We are proud to lead the dynamic team of men and women that is today’s Canaccord Capital. Their talent in consistently delivering ideas that count, whether to help clients meet their investment objectives or to further our own operating excellence, is the engine that drives the performance of our business and builds value for our shareholders.

Thanks largely to our employees’ diligent efforts, fiscal 2007 was Canaccord’s fourth consecutive year of record financial performance. Revenues advanced 30% to more than three-quarters of a billion dollars. While expenses increased 33% (due to investments in our capital markets capabilities), net income rose 15%. During fiscal 2007, the Board approved a 25% increase in the common share dividend. Canaccord ended the fiscal year with a strong balance sheet, and equally strong business momentum.

Our performance in fiscal 2007 adds to the financial strength we need for the continued execution of our global strategy – to become the pre-eminent global investment dealer focused on the small to mid-cap market. Our touchstone in that pursuit is focus. We have ensured that Canaccord is focused on a core offering of capital markets and wealth management products. We are specialized in seven  growth sectors of economic activity, and we provide clients with access to a global platform based on specific expertise in key markets in Canada, the United States and the United Kingdom. We believe this focus enables us to provide investment insights that add tangible value for clients. Moreover, this specialized depth and breadth of capability is driving continuing improvements in Canaccord’s balance and diversification of revenues across markets and industries.

Canaccord Adams, our capital markets division, enjoyed another excellent year in fiscal 2007. Our investment bankers excel at providing our small and mid-cap clients with the quality ideas that can help drive the growth of their businesses. We offer not only a global platform for distribution and sales but also diversified – and award winning – research expertise across economic sectors that provides strong support for issuers.

Client recognition of our capabilities continues to drive gains in Canaccord Adams’ share of Canadian investment banking assignments. While we saw specific strength in our Real Estate, Mining and Metals, Energy and Life Sciences practices during fiscal 2007, it was an excellent year across all sectors. Our global investment banking team led 174 transactions over $1.5 million that raised $5.1 billion in capital – the most transactions of any Canadian investment dealer. It is important to note that 55% of these transactions were for non-resource companies, which is another significant outcome of our long term strategy of diversification.

We are pleased with the progress of our US operations. Fiscal 2007 marked the first full year of our ownership of Adams Harkness Financial Group, Inc., which was rebranded Canaccord Adams Inc. in January 2006. We made further investments during the year to build our investment banking and research teams serving high quality small and mid-cap companies based in the United States, significantly expanding our capabilities in Energy in Houston, Technology in San Francisco and Life Sciences in Boston. We also rebuilt the company’s technology infrastructure for improved productivity and expanded our New York sales operation to provide enhanced client services. Overall, the acquisition is generating a positive cash-on-cash return during this integration and expansion period. More importantly, our US presence has proven to be a competitive advantage in winning new underwriting mandates: our team participated in 30 transactions that raised $2.3 billion in fiscal 2007.

Canaccord Adams Limited is our very successful European subsidiary and, as part of our European strategy, is a leading Nominated Adviser (Nomad) and broker on the AIM of the London Stock Exchange. In the 2007 Hemscott Ranking, Canaccord Adams Limited was the AIM market leader by client market capitalization. We were also the best performing broker on AIM as measured by the price performance of our sponsored listings. These rankings reflect our very deliberate focus on high quality companies and the high quality opportunities they represent for investors. Following a substantial decline on the AIM during fiscal 2007, underwriting activity decreased; nevertheless, we participated in 43 transactions valued at a total of $2 billion. As liquidity returns to the market, we will be there with the quality ideas our clients have come to expect from Canaccord Adams.

In our view, the results of fiscal 2007 demonstrate the efficacy of our strategy of market and sector diversification. Revenues from our Canaccord Adams operations advanced 35% despite business downturns in some areas of our banking business due to Canadian legislation that intends to eliminate the income trust tax structure over a four-year period, US legislation banning the online gaming industry, and the decline in underwriting activity on the AIM. Our diversified base of business across geographies and industries smoothed the impact of these unforeseen events. That in turn enabled us to make ongoing investments in our talent and operations that we are confident will drive further significant improvements in both our financial performance and value growth in the years ahead.

We are very pleased with the consistent performance of our Private Client Services operations. Our Investment Advisors (IAs) did an excellent job during fiscal 2007 of building our base of investment assets and providing specialized skills for smaller investment banking transactions. Given an added boost by strong equity markets during much of the year, assets under administration reached $15 billion at year end, representing 4.9% year-over-year growth and a five-year compound annual growth rate of 31%. Assets under management rose 6.4% over fiscal 2006, contributing to a 58% compound annual rate of growth over the past five years. Revenues for the group grew by more than 21% to a record $273 million, even though our total number of IAs increased only slightly during the year.

Competition for high quality IAs was intense throughout fiscal  2007 in Canada and often marked by what we consider to be uneconomic signing bonuses. We remain focused on expanding our team of skilled advisors by providing an attractive, entrepreneurial environment that features broad product choice, marketing support and state-of-the-art technologies for brokers and their clients.

A growing portion of the new investment assets our IAs attract is being committed to our managed product offerings. These products offer a choice of investment managers and geographic reach that Canaccord clients and their IAs can use to achieve a customized investment portfolio matching their objectives and styles. During fiscal 2007, we added five new managers to our Alliance Program and saw continued growth in our Independence Accounts. In both of these programs – indeed, in all Canaccord products and services – our intention is to provide IAs and their clients with more access to ideas that count.

Canaccord Capital is fortunate to have a deep, diverse pool of talent throughout our operations that has given us the depth and breadth of resources needed to develop our next generation of leadership internally. We view it as critically important to the preservation of an entrepreneurial culture like ours that future generations of leaders share the common goals and values that have fostered the Company’s growth. At the 2006 Annual General Meeting, we were very pleased to announce a substantial internal management transition in which Paul Reynolds moved to the position of President after 22 years with Canaccord. At our Annual General Meeting in 2007, Paul will become the CEO, and Peter Brown will become non-executive Chairman of the Board. Mark Maybank, who joined the firm in 2001, took over the position of Chief Operating Officer at last year’s meeting of shareholders. Michael Greenwood, who most recently served as President and COO, resigned after 14 years with Canaccord. Brad Kotush, our CFO, was appointed during 2006, completing our internal transition to a new era of leadership.

The executives who are stepping forward share our common goals and values. Together, they form a deeply experienced management team that is very well positioned to advance the global interests of Canaccord, its clients and shareholders. Paul Reynolds operates from Canaccord Adams’ London office; Mark Maybank is located in Toronto; Peter Brown, our Chairman and CEO, and Brad Kotush, CFO, operate from our office in Vancouver. All are connected by a common communications platform. More importantly, each shares a strong passion for the consensus-based, idea-driven environment that is a core value of Canaccord.

Although we cannot predict with certainty the trends of investment markets over the coming year, we are cautiously optimistic. We are more optimistic, however, about Canaccord’s ability to prosper in various markets. Our focus on diversification is beginning to deliver the quality of results we had expected, and we intend to continue to work towards that objective in the year ahead. That will likely take the form of selected acquisitions of capabilities to build out our core competencies and teams in our seven vertical sectors across each of our three geographies, much as we did during fiscal 2007 in Life Sciences, Energy and Technology.

Fiscal 2008, like any year, will not be without its challenges. New regulations governing best execution are driving the trend to electronic trading in the United States and will likely do the same in Canada. To ensure that we can serve our clients effectively and economically, we recently hired an electronic trading team in Toronto. We will be augmenting our suite of execution services to include direct market access, algorithmic trading and smart order routing in order to better serve new and existing clients. Canaccord is also a founding participant in Alpha, a significant Alternative Trading System currently in development.

The past four years of record results are a tribute to the employees of Canaccord, and we thank them for their dedication to excellence. Their focus on ideas that count, their ability to serve clients in ways that set us apart, and their enthusiasm for being part of an entrepreneurial culture are the real engine of value creation for our shareholders.

Sincerely,


CHAIRMAN & CHIEF EXECUTIVE OFFICER

President