Management's
Responsibility for Financial Statements



The
accompanying consolidated financial statements, the notes thereto and other
financial information contained in this annual report has been prepared by, and
are the responsibility of, the management of Dundee Corporation.  These
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles, using management's best estimates
and judgements when appropriate.



The
Board of Directors is responsible for ensuring that management fulfills its
responsibility for financial reporting and internal control.  The Audit
Committee, which is comprised of four independent Directors, meets with
management as well as the external auditors to satisfy itself that management is
properly discharging its financial reporting responsibilities and to review the
Company's consolidated financial statements and the report of the auditors.
 It reports its findings to the Board of Directors who approve the
consolidated financial statements.



The consolidated financial statements have been audited by Ernst & Young LLP, the independent auditors, in accordance with generally accepted auditing standards.  The auditors have full and unrestricted access to the Audit Committee.











(signed) Ned Goodman

(signed) Joanne Ferstman

President and

Executive Vice President and

Chief Executive Officer

Chief Financial Officer





Toronto, Canada

March 24, 2005







34

DUNDEE CORPORATION



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Auditors'
Report



To the Shareholders of Dundee Corporation



We
have audited the consolidated balance sheets of Dundee Corporation  (the
"Company") as at December 31, 2004 and 2003 and the consolidated statements
of operations, changes in shareholders' equity, and cash flows for the years
then ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.



We conducted our audits in accordance with Canadian generally accepted auditing standards.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.



In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.







[mdafins044.gif]



Chartered Accountants



Toronto, Canada

March 24, 2005













35

DUNDEE CORPORATION



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[mdafins046.gif]







(signed) Ned Goodman

(signed) Garth A.C. MacRae

Director

Director





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DUNDEE CORPORATION



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[mdafins048.gif]





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DUNDEE CORPORATION



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38

DUNDEE CORPORATION



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39

DUNDEE CORPORATION



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DUNDEE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|December
31, 2004 and 2003
(tabular
dollar amounts in thousands of Canadian dollars, except per share amounts) | 
|-------------------------------------------------------------------------------------------------------------- | 



Dundee
Corporation (the "Company" or "Dundee Corporation", (formerly Dundee
Bancorp Inc.)) is primarily a holding company dedicated to wealth management,
real estate and resources.  The Company's domestic wealth management
activities are carried out through its 67% owned subsidiary, Dundee Wealth
Management Inc. ("Dundee Wealth"). Dundee Corporation also provides wealth
management services internationally through offices in Bermuda and the Cayman
Islands.  Together, these domestic and international wealth management
operations provide a broad range of financial products and services to
individuals, financial advisors, institutions, corporations and foundations.
 Real estate operations are carried out through the Company's 86% owned
subsidiary, Dundee Realty Corporation ("Dundee Realty").  Dundee
Corporation also holds and manages its own investments which include both
publicly listed and private companies in a variety of sectors, including real
estate, resources and financial services.  The Company trades on the TSX.



1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

AND BASIS OF PRESENTATION



The
consolidated financial statements of the Company are prepared in accordance with
Canadian generally accepted accounting principles ("GAAP").



Principles of Consolidation

The
consolidated financial statements include the accounts of the Company and its
subsidiaries as well as the Company's proportionate share of assets,
liabilities, revenue and expenses of joint ventures in which it participates.
 The Company's major subsidiaries include:



[mdafins054.gif]



All intercompany transactions have been eliminated in these consolidated financial statements.  The non controlling interests in the net book value of subsidiaries and in their net earnings are included as a separate line item in the consolidated balance sheets and consolidated statements of operations, respectively.



Acquisitions

The
Company accounts for business combinations and acquisitions as purchase
transactions.  Accordingly, the purchase price of a business acquisition is
allocated to its identifiable net assets on the basis of estimated fair values
at the date of purchase including identifiable intangible assets and associated
future income tax effects, with any excess being assigned to goodwill.
 When the net of the amounts assigned to identifiable net assets exceeds
the cost of the purchase ("negative goodwill"), the excess is eliminated, to
the extent possible, by a pro-rata allocation to certain non-current assets,
with the balance presented as an extraordinary gain.  Goodwill arising on
acquisition is allocated to reporting units and tested at least annually for
impairment.  For interests acquired during the year, purchase accounting is
applied on a prospective basis from the date of the transaction.



40

DUNDEE CORPORATION



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Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.



Cash and Cash Equivalents

Cash and cash equivalents are carried at cost, which approximates fair value.  Cash equivalents include short term financial instruments which are highly liquid and immediately exchangeable into known amounts of cash.



Brokerage Securities Owned and Brokerage Securities Sold Short

Brokerage
securities owned and brokerage securities sold short are stated at market values
on the consolidated balance sheet dates.  Market value is based on quoted
market prices where available, or, for non-listed securities, market value is
based on management's estimates.



Derivative Financial Instruments

The Company and its subsidiaries utilize derivative financial instruments primarily to manage financial risks, including interest rate, commodity and foreign exchange risks.  Hedge accounting is applied when the derivative is designated as a hedge of a specific exposure and there is reasonable assurance that it will continue to be effective as a hedge.  Gains and losses relating to commodity price derivative instruments that meet hedge criteria are recognized as part of oil and gas revenues concurrently with the hedged transaction.  Hedge accounting is discontinued prospectively when the derivative no longer qualifies as a hedge or the hedging relationship is terminated, at which time the fair value of the derivative that had been deferred by the application of hedge accounting is recognized in earnings over the term of the original hedging relationship.



Other derivative financial instruments, not designated as hedges, are carried at estimated fair value with the resulting gains and losses arising from changes in fair values being reported in current operations.



Client Accounts

In
accordance with brokerage industry practice, client transactions are entered
into on either a cash or margin basis and are recorded on a trade-date basis.
 If transactions are conducted on a margin basis, the Company's brokerage
subsidiary may extend credit to a client to purchase securities, and such
securities purchased and/or other securities in the client's account are held
as collateral for the amounts loaned.  Amounts due from clients are carried
at the contractual amount receivable, net of any allowance for credit losses.
 The Company's brokerage subsidiary engages in securities borrowing and
lending transactions.  Cash received or delivered as collateral against
these transactions is included in client accounts.



Corporate Investments

Investments
in companies that are subject to significant influence by the Company are
accounted for using the equity method whereby the Company recognizes in earnings
its proportionate share of earnings or losses of the investee.  An interest
in excess of 20% of the underlying voting shares of an investee would generally
indicate that the Company has significant influence over an investee.
 However, in certain circumstances, the Company may exert significant
influence by majority representation on the investee's board of directors or
by other day-to-day participation in operations.  Application of the equity
method will result in the recognition of a dilution gain or loss if the Company's
interest in the investment is reduced as a result of, for example, the issuance
of additional shares by the investee.



41

DUNDEE CORPORATION



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Other investments are accounted for using the cost method.  Changes in global market conditions, including changes in interest rates, may directly affect the value of securities.  An investment, including an equity accounted investment, is written down to reflect a decrease in the underlying net realizable value of an investment if, in the opinion of management, such decrease is other than temporary.



Deferred Sales Commissions

Deferred sales commissions consist of sales commissions paid to brokers and dealers on the sale of investment management products sold on a deferred sales charge basis.  Commencing in the month they are paid, these costs are amortized on a straight-line basis over a five-year period.



Capital and Other Assets



Real Estate Assets

Land under development and housing and condominiums are stated at the lower of cost and net realizable value.  Net realizable value is calculated by estimating the future cash flows from such properties and discounting these cash flows at a rate that includes a risk premium appropriate for a particular project.  Land held for development is stated at cost less any impairment charges.



Capitalized costs on land, housing and condominiums include all expenditures incurred in connection with the acquisition, development and construction of the asset until such asset is available for its intended use.  These expenditures include interest on debt that is related to these assets.  Ancillary earnings related specifically to such assets during the development period are treated as a reduction of capitalized costs.  The cost of sale of land under development is allocated to each lot based on the projected total estimated cost to develop the entire subdivision, pro-rated based on street frontage for each lot.  The cost of sale of houses and condominiums is based on the total costs incurred up to the date of occupancy, as well as a provision for costs to complete.



Revenue properties are stated at historic cost less accumulated depreciation and any impairment charges.  The net book value of revenue properties under development includes interest on project-specific and general debt, property taxes, carrying charges and applicable general and administrative expenses incurred in the project development and construction periods, and initial leasing costs, less revenue earned prior to the project being declared operational.  The Company uses the straight-line method of depreciation for revenue properties, initial leasing costs and major expansions and renovations.



Oil and Gas Expenditures

Deferred exploration and development expenditures are recorded pursuant to the full cost method of accounting whereby all costs related to the exploration and development of oil and gas reserves are accumulated in separate country-by-country cost centres.  Impairment in respect of these expenditures is recognized when the carrying amount of the oil and gas properties, by cost centre, exceeds its undiscounted future cash flows based on estimated future commodity prices.  If impairment is recognized, the amount of the impairment is determined as the excess of the carrying amount over the fair value.  Fair value is based on the present value of expected cash flows, reflecting discounting at the risk-free rate of interest.  Both proven and probable reserves are used in estimating fair value.  This cost centre impairment test is conducted as at each annual balance sheet date.



The present value of expected future abandonment and reclamation costs are recorded at the time the obligation is incurred.  Actual reclamation and abandonment costs incurred are charged against the amount calculated, with a gain or loss recorded for the difference between the actual costs and the accreted value of the obligation at the time of reclamation.



42

DUNDEE CORPORATION



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Depreciation and depletion of oil and gas properties and equipment, other than undeveloped properties, is computed using the unit-of-production method whereby the ratio of production to proven reserves, before royalties, determines the proportion of depletable costs to be expensed.



Pre-production stage and pre-development expenditures are recorded at cost, unless impairment is identified requiring a write-down to net realizable value.



Capital and Other Assets

Capital assets are recorded at cost, net of accumulated amortization, and are amortized on a straight-line or declining-balance basis.  Annual amortization rates adopted by the Company range from 10% to 35%.  Leasehold improvements are amortized on a straight-line basis over the period of the lease.



Other assets include deposits made to regulatory authorities, including contingency trust funds and the Canadian Investor Protection Fund,  deferred financing costs which include debt issue fees and expenses that are amortized on a straight-line basis over the term of the debt, deferred trademark costs which are amortized on a straight-line basis over 15 years and, in respect of the wealth management segment, deferred banking costs which will be amortized on a straight-line basis over five years commencing in 2005.



Goodwill and Other Intangible Assets

Goodwill and investment management contracts with indefinite lives are not amortized but are tested for impairment at least annually, or when circumstances suggest that an impairment may have occurred.  Intangible assets identified as funds under administration in an acquisition are amortized on a straight-line basis over 15 years.



Revenue Recognition



Wealth Management

Management and administration fees are generally calculated as a percentage of the net asset value of the respective mutual fund or other discretionary portfolio being managed and are recognized on an accrual basis.  The Company may also earn performance fees from these managed assets when their market appreciation exceeds established benchmarks.  Performance fees are not recognized in earnings until their value can be established with certainty.



Redemption fees paid by unitholders of mutual funds purchased on a deferred sales charge basis, the sales commission of which was financed by the Company, are recognized as revenue on the settlement date of the redemption of the applicable mutual fund units.



Securities transactions and related commission revenues are recorded in the accounts on a trade-date basis.  Interest earned from client accounts and from brokerage securities owned or brokerage securities sold short is recognized as earned and has been included in financial services revenue.



Brokerage securities owned and brokerage securities sold short are recorded at market value.  Both realized and unrealized gains and losses from brokerage securities owned and brokerage securities sold short are included in the determination of net earnings.



Investment Income

Investment
income includes interest and dividend income from investments carried at cost
which are recognized as earned, as well as realized investment gains or losses
in respect of the Company's corporate investments or other assets.





43

DUNDEE CORPORATION



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Real Estate

Revenue
from the sale of developed sites and land sold to third parties is recognized at
the time the agreement of purchase and sale is executed, provided that the
agreement is unconditional, at least 15% of the sale proceeds have been
received, and the collectibility of the remaining proceeds is reasonably
assured.  Revenue from housing is recognized when ownership has been
transferred to the purchaser and collectibility of the proceeds is assured.
Revenue from condominium projects is recognized by the percentage-of-completion
method upon the sale of individual units when the following criteria have been
satisfied: construction is beyond a preliminary stage, the purchaser is unable
to require a refund, sales prices are collectible, and proceeds and costs can be
estimated.  If all these conditions have not been met, revenue is
recognized when ownership has been transferred to the purchaser and
collectibility of the proceeds is assured.  Revenues from real estate
revenue properties include base rents and recoveries of operating costs.
 The Company's real estate segment uses the straight-line method of
rental revenue recognition on revenue properties whereby any contractual rent
increase over the term of a lease is recognized in earnings over the lease term.
 All other real estate revenue, including management fees, is recognized
when earned.



Oil and Gas Sales, Net of Royalties

Revenues from oil and gas sales are recognized when title passes to the purchaser, normally at the pipeline delivery point for natural gas and at the wellhead for crude oil.



Income Taxes

The Company uses the asset and liability method to provide for income taxes on all transactions recorded in the consolidated financial statements.  The asset and liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases.  Future income tax assets and liabilities are determined for each temporary difference and for unused losses, as applicable, at rates expected to be in effect when the asset is realized or the liability is settled.  A valuation allowance is established, if necessary, to reduce the future income tax asset to an amount that is more likely than not to be realized.



Foreign Currency Translation

The
Company's foreign real estate subsidiaries are considered financially
self-sustaining and operationally independent.  Accordingly, assets and
liabilities of these subsidiaries that are denominated in foreign currencies are
translated into Canadian dollars using the rate in effect on the consolidated
balance sheet dates.  Revenues and expenses are translated at the average
rate for the reporting periods.  Translation gains and losses are deferred
as a separate component of shareholders' equity until there has been a
realized reduction in the underlying investment.



All other foreign currency denominated amounts, including those of integrated foreign operations, are translated into Canadian dollars using average rates for the year for items included in the consolidated statements of operations, the rate in effect at the consolidated balance sheet dates for monetary assets and liabilities included in the consolidated balance sheets and historical rates for other items.  Translation gains or losses are included in the determination of net earnings.



Stock Based Compensation

The Company may issue stock based compensation to directors, financial advisors and certain employees under the terms of its share incentive plan and the share incentive plans of its subsidiaries.  These plans may include the issuance of stock options and stock based awards.



The
Company uses the fair value based method to account for stock based
transactions.  The value of stock based compensation, as of the date of
grant, including awards under the Company's share incentive plan or the share
incentive plans of its subsidiaries, is recognized over the applicable vesting
period as an increase in compensation expense with a corresponding increase to
contributed surplus.  When stock options are exercised or when shares are
issued pursuant to the plan, any proceeds received, together with the amount in
contributed surplus, are added to share capital.  No expense is recognized
for stock options granted before January 1, 2003, and at the time these options
are exercised, the proceeds received are recorded as share capital.



44

DUNDEE CORPORATION



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The
Company's contributions under its employee share purchase plans are expensed
as incurred.



Earnings Per Share

Basic
earnings per share is computed by dividing the net earnings for the year by the
weighted average number of Class A subordinate voting shares ("Subordinate
Shares") and Class B common shares ("Class B Shares") outstanding
during 2004 of  25,231,672 (2003 - 25,217,314).



Diluted
earnings per share is calculated to reflect the dilutive effect of exercising
outstanding stock options by application of the treasury stock method.  The
weighted average number of shares outstanding during 2004, calculated on a
diluted basis, was 25,866,411 (2003 - 25,475,047).



Reclassification of 2003 Amounts

Certain of the prior year amounts have been reclassified to conform to the basis of presentation adopted for 2004.



2.

BUSINESS COMBINATIONS



Reorganizations and Business Combinations Completed in 2004



Reorganization
of Eurogas Corporation ("Eurogas") and Great Plains Exploration Inc. ("Great
Plains")

On June 11, 2004, Eurogas and Great Plains completed a plan of arrangement pursuant to which all but two of the Canadian assets of Eurogas were transferred to Great Plains.  Under the terms of the arrangement, each Eurogas share was exchanged for one new Eurogas share and 0.2 of a Great Plains share.  Immediately following the completion of the plan of arrangement, the Company held a 51% interest in each of Eurogas and Great Plains and therefore accounted for these subsidiaries on a consolidated basis.



The
Company's continuing interest in Eurogas remains at 51% and the accounts of
Eurogas continue to be consolidated in these financial statements.



At
the time of the arrangement and following the exercise of certain options, the
Company's ownership interest in Great Plains was diluted to 49%.  In
accordance with GAAP, the Company ceased consolidating the accounts of Great
Plains in June 2004, and began accounting for this investment using the equity
method (note 4).  Subsequent to the plan of arrangement, the Company's
interest in Great Plains was diluted to 24%.



Acquisition of a 50% Interest in the Historic Distillery District

On October 12, 2004, the Company acquired 50% of the Historic Distillery District in Toronto, Ontario, for $20,159,000.  The assets acquired and liabilities assumed in this transaction were allocated as follows:



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45

DUNDEE CORPORATION



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Included in the consideration is $725,000 related to accounts payable and accrued liabilities assumed as part of the acquisition of the Historic Distillery District.  The acquisition was financed by way of a $32,000,000 loan provided by a third party.  The loan is for an initial term of one year and bears interest at an annual rate equal to the greater of prime plus 3% or 7%.  The loan is secured by the property and a guarantee of a subsidiary of the Company for $15,000,000 as disclosed in note 12 as a component of contingent liabilities related to unincorporated joint ventures.



Step Acquisition of Dundee Realty

On
July 12, 2004, the Company acquired an additional 1.4% interest in Dundee Realty
(see "Reorganizations and Business Combinations Completed in 2003")
from a non controlling shareholder.  The purchase price was $1,452,000 of
which $1,312,000 was assigned to the value of land under development and
included in "capital and other assets", with the balance allocated to
non controlling interest.



Termination
of the Investment Management Contract with Dundee Precious Metals Inc. ("Dundee
Precious")

In
consideration for the voluntary termination of Dundee Wealth's investment
management contract with Dundee Precious, Dundee Precious issued 4,625,000
common shares and granted an option to acquire an additional 2,500,000 common
shares at $7.31 per share (the "Option") to Dundee Wealth.  Dundee
Wealth subsequently sold the 4,625,000 common shares and the Option to Dundee
Corporation, for cash consideration of $27,843,000.  Included in investment
income is a gain of $26,849,000 realized in respect of this transaction.
 The investment increased the Company's interest in Dundee Precious to
21% and accordingly, the Company began to account for this investment using the
equity method.



Acquisition
of M. Murenbeeld & Associates Inc. ("Murenbeeld")

On
September 3, 2004, Dundee Wealth entered into a share purchase agreement to
acquire all of the issued and outstanding shares of Murenbeeld, a company
engaged in the preparation and sale of research products and related advisory
services ("intellectual property").  Cash consideration of $200,000 was
paid on closing.  In addition,  Dundee Wealth issued shares at a
stated value of $442,000 and agreed to pay a further $300,000 in cash, which
will vest or become payable, subject to certain conditions, over the next five
years.  The additional contingent consideration will be charged to earnings
as a compensatory amount over the vesting period.  The intellectual
property acquired is being amortized to expense on a straight-line basis over
five years.



Disposition
of Matisse Investment Management Ltd. ("Matisse")

On September 20, 2004, a subsidiary of Dundee Wealth disposed of its 100% interest in Matisse, the manager of the Dynamic Managed Futures Hedge Fund.  The aggregate sale price recorded was $642,000, being the discounted value of estimated quarterly payments thereon.  The Company recognized a loss of $271,000 in respect of the disposition.



Reorganizations and Business Combinations Completed in 2003



Dundee Realty Plan of Arrangement

On
June 30, 2003, the Company completed a plan of arrangement involving Dundee
Realty whereby the revenue properties of Dundee Realty were transferred to a
newly created real estate investment trust, Dundee Real Estate Investment Trust
("Dundee REIT").  Dundee Corporation and certain of the Dundee Realty
management ("Management Shareholders") acquired all shares of Dundee Realty
owned by the public shareholders for consideration of $3.00 and one unit of
Dundee REIT for each Dundee Realty share.  Following the arrangement,
Dundee Realty's operations consisted primarily of its land and housing
business.



The
Company's interest in Dundee REIT was reduced from 45% to 42% and the Company's
interest in Dundee Realty's land and housing business was increased from 43%
to 85% on the date of the arrangement.  As a result, as of June 30, 2003,
the Company accounts for its investment in Dundee Realty on a consolidated
basis.  The investment in Dundee REIT continues to be accounted for on an
equity basis.



46

DUNDEE CORPORATION



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The
Company's total cost of purchase of Dundee Realty following the plan of
arrangement was $83,369,000, including cash of $24,406,000 paid pursuant to the
plan of arrangement, $40,437,000 of historical carrying value for the 43%
interest already owned, and $18,526,000 of transaction and other acquisition
related costs, net of taxes.  The Company's historical carrying value
represents that portion of the carrying value of the Company's investment in
Dundee Realty accounted for on an equity basis relating to the non-REIT portion
of the business immediately prior to the plan of arrangement.



The
increase in the Company's ownership interest in Dundee Realty as a result of
the plan of arrangement was accounted for as a step acquisition using the
purchase method of accounting.  The purchase price was assigned to the
assets and liabilities acquired based on their estimated fair values as of the
date of acquisition.  The difference between the estimated fair value of
these assets, net of liabilities, and the purchase price on June 30, 2003, when
combined with the negative goodwill in respect of the 43% interest in the net
assets already owned by the Company, was $115,454,000, of which $95,503,000 has
been applied to reduce the carrying value of the real estate and other assets
acquired to the extent appropriate under GAAP, with the excess being recorded as
an extraordinary gain of $19,951,000.  The amount of negative goodwill
applied to reduce the carrying value of assets is being amortized into earnings
over the life of the underlying capital or real estate assets to which the
excess was applied, or will be recognized in earnings at the time that these
assets are sold.



The purchase price allocation is as follows:



[mdafins058.gif]



Acquisition
of Cartier Partners Financial Group Inc. ("Cartier")

On
December 30, 2003, Dundee Wealth completed the acquisition of 100% of Cartier,
an integrated distributor of mutual funds, securities and life insurance
products and services.  Pursuant to the acquisition, Dundee Wealth also
purchased $88,172,000 of debt and the 30% interest in Cartier Mutual Funds Inc.
("CMF") not owned by Cartier, from the former majority shareholder of
Cartier.



The aggregate purchase price of $217,532,000 was comprised of cash of $165,129,000 ($541,000 paid in 2004), including $88,172,000 of assumed debt and $3,087,000 paid in respect of the acquisition of 30% of CMF, common shares of Dundee Wealth with a value of $48,234,000 ($1,973,000 issued in 2004), and future obligations in the amount of $2,104,000.  In addition, transaction costs of $2,065,000 were recorded ($365,000 incurred in 2004).  On acquisition, the Company assigned $47,686,000 to the intangible value of investment management contracts and $30,573,000 to the intangible value of funds under administration.  The $143,905,000 excess of the purchase price over the net assets acquired was recorded as goodwill.  In 2004, Dundee Wealth completed its assessment of the fair value of the net assets acquired and accordingly reduced the carrying value of goodwill by $1,058,000.



47

DUNDEE CORPORATION



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As part of the acquisition, Dundee Wealth agreed to satisfy a future obligation to issue additional Cartier common shares, by paying additional cash and issuing additional common shares of Dundee Wealth, subject to certain conditions being met by February 2005, which obligation has been discounted at a rate of 6.7% per annum to $2,104,000.  Subsequent to year end, Dundee Wealth issued shares with a value of $1,861,000 and paid cash of $409,000 in full settlement of this obligation.



In
December 2003, and upon completion of the acquisition, Dundee Wealth's
investment in Cartier was transferred to DWM Inc. ("DWM"), a subsidiary of
Dundee Wealth, in exchange for additional common shares of DWM.  In January
2004, the non controlling shareholder of DWM exercised its pre-emptive right and
subscribed for additional common shares of DWM for $25,000,000 in cash.
 Following these transactions, Dundee Wealth's interest in DWM increased
from 81.7% to 83.6%.  The increase in ownership was accounted for as a step
purchase with the excess of the purchase price over the assigned value of
assets, net of liabilities acquired, being classified as goodwill.



Following
the acquisition of Cartier, Dundee Wealth initiated the process of exiting or
otherwise consolidating activities involving Cartier's business operations,
locations and back-office systems.  These integration efforts encompass (a)
planning, coordinating and implementing multiple system conversions from diverse
platforms previously operated by Cartier into a single back-office system; (b)
upgrading compliance processes and documentation and (c) combining operations to
a uniform operating platform, with uniform procedures.  Approximately
$5,500,000 of costs associated with these activities were accrued at the time of
the acquisition and recorded as a liability in Cartier's purchase price.
 Remaining costs are being charged to earnings as incurred.  For the
year ended December 31, 2004, Dundee Wealth completed four back-office system
conversions and $15,500,000 of integration-related costs were charged to
earnings, which includes costs associated with name change and branding, advisor
retention and training and incremental employee costs.  In addition,
$2,200,000 of incurred costs were applied to reduce liabilities accrued at
acquisition and the Company reduced the accrued liability by a further
$2,100,000 by an adjustment to the purchase equation.



Acquisition of the Non Controlling Interest in Canada Dominion

On March 28, 2003, Dundee Wealth acquired the remaining 49% interest of the Canada Dominion Group of Companies that it did not already own for cash of $1,000,000 and a note payable of a further $3,000,000 to be paid in three equal installments of $1,000,000 on the first three anniversary dates of the transaction.  This note payable was discounted at a rate of 6.7% per annum and recorded at an initial value of $2,639,000.



3.

BROKERAGE SECURITIES OWNED AND

BROKERAGE SECURITIES SOLD SHORT



[mdafins060.gif]



Bond
and convertible debenture maturities range from calendar 2005 to 2029 (2003 -
from calendar 2004 to 2049) and have annual interest yields ranging from 0% to
12.5% (2003 - 0% to 12.7%).



From
time to time, the Company's brokerage subsidiary may sell securities that it
does not currently own and will therefore be obligated to purchase such
securities at a future date.  The subsidiary may incur a loss if the market
value of these securities subsequently increases.



48

DUNDEE CORPORATION



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At
December 31, 2004, the Company held foreign exchange forward contracts with a
notional amount of $18,863,000 (2003 - $18,481,000) to manage its foreign
exchange exposure to the U.S. dollar.  Foreign exchange contract maturities
are short term in nature and range from 30 days to one year (2003 - 120 days).



4.

CORPORATE INVESTMENTS



[mdafins062.gif]

(a)

The
Company's interest in Dundee Real Estate Investment Trust ("Dundee REIT")
is held through units of Dundee Properties Limited Partnership.  These
limited partnership units are convertible, at the Company's option, into units
of Dundee REIT on a one-for-one basis. The difference between the cost of the
Company's investment in Dundee REIT and the underlying net book value of
Dundee REIT is amortized as an adjustment to equity earnings over the life of
the revenue properties (note 2).



Corporate Investments Segregated by Business Segment



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The estimated fair value of corporate investments as at December 31, 2004, determined using quoted market values for listed securities and carrying values for non-quoted securities and loans, approximates $480,000,000 (2003
- $475,000,000).



Investment Income



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49

DUNDEE CORPORATION



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5.

DEFERRED SALES COMMISSIONS



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6.

CAPITAL AND OTHER ASSETS



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Real Estate Assets by Type (note 2)



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Note:
 Interest capitalized to real estate assets under development during 2004
amounted to $1,366,000 (2003 - $1,355,000).



Oil and Gas Properties by Geographic Area



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7.

GOODWILL AND OTHER INTANGIBLE ASSETS (note 2)



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DUNDEE CORPORATION



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8.

BANK INDEBTEDNESS



The
Company's brokerage subsidiary may borrow up to a maximum of $100,000,000
pursuant to a call loan facility established with a Canadian chartered bank,
primarily to facilitate the securities settlement process for both client and
Company securities transactions.  Amounts borrowed pursuant to this
facility are collateralized by either unpaid client securities or securities
owned by the Company.  At December 31, 2004, the Company's brokerage
subsidiary had $361,000 (2003 - $21,181,000) outstanding pursuant to this
facility.  During 2004, the Company's brokerage subsidiary paid interest
on the outstanding call loan balance at interest rates between 2.75% and 3.25%
on Canadian funds (2003 - between 3.50% and 4.00%) and between 1.75% and 3.00%
on U.S. funds (2003 - between 1.50% and 1.75%).



9.

CORPORATE DEBT



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$150,000,000
─ 6.70% Senior Debentures

On
September 24, 1997, the Company issued $150,000,000 ten-year senior unsecured
debentures (the "Debentures") at a discount of $3.09 per $1,000 principal
amount.  The Debentures pay interest at 6.70% per annum, payable
semi-annually in arrears on March 24 and September 24 of each year.  The
Debentures are redeemable in whole or in part at any time prior to maturity, at
the option of the Company, at the higher of the par value of the Debentures or
at a price calculated to provide a yield to maturity equal to the Government of
Canada Yield at the time of the redemption plus 0.20%.  At December 31,
2004, the fair value of the Debentures, based on quoted market values was
$154,272,000 (2003 - $150,165,000).



$55,000,000
─ Revolving Term Credit Facility, Corporate

In
April 2004, the Company renewed its revolving term, unsecured credit facility
with a Canadian chartered bank, extending the expiry date to April 28, 2005.
 The credit facility provides for a tiered interest rate structure based on
the Company's public debt rating on its Debentures.  Based on the Company's
current debt rating, Canadian dollar draws on the credit facility bear interest,
at the Company's option, at either a Canadian chartered bank's prime lending
rate, or Corporate Bankers' Acceptance rate plus 1%.  The Company is
subject to a standby fee of 0.20% on unused amounts under the facility.  At
December 31, 2004, $21,275,000 (2003 - $54,888,000) had been borrowed under the
Company's credit facility.



$22,300,000
─ Revolving Term Credit Facility, Subsidiary of Dundee Wealth

A
$22,300,000 credit facility with a Canadian chartered bank was assumed by a
subsidiary of the Company as a result of the acquisition of DynamicNova Inc. in
2002.  On December 30, 2004, the facility was renegotiated and extended to
December 29, 2005.  The facility is subject to interest at prime plus 0.25%
per annum and a standby fee of 0.1875% per annum.  As at December 31, 2004,
the subsidiary had borrowed $10,000,000 (2003 - $22,294,000) pursuant to the
credit facility.



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DUNDEE CORPORATION



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The
facility is secured by way of a General Security Agreement on all of the assets
of certain subsidiaries of the Company, including the assets of the Company's
major investment management subsidiary.  The facility is also secured by
unsecured guarantees from Dundee Wealth and DWM.



Real Estate Debt

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Real
estate debt is secured by charges on specific properties to which the debt
relates.  Dundee Realty incurred a weighted average interest rate of 5.74%
(2003 - 8.10%) on fixed rate debt and 5.64% (2003 - 5.06%) on variable rate
debt.  Fixed rate debt matures between 2006 and 2017.  Variable rate
debt matures between 2005 and 2009.



The acquisition of the Historic Distillery District (note 2) was financed by way of a $16,000,000 loan provided by a third party.  The loan is for an initial term of one year and bears interest at an annual rate equal to the greater of prime plus 3% or 7%.  The loan is secured by the property and a guarantee by Dundee Realty for $15,000,000.



Income Trusts

Infinity
Income Trust and Multi-Fund Income Trust (the "Trusts") were formed for the
purpose of financing the deferred sales commissions of certain mutual funds
between August 1, 1997 up to and including February 26, 1998 and between August
1, 1997 up to and including July 17, 1998, respectively.  Amounts owing to
the Trusts as at December 31, 2004 and 2003 are detailed below:



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A
portion of the monthly management fee, ranging from 0.15% to 0.55% per annum of
the net asset value of the mutual funds financed by the Trust ("Trust Units")
is applied against amounts outstanding.  Repayments will be applied first
to the interest, then to the secured notes, and finally to the participation
certificates.



The repayment of the secured notes and participation certificates will continue to the earlier of April 30, 2013 or until there are no remaining Trust Units.  Any redemption charges paid by the unitholders on the redemption of Trust Units are applied to the repayment of the secured notes and the participation certificates.  In the event that the monthly management fee paid is insufficient to repay the secured notes and the participation certificates by April 30, 2013, any amounts then outstanding will not be required to be repaid.  The secured notes are secured by a general security interest in the accounts of certain mutual funds managed by Dundee Wealth and its subsidiaries.



Prime Trust

During 2004, amounts borrowed pursuant to the Prime Trust arrangement were repaid in full and the facility, including the obligation to cede a portion of the management fees pursuant to its terms, was terminated.





52

DUNDEE CORPORATION



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10.

SHARE CAPITAL



Authorized

The Company is authorized to issue an unlimited number of Subordinate Shares, an unlimited number of Class B Shares, an unlimited number of first preference shares, issuable in series, an unlimited number of second preference shares, issuable in series, and an unlimited number of third preference shares, issuable in series.



Common Shares

Holders of Subordinate Shares and Class B Shares are entitled to one vote and 100 votes, respectively, for each such share held.  The Subordinate Shares and Class B Shares participate equally, share for share, as to dividends.  The Class B Shares are convertible into Subordinate Shares on a one-for-one basis at any time.  In the event of an offer to purchase the Class B Shares by a third party, and in certain circumstances, each Subordinate Share will be convertible, at the option of the holder, into one Class B Share for purposes of accepting such an offer.



Preference Shares



First
Preference Shares ─Each series of first preference shares ranks on a
parity with the first preference shares of every other series and will be
entitled to preference on the payment of dividends and the distribution of
assets in the event of the liquidation, dissolution or winding-up of the Company
over the Subordinate Shares, Class B Shares, second preference shares and third
preference shares.



Second
Preference Shares ─Each series of second preference shares ranks
junior and subordinate to the first preference shares, on a parity with second
preference shares of every other series and will be entitled to preference over
the Subordinate Shares, Class B Shares and third preference shares.



Third
Preference Shares ─Each series of third preference shares ranks
junior and subordinate to the first preference shares and the second preference
shares, on a parity with the third preference shares of every other series and
will be entitled to preference over the Subordinate Shares and Class B Shares.



Contributed Surplus

In
2004, and in connection with the Company's share incentive arrangements, the
Company recognized $1,266,000 (2003 - $987,000) of stock based compensation
expense (note 11) and increased contributed surplus by a corresponding amount.



Retained Earnings

During
2004, the Company purchased for cancellation 78,016 Subordinate Shares (2003 -
314,301) having an aggregate stated capital of $922,000 (2003 - $3,705,000).
 The difference between the purchase price paid of $1,956,000 (2003 -
$4,694,000) and the stated capital has been charged to retained earnings.





53

DUNDEE CORPORATION



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Issued and Outstanding

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11.

STOCK BASED COMPENSATION



Share Purchase Plan

Under
the share purchase plan, eligible participants may contribute up to a specified
maximum amount of their basic annual salary towards the purchase of Subordinate
Shares of the Company from treasury.  The Company may match up to the full
amount of each participant's contribution to the share purchase plan, such
contribution being used either to purchase Subordinate Shares in the open
market, or to issue additional Subordinate Shares from treasury.



During
2004, participants contributed $178,000 (2003 - $168,000) to the share
purchase plan and received 8,573 (2003 - 10,282) Subordinate Shares issued
from treasury.  The Company recognized compensation expense of $178,000
(2003 - $168,000) in respect of the share purchase plan, of which $133,000
(2003 - $156,000) was used to purchase Subordinate Shares in the open market
and $45,000 (2003 - $12,000) was used to issue Subordinate Shares from
treasury.



As at December 31, 2004, 660,000 Subordinate Shares were approved for issuance pursuant to the share purchase plan of which 338,445 Subordinate Shares have been issued and 321,555 Subordinate Shares remain available for issuance from treasury.



Share Bonus Plan

The
share bonus plan permits Subordinate Shares of the Company to be issued from
treasury as a discretionary bonus to eligible participants from time to time on
terms established in the Company's share incentive plan.  During 2004,
the Company issued 2,500 Subordinate Shares (2003 - 2,500) pursuant to the
terms of the share bonus plan and recognized compensation expense of $31,000
(2003 - $31,000).



As at December 31, 2004, 500,000 Subordinate Shares were approved for issuance pursuant to the share bonus plan of which 72,000have been issued and 428,000 Subordinate Shares remain available for issuance from treasury.





54

DUNDEE CORPORATION



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Share Option Plan

Under
the share option plan, the Company may issue options to purchase Subordinate
Shares to eligible participants. The exercise price per option may not be less
than the closing price of the Subordinate Shares on the TSX or such other stock
exchange, as applicable, on the last trading day immediately preceding the day
the options are granted.  Options granted prior to January 1, 2004 become
exercisable as to 33 1/3% of the Subordinate Shares, on a cumulative basis, on
the first three anniversary dates following the date of grant and will expire 10
years thereafter.  Options granted after December 31, 2003 become
exercisable as to 20% of the Subordinated Shares, on a cumulative basis, on the
first five anniversary dates following the date of grant and will expire five
and a half years thereafter.



During 2004, the Company acquired certain stock options for subsequent cancellation at a cost of $6,848,000 of which $4,896,000 was recognized as stock based compensation and $1,952,000 was recorded as a decrease in retained earnings.



The total number of share options cannot exceed 4,000,000.  Options to purchase 1,977,500 Subordinate Shares of the Company were outstanding as at December 31, 2004 and 940,341 Subordinate Shares remain available for grant of options under the share option plan.



A
summary of the status of the Company's share option plan as at December 31,
2004 and 2003, and the changes during the years then ended, is as follows:



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Deferred Share Unit Plan

In
2002, the Company adopted a deferred share unit plan ("DSUP") to
significantly strengthen the link between the interests of eligible directors,
officers and employees of the Company by providing them with a long term
incentive tied to the performance of Subordinate Shares of the Company.
 The compensation committee administers the DSUP and discretionary awards
will be based on certain criteria, including services performed or to be
performed.



During
2004, the Company issued 21,792 (2003 - 58,866) deferred share units to
directors of the Company, each unit entitling the holder to a Subordinate Share
of Dundee Corporation on retirement.  The Company recognized stock based
compensation expense of $583,000 (2003 - $987,000) in respect of these units.





55

DUNDEE CORPORATION



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The total number of deferred share units cannot exceed 500,000.  Deferred share units to purchase 80,658 Subordinate Shares of the Company were outstanding as at December 31, 2004 and 419,342 Subordinate Shares remain available for granting under the DSUP.



Share Incentive Plans and other Stock Based Plans of Dundee Wealth

Dundee
Wealth has established a share incentive plan for employees, officers and
directors of Dundee Wealth and its subsidiaries and a share incentive plan for
independent financial advisors and service providers of, and consultants to
Dundee Wealth.  Each share incentive plan consists of a share purchase
plan, a share bonus plan, a deferred share plan and a share option plan.
 Additionally, Dundee Wealth has established a reserve share plan as
further incentive under certain business acquisitions.  During 2004, Dundee
Wealth issued 1,038,670 (2003 - 983,393) common shares and granted 10,544,836
stock options or similar awards (2003 - 6,418,664) for future share issuance
conditional on certain criteria.  Compensation expense in respect of issued
common shares of Dundee Wealth was $3,569,000 and Dundee Wealth accrued further
stock based compensation expense of $4,784,000 against conditional future share
issuances.   In addition, during 2004, Dundee Wealth issued 82,206
awards (2003 - nil) under its deferred share unit plan and  recognized
stock based compensation expense of $729,000 (2003 - nil).



Stock Option Plan of Eurogas Corporation

Eurogas
has established a stock option plan for its directors, officers and employees.
 As at December 31, 2004, Eurogas had granted 3,791,667 (2003 -
5,075,000) options at a weighted average exercise price of $0.24 (2003 -
$0.41) of which 3,525,000 (2003 - 4,458,333) stock options were exercisable at
year end.  Compensation expense of $76,000 (2003 - $11,000) was
recognized in respect of Eurogas' stock option arrangements.



Stock Option Plan of Dundee Realty Corporation

On June 30, 2003, the non controlling shareholders of Dundee Realty were granted options to acquire an additional 1%  interest in Dundee Realty each year for a five-year period at a price of $420,000 for each 1% exercised.  The options vest on each anniversary date of the original grant date and any options not exercised within six months of each vesting date will expire.  During 2004, one of the non controlling shareholders sold his interest in Dundee Realty to the other shareholders, and options to purchase a 1% interest in Dundee Realty were cancelled.



12.

CONTINGENCIES AND COMMITMENTS



Lease Commitments

The Company and its subsidiaries have lease agreements for premises pursuant to which future minimum annual lease payments, exclusive of operating costs and realty taxes, are as follows:



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DUNDEE CORPORATION



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Distribution Agreements

Certain of Dundee Wealth's subsidiaries have entered into agreements with certain limited partnerships to act as distributors of certain mutual funds and to arrange for the financing of deferred sales commissions on these mutual funds.  As partial consideration therefor, the subsidiaries will pay a distribution fee calculated as 0.15% to 1.00% per annum of the net asset value of the related mutual fund units.  These distribution agreements have a finite life and will expire between December 2011 and December 2016.



Shareholders'
Agreement

Pursuant
to a shareholders' agreement between the Company, Dundee Wealth, DWM and the
Caisse de depot et placement du Quebec ("Caisse"), the non controlling
shareholder of DWM, Caisse has the right, in certain circumstances, to require
DWM, Dundee Wealth or the Company to purchase for cash all or part of its shares
in DWM at fair market value.  The repurchase right will first belong to DWM
and Dundee Wealth, as they may agree, and only if they are unable or fail to
purchase shall the Company have the obligation to purchase.



The
Company has entered into a shareholders' agreement with the Management
Shareholder of Dundee Realty pursuant to which the Company agreed to repurchase
the interest of the Management Shareholder in certain circumstances.  If
the repurchase occurs prior to June 30, 2005, the aggregate purchase price is
deemed to be $3,600,000, otherwise the purchase price is fair market value at
the time of purchase.



Oil and Gas Commitments

During 2002, an oil and gas prospecting permit was converted to an exploration permit with a primary term of four years.  Eurogas has an outstanding work commitment to drill one well with respect to the exploration permit on development property that is located in Tunisia.



Real Estate Commitments

As
part of Dundee Realty's plan of arrangement and subsequent creation of Dundee
REIT, Dundee Realty entered into the following contractual obligations:



- Dundee
    Realty retained the ownership of 50% of the property management company
    which provides property management services to Dundee REIT.  Under the
    property management arrangements, Dundee Realty agreed to provide Dundee
    REIT with a rent supplement that is computed using a formula based on vacant
    space of certain of Dundee REIT's revenue properties.  The term of
    the rent supplement beginning June 30, 2003, is five years for certain
    office and retail space and three years for certain industrial space.
     For the year ended December 31, 2004, the Company paid $3,393,000 in
    respect of this rent supplement.
- Dundee
    Realty has agreed to guarantee certain debt associated with some of the
    properties that have been transferred to an indirect subsidiary of Dundee
    REIT.  As at December 31, 2004, the aggregate of such guarantees was
    $34,716,000 (2003 - $32,901,000).  Dundee Realty has been indemnified
    by Dundee REIT in respect of these guarantees.



In addition, the Company has made the following commitments in respect of its real estate division:

- Dundee Realty has provided a guarantee in the amount of $15,000,000 in connection with a $32,000,000 loan obtained by a joint venture of the Historic Distillery District in which Dundee Realty has a 50% interest.
- Dundee Realty has commitments under land purchase agreements totaling$20,823,000 as at December 31, 2004, which will become payable in future periods upon the satisfaction of certain conditions pursuant to such agreements.  In addition, estimated costs to complete land or housing and condominium projects under development not already accrued as at December 31, 2004 were $3,015,000.
- Dundee
    Realty conducts its real estate activities from time to time through joint
    ventures with third party partners.  The Company is contingently liable
    for the obligations of the other owners of the unincorporated joint ventures
    in the amount of $27,809,000 as at December 31, 2004, inclusive of the
    $15,000,000 guaranteed amount mentioned previously.  The Company would
    have available to it the other venturers' share of assets to satisfy the
    obligations, if any, that may arise.
    
    
    57
DUNDEE CORPORATION



As
at and for the years ended December 31, 2004 and 2003, the Company's share of
assets, liabilities, revenues and expenses of joint ventures in respect of real
estate projects is illustrated in the table below.



[mdafins092.gif]



Contingent Liabilities

A
subsidiary of Dundee Wealth is named in certain claims for a total of
approximately $9,700,000 initiated by certain former clients of a former
financial advisor of a predecessor mutual fund dealer relating to activities
which took place between 1996 and 1997.  Management's initial analysis of
these claims indicates that they are frivolous, unsubstantiated in the amounts
of the claims and without merit.  Another subsidiary of Dundee Wealth is a
defendant in a class action claim for approximately $10,000,000 relating to two
real estate limited partnerships sold by financial advisors of a predecessor
securities dealer between 1996 and 1997.  The Company and its subsidiaries
are also defendants in various other legal actions.  The Company intends to
vigorously defend itself against these claims.  Although the ultimate
outcome of these matters cannot be ascertained at this time and the results of
legal proceedings cannot be predicted with certainty, it is the opinion of
management of the Company, based on information currently available, that these
are not material liabilities, adequate financial provisions have been made for
any liabilities and the resolution of these matters will not have a material
adverse effect on the financial position of the Company.



13.

SEGMENTED INFORMATION



Financial information is presented in accordance with the following operating segments:



WEALTH MANAGEMENT

The wealth management segment includes the operations of Dundee Wealth, a publicly listed wealth management company that provides investment management, securities brokerage, financial planning and investment advisory services to individuals, financial advisors, institutions, corporations and foundations.  International wealth management activities are carried out through The Dundee Bank, a Cayman Islands registered bank, licensed with the Cayman Islands Monetary Authority and through its subsidiaries, which primarily provide banking services and administrative services to international mutual funds, hedge funds and other investment clients. Domestic banking activities will be conducted through our wholly owned subsidiary, Dundee Wealth Bank, which has not yet commenced operations.



58

DUNDEE CORPORATION



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REAL ESTATE

This business segment includes the operating results of the land and housing operations of our 86% owned subsidiary, Dundee Realty.  The real estate segment also includes the operating results of Dundee REIT which is accounted for on an equity basis.



RESOURCES

The
resources segment includes a number of significant investments in the resource
sector.  Included in the resource segment are operating results from the
Company's 51% interest in Eurogas, including its exploration and development
activities carried out in Canada, Spain and Tunisia.  The resource segment
also includes the Company's interest in Dundee Precious and Breakwater
Resources Ltd., and several other smaller resource holdings.



OTHER INVESTMENTS AND CORPORATE COSTS

This segment consists of the remaining public and private investment holdings, covering a wide spectrum of industry sectors.  These investments are generally carried at cost, but may be accounted for on an equity basis if the Company exerts significant influence over the affairs of the investment company.  This segment also includes our general corporate overhead costs, including interest on corporate debt, which are not specifically allocated to any operating division.



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DUNDEE CORPORATION



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14.

INCOME TAXES



The Company's income tax provision differs from the amount that would be computed by applying the combined Canadian federal and provincial statutory income tax rate as a result of the following:



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Significant components of the Company's future income tax assets and liabilities as at December 31, 2004 and 2003 are as follows:



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As at December 31, 2004, the Company has operating loss carry forwards of $142,309,000.  Income tax benefits associated with $39,485,000 of these losses has been recognized in the consolidated financial statements.  A summary of the operating loss carry forwards by year of expiry is as follows:



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DUNDEE CORPORATION



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15.

RELATED PARTY TRANSACTIONS



Other than as disclosed elsewhere in these consolidated financial statements, the particulars of related party transactions as at and for the years ended December 31, 2004 and 2003 are discussed below.



Wealth Management Revenues

Dundee
Wealth and its subsidiaries, in the course of their regular business activities,
have routine transactions with affiliated companies of Dundee Corporation,
including certain of Dundee Corporation's equity accounted investees.
 Generally, transactions between Dundee Wealth and these related entities
are conducted on normal market terms and are recorded at their exchange value.



In
the normal course of its business, Dundee Wealth's investment management
subsidiary will purchase or sell securities through registered brokers for the
benefit of mutual fund clients and other discretionary client portfolios.
 These transactions may, from time to time, be conducted through Dundee
Wealth's brokerage subsidiary.  These transactions are conducted at a
negotiated discounted schedule.



Dundee
Wealth's brokerage subsidiary may participate in corporate finance related
activities, including financial advisory activities, with or on behalf of other
entities in the Company, including equity accounted investees of the Company or
fiduciary accounts managed by Dundee Wealth's investment management
subsidiary.



Officers
and directors of the Company and its subsidiaries may make use of the facilities
of Dundee Wealth's brokerage firm or mutual fund dealer.



Corporate Investments

As at December 31, 2004, the Company held mutual funds and other investments with a net carrying value of $24,015,000 (2003
- $40,460,000) managed by a subsidiary of Dundee Wealth.  Transactions in respect of these assets are conducted on the same basis as third party investors.



Shareholder Loans

The Company has made shareholder loans aggregating $1,947,000 to certain officers of the Company and its subsidiaries primarily to acquire shares of the Company.  These shareholder loans are generally secured by the underlying shares acquired.



16.

FINANCIAL INSTRUMENTS



In
the normal course of business, the Company's subsidiaries may enter into
various derivative instrument contracts to meet the needs of customers, earn
trading income, and manage the subsidiaries' exposure to market risk.
 Each type of contract will limit or give rise to varying degrees and types
of risk including credit risk, market risk and interest rate risk.



Credit Risk

Credit
risk arises from the potential for a counterparty to default on a contractual
obligation.  Certain of the Company's subsidiaries are exposed to the
risk that in the event of counterparty default, prevailing market conditions are
such that the Company would incur a loss in replacing the defaulted transaction.
 The Company's subsidiaries limit the credit risk of derivatives traded
over-the-counter by dealing with counterparties that are creditworthy.  For
exchange traded products, exposure to credit risk is limited, as these
transactions are standardized contracts executed on established exchanges and
subject to daily settlement of variation margins.  Written options also
have no credit risk as the counterparty has already performed in accordance with
the terms of the contract through an up-front payment of the option premium.



61

DUNDEE CORPORATION



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Certain
other trading-related activities of the Company's brokerage subsidiary are
subject to the risk of counterparty non-performance.  In connection with
these activities, the Company enters into securities borrowing and lending
arrangements and certain other collateralized transactions which may result in
credit exposure in the event the counterparty to the transaction is unable to
fulfill its contractual obligations.



The Company seeks to control the risks associated with client activities by monitoring credit exposures, limiting transactions with specific clients, and by primarily requiring settlement of securities transactions on a cash basis or delivery against payment.  Clients purchasing securities on margin must maintain collateral in their client accounts in accordance with regulations of the Investment Dealers Association of Canada and other regulatory authorities.



The
Company's exposure to credit risk associated with its trading activities is
measured on an individual counterparty basis.



Market Risk

The
Company is exposed to the risk of loss resulting from fluctuations in the prices
of financial instruments which may occur with volatility in interest rates,
global market conditions, and to a lesser extent, foreign exchange variations.
 Certain of the Company's financial instruments, including brokerage
securities owned and brokerage securities sold short (note 3),  are stated
at market values with unrealized gains and losses being recorded through
earnings.  These changes may materially affect future results.



Interest Rate Risk

The value of certain financial instruments that are stated at market value may be subject to interest rate risk which arises from the possibility that changes in interest rates will affect the value of these financial instruments.  The Company does not hedge its exposure to interest rate risk as it considers such risk minimal.



17.

CHANGES IN ACCOUNTING POLICIES



Canadian Generally Accepted Accounting Principles

On
January 1, 2004, the Company prospectively adopted the requirements of the
Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1100,
"Generally Accepted Accounting Principles".  This section
establishes standards for financial reporting in accordance with GAAP and
provides guidance on sources to consult when selecting accounting policies and
determining appropriate disclosures when a matter is not dealt with explicitly
in the primary sources of GAAP.



On
implementation of CICA Handbook Section 1100, the Company's real estate
segment adopted the straight-line method of rental revenue recognition whereby
any contractual rent increases over the term of a lease are recognized into
earnings over the lease term.  Previously, revenues from leases that
included contractual increases in basic rents were accounted for on a
straight-line basis only where such increases exceeded expected increases in the
projected Consumer Price Index.  This change has been applied prospectively
and had the effect of increasing net earnings for the year ended December 31,
2004 by $1,589,000.



The
Company's real estate segment previously amortized revenue properties using
the sinking fund method. On implementation of CICA Handbook Section 1100, the
real estate segment adopted the straight-line method of depreciation for revenue
properties.  This change has been applied prospectively and had the effect
of decreasing net earnings for the year ended December 31, 2004 by $4,321,000.





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DUNDEE CORPORATION



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Asset Retirement Obligations

Effective
January 1, 2004, the Company implemented the requirements of CICA Handbook
Section 3110, "Asset Retirement Obligations".  This standard
requires the inclusion of the estimated present value of the liability in
respect of future abandonment and reclamation costs in the carrying value of its
oil and gas properties, with the costs being depleted in accordance with the
Company's depletion policy in respect of these assets.  The liability
will accrete until the Company settles the retirement obligation.  Actual
abandonment and reclamation costs incurred are charged against the liability,
with a gain or loss recorded for the difference between the actual costs and the
accreted value of the obligation at the time of reclamation.  Previously,
estimated future abandonment and reclamation costs were provided for over the
life of the reserves by the unit of production method.



Certain
of the Company's equity accounted investees in the resource segment have also
applied the requirements of CICA Handbook Section 3110.



The new standard has been applied retroactively.  The impact on the December 31, 2003 restated consolidated balance sheet is as follows:



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The opening retained earnings as of January 1, 2003 were decreased by $3,453,000 as a result of the retroactive application of the new accounting standard.



The impact on the consolidated results of operations for the year ended December 31, 2003 is detailed below.



[mdafins104.gif]



Full Cost Accounting in the Oil and Gas Industry

On
January 1, 2004, the Company adopted CICA Accounting Guideline 16, "Oil and Gas Accounting  Full Cost"
("AcG 16"), which replaces AcG 5, "Full Cost Accounting", in the
oil and gas industry.  This guideline requires the recognition of an
impairment when the carrying amount of oil and gas properties exceeds their
undiscounted future cash flows based on estimated future commodity prices.
 If impairment is recognized, the amount of impairment is determined as the
excess of the carrying amount over the fair value.  Fair value is based on
the present value of expected cash flows, reflecting discounting at the
risk-free rate of interest.  Both proven and a portion of probable reserves
are used in estimating fair value.  This impairment test is conducted as at
each annual balance sheet date.  Previously, the "cost ceiling" limited
the net book value of the oil and gas properties to the undiscounted and
unescalated future net revenues from production of proven reserves.  The
implementation of AcG 16 had no effect on the consolidated financial statements
of the Company.



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DUNDEE CORPORATION



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Hedging Relationships

On
January 1, 2004, the Company prospectively adopted the requirements of CICA
Accounting Guideline 13, "Hedging Relationships" ("AcG 13") and
the Emerging Issues Committee Abstract 128, "Accounting for Trading, Speculative or Non-hedging Derivative Financial Instruments"
("EIC 128").  AcG 13 provides detailed guidance on the identification,
designation, documentation and effectiveness of hedging relationships for the
purpose of applying hedge accounting and discontinuance of hedge accounting.
 EIC 128 requires that any derivative financial instrument not designed
within an AcG 13 compliant hedging relationship be measured at fair value with
changes in fair value recognized immediately in earnings.  These changes in
accounting policies had no effect on the consolidated financial statements of
the Company.



Impairment of Long-lived Assets

On
January 1, 2004, the Company implemented the requirements of CICA Handbook
Section 3063, "Impairment of Long-lived Assets", which provides
guidance on impairment testing of long-lived assets.  The change in
accounting policy had no effect on the consolidated financial statements of the
Company.



18.

FUTURE ACCOUNTING CHANGES



The Company will be required to adopt the following accounting standards in future years.



Variable Interest Entities

CICA
Accounting Guideline 15, "Consolidation of Variable Interest Entities",
is effective for annual and interim periods beginning on or after November 1,
2004.  The standard was revised in August 2004 ("AcG 15R") to harmonize
with counterpart pronouncements in the United States.  AcG 15R defines a
variable interest entity ("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 the equity at risk lack
the characteristics of a controlling financial interest.  AcG 15R requires
the primary beneficiary to consolidate a VIE and defines a primary beneficiary
as an entity that is exposed to a majority of the VIE's expected losses or is
entitled to a majority of the VIE's expected residual returns, or both, also
as defined by AcG 15R.



The Company has evaluated its interests in joint ventures and has determined that certain joint ventures are VIEs.  However, the Company has determined that it is not the primary beneficiary under these arrangements as at December 31, 2004.  The Company will be required to re-evaluate this determination following changes to financing and business activities related to these joint ventures.  The Company currently uses the proportionate consolidation method to account for its interests in joint ventures.



The Company is also assessing if it would meet the definition of primary beneficiary in respect of certain mutual fund entities that it manages and which experience low volatility of returns.  The Company does not expect the application of these requirements to have any material effect on the consolidated financial statements.



Financial Instruments

In
January 2005, the CICA released CICA Handbook Section 3855, "Financial Instruments  Recognition and Measurement",
and two related standards, Section 3865, "Hedges", and Section 1531,
"Comprehensive Income".  Under the new standards, which are
effective for fiscal years starting on or after October 1, 2006, investments in
debt and equity securities must generally be measured at fair value except for
equity securities which do not have a quoted market value, debt securities which
are expected to be held to maturity, and equity securities accounted for under
the equity method.  Generally, unrealized gains and losses in respect of
these financial instruments are recognized in earnings, except for investments
designated as being "available for sale", in which case unrealized gains and
losses are recognized directly in shareholders' equity and designated as "other
comprehensive income".  Trade receivables and payables, and debt
securities held for maturity will continue to be accounted for at historical
cost.



64

DUNDEE CORPORATION



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All
derivatives, including hedges, must also be measured at fair value.
 Changes in the fair value of a derivative which hedges an entity's
exposure that the fair value of an asset or liability will change due to a
particular risk are recognized in earnings together with those of the respective
offsetting hedged item.  However, changes in the fair value of a derivative
which hedges an entity's exposure to changing cash flows are accumulated in
"other comprehensive income" until the transaction being hedged affects
earnings.



The Company is currently evaluating the impact of applying the new standards.



19.

SUBSEQUENT EVENT



On
March 22, 2005, Dundee Wealth issued 4,950,000common shares from
treasury for aggregate proceeds of approximately $47,295,000, net of issue
costs, pursuant to a short form prospectus dated March 15, 2005.  As a
result, the Company's interest in Dundee Wealth was diluted from 67.3% at
December 31, 2004 to approximately 63.6%.  The Company anticipates that it
will recognize a dilution gain of approximately $13,400,000 in respect of such
dilution.





65

DUNDEE CORPORATION



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