
        of money market instruments, federal crown corporations, strips,
        euros, US Pays, gilts and structured products, as well as federal,
        provincial and municipal bonds.
    

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.

Canaccord Wealth Management

On September 29, 2009, Canaccord announced the rebranding of its Private Client Services division as Canaccord Wealth Management. As part of this initiative, the Company unveiled a new product strategy under the "Complete Canaccord" offering, providing Canaccord Wealth Management clients with a complete wealth strategy tailored to their specific investment objectives and financial, estate and tax planning needs. This new format for providing comprehensive financial solutions to clients is another example of Canaccord's continued commitment to meeting the diverse needs of our client base.

Canaccord Wealth Management also continued to deliver on its committment to providing superior training and education to Investment Advisors. A new personal and professional development platform, Canaccord University, was launched to support skill-building initiatives in the areas of products, technology and tools, and practice management. Advisors at Canaccord Wealth Management participate in both external and internal training opportunities to continually equip themselves to best serve our clients' financial needs. Many Canaccord Investment Advisors have completed the training required for advanced industry designations such as Chartered Financial Analyst or Certified Investment Manager.

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

Corporate and Other

This segment, described as Corporate and Other, includes correspondent brokerage services, bank and other interest revenue, foreign exchange gains and losses, and expenses not specifically allocable to either the Canaccord Adams or Canaccord Wealth Management 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

    
    Second quarter and first-half fiscal 2010 summary data(1)
    -------------------------------------------------------------------------
    (C$ thousands,     Three months                   Six months
     except               ended        Quarter-         ended
     per share,        September 30       over-      September 30        YTD-
     employee and -------------------  quarter  ------------------- over-YTD
     % amounts)       2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
    Canaccord
     Capital Inc.

    Revenue
      Commission   $56,628   $60,630    (6.6)%   112,084   132,626   (15.5)%
      Investment
       banking      47,620    34,024     40.0%   103,506   110,171    (6.0)%
      Principal
       trading      11,589        87      n.m.    23,059     5,998      n.m.
      Interest       3,121    11,734   (73.4)%     6,597    24,063   (72.6)%
      Other          4,786     4,354      9.9%    15,961    10,679     49.5%
    -------------------------------------------------------------------------
    Total revenue $123,744  $110,829     11.6%  $261,207  $283,537    (7.9)%
    Expenses
      Incentive
       compensation 63,966    50,977     25.5%   132,429   133,704    (1.0)%
      Salaries and
       benefits     13,983    14,195    (1.5)%    27,785    29,638    (6.3)%
      Other
       overhead
       expenses(2)  37,934    50,633   (25.1)%    77,137   101,642   (24.1)%
    -------------------------------------------------------------------------
    Total
     expenses     $115,883  $115,805      0.1%  $237,351  $264,984   (10.4)%
    Income (loss)
     before income
     taxes           7,861    (4,976)     n.m.    23,856    18,553     28.6%
    Net income
     (loss)          6,746    (5,398)     n.m.    15,858    11,061     43.4%
    Earnings
     (loss) per
     share -
     diluted          0.12     (0.11)     n.m.      0.28      0.21     33.3%
    Return on
     average
     common equity    6.9%    (5.0)%   11.9p.p.     8.3%      5.3%    3.0p.p.
    Book value
     per share -
     period end       6.78      7.15    (5.2)%
    Number of
     employees       1,539     1,688    (8.8)%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for ROE, book value per share
        and number of employees.
    (2) Consists of trading costs, premises and equipment, communication and
        technology, interest, general and administrative, amortization and
        development costs.
    p.p.: percentage points
    n.m.: not meaningful


    Geographic distribution of revenue for the second quarter of fiscal
    2010(1)
    -------------------------------------------------------------------------
                       Three months                   Six months
                          ended        Quarter-         ended
    (C$ thousands,     September 30       over-      September 30        YTD-
     except                            quarter                      over-YTD
     % amounts)       2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
    Canada        $ 79,190  $ 80,775    (2.0)%  $167,124  $189,673   (11.9)%
    UK              13,774    13,096      5.2%    34,700    46,815   (25.9)%
    US              30,137    18,284     64.8%    57,316    43,905     30.5%
    Other
     Foreign
     Location          643    (1,326) (148.5)%     2,067     3,144   (34.3)%
    -------------------------------------------------------------------------
    Total         $123,744  $110,829     11.6%  $261,207  $283,537    (7.9)%
    -------------------------------------------------------------------------
    (1) For a business description of Canaccord's geographic distribution
        please refer to the "About Canaccord Financial Inc." section on page
        12.
    

Second quarter 2010 vs. second quarter 2009

On a consolidated basis, revenue is generated through five activities: commissions and fees associated with agency trading and private client wealth management activity, investment banking, principal trading, interest and other. Revenue for the three months ended September 30, 2009 was $123.7 million, an increase of 11.6% or $12.9 million compared to the same period a year ago.

For the second quarter of fiscal 2010, revenue generated from commissions decreased by $4.0 million to $56.6 million compared to the same period a year ago. This decrease was due to a $2.5 million commission revenue decline in our Canaccord Wealth Management segment and a $1.5 million drop in our Canaccord Adams segment.

Investment banking revenue was $47.6 million, an increase of $13.6 million or 40.0%, primarily due to stronger capital markets activity in the US. Revenue derived from principal trading was $11.6 million, an increase of $11.5 million mainly due to stronger market-making operation in our UK subsidiary.

Interest revenue was $3.1 million, which decreased by $8.6 million or 73.4% due to the drop in the number and size of margin accounts and lower interest rates.

Other revenue was $4.8 million, up $0.4 million or 9.9%, which was mainly attributed to an increase in foreign exchange gains in the quarter.

Second quarter revenue in Canada was $79.2 million, a decrease of 2.0% or $1.6 million from the same period a year ago. This change was due to a $3.5 million decline in revenue from our Corporate and Other segment and $3.4 million from our Canaccord Wealth Management segment. This was offset by a $5.3 million increase in revenue in the Canadian capital markets segment.

Revenue in the UK was $13.8 million, up 5.2% or $0.7 million compared to the same period a year ago. Revenue from Other Foreign Location was $0.6 million, an increase of $2.0 million. The growth in revenue was mainly attributed to principal trading activity during the quarter.

Revenue in the US was $30.1 million, up $11.9 million or 64.8% from Q2/09. Revenue improved significantly compared to Q2/09 because of favourable trends in the equity markets, changes in the competitive landscape and increased activity in respect of both public and private offerings and advisory work.

First-half fiscal year 2010 vs. first-half fiscal year 2009

Revenue for the six months ended September 30, 2009 was $261.2 million, down 7.9% or $22.3 million compared to the same period a year ago. Revenue generated from commissions decreased by 15.5% to $112.1 million compared to the prior year largely due to the significantly weaker market conditions during Q1/10 compared to Q1/09. The Q1/09 results were relatively stronger as this period was prior to the market disruption that occurred near the end of Q2/09.

Investment banking revenue was $103.5 million, representing a decrease of 6.0% primarily due to the lower financing activity in equity markets in our Canadian, UK and Other Foreign Location operations. This was offset by an increase in revenue in our US operations, comparing the first half of fiscal year 2010 to the first half of fiscal year 2009.

Principal trading experienced an increase of $17.1 million to $23.1 million compared to the same period last year. The increase in principal trading activity in our UK operations resulted in higher principal trading revenues in the first half of fiscal year 2010. Interest revenue was $6.6 million, down 72.6% due to a decrease in interest revenue from banks and clients as a result of lower interest rates and smaller margin accounts. Other revenue increased by $5.3 million to $16.0 million during the first-half fiscal year 2010 as a result of foreign exchange gains.

Year-to-date revenue in Canada was $167.1 million, a decrease of 11.9% or $22.5 million from the same period a year ago. First-half fiscal year 2010 revenue in the UK was $34.7 million, a decrease of 25.9% or $12.1 million from the same period a year ago. Revenue in the US was $57.3 million, an increase of 30.5% or $13.4 million compared to the first-half fiscal year 2009. Revenue from Other Foreign Location was $2.1 million compared to $3.1 million in the six months ended September 30, 2008. The overall year-to-date decline in revenue was a result of weaker market conditions in Q1/10 compared to Q1/09. However, revenue increased significantly in the US operations due to improvements in the equity markets, changes in the competitive landscape and increased activity in respect of both public and private offerings as well as increased advisory fees.

    
    Expenses as a percentage of revenue
    -------------------------------------------------------------------------
                       Three months                   Six months
                          ended        Quarter-         ended
    in                 September 30       over-      September 30        YTD-
     percentage                        quarter                      over-YTD
     points           2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
      Incentive
       compensation  51.7%     46.0%    5.7p.p.    50.7%     47.2%    3.5p.p.
      Salaries and
       benefits      11.3%     12.8%  (1.5)p.p.    10.6%     10.4%    0.2p.p.
      Other overhead
       expenses(1)   30.7%     45.7% (15.0)p.p.    29.5%     35.8%  (6.3)p.p.
    -------------------------------------------------------------------------
    Total            93.7%    104.5% (10.8)p.p.    90.8%     93.4%  (2.6)p.p.
    -------------------------------------------------------------------------
    (1) Consists of trading costs, premises and equipment, communication and
        technology, interest, general and administrative, amortization and
        development costs.
    p.p.: percentage points
    

Second quarter 2010 vs. second quarter 2009

Expenses for the three months ended September 30, 2009 were $115.9 million, up 0.1% from a year ago.

Incentive compensation expense was $64.0 million for the quarter, an increase of 25.5% or $13.0 million, consistent with the net increase in incentive-based revenue. Consolidated incentive compensation as a percentage of total revenue was 51.7%, up 5.7 percentage points, due to a decrease in non-incentive-based revenue, primarily interest revenue, as well as higher long term incentive plan (LTIP) expense. Salaries and benefits expense was $14.0 million, a decrease of 1.5% in the second quarter of fiscal 2010 from the same period a year ago, attributable to reductions in the number of staff during fiscal 2010.

The total compensation (incentive compensation plus salaries) payout as a percentage of consolidated revenue for Q2/10 was 63.0%, an increase of 4.2 percentage points from 58.8% in Q2/09. This was mainly due to a decreased proportion of non-incentive-based revenue in consolidated revenue.

First-half fiscal year 2010 vs. first-half fiscal year 2009

Expenses for the six months ended September 30, 2009 were $237.4 million, an overall decrease of $27.6 million or 10.4% from a year ago. Incentive compensation expense was $132.4 million, a decrease of 1.0%, which was consistent with the decrease in incentive-based revenue. Consolidated incentive compensation as a percentage of total revenue was 50.7%, an increase of 3.5 percentage points mainly as a result of the dramatic decline in interest revenue, a non-incentive-based revenue item.

Salaries and benefits expense was $27.8 million, a decrease of 6.3% in the first half of fiscal 2010 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 61.3%, an increase of 3.7 percentage points from 57.6% in the first six months of fiscal 2009, a result of the significant decrease in non-incentive-based revenue as a percentage of consolidated revenue.

    
    Other overhead expenses
    -------------------------------------------------------------------------
                       Three months                   Six months
                          ended        Quarter-         ended
    (C$ thousands,     September 30       over-      September 30        YTD-
     except                            quarter                      over-YTD
     % amounts)       2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
      Trading
       costs      $  7,002  $  6,717      4.2%  $ 14,326  $ 13,038      9.9%
      Premises and
       equipment     6,104     5,957      2.5%    11,986    11,742      2.1%
      Communication
       and
       technology    5,245     6,539   (19.8)%    10,734    12,702   (15.5)%
      Interest         492     3,354   (85.3)%     1,337     7,313   (81.7)%
      General and
       adminis-
       trative      11,698    19,611   (40.3)%    23,586    38,888   (39.3)%
      Amortization   1,906     2,072    (8.0)%     3,827     4,114    (7.0)%
      Development
       costs         5,487     6,383   (14.0)%    11,341    13,845   (18.1)%
    -------------------------------------------------------------------------
    Total other
     overhead
     expenses     $ 37,934  $ 50,633   (25.1)%  $ 77,137  $101,642   (24.1)%
    -------------------------------------------------------------------------
    

Second quarter 2010 vs. second quarter 2009

Other overhead expenses decreased by 25.1% or $12.7 million from the prior year to $37.9 million for the second quarter of fiscal 2010 mainly due to the decrease in general and administrative, interest, development costs, and communications and technology expenses.

General and administrative expense declined due to lower expenses in promotion and travel, professional fees, and reserve expense. Promotion and travel expenses decreased by $2.7 million or 39.3% due to a firm-wide effort to decrease expenses incurred by the firm as part of the cost savings initiative and also due to expense recoveries from compensation pools. Professional fees expenses dropped by $3.2 million or 61.7% due to non-recurring consultancy fees incurred in Q2/09 to upgrade internal infrastructure. Reserve expense was $1.3 million or 134.6% lower than Q2/09 due to less provision for receivables when collectibility cannot be reasonably determined and the decrease in reserve expense was mainly attributed to our Canaccord Wealth Management segment.

Interest expense decreased by $2.9 million or 85.3%, which was attributable to the decline in interest rates over the past year. The US operations reduced hiring incentives during Q2/10, resulting in the $0.9 million or 14.0% decrease in development costs compared to Q2/09. Certain communication and technology expenses were recovered from compensation pools as part of our cost alignment strategy, leading to the 19.8% or $1.3 million decline in this expense.

Net income for Q2/10 was $6.7 million compared to a net loss of $5.4 million the same period a year ago. Diluted EPS was $0.12 in Q2/10 compared to a loss per share of $0.11 in Q2/09. The increases in net income and EPS were mainly due to an increase in revenue along with similar expense levels compared to the same quarter last period. Annualized ROE for Q2/10 was 6.9% compared to an annualized ROE of (5.0)% in Q2/09. Book value per diluted share for Q2/10 was $6.78 versus $7.15 in Q2/09.

The effective tax rate for this quarter was 14.2% compared to (8.5)% in the same quarter last year and 43.0% last quarter. The increase from a year ago was due primarily to the reduction of previously recorded valuation allowances. The decrease from Q1/10 was due to a charge taken in the last quarter for adjustments to future tax assets to reflect tax rate reductions netted against the utilization of tax losses carried forward.

First-half fiscal year 2010 vs. first-half fiscal year 2009

Other overhead expenses for the six months ended September 30, 2009 decreased by 24.1% or $24.5 million to $77.1 million from the same period a year ago. The main reason for the decrease was a drop in general and administrative, interest, communication and technology, and development expenses. General and administrative expense was down $15.3 million primarily as a result of the $7.8 million decrease in promotion and travel expenses. As explained above, this decrease was because of a combination of a firm-wide effort to lower promotion and travel expense spending and additional expense recoveries from compensation pools. Professional fees were down $4.7 million as a result of non-recurring consultancy fees incurred in Q2/09 to upgrade internal infrastructure.

The remaining decrease in overhead expenses was due to interest expense, which dropped 81.7% or $6.0 million, and development costs, which decreased $2.5 million. The decline in interest expense was the result of a decrease in clients' payable balances in addition to lower interest rates. Development costs were reduced because of a $4.1 million drop in hiring incentives paid in the US, and Corporate and Other segments; however, this was offset by a $1.6 million increase in hiring incentives invested by our Canaccord Wealth Management segment as part of its overall restructuring strategy.

Net income for the first half of fiscal 2010 was $15.9 million compared to $11.1 million for the same period a year ago. Diluted EPS was $0.28 compared to $0.21 a year ago, and annualized ROE was 8.3% compared to 5.3% a year ago. This increase was the result of greater revenue due to strengthening market activities along with consistent amount of expenses incurred compared to the same period in the prior year. Book value per diluted share at the period end was $6.78, a 5.2% decrease from $7.15.

Income tax expense was $8.0 million in the year to date of fiscal 2009, an increase of $0.5 million. The change was largely due to the increase in income. The year-to-date effective tax rate was 33.5% compared to 40.4% for the same period last year. The lower effective tax rate was due in part to changes in estimates, a decrease in expenses not deductible for tax purposes and utilization of tax losses carried forward.

RESULTS OF OPERATIONS

    
    Canaccord Adams(1)
    -------------------------------------------------------------------------
                       Three months                   Six months
    (C$ thousands,        ended        Quarter-         ended
     except            September 30       over-      September 30        YTD-
     employees and 	                   quarter                      over-YTD
     % amounts)       2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
    Canaccord Adams

      Revenue     $ 78,475  $ 58,336     34.5%  $163,972  $163,129      0.5%
      Expenses
        Incentive
         compen-
         sation     42,761    29,998     42.5%    87,992    82,527      6.6%
        Salaries
         and
         benefits    3,376     3,919   (13.9)%     6,780     8,142   (16.7)%
        Other
         overhead
         expenses   17,881    29,233   (38.8)%    38,378    57,501   (33.3)%
    -------------------------------------------------------------------------
      Total
       expenses   $ 64,018  $ 63,150      1.4%   133,150  $148,170   (10.1)%
      Income before
       income
       taxes(2)     14,457    (4,814)     n.m.    30,822    14,959    106.0%
      Number of
       employees       482       551   (12.5)%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for number of employees.
    (2) See "Intersegment Allocated Costs".
    n.m.: not meaningful
    

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.

Second quarter 2010 vs. second quarter 2009

Revenue for Canaccord Adams in Q2/10 was $78.5 million, an increase of 34.5% or $20.1 million from the same quarter a year ago, due to the stronger global capital markets in Canada and the US in Q2/10 compared to Q2/09.

Revenue from Canadian operations

Canaccord Adams in Canada generated revenue of $34.5 million in Q2/10, an increase of 18.4% or $5.4 million from Q2/09. The increase in revenue in this geographic sector was largely due to an improvement in capital markets activity in Canada since the first quarter of fiscal 2010. Canadian revenue for Canaccord Adams of $34.5 million represented 43.9% (Q2/09: 49.9%) of Canaccord Adams' total revenue.

Revenue from UK and Other Foreign Location

Canaccord Adams' operations in the UK and Europe include providing institutional sales and trading, corporate finance and research services. Revenue derived from capital markets activity outside of Canada, the UK and the US is reported as Other Foreign Location, which includes operations for Canaccord International Ltd. Revenue in the UK and Other Foreign Location was $14.4 million, which increased 22.5% or $2.6 million from the same period a year ago mainly due to an increase in market-making operations during Q2/10. UK and Other Foreign Location revenue of $14.4 million was 18.4% (Q2/09: 20.2%) of Canaccord Adams' total revenue.

Revenue from US operations

The US operations reflect the capital markets activities of Canaccord Adams Inc. Second quarter 2010 revenue for Canaccord Adams in the US was $29.6 million (Q2/09: $17.5 million), an increase of $12.1 million or 69.5% compared to the same period last year primarily due to improvements in the equity markets, changes in the competitive landscape and increased activity in respect of both public and private offerings as well as increased advisory fees. Revenue from the US operations represented 37.7% (Q2/09: 29.9%) of Canaccord Adams' total revenue.

Expenses

Expenses for Q2/10 were $64.0 million, up 1.4% or $0.9 million. This was mainly attributed to the increase in incentive compensation of $12.8 million or 42.5% due to higher incentive-based revenue in the quarter. Salary and benefits expense for the quarter was down $0.5 million or 13.9%, due to the decrease of 69 employees in this segment. Total compensation expense as a percentage of revenue for the quarter was 58.8%, an increase of 0.7 percentage points from 58.1% in Q2/09.

General and administrative expense was $5.2 million in Q2/10, a decrease of $7.0 million or 57.2%. Promotion and travel expenses were down $3.1 million or 56.8% due to the cost reduction initiatives announced in fiscal 2009 and changes in expense allocations to compensation pools introduced in fiscal 2009. Professional fees were $3.2 million lower due to non-recurring consultancy fees to upgrade internal infrastructure incurred in Q2/09.

Income before income taxes for the quarter was $14.5 million compared to a net loss before income taxes of $4.8 million for the same period last year. The increase in income was mainly a result of the $20.1 million increase in revenue because of the improved economic conditions and favourable competitive environment in the small- to mid-size capital markets, especially in the US operations.

First-half fiscal year 2010 vs. first-half fiscal year 2009

Revenue for Canaccord Adams for the first half of fiscal 2010 was $164.0 million, which increased $0.8 million from the same period last year due to recovering capital markets activities in all geographies where we operate, particularly in the US segment.

Revenue from Canadian operations

In Canada, revenue was $70.9 million, a slight decrease of 0.3% from the same period a year ago. Within Canada, $57.4 million was derived from investment banking and equities activity, while $13.5 million was from our international trading, registered traders and fixed income operations. Overall, our Canadian revenue represented 43.3% of Canaccord Adams' total revenue.

Revenue from UK and Other Foreign Location operations

Our UK and Other Foreign Location revenue was $36.8 million, a decrease of $13.2 million from the same period a year ago, due to significantly lower revenue in Q1/10 compared to Q1/09 as a result of the market disruptions that began in Q2/09. Revenue from our UK and Other Foreign Location operations represented 22.4% of Canaccord Adams' total revenue.

Revenue from US operations

The US operations experienced a significant increase in revenue during the first half of fiscal 2010, mainly due to the improvements in the equity markets, changes in the competitive landscape and increased activity in respect of both public and private offerings as well as increased advisory fees. Revenue was $56.3 million, an increase of $14.2 million or 33.9% compared to the same period a year ago. Revenue from US operations represented 34.3% of Canaccord Adams' total revenue.

Expenses

Expenses for the first half of fiscal 2010 were $133.2 million, a decrease of $15.0 million. Incentive compensation was $88.0 million, an increase of $5.5 million or 6.6% compared to the same period a year ago. Incentive compensation expense as a percentage of revenue increased by 3.1 percentage points, a result of new LTIP grants during Q2/10.

Salary and benefits expense for the first half of fiscal 2010 declined by $1.4 million from a year ago related to the net decrease of 69 employees. The total compensation expense payout as a percentage of revenue for the first half of fiscal 2010 was 57.8%, an increase of 2.2 percentage points from 55.6% for the same period a year ago.

Overhead expenses were $38.4 million during the first half of fiscal 2010, a decrease of $19.1 million or 33.3% compared to the same period in fiscal 2009. This was mainly due to a $13.2 million decrease in general and administrative expense primarily connected to the $4.3 million decline in non-recurring consultancy fees paid to upgrade our internal infrastructure as well as a $7.5 million decrease in promotion and travel expenses. There were less hiring incentives incurred in our US operations, leading to a drop in development costs of $3.1 million to $4.7 million during the first half of fiscal 2010.

Income before income taxes for the period was $30.8 million compared to $15.0 million for the same period a year ago. This improvement was a result of lower expenses as part of our restructuring plan announced in fiscal 2009.

    
    Canaccord Wealth Management(1)
    -------------------------------------------------------------------------
    (C$ thousands,
     except AUM
     and AUA,
     which are in
     C$ millions;      Three months                   Six months
     employees;           ended        Quarter-         ended
     Advisory          September 30       over-      September 30        YTD-
     Teams, and                        quarter                      over-YTD
     % amounts)       2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
    Revenue       $ 40,138  $ 43,844    (8.5)%  $ 80,323  $101,697   (21.0)%
    Expenses
      Incentive
       compensation 19,368    20,116    (3.7)%    38,011    47,066   (19.2)%
      Salaries and
       benefits      4,360     3,477     25.4%     8,606     7,258     18.6%
      Other
       overhead
       expenses     11,485    12,318    (6.8)%    23,764    26,270    (9.5)%
    -------------------------------------------------------------------------
    Total
     expenses     $ 35,213  $ 35,911    (1.9)%  $ 70,381  $ 80,594   (12.7)%
    Income before
     income
     taxes(2)        4,925     7,933   (37.9)%     9,942    21,103   (52.9)%
    Assets under
     management        453       609   (25.6)%
    Assets under
     administration 11,386    11,584    (1.7)%
    Number of
     Advisory Teams    334       341    (2.1)%
    Number of
     employees         698       744    (6.2)%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for AUM, AUA, number of Advisory
        Teams, and number of employees.
    (2) See "Intersegment Allocated Costs".
    

Revenue from Canaccord Wealth Management is generated through traditional commission-based brokerage services; the sale of fee-based products and services; margin interest; and fees and commissions earned in respect of investment banking and venture capital transactions by private clients.

Second quarter 2010 vs. second quarter 2009

Revenue from Canaccord Wealth Management was $40.1 million, a decrease of $3.7 million or 8.5% mainly due to lower client interest revenue. AUA decreased by 1.7% or $0.2 billion to $11.4 billion compared to Q2/09. AUM decreased by 25.6% year over year. There were 334 Advisory Teams at the end of the second quarter of fiscal 2010, a decrease of 7 from a year ago. Canaccord's fee-based revenue accounted for 15.2% of Canaccord Wealth Management's revenue in Q2/10 compared to 19.3% in Q2/09, a decrease of 4.1 percentage points.

Expenses for Q2/10 were $35.2 million, a decrease of 1.9% or $0.7 million. This change was made up of lower expenses in incentive compensation, down by by $0.7 million, and in other overhead expense, down by $0.8 million, but offset by a $0.9 million increase in salaries and benefits expense. The movement in incentive compensation expense was consistent with the decline in revenue. Other overhead expenses decreased mainly due to lower interest expense of $2.4 million resulting from the drop in interest rates. This decrease was offset by a $1.2 million increase in development costs due to investments made through hiring incentives relating to Canaccord Wealth Management's recruiting strategy.

Income before income taxes for the quarter was $4.9 million compared to $7.9 million from the same period a year ago. The decrease was due to reduced revenue in Q2/10 compared to Q2/09 as described above.

First-half fiscal year 2010 vs. first-half fiscal year 2009

Revenue from Canaccord Wealth Management was $80.3 million, a decrease of $21.4 million. The decrease in revenue from Canaccord Wealth Management was attributed to the weak market conditions experienced since the market disruptions in fiscal 2009. Fee-related revenue as a percentage of total Canaccord Wealth Management revenue decreased by 2.8 percentage points to 14.5% compared to the same period last year.

Expenses for the six months ended September 30, 2009 were $70.4 million, a decrease of $10.2 million or 12.7%. Incentive compensation expense decreased by $9.1 million or 19.2%, in line with the 21.0% decline in total revenue. Interest expense decreased by $5.0 million or 93.5%, a result of lower interest rates and smaller cash balances in our client accounts. The total compensation expense payout as a percentage of revenue for the first six months of fiscal 2010 was 58.0%, an increase of 4.6 percentage points from 53.4% for the same period a year ago. The significant decrease in non-incentive-based revenue, particularly interest revenue, is the main reason for this increase in compensation expense payout as a percentage of revenue.

The decrease in expenses was offset by an increase in development costs of $1.6 million or 53.5%, which was mainly due to additional hiring incentives incurred as part of our recruiting strategy in this segment.

Income before income taxes for the first half of fiscal 2010 was $9.9 million, a decline of 52.9% from the same period a year ago.

    
    Corporate and Other(1)
    -------------------------------------------------------------------------
                       Three months                   Six months
    (C$ thousands,        ended        Quarter-         ended
     except            September 30       over-      September 30        YTD-
     employees and                     quarter  	                over-YTD
     % amounts)       2009      2008    change      2009      2008    change
    -------------------------------------------------------------------------
    Revenue       $  5,131  $  8,649   (40.7)%    16,912    18,711    (9.6)%
    Expenses
      Incentive
       compensation  1,837       863    112.9%     6,426     4,111     56.3%
      Salaries and
       benefits      6,247     6,799    (8.1)%    12,399    14,238   (12.9)%
      Other
       overhead
       expenses      8,568     9,082    (5.7)%    14,995    17,871   (16.1)%
    -------------------------------------------------------------------------
    Total
     expenses     $ 16,652  $ 16,744    (0.5)%    33,820    36,220    (6.6)%
    Loss before
     income
     taxes(2)      (11,521)   (8,095)    42.3%   (16,908)  (17,509)   (3.4)%
    Number of
     employees         359       393    (8.7)%
    -------------------------------------------------------------------------
    (1) Data is considered to be GAAP except for number of employees.
    (2) See "Intersegment Allocated Costs".
    

This segment, described as Corporate and Other, includes correspondent brokerage services, bank and other interest revenue, foreign exchange gains and losses and expenses not specifically allocable to either the Canaccord Adams or Canaccord Wealth Management 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.

Second quarter 2010 vs. second quarter 2009

Revenue for the three months ended September 30, 2009 was $5.1 million, a decrease of 40.7% or $3.5 million from the same quarter a year ago. The change was mainly related to a $4.0 million decline in interest revenue compared to the same quarter in the prior year, which was due to lower interest rates.

Expenses for Q2/10 were $16.7 million, a decrease of 0.5%. Incentive compensation expense increased by $1.0 million due to higher LTIP expense.

Overall, loss before income taxes was $11.5 million in Q2/10 compared to $8.1 million in the same quarter a year ago. The increased loss was mainly due to a drop in interest revenue.

First-half fiscal year 2010 vs. first-half fiscal year 2009

Revenue was $16.9 million, down $1.8 million, primarily attributed to the decline in interest revenue offset by an increase in foreign exchange gains.

Expenses for the first half of fiscal 2010 were $33.8 million, a decrease of $2.4 million. There was a net increase in incentive compensation expense of $2.3 million or 56.3% mainly due to higher long-term incentive compensation expense. This was offset by a decrease in salaries and benefits expense, a result of the staff restructuring in fiscal 2009. General and administrative expense also decreased by $1.3 million mainly due to less contingent liability accruals and a drop in promotion and travel expenses during the period. Development costs also decreased by $1.0 million, resulting from decreased spending on systems development.

Overall, loss before income taxes was $16.9 million compared to $17.5 million for the same period a year ago.

Intersegment allocated costs

Included in the Corporate and Other segment are certain trade processing, support services, research, and other expenses that have been incurred to support the activities within the Canaccord Adams and Canaccord Wealth Management segments. Excluding executive incentive compensation and certain administrative support, foreign exchange gains and losses and net interest, management has determined that allocable costs from Corporate and Other to Canaccord Wealth Management were $8.2 million for the quarter ending September 30, 2009 and to Canaccord Adams such allocable costs were $2.2 million.

FINANCIAL CONDITION

Below are specific changes in selected balance sheet items.

Assets

Cash and cash equivalents were $709.5 million on September 30, 2009 compared to $701.2 million on March 31, 2009. Refer to the Liquidity and Capital Resources section below for more details.

Securities owned were $517.1 million compared with $133.7 million on March 31, 2009, mainly attributable to an increase in fixed income activity, net holdings of marketable securities, and additional corporate finance bought deals. This was a result of a firm initiative to expand the Fixed Income group, which deals in the primary and secondary markets of all fixed income products.

Accounts receivable were $2.1 billion at September 30, 2009 compared to $1.1 billion at March 31, 2009, attributed to an increase in brokers and investment dealers, and clients' receivables. This increase was due to greater business activities and expansion of the Fixed Income group. Accounts receivable net accounts payable remained constant at $(0.4) million comparing September 30, 2009 and March 31, 2009.

Other assets were $95.1 million compared to $126.1 million at March 31, 2009, mainly due to a decrease in income taxes receivable and future income taxes.

Liabilities

Bank overdrafts and call loan facilities utilized by Canaccord may vary significantly on a day-to-day basis and depend on securities trading activity. At September 30, 2009 Canaccord had available credit facilities with banks in Canada, the US, and the UK in the aggregate amount of $460.9 million (March 31, 2009 - $568.7 million). These credit facilities, consisting of call loans, letters of credit and daylight overdraft facilities, are collateralized by either unpaid client securities and/or securities owned by the Company. On September 30, 2009 there was bank indebtedness of $85.6 million compared to $75.6 million on March 31, 2009.

Accounts payable were $2.5 billion compared to $1.5 billion at March 31, 2009, an increase of $1.0 billion mainly related to an increase in payables to brokers and investment dealers. As discussed above in "Assets", the increase was due to greater business activities, expansion of the Fixed Income group, and additional corporate finance bought deals.

Other liabilities were $397.2 million, an increase of $292.8 million compared to $104.4 million at March 31, 2009 due to the $10.0 million repayment of subordinated debt offset by a $302.8 million increase in securities sold short, a result of the Company's initiative to grow the Fixed Income group.

OFF-BALANCE SHEET ARRANGEMENTS

A subsidiary of the Company has entered into irrevocable, secured standby letters of credit from a financial institution totalling $2.5 million (US$2.3 million) (March 31, 2009 - $2.9 million (US$2.3 million)) as rent guarantees for its leased premises in Boston, New York and San Francisco.

LIQUIDITY AND CAPITAL RESOURCES

Canaccord has a capital structure comprised of share capital, retained earnings and accumulated other comprehensive losses. On September 30, 2009, cash and cash equivalents of $709.5 million, net of bank indebtedness of $85.6 million, were $623.9 million, a decrease of $1.7 million from $625.6 million as of March 31, 2009. During the six months ended September 30, 2009, financing activities used cash in the amount of $12.1 million. Investing activities provided cash in the amount of $1.2 million mainly relating to the proceeds on net redemption of restructured ABCP notes. Operating activities provided cash in the amount of $7.7 million, which was due to net income offset by net changes in securities owned and securities sold short and net changes in payables and receivables. An increase in cash of $1.5 million was attributed to the effect of foreign exchange on cash balances. In total, there was a decrease in net cash of $1.7 million compared to March 31, 2009.

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 fair value. The fair 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.

During the six-month period ended September 30, 2009, there were no material changes to the Company's commitments from those described in Note 17 of the March 31, 2009 Audited Annual Consolidated Financial Statements.

OUTSTANDING SHARE DATA

    
    -------------------------------------------------------------------------
                                       Outstanding shares as of September 30
    -------------------------------------------------------------------------
                                                          2009          2008
    -------------------------------------------------------------------------
    Issued shares excluding unvested shares(1)      48,681,034    48,273,824
    Issued shares outstanding(2)                    55,359,489    54,552,553
    Issued shares outstanding - diluted(3)          57,226,445    57,981,364
    Average shares outstanding - basic              48,420,751    48,247,858
    Average shares outstanding - diluted            55,444,791    53,956,302
    -------------------------------------------------------------------------
    (1) Excludes 3,746,523 unvested shares that are outstanding relating to
        share purchase loans for recruitment and retention programs, and
        2,931,932 unvested shares purchased by the employee benefit trust for
        the long term incentive plan (LTIP).
    (2) Includes 3,746,523 unvested shares that are outstanding relating to
        share purchase loans for recruitment and retention programs, and
        2,931,932 unvested shares purchased by the employee benefit trust for
        the LTIP.
    (3) Includes 1,866,956 of share issuance commitments.
    

At November 4, 2009, Canaccord had 55,359,489 common shares issued and outstanding, an increase of 806,936 common shares from September 30, 2008 due to shares issued in connection with stock-based compensation plans.

The Company renewed its normal course issuer bid (NCIB) and is currently entitled to acquire up to 2,767,974 of its shares from September 3, 2009 to September 2, 2010; this number represents 5% of its shares outstanding as of August 28, 2009. There were nil shares purchased through the NCIB between September 3, 2009 and September 30, 2009.

STOCK-BASED COMPENSATION PLANS

Stock options

The Company granted stock options to purchase common shares of the Company to independent directors and senior managers. The independent directors and senior managers have been granted options to purchase up to an aggregate of 2,449,993 common shares of the Company. The stock options vest over a four- to five-year period and expire seven years after the grant date. The weighted average exercise price of the stock options is $9.91.

On August 31, 2009, the independent directors of the Company approved the grant of stock options to certain senior managers of the Company and its subsidiaries. An aggregate of 2,099,993 options were granted at an exercise price of $9.47 per share that vest over five years. The options expire at the earliest of: (1) seven years after the grant date, (2) three years after death or any other event of termination of employment, (3) after any unvested optioned shares held by the optionee are cancelled for any reason, and (4) in the case of early retirement, after a determination that the optionee has competed with the Company or violated any non-competition, non-solicitation or non-disclosure obligations.

Long term incentive plan (LTIP)

Under the LTIP, eligible participants are awarded restricted share units (RSUs) which vest over three years. For employees in Canada, an employee benefit trust (the Trust) has been established, and either (a) the Company will fund the Trust with cash, which will be used by a trustee to purchase on the open market common shares of the Company that will be held in trust by the trustee until RSUs vest, or (b) the Company will issue common shares from treasury to participants following vesting of RSUs. For employees in the United States and the United Kingdom, at the time of each RSU award, the Company will allot common shares and these shares will be issued from treasury at the time they vest for each participant.

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 September 30, 2009, forward contracts outstanding to sell US dollars had a notional amount of US$10.0 million, an increase of $0.5 million from a year ago. Forward contracts outstanding to buy US dollars had a notional amount of US$7.0 million, an increase of US$1.5 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.

RELATED PARTY TRANSACTIONS

Security trades executed for employees, officers and directors of Canaccord are transacted in accordance with terms and conditions applicable to all clients. Commission income on such transactions in the aggregate is not material in relation to the overall operations of Canaccord.

CRITICAL ACCOUNTING ESTIMATES

The following is a summary of Canaccord's critical accounting estimates. Canaccord's accounting policies are in accordance with Canadian GAAP and are described in Note 1 to the Audited Annual Consolidated Financial Statements. The accounting policies described below require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses recorded in the financial statements. Because of their nature, estimates require judgment based on available information. Actual results or amounts could differ from estimates, and the difference could have a material impact on the financial statements.

Revenue recognition and valuation of securities

Securities owned and sold short, including share purchase warrants and options, are categorized as held for trading as per Canadian Institute of Chartered Accountants (CICA) Handbook Section 3855, "Financial Instruments - Recognition and Measurement", and are recorded at fair value with unrealized gains and losses recognized in net income. In the case of publicly traded securities, fair value is determined on the basis of market prices from independent sources, such as listed exchange prices or dealer price quotations. Adjustments to market prices are made for liquidity, relative to the size of the position, holding periods and other resale restrictions, if applicable. Investments in illiquid or non-publicly traded securities categorized as held for trading are measured at fair value determined by a valuation model. There is inherent uncertainty and imprecision in estimating the factors that can affect value and in estimating values generally. The extent to which valuation estimates differ from actual results will affect the amount of income or loss recorded for a particular security position in any given period. With Canaccord's security holdings consisting primarily of publicly traded securities except as noted below, our procedures for obtaining market prices from independent sources, the validation of estimates through actual settlement of transactions and the consistent application of our approach from period to period, we believe that the estimates of fair value recorded are reasonable.

Asset-backed commercial paper

There is a significant amount of uncertainty in estimating the amount and timing of cash flows associated with the Company's holdings in ABCP. The Company estimates the fair value of its ABCP holdings by discounting expected future cash flows on a probability weighted basis considering the best available data. Since the fair value of the ABCP is based on the Company's assessment of current conditions, amounts reported may change materially in subsequent periods. Refer to Note 7 in the Audited Annual Consolidated Financial Statements for further details.

Provisions

Canaccord records provisions related to pending or outstanding legal matters and doubtful accounts associated with client receivables, loans, advances and other receivables. Provisions in connection with legal matters are determined on the basis of management's judgment in consultation with legal counsel, considering such factors as the amount of the claim, the possibility of wrongdoing by an employee of Canaccord, and precedents. Client receivables are generally collateralized by securities and, therefore, any impairment is generally measured after considering the market value of any 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. Accounting standards require a valuation allowance when it is more likely than not that all or a portion of a future income tax asset will not be realized prior to its expiration. Although realization is not assured, Canaccord believes that, based on all evidence, it is more likely than not that all of the future income tax assets, net of the valuation allowance, will be realized. Canaccord believes that adequate provisions for income taxes have been made for all years.

Consolidation of variable interest entities

The Company consolidates variable interest entities (VIEs) in accordance with the guidance provided by CICA Accounting Guideline 15, "Consolidation of Variable Interest Entities" (AcG-15). AcG-15 defines a VIE as an entity which either does not have sufficient equity at risk to finance its activities without additional subordinated financial support or where the holders of equity at risk lack the characteristics of a controlling financial interest. The enterprise that consolidates a VIE is called the primary beneficiary of the VIE. An enterprise should consolidate a VIE when that enterprise has a variable interest that will absorb a majority of the entity's expected losses or receive a majority of the entity's expected residual returns.

The Company has established an employee benefit trust to fulfill obligations to employees arising from the Company's stock-based compensation plan. The employee benefit trust has been consolidated in accordance with AcG-15 as it meets the definition of a VIE and the Company is the primary beneficiary of the employee benefit trust.

Stock-based compensation plans

Stock-based compensation represents the cost related to stock-based awards granted to employees. The Company uses the fair value method to account for such awards. Under this method, the Company measures the fair value of stock-based awards as of the grant date and recognizes the cost as an expense over the applicable vesting period with a corresponding increase in contributed surplus. In the case where vesting is also dependent on performance criteria, the cost is recognized over the vesting period in accordance with the rate at which such performance criteria are achieved (net of estimated forfeitures). Otherwise, the cost is recognized on a graded basis. When stock-based compensation awards vest, contributed surplus is reduced by the applicable amount and share capital is increased by the same amount.

RECENT ACCOUNTING PRONOUNCEMENTS

Business Combinations and Consolidated Financial Statements

In January 2009 the CICA issued a new accounting standard, CICA Handbook Section 1582, "Business Combinations", which replaces the former Section 1581, "Business Combinations". This standard harmonizes Canadian guidance to the International Financial Reporting Standard (IFRS) 3, "Business Combinations". This standard requires additional use of fair value measurements, transaction costs to be expensed, and increased financial statement notes disclosure. It also provides guidance on the recognition and measurement of goodwill acquired in the business combination. This standard is to be applied prospectively for business combinations for which the acquisition date is on or after April 1, 2011.

In addition, the CICA has issued Handbook Section 1601, "Consolidated Financial Statements", and Handbook Section 1602, "Non-controlling Interests", which replace CICA Handbook Section 1600, "Consolidated Financial Statements". CICA Handbook Section 1601 carries forward guidance from CICA Handbook Section 1600 except for the standards relating to the accounting for non-controlling interests, which are addressed separately in Section 1602. Section 1602 harmonizes Canadian standards with amended International Accounting Standard 27, "Consolidated and Separate Financial Statements". This Canadian standard provides guidance on accounting for a non-controlling interest in a subsidiary in the consolidated financial statements subsequent to a business combination. These two standards will be effective for the Company beginning April 1, 2011.

Early adoption prior to April 1, 2011 is permitted, and all three standards must be adopted concurrently. The impact of adoption of these standards is being assessed.

International Financial Reporting Standards (IFRS)

The Canadian Accounting Standards Board (AcSB) has confirmed that the use of IFRS will be required commencing in 2011 for publicly accountable, profit-oriented enterprises. IFRS will replace Canadian GAAP currently followed by the Company. The purpose of this adoption is to increase the comparability of financial reporting among countries and to improve transparency. The Company will be required to begin reporting under IFRS for its fiscal year ended March 31, 2012 and will be required to provide information that conforms with IFRS for the comparative periods presented.

The Company is currently in the process of evaluating the potential impact of IFRS on the consolidated financial statements. This is an ongoing process as the International Accounting Standards Board (IASB) and the AcSB continue to issue new standards and recommendations. The Company's consolidated financial performance and financial position as disclosed in the current Canadian GAAP financial statements may differ significantly when presented in accordance with IFRS. Some of the significant differences identified between IFRS and Canadian GAAP may have a material effect on the Company's consolidated financial statements.

In order to prepare for the conversion to IFRS, the Company has developed an IFRS conversion plan, which includes the following activities:

    
    -   Identification of accounting differences between existing Canadian
        GAAP and IFRS
    -   Review of presentation of financial statements under IFRS
    -   Determination of potential business impacts
    -   Evaluation of the impact on financial systems
    -   Evaluation of the impact of IFRS on internal controls over financial
        reporting and disclosure controls and procedures
    -   Assessment of training and resource requirements
    -   Development of a communication plan for both internal and external
        stakeholders
    

Key elements of the plan that are currently in progress include, but are not limited to:

    
    -   Evaluation of major accounting differences
    -   Assessment of the application of IFRS 1 "First time adoption of IFRS"
    -   Development of ongoing training and education for employees
    

CHANGES IN ACCOUNTING POLICIES

Goodwill and Intangible Assets

The CICA issued a new accounting standard, CICA Handbook Section 3064, "Goodwill and Intangible Assets", which prescribes when expenditures qualify for recognition as intangible assets and provides increased guidance on the recognition and measurement of internally generated goodwill and intangible assets. The Company adopted Section 3064 effective April 1, 2009. The adoption of this new standard had no impact on the Company's financial statements.

Financial Instruments - Disclosures

The AcSB amended CICA Handbook Section 3862, "Financial Instruments - Disclosures", to increase disclosure requirements regarding the fair value measurements of financial instruments. The Company adopted these new amendments during fiscal 2010 and this information is included in Note 4.

ASSET-BACKED COMMERCIAL PAPER

As a result of liquidity issues in the ABCP market, there has been very limited trading of the ABCP since mid-August 2007. On March 17, 2008 the Pan-Canadian Investors Committee (the Committee) for ABCP filed proceedings for a plan of compromise and arrangement (the Plan) under the Companies' Creditors Arrangement Act (Canada) (CCAA) with the Ontario Superior Court (the Court). The Court issued the final implementation order in the ABCP restructuring process on January 12, 2009 and the restructuring closed on January 21, 2009. The first two installments of interest (to August 31, 2008) were made during the year ended March 31, 2009 and one further and final payment is scheduled to be made on November 4, 2009. Reimbursement of restructuring costs under the Canaccord Relief Program is expected shortly thereafter.

There has been very limited trading of the restructured ABCP notes since January 21, 2009 and, as such, no meaningful market quote is available. There is a significant amount of uncertainty in estimating the amount and timing of cash flows associated with the ABCP. The Company estimated the fair value of its ABCP by discounting expected future cash flows on a probability weighted basis considering the best available data at September 30, 2009.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

Disclosure controls and procedures

Based on an evaluation performed as of March 31, 2009, the President & CEO and the Executive Vice President & CFO concluded that the design and operation of our disclosure controls and procedures were effective as defined under National Instrument 52-109. During the quarter ended September 30, 2009, there were no changes that would have materially affected, or are reasonably likely to materially affect, Canaccord's disclosure controls and procedures.

Changes in internal control over financial reporting

An evaluation of the Company's internal control over financial reporting was performed as of March 31, 2009. Based on this evaluation, the President & CEO and the Executive Vice President & CFO concluded that our internal controls over financial reporting are designed and operating effectively as defined under National Instrument 52-109 and there were no material weaknesses. There were no changes in internal control over financial reporting that occurred during the quarter ended September 30, 2009 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

On November 4, 2009 the Board of Directors considered the dividend policy and approved a quarterly dividend of $0.05 per share payable on December 10, 2009 with a record date of November 20, 2009. The reinstatement of the quarterly dividend is an indication of the Board's confidence in Canaccord's improved business environment and the Company's ability to earn stable returns for shareholders

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 September 30, 2009. This information is unaudited but reflects all adjustments of a recurring nature that 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 per share        Fiscal 2010                Fiscal 2009
     amounts)                -----------                -----------
    -------------------------------------------------------------------------
                             Q2       Q1       Q4       Q3       Q2       Q1
    -------------------------------------------------------------------------
    Revenue
      Canaccord Adams  $ 78,475 $ 85,497 $ 64,972 $ 49,250 $ 58,336 $104,793
      Canaccord Wealth
       Management        40,138   40,185   37,255   33,532   43,844   57,853
      Corporate and
       Other              5,131   11,781    4,769    4,406    8,649   10,062
    -------------------------------------------------------------------------
    Total revenue       123,744  137,463  106,996   87,188  110,829  172,708
    Net income (loss)     6,746    9,112    3,666  (62,378)  (5,398)  16,459
    EPS - basic            0.14     0.19     0.07    (1.27)   (0.11)    0.35
    EPS - diluted          0.12     0.16     0.07    (1.27)   (0.11)    0.31
    -------------------------------------------------------------------------


    ----------------------------------------------
    (C$ thousands,
     except per share           Fiscal 2008
     amounts)                   -----------
    ----------------------------------------------
                             Q4       Q3       Q2
    ----------------------------------------------
    Revenue
      Canaccord Adams  $ 77,965 $109,583 $ 89,071
      Canaccord Wealth
       Management        54,463   61,166   57,415
      Corporate and
       Other             11,018   12,605   12,383
    ----------------------------------------------
    Total revenue       143,446  183,354  158,869
    Net income (loss)   (35,154)  15,048   12,411
    EPS - basic           (0.80)    0.34     0.28
    EPS - diluted         (0.80)    0.31     0.26
    ----------------------------------------------
    

RISKS

The securities industry and Canaccord's activities are by their very nature subject to a number of inherent risks. Economic conditions, competition and market factors such as volatility in the Canadian and international markets, interest rates, commodity prices, market prices, trading volumes and liquidity will have a significant impact on Canaccord's profitability. An investment in the common shares of Canaccord involves a number of risks, including market, liquidity, credit, operational, legal and regulatory risks, which could be substantial and are inherent in Canaccord's business. Canaccord is also directly exposed to market price risk, liquidity risk and volatility risk as a result of its principal trading activities in equity securities and to specific interest rate risk as a result of its principal trading in fixed income securities. Canaccord Wealth Management 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. The Company has a capital management framework to maintain the level of capital that will meet the firm's regulated subsidiaries' target ratios as set out by the respective regulators, fund current and future operations, ensure that the firm is able to meet its financial obligations as they come due, and support the creation of shareholder value. The regulatory bodies that certain of the Company's subsidiaries are subject to are listed in Note 16 of the March 31, 2009 Audited Annual Consolidated Financial Statements. Further discussion regarding risks can be found in our Annual Information Form.

ADDITIONAL INFORMATION

A comprehensive discussion of our business, strategies, objectives and risks is available in our Annual Information Form and Management's Discussion and Analysis, including our Audited Annual Consolidated Financial Statements in Canaccord's 2009 Annual Report, which have been posted to shareholders and are available on our website at canaccordfinancial.com and on SEDAR at sedar.com.

    
    Interim Consolidated Financial Statements

    Canaccord Capital Inc.
    Unaudited
    For the three months and six months ended September 30, 2009
    (Expressed in Canadian dollars)



                           Canaccord Capital Inc.

               INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited)

                                                    (in thousands of dollars)
    As at                                           September 30,   March 31,
                                                          2009        2009
                                                            $           $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                            709,455     701,173
    Securities owned (note 3)                            517,070     133,691
    Accounts receivable (notes 5 and 11)               2,085,356   1,061,161
    Income taxes receivable                                2,107      23,771
    Future income taxes                                   12,019      15,680
    -------------------------------------------------------------------------
    Total current assets                               3,326,007   1,935,476
    Investment                                             5,000       5,000
    Investment in asset-backed commercial
     paper (note 6)                                       34,280      35,312
    Equipment and leasehold improvements                  41,718      46,311
    -------------------------------------------------------------------------
                                                       3,407,005   2,022,099
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                     85,600      75,600
    Securities sold short (note 3)                       382,209      79,426
    Accounts payable and accrued liabilities
     (notes 5 and 11)                                  2,535,971   1,469,369
    Subordinated debt (note 8)                            15,000      25,000
    -------------------------------------------------------------------------
    Total current liabilities                          3,018,780   1,649,395
    -------------------------------------------------------------------------
    Commitments and contingencies (note 13)
    Shareholders' equity
    Common shares (note 9)                               193,291     183,619
    Contributed surplus                                   44,393      44,383
    Retained earnings                                    176,726     160,868
    Accumulated other comprehensive losses               (26,185)    (16,166)
    -------------------------------------------------------------------------
    Total shareholders' equity                           388,225     372,704
    -------------------------------------------------------------------------
                                                       3,407,005   2,022,099
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



                           Canaccord Capital Inc.

          INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

                                         (in thousands of dollars,
                                         except per share amounts)

                                        For the                 For the
                                  three months ended        six months ended
                              ----------------------- -----------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                    $           $           $           $
    ------------------------------------------------- -----------------------

    REVENUE
    Commission                    56,628      60,630     112,084     132,626
    Investment banking            47,620      34,024     103,506     110,171
    Principal trading             11,589          87      23,059       5,998
    Interest                       3,121      11,734       6,597      24,063
    Other                          4,786       4,354      15,961      10,679
    ------------------------------------------------- -----------------------
                                 123,744     110,829     261,207     283,537
    ------------------------------------------------- -----------------------

    EXPENSES
    Incentive compensation        63,966      50,977     132,429     133,704
    Salaries and benefits         13,983      14,195      27,785      29,638
    Trading costs                  7,002       6,717      14,326      13,038
    Premises and equipment         6,104       5,957      11,986      11,742
    Communication and technology   5,245       6,539      10,734      12,702
    Interest                         492       3,354       1,337       7,313
    General and administrative    11,698      19,611      23,586      38,888
    Amortization                   1,906       2,072       3,827       4,114
    Development costs              5,487       6,383      11,341      13,845
    ------------------------------------------------- -----------------------
                                 115,883     115,805     237,351     264,984
    ------------------------------------------------- -----------------------
    Income (loss) before income
     taxes                         7,861      (4,976)     23,856      18,553
    Income tax expense
     (recovery) (note 7)
      Current                       (201)      1,409       4,360     (10,141)
      Future                       1,316        (987)      3,638      17,633
    ------------------------------------------------- -----------------------
                                   1,115         422       7,998       7,492
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------
    Net income (loss) for
     the period                    6,746      (5,398)     15,858      11,061
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------

    Basic earnings (loss)
     per share (note 9 (iv))        0.14       (0.11)       0.33        0.23
    Diluted earnings (loss)
     per share (note 9 (iv))        0.12       (0.11)       0.28        0.21
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------

    See accompanying notes



                           Canaccord Capital Inc.

       INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (Unaudited)

                                          (in thousands of dollars)
                                        For the                 For the
                                  three months ended        six months ended
                              -----------------------------------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                    $           $           $           $
                              -----------------------------------------------
    Net income (loss) for the
     period                        6,746      (5,398)     15,858      11,061
    Other comprehensive loss,
     net of taxes
      Net change in unrealized
       losses on translation of
       self-sustaining foreign
       operations                (10,304)     (6,332)    (10,019)     (6,762)
    -------------------------------------------------------------------------
    Comprehensive income (loss)
     for the period               (3,558)    (11,730)      5,839       4,299
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                                    (in thousands of dollars)
    As at and for the six months                    September 30,   March 31,
     ended September 30, 2009 and 2008                    2009        2009
                                                            $           $
    -------------------------------------------------------------------------
    Common shares, opening                               183,619     111,142
    Shares issued                                          3,296      68,829
    Shares cancelled                                           -        (442)
    Acquisition of common shares for long term
     incentive plan (note 9)                              (5,237)    (13,839)
    Release of vested common shares from employee
     benefit trust (note 9)                                8,880       4,778
    Unvested share purchase loans                          2,733        (403)
    -------------------------------------------------------------------------
    Common shares, closing                               193,291     170,065
    -------------------------------------------------------------------------

    Contributed surplus, opening                          44,383      34,024
    Excess on redemption of common shares                      -        (340)
    Stock-based compensation (note 10)                      (393)      6,261
    Unvested share purchase loans                            403       1,178
    -------------------------------------------------------------------------
    Contributed surplus, closing                          44,393      41,123
    -------------------------------------------------------------------------

    Retained earnings, opening                           160,868     222,597
    Net income for the period                             15,858      11,061
    Dividends                                                  -     (13,457)
    -------------------------------------------------------------------------
    Retained earnings, closing                           176,726     220,201
    -------------------------------------------------------------------------

    Accumulated other comprehensive losses, opening      (16,166)    (10,319)
    Other comprehensive income losses for the period     (10,019)     (6,762)
    -------------------------------------------------------------------------
    Accumulated other comprehensive losses, closing      (26,185)    (17,081)
    -------------------------------------------------------------------------

    Shareholders' equity                                 388,225     414,308
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



                           Canaccord Capital Inc.

          INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

                                          (in thousands of dollars)
                                        For the                 For the
                                  three months ended        six months ended
                              ----------------------- -----------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                    $           $           $           $
    ------------------------------------------------- -----------------------

    OPERATING ACTIVITIES
    Net income (loss) for
     the period                    6,746      (5,398)     15,858      11,061
    Items not affecting cash
      Amortization                 1,906       2,072       3,827       4,114
      Stock-based compensation
       expense                     5,807       4,272      11,075      10,580
      Future income tax
       (recovery) expense          1,316        (987)      3,638      17,633
    Changes in non-cash working
     capital
      (Increase) decrease in
       securities owned         (349,400)     60,440    (384,189)     36,225
      (Increase) decrease in
       accounts receivable      (830,505)    283,839    (925,543)    181,393
      Decrease (increase) in
       income taxes receivable    15,623         479      19,354      (8,319)
      Increase (decrease) in
       securities sold short     326,489     (17,027)    303,167       1,424
      Increase (decrease) in
       accounts payable and
       accrued liabilities       818,244    (337,801)    960,473    (193,981)
    ------------------------------------------------- -----------------------
    Cash provided by (used in)
     operating activities         (3,774)    (10,111)      7,660      60,130
    ------------------------------------------------- -----------------------

    FINANCING ACTIVITIES
    Repayment of subordinated
     debt                              -           -     (10,000)          -
    Issuance of shares for
     cash net of issuance costs        -           -           -      66,462
    Purchase and cancellation
     of shares                         -        (391)          -        (782)
    Decrease in unvested common
     share purchase loans          1,790         208       3,136         775
    Acquisition of common
     shares for long term
     incentive plan                 (776)    (13,049)     (5,237)    (13,839)
    Dividends paid                     -     (13,457)          -     (13,457)
    ------------------------------------------------- -----------------------
    Cash provided by (used in)
     financing activities          1,014     (26,689)    (12,101)     39,159
    ------------------------------------------------- -----------------------

    INVESTING ACTIVITIES
    Purchase of equipment and
     leasehold improvements         (113)     (2,087)       (565)     (2,757)
    Proceeds on net redemption
     of investment in ABCP           867           -       1,761           -
    ------------------------------------------------- -----------------------
    Cash provided by (used in)
     investing activities            754      (2,087)      1,196      (2,757)
    ------------------------------------------------- -----------------------

    Effect of foreign exchange
     on cash balances             (2,619)     (1,662)      1,527      (2,675)
    ------------------------------------------------- -----------------------

    (Decrease) increase in
     cash position                (4,625)    (40,549)     (1,718)     93,857
    Cash position, beginning
     of period                   628,480     555,017     625,573     420,611
    ------------------------------------------------- -----------------------
    Cash position, end of
     period                      623,855     514,468     623,855     514,468
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------

    Cash position is
     comprised of:
    Cash and cash
     equivalents                 709,455     521,322     709,455     521,322
    Call loans                   (85,600)     (6,854)    (85,600)     (6,854)
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------
                                 623,855     514,468     623,855     514,468
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------

    Supplemental cash flow
     information
    Interest paid                    436       3,344       1,227       7,267
    Income taxes paid              1,179       2,283       2,003       2,836
    ------------------------------------------------- -----------------------
    ------------------------------------------------- -----------------------

    See accompanying notes



                           Canaccord Capital Inc.

       NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

    For the three and six months ended September 30, 2009

    (in thousands of dollars, except per share amounts)

    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 (UK) and the United
    States of America (US). The Company has operations in each of the two
    principal segments of the securities industry: capital markets and wealth
    management services. 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. The Company's business is
    affected by the overall condition of the North American and European
    equity and bond markets, including the seasonal variance in these
    markets.

    1.  SIGNIFICANT ACCOUNTING POLICIES

    Basis of presentation and principles of consolidation

    These unaudited interim consolidated financial statements have been
    prepared by the Company in accordance with Canadian generally accepted
    accounting principles (GAAP) with respect to interim financial
    statements. 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, 2009 as filed on SEDAR
    on May 26, 2009 (Audited Annual Consolidated Financial Statements) except
    for the changes in accounting policies as described in Note 2.
    Accordingly, they do not include all the information and footnotes
    required for compliance with Canadian GAAP for annual financial
    statements. These unaudited interim consolidated financial statements and
    notes thereon should be read in conjunction with the Audited Annual
    Consolidated Financial Statements.

    The preparation of these unaudited interim 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 unaudited interim 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.

    Recent accounting pronouncements

    Business Combinations and Consolidated Financial Statements

    In January 2009, the Canadian Institute of Chartered Accountants (CICA)
    issued a new accounting standard, CICA Handbook Section 1582, "Business
    Combinations", which replaces the former Section 1581, "Business
    Combinations". This standard harmonizes Canadian guidance to the
    International Financial Reporting Standard (IFRS) 3, "Business
    Combinations". This standard requires additional use of fair value
    measurements, transaction costs to be expensed and increased financial
    statements note disclosure. It also provides guidance on the recognition
    and measurement of goodwill acquired in the business combination. This
    standard is to be applied prospectively by the Company for business
    combinations for which the acquisition date is on or after April 1, 2011.

    In addition, the CICA has issued Handbook Section 1601, "Consolidated
    Financial Statements", and Handbook Section 1602, "Non-controlling
    Interests", which replace CICA Handbook Section 1600, "Consolidated
    Financial Statements". CICA Handbook Section 1601 carries forward
    guidance from CICA Handbook Section 1600 except for the standards
    relating to the accounting for non-controlling interests, which are
    addressed separately in Section 1602. Section 1602 substantially
    harmonizes Canadian standards with amended International Accounting
    Standard 27 "Consolidated and Separate Financial Statements". This
    Canadian standard provides guidance on accounting for non-controlling
    interest in a subsidiary in the consolidated financial statements
    subsequent to a business combination. These two standards will be
    effective for the Company beginning April 1, 2011.

    Early adoption prior to April 1, 2011 is permitted, and all three
    standards must be adopted concurrently. The impact of adoption of these
    standards is not expected to have a material impact on the Company's
    consolidated financial statements.


    International Financial Reporting Standards

    The Canadian Accounting Standards Board (AcSB) has confirmed that the use
    of IFRS will be required commencing in 2011 for publicly accountable,
    profit- oriented enterprises. IFRS will replace Canadian GAAP currently
    followed by the Company. The purpose of this adoption is to increase the
    comparability of financial reporting among countries and to improve
    transparency.  The Company will be required to begin reporting under IFRS
    for its fiscal year ended March 31, 2012 and will be required to provide
    information that conforms with IFRS for the comparative periods
    presented.

    The Company is currently in the process of evaluating the potential
    impact of IFRS on the consolidated financial statements. This is an
    ongoing process as the International Accounting Standards Board (IASB)
    and the AcSB continue to issue new standards and recommendations. The
    Company's consolidated financial performance and financial position as
    disclosed in the current Canadian GAAP financial statements may differ
    significantly when presented in accordance with IFRS. Some of the
    significant differences identified between IFRS and Canadian GAAP may
    have a material impact on the Company's consolidated financial
    statements.

    2.  CHANGE IN ACCOUNTING POLICIES

    Goodwill and Intangible Assets

    The CICA issued a new accounting standard, CICA Handbook Section 3064,
    "Goodwill and Intangible Assets", which prescribes when expenditures
    qualify for recognition as intangible assets and provides increased
    guidance on the recognition and measurement of internally generated
    goodwill and intangible assets. The Company adopted Section 3064
    effective April 1, 2009. The adoption of this new standard has no impact
    on the consolidated financial statements.

    Financial Instruments - Disclosures

    The AcSB amended CICA Handbook Section 3862 "Financial Instruments -
    Disclosures" to increase disclosure requirements regarding the fair value
    measurements of financial instruments. The Company adopted these new
    amendments during fiscal 2010 and this information is included in Note 4.

    3.  SECURITIES OWNED AND SECURITIES SOLD SHORT

                                September 30, 2009          March 31, 2009
                            ------------------------- -----------------------
                             Securities   Securities   Securities  Securities
                                owned     sold short      owned    sold short
                                  $            $            $            $
    -------------------------------------------------------------------------
    Corporate and government
     debt                     368,250      336,183       86,069       72,315
    Equities and convertible
     debentures               148,820       46,026       47,622        7,111
    -------------------------------------------------------------------------
                              517,070      382,209      133,691       79,426
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at September 30, 2009, corporate and government debt maturities ranged
    from 2009 to 2055 (March 31, 2009 - 2009 to 2049) bearing interest
    ranging from 0.75% to 12.00% (March 31, 2009 - 3.00% to 10.75%).

    4.  FINANCIAL INSTRUMENTS

    During the periods, there were no material changes to the risks
    associated with the Company's financial instruments from those described
    in Note 4 of the Audited Annual Consolidated Financial Statements.
    Additional disclosures regarding fair value measurements of financial
    instruments as required by new amendments made to CICA Handbook Section
    3862 are presented below.

    A fair value hierarchy is presented below that distinguishes the
    significance of the inputs used in determining the fair value
    measurements of various financial instruments. The hierarchy contains the
    following levels: Level 1 uses inputs based on quoted prices, Level 2
    uses observable inputs other than quoted prices and Level 3 uses inputs
    that are not based on observable market data.


                              Carrying Value         Estimated Fair Value

                            September  March 31,          September
                             30, 2009    2009              30, 2009

                                                 Level 1   Level 2   Level 3
                                 $         $         $         $         $
    -------------------------------------------------------------------------
    Held for trading(1)
    Cash and cash
     equivalents             709,455   701,173   709,455         -         -
    Securities owned, net
     of securities sold
     short                   134,861    54,265   131,127     3,734         -
    Investment in ABCP
     (note 6)                 34,280    35,312         -         -    34,280
    Available for sale
     financial assets
    Investment(2)              5,000     5,000       n/a       n/a       n/a
    Other financial
     liabilities
    Subordinated debt         15,000    25,000    15,000         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The fair values of the Company's bank indebtedness, accounts
        receivable, and accounts payable and accrued liabilities approximate
        their carrying values due to their short-term nature.
    (2) Investment is classified as available for sale and carried at cost as
        the investment does not have a quoted market price. The estimated
        fair value of the investment cannot be reliably determined and,
        therefore, it is not disclosed in the above table.

    5.  ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

    Accounts receivable

                                                     September 30,  March 31,
                                                           2009       2009
                                                             $          $
    -------------------------------------------------------------------------
    Brokers and investment dealers                        897,534    331,930
    Clients                                               678,598    288,877
    RRSP cash balances held in trust                      448,435    397,011
    Other                                                  60,789     43,343
    -------------------------------------------------------------------------
                                                        2,085,356  1,061,161
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable and accrued liabilities

                                                     September 30,  March 31,
                                                           2009       2009
                                                             $          $
    -------------------------------------------------------------------------
    Brokers and investment dealers                        971,068    419,437
    Clients                                             1,195,134    923,902
    Other                                                 369,769    126,030
    -------------------------------------------------------------------------
                                                        2,535,971  1,469,369
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable to clients include $448.4 million (March 31, 2009 -
    $397.0 million) payable to clients for RRSP cash balances held in trust.
    Client security purchases are entered into on either a cash or 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 Industry
    Regulatory Organization 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 clients' accounts. Interest on margin loans and
    amounts due to clients is based on a floating rate (September 30, 2009 -
    5.25%-6.25% and 0.00%-0.05%, respectively; March 31, 2009 - 5.50%-6.25%
    and 0.00%-0.20%, respectively).

    6.  INVESTMENT IN ASSET-BACKED COMMERCIAL PAPER

                                                     September 30,  March 31,
                                                           2009       2009
                                                             $          $
    -------------------------------------------------------------------------
    Investment in asset-backed commercial paper            34,280     35,312
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As a result of liquidity issues in the asset-backed commercial paper
    (ABCP) market, there has been very limited trading of the ABCP since mid-
    August 2007. In January 2009, the Company received restructured ABCP
    notes upon the final implementation order issued by the Ontario Superior
    Court in a plan of arrangement under the Companies' Creditors Arrangement
    Act (Canada) (CCAA) (the Plan). During the quarter ended September 30,
    2009, there were no material changes to the accounting treatment of
    investment in ABCP. Refer to Note 7 of the Audited Annual Consolidated
    Financial Statements for further information.

    The Plan as amended provided for a declaratory release that was effective
    on implementation of the Plan and that, with the closing of the Canaccord
    Relief Program, resulted in the release of all existing and future ABCP-
    related claims against the Company.

    There is no assurance that the validity or effectiveness of the
    declaratory release will not be challenged in actions commenced against
    the Company and others. Any determination that the declaratory release is
    invalid or ineffective could materially adversely affect the Company's
    business, results of operations and financial condition.

    There has been very limited trading of the restructured ABCP notes since
    January 21, 2009 and, as such, no meaningful market quote is available.
    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 on a
    probability weighted basis considering the best available data at the
    reporting date.

    The assumptions used in the valuation model include:

                                                     September 30,  March 31,
                                                           2009       2009
    -------------------------------------------------------------------------
    Weighted average interest rate                          5.01%      4.72%
    Weighted average discount rate                          6.06%      6.83%
    Maturity of notes                                     7 to 18    8 to 19
                                                            years      years
    Credit losses                                          30% to     25% to
                                                             100%       100%

    The following is a summary of transactions impacting ABCP for the six-
    month period September 30, 2009:

                                                                      Amount
                                                                        $
    -------------------------------------------------------------------------
    Balance, March 31, 2009                                           35,312
    Net redemptions                                                   (2,108)
    Purchases under the client relief program                            806
    Fair value adjustment                                                270
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, September 30, 2009                                       34,280
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7.  INCOME TAXES

    The Company's income tax expense differs from the amount that would be
    computed by applying the combined federal and provincial/state income tax
    rates as a result of the following:

                                        For the                 For the
                                  three months ended        six months ended
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                    $           $           $           $
    -------------------------------------------------------------------------

    Income taxes at the
     estimated statutory rate      2,330      (1,553)      7,204       5,815
    Less: International Finance
     Business recovery of
     provincial taxes                (33)          -        (181)          -
    Less: Difference in tax rates
     in foreign jurisdictions        265        (265)         55        (912)
    Non-deductible items affect-
     ing the determination of
     taxable income                  342         699         674       1,041
    Change in valuation allowance
     related to US operating
     losses                       (1,879)      1,781      (2,696)      1,766
    Change in FIT asset -
     reversal period of
     temporary differences            90        (240)      2,942        (218)
    -------------------------------------------------------------------------
    Income tax expense - current
     and future                    1,115         422       7,998       7,492
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  SUBORDINATED DEBT

                                                     September 30,  March 31,
                                                           2009       2009
                                                             $          $
    -------------------------------------------------------------------------
    Loan payable, interest payable monthly
     at prime + 4% per annum, due on demand                15,000     25,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    9.  SHARE CAPITAL

                                                     September 30,  March 31,
                                                           2009       2009
                                                             $          $
    -------------------------------------------------------------------------
    Share capital
      Common shares                                       252,715    249,418
      Unvested share purchase loans                       (28,062)   (30,911)
      Acquisition of common shares for long
       term incentive plan (note 10)                      (31,362)   (34,888)
    -------------------------------------------------------------------------
                                                          193,291    183,619
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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, September 30, 2008                        54,552,553   $242,309
    Shares issued in connection with stock
     compensation plans (note 10)                         765,363      8,128
    Shares cancelled                                     (225,072)    (1,019)
    -------------------------------------------------------------------------
    Balance, March 31, 2009                            55,092,844    249,418
    Shares issued in connection with stock
     compensation plans (note 10)                         266,645      3,297
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, September 30, 2009                        55,359,489    252,715
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company renewed its normal course issuer bid (NCIB) and is currently
    entitled to acquire up to 2,767,974 of its shares from September 3, 2009
    to September 2, 2010; this number represents 5% of its shares outstanding
    as of August 28, 2009. There were nil shares purchased through the NCIB
    between September 3, 2009 and September 30, 2009.

    (iii) 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 a
    vesting period up to five years. The difference between the unvested and
    unamortized values is included in contributed surplus.

    (iv) Earnings per share

                                        For the                 For the
                                  three months ended        six months ended
                              ----------------------- -----------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
    -------------------------------------------------------------------------
    Basic earnings (loss)
     per share
    Net income (loss) for
     the period                   $6,746     $(5,398)    $15,858     $11,061
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number
     of common shares
     (number)                 48,536,387  49,020,939  48,420,751  48,247,858
    Basic earnings (loss)
     per share                     $0.14      $(0.11)      $0.33       $0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per share
    Net income (loss) for
     the period                   $6,746     $(5,398)    $15,858     $11,061
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number
     of common shares
     (number)                 48,536,387  49,020,939  48,420,751  48,247,858
    Dilutive effect of un-
     vested shares (number)    3,746,523   2,949,931   3,746,523   2,949,931
    Dilutive effect of stock
     options (number) (note 10)   24,909         811      10,734       3,171
    Dilutive effect of share
     issuance commitment in
     connection with retention
     plan (number) (note 10)           -     602,366           -     602,366
    Dilutive effect of un-
     vested shares purchased
     by employee benefit trust
     (number) (note 10)        3,020,875   2,556,807   3,061,594   2,078,364
    Dilutive effect of share
     issuance commitment in
     connection with long term
     incentive plan (number)
     (note 10)                   261,418       7,716     205,189      74,612
    -------------------------------------------------------------------------
    Adjusted weighted average
     number of common shares
     (number)                 55,590,112  55,138,570  55,444,791  53,956,302
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per share                     $0.12      $(0.11)      $0.28       $0.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10. STOCK-BASED COMPENSATION PLANS

    Stock options

    The Company granted stock options to purchase common shares of the
    Company to independent directors and senior managers. The stock options
    vest over a four- to five-year period and expire seven years after the
    grant date or 30 days after the participant ceases to be a director. The
    exercise price is based on the fair market value of the common shares at
    grant date. The weighted average exercise price of the stock options was
    $9.91 at September 30, 2009.

    During the quarter ended September 30, 2009, the independent directors of
    the Company approved the grant of stock options to certain senior
    managers of the Company and its subsidiaries.  An aggregate of 2,099,993
    options were granted at an exercise price of $9.47 per share that vest
    over five years. The options expire at the earliest of: (1) seven years
    after the grant date, (2) three years after death or any other event of
    termination of employment, (3) after any unvested optioned shares held by
    the optionee are cancelled for any reason, and (4) in the case of early
    retirement, after a determination that the optionee has competed with the
    Company or violated any non- competition, non-solicitation or non-
    disclosure obligations.

    The following is a summary of the Company's stock options to independent
    directors and senior managers as at September 30, 2009 and changes during
    the year then ended:

                                                                    Weighted
                                                                     average
                                                       Number of    exercise
                                                          shares    price ($)
    -------------------------------------------------------------------------
    Balance, September 30, 2008                          275,000       15.54
    Granted                                                    -           -
    Expired                                              (50,000)      16.31
    -------------------------------------------------------------------------
    Balance, March 31, 2009                              225,000       15.37
    Granted                                            2,224,993        9.34
    -------------------------------------------------------------------------
    Balance, September 30, 2009                        2,449,993        9.91
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The fair value of each stock option grant was estimated on grant date
    using the Black-Scholes option pricing model with the following
    assumptions:

                                  August         May      August        June
                                    2009        2009        2008        2008
                                   grant       grant       grant       grant
    -------------------------------------------------------------------------
    Dividend yield                 2.00%       2.30%       5.10%       5.10%
    Expected volatility           44.00%      44.00%      30.00%      30.00%
    Risk-free interest rate        2.45%       2.45%       2.32%       2.32%
    Expected life                5 years     5 years     5 years     5 years

    Option pricing models require the input of highly subjective assumptions
    including the expected price volatility. Changes in the subjective
    assumptions can materially affect the fair value estimate and, therefore,
    the existing models do not necessarily provide a reliable single measure
    of the fair value of the Company's stock options.

    Compensation expense of $195 and $257 has been recognized for the three
    and six months ended September 30, 2009 ($50 and $101 for the three and
    six months ended September 30, 2008).

    Long term incentive plan

    Under the long term incentive plan (LTIP), eligible participants are
    awarded restricted share units (RSUs) which vest over three years. For
    employees in Canada, an employee benefit trust (the Trust) has been
    established, and either (a) the Company will fund the Trust with cash,
    which will be used by a trustee to purchase on the open market common
    shares of the Company that will be held in trust by the trustee until
    RSUs vest, or (b) the Company will issue common shares from treasury to
    participants following vesting of RSUs. For employees in the United
    States and the United Kingdom, at the time of each RSU award, the Company
    will allot common shares and these shares will be issued from treasury at
    the time they vest for each participant.

    The costs of the RSUs are amortized over the vesting period of three
    years. Compensation expense of $5.6 million and $10.8 million has been
    recognized for the three and six months ended September 30, 2009 ($4.0
    million and $8.8 million for the three and six months ended September 30,
    2008).

                                        For the                 For the
                                  three months ended        six months ended
                              ----------------------- -----------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                              ----------------------- -----------------------
    Awards outstanding,
     beginning of period       4,974,663   3,258,398   4,602,385   2,221,578
    Grants                       995,136     857,105   1,903,460   2,061,975
    Vested                      (522,548)   (233,945) (1,058,594)   (401,995)
    -------------------------------------------------------------------------
    Awards outstanding,
     end of period             5,447,251   3,881,558   5,447,251   3,881,558
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                        For the                 For the
                                  three months ended        six months ended
                              ----------------------- -----------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                              ----------------------- -----------------------
    Common shares held by
     Trust, beginning of
     period                    3,252,159   1,576,127   3,075,300   1,621,895
    Acquired                      76,652   1,606,903     648,581   1,706,903
    Released on vesting         (396,879)   (171,975)   (791,949)   (317,743)
    -------------------------------------------------------------------------
    Common shares held by
     Trust, end of period      2,931,932   3,011,055   2,931,932   3,011,055
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. 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 unaudited interim
    consolidated financial statements.

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

                                                     September 30,  March 31,
                                                           2009       2009
                                                             $          $
    -------------------------------------------------------------------------
    Accounts receivable                                    42,241     38,733
    Accounts payable and accrued liabilities               80,235     77,334
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. SEGMENTED INFORMATION

    The Company has two operating segments:

        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 UK and
        Other Foreign Location, and the US.

        Canaccord Wealth Management - provides brokerage services and
        investment advice to retail or private clients in Canada and the US.

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

    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 operating results.

    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 intersegment
    revenues.

    For the three months ended September 30

                                                     2009
                               ----------------------------------------------
                                           Canaccord
                               Canaccord      Wealth   Corporate
                                   Adams  Management   and Other       Total
                                     $          $           $           $
    -------------------------------------------------------------------------
    Revenue                       78,475      40,138       5,131     123,744
    Expenses                      61,305      31,982      15,203     108,490
    Amortization                     926         618         362       1,906
    Development costs              1,787       2,613       1,087       5,487
     ------------------------------------------------------------------------
    Income (loss) before
     before income taxes          14,457       4,925     (11,521)      7,861
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                     2008
                              ----------------------------------------------
                                           Canaccord
                               Canaccord      Wealth   Corporate
                                   Adams  Management   and Other       Total
                                     $          $           $           $
    -------------------------------------------------------------------------
    Revenue                       58,336      43,844       8,649     110,829
    Expenses                      58,542      34,122      14,686     107,350
    Amortization                     926         411         735       2,072
    Development costs              3,682       1,378       1,323       6,383
     ------------------------------------------------------------------------
    Income (loss) before
     before income taxes          (4,814)      7,933      (8,095)     (4,976)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the six months ended September 30

                                                     2009
                               ----------------------------------------------
                                           Canaccord
                               Canaccord      Wealth   Corporate
                                   Adams  Management   and Other       Total
                                     $          $           $           $
    -------------------------------------------------------------------------
    Revenue                      163,972      80,323      16,912     261,207
    Expenses                     126,535      64,643      31,005     222,183
    Amortization                   1,884       1,220         723       3,827
    Development costs              4,731       4,518       2,092      11,341
    -------------------------------------------------------------------------
    Income (loss) before
     before income taxes          30,822       9,942     (16,908)     23,856
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    2008
                               ----------------------------------------------
                                           Canaccord
                               Canaccord      Wealth   Corporate
                                   Adams  Management   and Other       Total
                                     $          $           $           $
    -------------------------------------------------------------------------
    Revenue                      163,129     101,697      18,711     283,537
    Expenses                     138,527      76,830      31,668     247,025
    Amortization                   1,838         820       1,456       4,114
    Development costs              7,805       2,944       3,096      13,845
    -------------------------------------------------------------------------
    Income (loss) before
     before income taxes          14,959      21,103     (17,509)     18,553
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Company's business operations are grouped into the following four
    geographic segments (revenue is attributed to geographic areas on the
    basis of the underlying corporate operating results):

                                        For the                 For the
                                  three months ended        six months ended
                              -----------------------------------------------
                               September   September   September   September
                                30, 2009    30, 2008    30, 2009    30, 2008
                                    $           $           $           $
    -------------------------------------------------------------------------
    Canada
      Revenue                     79,190      80,750     167,124     189,628
      Equipment and leasehold
       improvements               29,533      24,799      29,533      24,799
      Goodwill and other
       intangible assets               -       3,959           -       3,959

    United Kingdom
      Revenue                     13,775      13,096      34,700      46,815
      Equipment and leasehold
       improvements                5,843       7,411       5,843       7,411

    United States
      Revenue                     30,137      18,309      57,316      43,950
      Equipment and leasehold
       improvements                6,342       7,044       6,342       7,044
      Goodwill and other
       intangible assets               -      27,856           -      27,856

    Other Foreign Location
      Revenue                        642      (1,326)      2,067       3,144
    -------------------------------------------------------------------------

    13. COMMITMENTS AND CONTINGENCIES

    During the period, there were no material changes, except for the
    contingency disclosed below, to the Company's commitments and
    contingencies from those described in Note 17 of the Audited Annual
    Consolidated Financial Statements.

    a)  Canaccord Capital Corporation was one of the underwriters of a public
        offering of 13% senior secured notes of Redcorp Ventures Ltd. under a
        prospectus dated July 5, 2007. The offering was for a total of $142.0
        million and Canaccord participated for 12.5% of that amount ($17.8
        million). A number of entities have given notice to the underwriters
        (including Canaccord) alleging that the statements in the prospectus
        describing the security for Redcorp's obligations under the notes
        were incorrect and constitute, among other things, negligent
        misstatements, which were reasonably relied upon by these entities to
        their detriment in deciding to purchase the notes and, as a result,
        the underwriters (including Canaccord) are liable to compensate these
        entities for all of their losses flowing from the misrepresentations.
        The defences to these claims, third party claims and the
        quantification of damages are yet to be determined. Canaccord intends
        to vigorously defend itself against these claims.

    14. SUBSEQUENT EVENTS

    a)  On October 1, 2009, Canaccord Adams Limited, a wholly owned
        subsidiary of the Company, acquired Intelli Partners Limited and its
        wholly owned subsidiary, Intelli Corporate Finance Limited, a
        corporate advisory and brokerage boutique located in Edinburgh,
        Scotland (Intelli) with a net working capital of approximately
        $5.3 million, for cash consideration of approximately $7.0 million.
        Intelli is focused on investment companies and companies within the
        asset management sector.

    b)  On November 4, 2009, the Board of Directors declared a common share
        dividend of $0.05 per share payable on December 10, 2009, with a
        record date of November 20, 2009.
    

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: Joy Fenney, Vice President, Investor Relations, Phone: (416) 869-3515, Email: joy_fenney@canaccord.com; Nominated Adviser and Broker: Marc Milmo or Jonny Franklin-Adams, Fox-Pitt, Kelton Limited, Phone: +44 (0) 207 663 6000, Email: corporatebroking@fpk.com


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