Exhibit
99.3




















DUNDEE
CORPORATION














MANAGEMENT’S
DISCUSSION AND ANALYSIS


December
31, 2008











































1





DUNDEE
CORPORATION


Management’s
Discussion and Analysis





Dundee Corporation(the “Company” or
“Dundee Corporation” or “we”) is an asset management company dedicated to
private wealth management, real estate and resources.  Certain of
these activities are carried out directly, through wholly or partially owned
subsidiaries, while others are undertaken through equity accounted or portfolio
investment holdings.  Dundee Corporation’s investment holdings include
publicly listed and private companies in a variety of sectors, as well as
investments in liquid securities such as mutual funds.  The Company is
listed on the Toronto Stock Exchange (“TSX”) under the symbol DC.A.





This
Management’s Discussion and Analysis has been prepared with an effective date of
March 31, 2009 and should be read in conjunction with, the audited consolidated
financial statements of the Company, including the notes thereto, as at and for
the year ended December 31, 2008 (“2008 Audited Consolidated Financial
Statements”).  Financial data has been prepared in accordance with
Canadian generally accepted accounting principles (“Canadian GAAP”) unless
otherwise specified.  All amounts are in Canadian dollars, unless
otherwise specified.





The
Company holds investments in various industry sectors and our ownership interest
in these investments is established through different, and sometimes complex
structures.  Our investments are accounted for as
follows:




(i)
            Available-for-sale
      (“AFS”) securities are carried on the balance sheet at fair value with
      unrealized gains and losses included in accumulated other comprehensive
      income (“AOCI”).  When an unrealized loss on an investment is
      determined to be other-than-temporary, the unrealized loss in AOCI is
      removed and an impairment is recognized on the investment through net
      earnings.(ii)
            The
      carrying values of our investments that are classified as equity-accounted
      investees are adjusted by our share of earnings or losses in the investee,
      and by any dilution in ownership.  Our share of earnings from
      equity accounted investees is reported in our consolidated statements of
      operations as “Share of earnings of equity accounted
      investees”.  In addition, we may recognize a fair value
      adjustment against the carrying values of our equity accounted investments
      if their fair value falls below their carrying value and we determine that
      the decrease in fair value is other-than-temporary in
    nature.


(iii)
            Our
      subsidiaries are not recorded as individual
      investments.  Instead, these subsidiaries are consolidated in
      these financial statements, and 100% of the investments’ accounts are
      recorded on a line-by-line basis in our own consolidated balance sheets
      and consolidated statements of operations, subject to non-controlling
      interest.








OPERATING SEGMENTS AND SIGNIFICANT
INVESTMENTS





Wealth
Management


The
wealth management segment includes the operations of our subsidiary,
DundeeWealth Inc. (“DundeeWealth”).   DundeeWealth is a Canadian
owned, independent wealth management company that provides diversified wealth
management and investment solutions including alternative and tax-advantaged
products, capital markets and advisory services to financial advisors,
institutions, corporations and foundations, and innovative wealth management
through independent financial advisors across Canada.  DundeeWealth is
listed on the TSX under the symbol DW.  Additional information
regarding DundeeWealth may be accessed at www.dundeewealth.com.





Our
wealth management segment also includes our recently established wholly owned
subsidiary, Ravensden Asset Management Inc. which is registered as an Investment
Counsel and Portfolio Manager in the province of Ontario, as well as our
international banking activities which are carried out through offices in
Bermuda and the Cayman Islands.





Real
Estate


The real
estate segment includes the operations of our 75% interest in Dundee Realty
Corporation (“Dundee Realty”), a company operating in the real estate asset
management business, with activities in a land and housing business in Canada
and the United States.  Land and housing activities are supplemented
by a portfolio of select income generating properties and by our 21% interest in
Dundee Real Estate Investment Trust (“Dundee REIT”)  (www.dundeereit.com).





DUNDEE
CORPORATION
 2




Resources


Activities
in our resources segment are carried out through Dundee Resources Limited
(“Dundee Resources”), a wholly owned subsidiary of the
Company.  Operations in our resources segment are carried out through
our 53% interest in Eurogas Corporation (“Eurogas”) (www.eurogascorp.com),  which
is involved in  natural gas storage activities in Spain, as well as
our 53% interest in Eurogas International Inc. (“EII”) which carries out oil and
gas exploration and development,  with interests
in  Tunisia.  The resources segment includes various other
portfolio holdings, including our 20%interest in Dundee
Precious Metals Inc. (“Dundee Precious”) (www.dundeeprecious.com), and our 25%
interest in Breakwater Resources Ltd. (“Breakwater”) (www.breakwater.ca), both
of which are accounted for on an equity basis.





Other
Investments and Corporate Costs


Our
remaining investments and the operating results from these investments have been
included in the other investments and corporate costs segment.  These
investments include both publicly traded and private companies in a variety of
sectors as well as liquid securities such as mutual funds.  This
segment also includes general corporate overhead costs, interest and stock based
compensation costs of the Company that are not specifically allocated to any
operating division.





Significant
Investments


The
following table lists the more significant investments in our portfolio as at
December 31, 2008, including our percentage ownership interest, the accounting
treatment used to account for our investment, the book value of the investment
at December 31, 2008 (other than for consolidated subsidiaries), and the market
values for investments that are publicly listed securities, determined using
quoted trading prices as at December 31, 2008.





(in
      thousands of dollars except percentages)31-Dec-08
              
              
              31-Dec-07Accounting
              
              Book
              
              
              Market
              
              
              Percentage
              
              
              PercentageInvestment
      Holding
              Treatment
              
              Value
              
              
              Value
      (c)
              
              
              Owned
              
              
              OwnedWealth
      Management SegmentDundeeWealth
      Inc. (a)
              Consolidation
              
              $
              N/A
              
              
              $
              371,413
              
              
              
              49
              %
              
              
              45
              %Real
      Estate SegmentDundee
      Realty Corporation
              Consolidation
              
              
              N/A
              
              
              
              N/A
              
              
              
              75
              %
              
              
              77
              %Dundee
      Real Estate Investment Trust (b)
              Equity
              
              
              96,337
              
              
              
              52,515
              
              
              
              21
              %
              
              
              17
              %Resources
      SegmentEurogas
      Corporation
              Consolidation
              
              
              N/A
              
              
              
              25,356
              
              
              
              53
              %
              
              
              51
              %Eurogas
      International Inc.
              Consolidation
              
              
              N/A
              
              
              
              N/A
              
              
              
              53
              %
              
              
              N/ADundee
      Precious Metals Inc.
              Equity
              
              
              37,952
              
              
              
              29,119
              
              
              
              20
              %
              
              
              20
              %Breakwater
      Resources Ltd.
              Equity
              
              
              13,560
              
              
              
              13,560
              
              
              
              25
              %
              
              
              25
              %


(a)
            The
      Company maintains an approximate 63% voting interest in
      DundeeWealth.


(b)
            Approximately
      82% of our interest in Dundee REIT is held through units of Dundee
      Properties Limited Partnership (“DPLP”), with the remainder in publicly
      traded Dundee REIT units.  The DPLP units are convertible, at
      the Company’s option into units of Dundee REIT on a one-for-one
      basis.


(c)
            See
      “Available-for-Sale Securities” and “Equity Accounted
      Investments”.







DUNDEE
CORPORATION
 3





PERFORMANCE MEASURES AND BASIS
OF PRESENTATION


Our
consolidated financial statements are prepared in accordance with Canadian GAAP
and are reported in Canadian dollars.  We believe that important
measures of our operating performance and the operating performance of our
subsidiaries include certain measures that are not defined under Canadian GAAP
and, as such, may not be comparable to similar measures used by other
companies.  Throughout this discussion, there will be references to
the following performance measures which management believes are relevant in
assessing the economics of our business:


Ø
            “AUM”
      or “Assets under Management” represent the period-end market value of
      client assets managed by DundeeWealth on a discretionary basis and in
      respect of which DundeeWealth earns investment management fees and, in
      certain cases, performance fees.  AUM are not reflected on our
      consolidated balance sheets.


Ø
            “AUA”
      or “Assets under Administration” represent the approximate period-end
      market value of client assets administered by DundeeWealth and in respect
      of which DundeeWealth earns commissions, trailer service fees and
      administrative or other similar fees.  AUA are not reflected on
      our consolidated balance sheets.


Ø
            “EBITDA”
      represents earnings before interest, taxes, depreciation and
      amortization.  We use this measure as a supplement to net
      earnings and cash flows.


Ø
            “Operating
      Earnings Before Interest, Taxes and Other Non-Cash Items” or “Operating
      EBITDA” and “Operating Earnings” are set out in the consolidated
      statements of operations of the Company.  While these measures
      are non-GAAP, the Company uses them as supplementary measures to net
      earnings.





SELECTED CONSOLIDATED FINANCIAL
INFORMATION OF DUNDEE CORPORATION




(in
      thousands of dollars, except for number of shares and amounts per
      share)As
      at and for the years ended December 31,
              
              2008
              
              
              2007
              
              
              2006Total
      assets
              
              $
              3,080,960
              
              
              $
              3,609,096
              
              
              $
              3,549,434Corporate
      debt
              
              
              529,507
              
              
              
              355,714
              
              
              
              419,713Future
      income tax liabilities
              
              
              3,024
              
              
              
              134,862
              
              
              
              87,143Client
      deposits and related liabilities
              
              
              408,647
              
              
              
              423,320
              
              
              
              269,636Liabilities
      of discontinued operations
              
              
              -
              
              
              
              2,395
              
              
              
              940,494Other
      liabilities
              
              
              343,452
              
              
              
              546,480
              
              
              
              399,928Preference
      shares of DundeeWealth
              
              
              152,978
              
              
              
              152,655
              
              
              
              -Preference
      shares, series 1
              
              
              147,371
              
              
              
              147,020
              
              
              
              141,902Non-controlling
      interest
              
              
              615,142
              
              
              
              726,394
              
              
              
              471,3132,200,121
              
              
              
              2,488,840
              
              
              
              2,730,129Net
      assets represented by common shares
              
              
              880,839
              
              
              
              1,120,256
              
              
              
              819,305Revenue
              
              
              1,228,655
              
              
              
              1,398,932
              
              
              
              1,113,265Net
      (loss) earnings from continuing operations
              
              
              (196,261
              )
              
              
              277,639
              
              
              
              98,582Net
      (loss) earnings for the year
              
              
              (196,192
              )
              
              
              293,733
              
              
              
              93,689Weighted
      average number of common shares (in thousands of shares)Basic
              
              
              74,805
              
              
              
              75,412
              
              
              
              75,183Diluted
              
              
              n/a
              
              
              
              78,519
              
              
              
              77,966Net
      (loss) earnings per share - BasicContinuing
              
              $
              (2.62
              )
              
              $
              3.68
              
              
              $
              1.31Discontinued
              
              
              -
              
              
              
              0.22
              
              
              
              (0.06
              )$
              (2.62
              )
              
              $
              3.90
              
              
              $
              1.25Net
      (loss) earnings per share - DilutedContinuing
              
              $
              (2.62
              )
              
              $
              3.49
              
              
              $
              1.19Discontinued
              
              
              -
              
              
              
              0.29
              
              
              
              (0.06
              )$
              (2.62
              )
              
              $
              3.78
              
              
              $
              1.13





DUNDEE
CORPORATION
 4





CONSOLIDATED
RESULTS OF OPERATIONS


Year
ended December 31, 2008 compared with the Year ended December 31,
2007





Consolidated
Net (Losses) Earnings


In the
midst of a deepening credit crisis and related concerns over its impact on the
global economy, stock markets around the world tumbled in the latter part of the
third quarter of 2008.  Equity values, which declined sharply in
reaction to recessionary pressures in Europe, demand concerns in Asia, and the
credit crisis in the U.S. financial system, directly impacted our AUM and AUA
levels as well as the market value of our investments in all
sectors.  Contributing to this reduction were reduced commodity prices
that likewise impacted the value of our resource-based AFS securities as well as
the operating results of our resource-based equity accounted
investments.  Concerns about the state of the economy have caused
downward pressure on the sales prices of real estate assets.





These
events provide the framework for our year end negative adjustment to both our
investment portfolio and our equity accounted investees, resulting in net losses
for 2008 of $196.2 million, representing a diluted loss per share of
$2.62.  This compares with net earnings in 2007 of $293.7 million or
diluted earnings per share of $3.78.





Aggregate
adjustments against our investments were $385.3 million, before taxes and
non-controlling interest of $197.1 million.  Approximately $114.2
million of this adjustment was in respect of our equity-accounted investments,
$213.8 million related to DundeeWealth’s portfolio of asset backed commercial
paper (“ABCP”) and collateralized loan obligations (“CLOs”) and $57.3 million
related to other investments in our portfolio of AFS securities.





Amidst
these events, DundeeWealth attained record net sales levels of $3.4 billion in
2008, yet were overshadowed by $10.6 billion of market depreciation resulting in
year end AUM levels of $25.4 billion, representing a 10% decline from
2007.  Unlike prior years, where performance fee revenues were an
important element of total revenues for DundeeWealth, no performance fee
revenues were earned in the current year because of rapid market value
deterioration and the related impact on investment performance experienced in
the latter part of 2008. Year-over-year, DundeeWealth’s performance fee revenue
dropped by $99 million ($81 million, net of related expenses).





In 2008,
DundeeWealth embarked on a plan for the integration of its investment
management, manufacturing and distribution activities, the realignment of its
capital markets division and the unification of its back office support service
in order to enhance service levels and achieve greater efficiency in delivery
and costs.  Severance costs incurred in 2008 aggregated $23.6 million
however, these costs are expected to result in annualized cost savings of
approximately $50 million, associated with the rationalization of 360 jobs and
related costs.  In line with this strategic direction, DundeeWealth
sold its Quebec-based mutual fund dealer and insurance distribution operations
to Industrial Alliance and Financial Services Inc. (“Industrial
Alliance”).  DundeeWealth incurred a loss on this disposition of $17.7
million, relating to the disposition of the underlying goodwill and other
intangible assets relating to this business which DundeeWealth had originally
acquired as part of a larger acquisition in 2003.





Operating
earnings from continuing operations, net of non-controlling interests in our
real estate division continued to make a significant contribution to our overall
results of $72.2 million in 2008 compared with $123.9 million in
2007.  Despite the decline in the Alberta housing market, Dundee
Realty’s land and housing operations remained strong.  During the
prior year, Dundee REIT completed a transaction with GE Real Estate (“GE”)
pursuant to which Dundee REIT sold certain properties to GE.  Our
share of the gain realized by Dundee REIT in respect of the sale of these
properties, aggregating $95.9 million after tax, was included as discontinued
operations in 2007.





Immediately
following the transaction with GE, Dundee Realty established an asset management
and advisory services business through which it provides third party management
and advisory services to the real estate sector including sourcing, acquiring
and management of commercial and residential real estate.  Dundee
Realty currently has approximately $5 billion of fee generating real estate
assets under management on behalf of its clients, which includes Dundee REIT,
and earned management fee revenues of $16.3 million in 2008.






DUNDEE
CORPORATION
 5





In the
wake of declining growth in the economy, equity markets appear to be concerned
that the world economy may lessen the demand for resources.  As a
result, all commodity prices, with perhaps the exception of gold, have fallen
sharply on equity exchanges around the world.  These factors have had
an adverse effect on the trading value of many of our resource-based
investments, some of which experienced precipitous declines in market
capitalization.  Net earnings from the resources segment declined from
$7.8 million to a loss of $191.8 million in 2008.  Losses in 2008
include our share of losses incurred by our equity accounted investees of $37.2
million and the recognition of adjustments to carrying value with respect to our
equity accounted investees of $114.2 million.  In 2007, we recognized
earnings of $13.9 million in respect of these investments.





Selected
Consolidated Segmented Earnings Information




(in
      thousands of dollars)For
      the year ended December 31,
              
              2008
              
              
              2007Wealth
      management
              
              $
              (145,250
              )
              
              $
              86,772Real
      estate
              
              
              72,243
              
              
              
              123,875Resources
              
              
              (191,822
              )
              
              
              7,833Other
      investments and corporate costs
              
              
              (13,671
              )
              
              
              10,766Intersegment
              
              
              3,272
              
              
              
              3,272(275,228
              )
              
              
              232,518Dilution
      gains from consolidated subsidiaries
              
              
              578
              
              
              
              136,591Income
      taxes
              
              
              78,389
              
              
              
              (91,470
              )Net
      (loss) earnings from continuing operations
              
              
              (196,261
              )
              
              
              277,639Gain
      (loss) from discontinued operations of DundeeWealth,net
      of tax and non-controlling interest
              
              
              69
              
              
              
              (79,815
              )Share
      of earnings of discontinued operations ofDundee
      REIT, net of tax
              
              
              -
              
              
              
              95,909$
              (196,192
              )
              
              $
              293,733




In the
prior year, DundeeWealth initiated several transactions which resulted in the
discontinuance of its domestic banking activities.  Operations from
these activities prior to their sale were included in the financial statements
as discontinued operations.  In a related transaction, the Bank of
Nova Scotia invested $348.3 million in DundeeWealth to acquire an approximate
18% interest in DundeeWealth.  Combined with DundeeWealth’s buyout of
the interest of a non-controlling shareholder in its underlying operating
subsidiaries, which was completed in the first quarter of 2007, these
transactions contributed to dilution gains of $136.6 million in
2007.





Available-for-Sale
Securities




(in
      thousands of dollars)2008
              
              
              2007Fair
      value of available-for-sale securities, beginning of year
              
              $
              645,181
              
              
              $
              187,989Transactions
      for the yearNew
      investments
              
              
              80,889
              
              
              
              663,403Proceeds
      from sales of securities
              
              
              (116,201
              )
              
              
              (84,165
              )Changes
      in unrealized gains in available-for-sale securities
              
              
              (308,564
              )
              
              
              (123,314
              )Other
      transactions
              
              
              (6,575
              )
              
              
              1,268Fair
      value of available-for-sale securities, end of year
              
              $
              294,730
              
              
              $
              645,181Represented
      by:Asset-backed
      commercial paper
              
              $
              169,478
              
              
              $
              283,305Collateralized
      loan obligations
              
              
              16,645
              
              
              
              86,589Mutual
      funds managed by a subsidiary
              
              
              68,194
              
              
              
              171,779Other
              
              
              40,413
              
              
              
              103,508Fair
      value of available-for-sale securities, end of year
              
              $
              294,730
              
              
              $
              645,181


DUNDEE
CORPORATION
 6


During
2008, we invested cash of $80.9 million in our AFS investment portfolio,
including approximately $24.9 million in resource-based investments and
approximately $56.0 million in short term investments and other
securities.  Proceeds from the sale of AFS securities were $116.2
million during 2008 and consisted primarily of the sale of mutual fund
investments.




Equity Accounted
Investments




(in
      thousands of dollars)2008
              
              
              2007Carrying
      value of equity accounted investments, beginning of year
              
              $
              289,041
              
              
              $
              336,697Transactions
      for the yearCash
      invested in equity accounted investees
              
              
              22,056
              
              
              
              50,548Share
      of earnings of equity accounted investees-continuing
      operations
              
              
              (14,231
              )
              
              
              34,134Share
      of property impairment losses of equity accounted
investees
              
              
              (21,459
              )
              
              
              (4,202
              )Share
      of earnings of equity accounted investees-discontinued
      operations
              
              
              -
              
              
              
              112,834Share
      of other comprehensive loss of equity accounted investees
              
              
              (1,802
              )
              
              
              (14,311
              )Cost
      of investments sold
              
              
              (327
              )
              
              
              (34,326
              )Cash
      received from redemption of Dundee REIT units
              
              
              -
              
              
              
              (183,996
              )Fair
      value adjustment
              
              
              (114,194
              )
              
              
              -Other
      transactions
              
              
              1,255
              
              
              
              (8,337
              )Carrying
      value of equity accounted investments, end of year
              
              $
              160,339
              
              
              $
              289,041







During
2008, Eurogas completed a transaction in respect of its underground natural gas
storage facility project, which diluted its interest in Escal UGS S.L.
(“Escal”), through which Eurogas carries on these activities, to approximately
33%.  Effective May 18, 2008, Escal is being carried in our
consolidated financial statements as an equity accounted investee with a book
value of approximately $6.0 million.





In August
2008, Dundee Resources acquired 10 million common shares of Odyssey, a
Canadian-based junior mining exploration company whose focus has been in Morocco
and Turkey.  As a result of this transaction, Dundee Resources’
interest in Odyssey increased to 43% and the Company began accounting for this
investment on an equity basis.




(in
      thousands of dollars except percentages)2008
              
              
              
              
              
              
              
              
              2007Carrying
              
              
              Market
              
              
              
              
              
              Carrying
              
              
              MarketOwnership
              
              
              Value
              
              
              Value
              
              
              Ownership
              
              
              Value
              
              
              ValueBreakwater
      Resources Ltd.
              
              
              25
              %
              
              $
              13,560
              
              
              $
              13,560
              
              
              
              25
              %
              
              $
              83,523
              
              
              $
              184,684Dundee
      Precious Metals Inc.
              
              
              20
              %
              
              
              37,952
              
              
              
              29,119
              
              
              
              20
              %
              
              
              96,146
              
              
              
              91,309Dundee
      Real Estate Investment Trust (a)
              
              
              21
              %
              
              
              96,337
              
              
              
              48,537
              
              
              
              17
              %
              
              
              95,056
              
              
              
              111,728Escal
      UGS S.L. (b)
              
              
              33
              %
              
              
              5,975
              
              
              
              5,975
              
              
              
              
              
              
              
              -
              
              
              
              -Odyssey
      Resources Ltd.
              
              
              43
              %
              
              
              2,842
              
              
              
              1,250
              
              
              
              
              
              
              
              -
              
              
              
              -Other
              
              
              
              
              
              
              3,673
              
              
              
              3,608
              
              
              
              
              
              
              
              14,316
              
              
              
              14,959$
              160,339
              
              
              $
              102,049
              
              
              
              
              
              
              $
              289,041
              
              
              $
              402,680


(a)
            Fair
      value is determined net of our obligation to deliver Dundee REIT units
      pursuant to the terms of our Exchangeable Debentures of $9.5
      million.


(b)
            Our
      33% interest in Escal UGS S.L. is held through Eurogas’ 74% owned
      subsidiary, Castor UGS Limited Partnership, giving Eurogas an effective
      25% interest in Escal.





The
aggregate market value of our equity accounted investments as at December 31,
2008, is $102.0 million.  Market value is generally determined using
quoted market prices where available, and carrying values for non-quoted
securities such as our investment in Escal.  In certain circumstances,
we do not believe that current trading prices are a true measure of the fair
value of the investment.  Subsequent to December 31, 2008, and
following the recent credit crisis and significant declines in commodity prices,
the market value of our equity-accounted subsidiaries, measured using current
trading prices, has continued to deteriorate.  As at December 31,
2008, the Company completed an impairment assessment and determined that there
was enough evidence to support an impairment that was other-than-temporary in
our equity accounted investments.  Consequently, a negative adjustment
of $114.2 million was recognized.





DUNDEE
CORPORATION
 7





SEGMENTED
RESULTS OF OPERATIONS


(in
      thousands of dollars)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2008Wealth
              
              
              
              
              
              
              
              
              Other
      InvestmentsFor
      the year ended December 31, 2008
              
              Management
              
              
              Real
      Estate
              
              
              Resources
              
              
              and
      Corporate Costs
              
              
              Intersegment
              
              
              TOTALREVENUESManagement
      fees
              
              $
              464,288
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              464,288Redemption
      fees
              
              
              16,833
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              16,833Financial
      services
              
              
              325,861
              
              
              
              -
              
              
              
              -
              
              
              
              1,022
              
              
              
              (1,523
              )
              
              
              325,360Real
      estate revenues
              
              
              -
              
              
              
              400,925
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              400,925Investment
      income (loss)
              
              
              16,959
              
              
              
              (303
              )
              
              
              3,105
              
              
              
              11,390
              
              
              
              (9,902
              )
              
              
              21,249823,941
              
              
              
              400,622
              
              
              
              3,105
              
              
              
              12,412
              
              
              
              (11,425
              )
              
              
              1,228,655EXPENSESSelling,
      general and administrative
              
              
              320,394
              
              
              
              6,843
              
              
              
              6,555
              
              
              
              10,887
              
              
              
              (1,522
              )
              
              
              343,157Variable
      compensation
              
              
              229,137
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              229,137Trailer
      service fees
              
              
              134,234
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              134,234Operating
      costs, real estate
              
              
              -
              
              
              
              286,538
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              286,538683,765
              
              
              
              293,381
              
              
              
              6,555
              
              
              
              10,887
              
              
              
              (1,522
              )
              
              
              993,066OPERATING
      EBITDA
              
              
              140,176
              
              
              
              107,241
              
              
              
              (3,450
              )
              
              
              1,525
              
              
              
              (9,903
              )
              
              
              235,589Amortization
      of deferred sales commissions
              
              
              81,868
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              81,868Depreciation,
      depletion and amortization
              
              
              15,203
              
              
              
              4,111
              
              
              
              113
              
              
              
              1,982
              
              
              
              -
              
              
              
              21,409Fair
      value adjustment of available-for-sale securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Interest
      expense
              
              
              21,526
              
              
              
              9,789
              
              
              
              4,284
              
              
              
              9,484
              
              
              
              (13,175
              )
              
              
              31,908Equity
      losses (earnings)
              
              
              -
              
              
              
              (1,468
              )
              
              
              37,158
              
              
              
              -
              
              
              
              -
              
              
              
              35,690Fair
      value adjustments
              
              
              231,008
              
              
              
              -
              
              
              
              149,533
              
              
              
              4,751
              
              
              
              
              
              
              
              385,292Foreign
      exchange loss (gains)
              
              
              14,044
              
              
              
              -
              
              
              
              (1,744
              )
              
              
              293
              
              
              
              -
              
              
              
              12,593Gain
      on exchangeable debentures
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,314
              )
              
              
              -
              
              
              
              (1,314
              )OPERATING
      EARNINGS (LOSS)BEFORE
      UNDERNOTED ITEMS
              
              
              (223,473
              )
              
              
              94,809
              
              
              
              (192,794
              )
              
              
              (13,671
              )
              
              
              3,272
              
              
              
              (331,857
              )Loss
      on sale of subsidiary
              
              
              (17,679
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (17,679
              )Non-controlling
      interest
              
              
              95,902
              
              
              
              (22,566
              )
              
              
              972
              
              
              
              -
              
              
              
              -
              
              
              
              74,308NET
      (LOSS) EARNINGS BEFORE NON-SEGMENTED ITEMS
              
              
              (145,250
              )
              
              
              72,243
              
              
              
              (191,822
              )
              
              
              (13,671
              )
              
              
              3,272
              
              
              
              (275,228
              )Dilution
      gains
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              578Income
      taxes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              78,389Net
      (loss) earnings from continuing operations
              
              
              (145,250
              )
              
              
              72,243
              
              
              
              (191,822
              )
              
              
              (13,671
              )
              
              
              3,272
              
              
              
              (196,261
              )Earnings
      from discontinued operations of DundeeWealth,net
      of tax and non-controlling interest
              
              
              69
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              69Share
      of earnings of discontinued operationsof
      Dundee REIT, net of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      (LOSS) EARNINGS FOR THE PERIOD
              
              $
              (145,181
              )
              
              $
              72,243
              
              
              $
              (191,822
              )
              
              $
              (13,671
              )
              
              $
              3,272
              
              
              $
              (196,192
              )




(in
      thousands of dollars)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2007Wealth
              
              
              
              
              
              
              
              
              Other
      InvestmentsFor
      the year ended December 31, 2007
              
              Management
              
              
              Real
      Estate
              
              
              Resources
              
              
              and
      Corporate Costs
              
              
              Intersegment
              
              
              TOTALREVENUESManagement
      fees
              
              $
              557,268
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              557,268Redemption
      fees
              
              
              14,725
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              14,725Financial
      services
              
              
              417,334
              
              
              
              -
              
              
              
              393
              
              
              
              2,996
              
              
              
              (2,489
              )
              
              
              418,234Banking
      interest income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Real
      estate revenues
              
              
              -
              
              
              
              355,862
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              355,862Investment
      income (loss)
              
              
              18,124
              
              
              
              21,821
              
              
              
              4,079
              
              
              
              20,243
              
              
              
              (11,424
              )
              
              
              52,8431,007,451
              
              
              
              377,683
              
              
              
              4,472
              
              
              
              23,239
              
              
              
              (13,913
              )
              
              
              1,398,932EXPENSESSelling,
      general and administrative
              
              
              322,013
              
              
              
              7,984
              
              
              
              7,754
              
              
              
              12,204
              
              
              
              (2,039
              )
              
              
              347,916Variable
      compensation
              
              
              283,058
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              283,058Trailer
      service fees
              
              
              129,355
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              129,355Banking
      interest expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Operating
      costs, real estate
              
              
              -
              
              
              
              229,909
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              229,909734,426
              
              
              
              237,893
              
              
              
              7,754
              
              
              
              12,204
              
              
              
              (2,039
              )
              
              
              990,238OPERATING
      EBITDA
              
              
              273,025
              
              
              
              139,790
              
              
              
              (3,282
              )
              
              
              11,035
              
              
              
              (11,874
              )
              
              
              408,694Amortization
      of deferred sales commissions
              
              
              67,508
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              67,508Depreciation,
      depletion and amortization
              
              
              16,534
              
              
              
              5,556
              
              
              
              71
              
              
              
              4,881
              
              
              
              -
              
              
              
              27,042Interest
      expense
              
              
              27,065
              
              
              
              10,054
              
              
              
              3,662
              
              
              
              13,640
              
              
              
              (15,146
              )
              
              
              39,275Equity
      earnings
              
              
              -
              
              
              
              (15,926
              )
              
              
              (13,909
              )
              
              
              (97
              )
              
              
              -
              
              
              
              (29,932
              )Fair
      value adjustment of available-for-sale securities
              
              
              37,607
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              37,607Foreign
      exchange (gains) loss
              
              
              (5,541
              )
              
              
              -
              
              
              
              46
              
              
              
              82
              
              
              
              -
              
              
              
              (5,413
              )Gain
      on exchangeable debentures
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (18,237
              )
              
              
              -
              
              
              
              (18,237
              )OPERATING
      EARNINGS (LOSS)BEFORE
      UNDERNOTED ITEMS
              
              
              129,852
              
              
              
              140,106
              
              
              
              6,848
              
              
              
              10,766
              
              
              
              3,272
              
              
              
              290,844Investment
      provision
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-controlling
      interest
              
              
              (43,080
              )
              
              
              (16,231
              )
              
              
              985
              
              
              
              -
              
              
              
              -
              
              
              
              (58,326
              )NET
      EARNINGS BEFORE NON-SEGMENTED ITEMS
              
              
              86,772
              
              
              
              123,875
              
              
              
              7,833
              
              
              
              10,766
              
              
              
              3,272
              
              
              
              232,518Dilution
      gains
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              136,591Income
      taxes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (91,470
              )Net
      earnings from continuing operations
              
              
              86,772
              
              
              
              123,875
              
              
              
              7,833
              
              
              
              10,766
              
              
              
              3,272
              
              
              
              277,639Earnings
      from discontinued operations of DundeeWealth,net
      of tax and non-controlling interest
              
              
              (79,815
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (79,815
              )Share
      of earnings of discontinued operationsof
      Dundee REIT, net of tax
              
              
              -
              
              
              
              95,909
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              95,909NET
      EARNINGS FOR THE PERIOD
              
              $
              6,957
              
              
              $
              219,784
              
              
              $
              7,833
              
              
              $
              10,766
              
              
              $
              3,272
              
              
              $
              293,733




8


ANNUALSEGMENTED RESULTS OF
OPERATIONS


Year
ended December 31, 2008 compared with the Year ended December 31,
2007





WEALTH MANAGEMENT SEGMENT


(in
      millions of dollars)ConsolidatedOther
              
              
              Intersegment
              
              
              Wealth
      ManagementDundeeWealth
              
              
              Wealth
      Management
              
              
              Amounts
              
              
              OperationsFor
      the years ended December 31,
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007REVENUESManagement
      fees
              
              $
              459.7
              
              
              $
              552.0
              
              
              $
              7.8
              
              
              $
              5.3
              
              
              $
              (3.2
              )
              
              $
              -
              
              
              $
              464.3
              
              
              $
              557.3Redemption
      fees
              
              
              16.8
              
              
              
              14.7
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              16.8
              
              
              
              14.7Financial
      services
              
              
              327.1
              
              
              
              416.5
              
              
              
              0.5
              
              
              
              2.2
              
              
              
              (1.7
              )
              
              
              (1.4
              )
              
              
              325.9
              
              
              
              417.3Investment
      income
              
              
              15.8
              
              
              
              20.9
              
              
              
              1.2
              
              
              
              (2.8
              )
              
              
              -
              
              
              
              -
              
              
              
              17.0
              
              
              
              18.1819.4
              
              
              
              1,004.1
              
              
              
              9.5
              
              
              
              4.7
              
              
              
              (4.9
              )
              
              
              (1.4
              )
              
              
              824.0
              
              
              
              1,007.4EXPENSESSelling,
      general and administrative
              
              
              317.4
              
              
              
              316.3
              
              
              
              7.9
              
              
              
              7.1
              
              
              
              (4.9
              )
              
              
              (1.4
              )
              
              
              320.4
              
              
              
              322.0Variable
      compensation
              
              
              229.2
              
              
              
              283.1
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              229.2
              
              
              
              283.1Trailer
      service fees
              
              
              134.2
              
              
              
              129.4
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              134.2
              
              
              
              129.4680.8
              
              
              
              728.8
              
              
              
              7.9
              
              
              
              7.1
              
              
              
              (4.9
              )
              
              
              (1.4
              )
              
              
              683.8
              
              
              
              734.5OPERATING
      EBITDA
              
              
              138.6
              
              
              
              275.3
              
              
              
              1.6
              
              
              
              (2.4
              )
              
              
              -
              
              
              
              -
              
              
              
              140.2
              
              
              
              272.9Amortization
      of deferred sales commissions
              
              
              81.9
              
              
              
              67.5
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              81.9
              
              
              
              67.5Depreciation
      and amortization
              
              
              14.8
              
              
              
              14.0
              
              
              
              0.4
              
              
              
              2.5
              
              
              
              -
              
              
              
              -
              
              
              
              15.2
              
              
              
              16.5Fair
      value adjustment to AFS securities
              
              
              231.0
              
              
              
              37.6
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              231.0
              
              
              
              37.6Foreign
      exchange
              
              
              14.3
              
              
              
              (6.0
              )
              
              
              (0.3
              )
              
              
              0.5
              
              
              
              -
              
              
              
              -
              
              
              
              14.0
              
              
              
              (5.5
              )Interest
      expense
              
              
              21.5
              
              
              
              26.9
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              21.5
              
              
              
              26.9OPERATING
      (LOSS) EARNINGSBEFORE
      UNDERNOTED ITEMS
              
              $
              (224.9
              )
              
              $
              135.3
              
              
              $
              1.5
              
              
              $
              (5.4
              )
              
              $
              -
              
              
              $
              -
              
              
              $
              (223.4
              )
              
              $
              129.9Loss
      on sale of subsidiary
              
              
              (17.7
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (17.7
              )
              
              
              -(LOSS)
      EARNINGS BEFORE NON CONTROLLINGINTEREST
      AND NON-SEGMENTED ITEMS
              
              $
              (242.6
              )
              
              $
              135.3
              
              
              $
              1.5
              
              
              $
              (5.4
              )
              
              $
              -
              
              
              $
              -
              
              
              $
              (241.1
              )
              
              $
              129.9


(a)  Before
income taxes, dilution gains (losses) and non-controlling interest





DUNDEEWEALTH





Ø
            RESULTS OF
      OPERATIONS





During
2008, DundeeWealth earned EBITDA of $138.6 million and incurred a net loss from
continuing operations of $242.6 million before taxes and non-controlling
interest.  Included in 2008 results was a pre-tax adjustment charge of
$231.0 million against the carrying value of certain AFS securities, relating
primarily to DundeeWealth’s investments in ABCP and CLOs.





By
comparison, DundeeWealth earned EBITDA of $275.3 million and net earnings from
continuing operations of $135.3 million, before taxes and non-controlling
interest in 2007.  Prior year earnings benefited from the exemplary
performance returns in mutual funds and other products, which generated
performance fee revenues, net of expenses, of approximately $81.5
million.  No performance fee revenues were earned in
2008.





Also
included in prior year results are losses from discontinued operations of $79.8
million, net of taxes and non-controlling interest, relating to DundeeWealth’s
banking operations which were disposed of late in that year.





(in
      millions of dollars)2008
              
              
              2007AUM,
      January 1,
              
              $
              28,161
              
              
              $
              23,809Gross
      additions
              
              
              8,699
              
              
              
              7,296Redemptions
              
              
              (5,334
              )
              
              
              (4,323
              )Market
      (depreciation) appreciation
              
              
              (10,565
              )
              
              
              1,159Acquisitions
              
              
              4,581
              
              
              
              69Changes
      in discretionary assets under administration
              
              
              (116
              )
              
              
              151AUM,
      December 31,
              
              $
              25,426
              
              
              $
              28,161AUA,
      December 31,
              
              
              22,141
              
              
              
              32,329Bank
      deposits, December 31,
              
              
              4,653
              
              
              
              2,883Combined
      assets, December 31,
              
              $
              52,220
              
              
              $
              63,373


DUNDEE
CORPORATION
 9




During
2008, DundeeWealth’s AUM decreased to $25.4 billion, down $2.8 billion or 10%
from $28.2 billion in the prior year. The decrease resulted primarily from
market depreciation of $10.6 billion.  Equity markets experienced
sharp declines in the latter part of 2008 as the global economy entered a
recession fuelled by the global credit crunch. The decline in AUM was partially
offset by a record year of strong net sales. Net assets gathered were $3.4
billion in 2008, 13% higher than the $3.0 billion gathered in
2007.  DundeeWealth’s market share of mutual fund AUM remained
consistent year-over-year at 3.03% at December 31, 2008 compared to 3.02% at
December 31, 2007.





During
2008, DundeeWealth acquired BHR Fund Advisors, L.P. (“BHR”), a registered
investment advisor, regulated by the U.S. Securities and Exchange Commission, as
well as a 60% interest in Aurion Capital Management Inc. (“Aurion”), a Canadian
institutional money manager.  The acquisitions of Aurion and BHR
increased AUM by $4.6 billion and accounted for $436.0 million of gross sales,
$145.0 million of net sales and $1.2 billion of market depreciation in
2008.





The
market environment throughout 2008 was characterized by a significant amount of
volatility.  The sub-prime mortgage meltdown and liquidity crisis
continued to exert downward pressure on stock markets.  During this
challenging period, Dynamic FundsTM, the award winning investment
brand managed by a subsidiary of DundeeWealth, led the industry in net sales of
long-term funds1 and ranked second in the industry in total net
sales, based on data provided by the Investment Funds Institute of
Canada.





Revenues
from continuing operations during 2008 were $819.4 million, representing an 18%
decline from consolidated revenues of $1,004.1 million in
2007.  Management fee revenues decreased by 17% in 2008, reflecting
both the impact of a decline in the value of AUM experienced by DundeeWealth in
the last quarter of 2008 and the absence of performance fee revenues in
2008.





(in
      millions of dollars)For
      the years ended December 31,
              
              2008
              
              
              %
      Change
              
              
              2007REVENUESManagement
      fees
              
              $
              459.7
              
              
              
              (17
              %)
              
              $
              552.0Redemption
      fees
              
              
              16.8
              
              
              
              14
              %
              
              
              14.7Financial
      services
              
              
              327.1
              
              
              
              (21
              %)
              
              
              416.5Other
              
              
              15.8
              
              
              
              (24
              %)
              
              
              20.9$
              819.4
              
              
              
              (18
              %)
              
              $
              1,004.1


Management
fee revenue in DundeeWealth is predominantly determined by the fair value of AUM
calculated on the last business day of each month.  Average AUM,
before accounting for assets acquired as part of the Aurion and BHR
transactions, increased to $25.6 billion during 2008 compared with $24.9 billion
during 2007.  The increase in average AUM resulted in a $12.5 million
increase in management fee revenue in 2008. This increase was partially offset
by a reduction in the average management fee rate earned on these assets from
1.73% in 2007 to 1.70% in the current year, thereby reducing management fee
revenue by approximately $9.3 million.  DundeeWealth’s acquisitions of
Aurion and BHR added another $7.0 million to management fee revenue in
2008.





Dampened
by the same global economic conditions and volatility experienced in AUM levels,
DundeeWealth’s AUA decreased by $10.1 billion to $22.2 billion from $32.3
billion at December 31, 2007, including $2.3 billion of AUA, representing 91,000
accounts that were sold to Industrial Alliance.  These factors, along
with decreased activity generating commission revenues, continued to exert
downward pressure on financial services revenues, which decreased by 21% during
2008 to $327.1 million from $416.5 million in the prior year. Financial services
revenue for the financial advisory part of the business is derived primarily
from commission revenue, trailer service fee revenue, and administrative fees or
other similar fees related to the purchase, sale and administration of wealth
management products and services and are driven by positive or negative
movements in AUA.





1Long-term funds net asset gathering
activities represent net asset gathering activities in AUM, exclusive of net
asset gathering activities in money market funds.





DUNDEE
CORPORATION
 10





As
DundeeWealth’s financial advisors operate through an open architecture advice
network, they may provide their clients with a wide range of DundeeWealth’s
investment products for their portfolios.  Transactions by financial
advisors in DundeeWealth’s own investment solutions strengthen growth in
AUM.  Commission and trailer service fee revenues earned by
DundeeWealth’s financial segment and paid by DundeeWealth’s investment segment
were $67.9 million in 2008 compared with $67.2 million in 2007.  In
accordance with accounting requirements, these intersegment commission and
trailer service fee revenues are eliminated and excluded from the determination
of consolidated financial services revenue.





Capital
markets activities are conducted through DundeeWealth’s IIROC (Investment
Industry Regulatory Organization of Canada, formerly the “IDA”) member firm,
Dundee Securities Corporation (“Dundee Securities”).  Aggregate
revenues from capital markets activities were $69.1 million in 2008 compared
with $110.7 million in the  prior year.





Although
there were several large transactions and advisory engagements during the
earlier part of 2008, industry statistics suggest that financing activity in
Canada has dropped by 31.5% year-over-year, representing a new issue value
decrease of 23% relative to 2007.  Consistent with these industry
results, new issue and advisory revenue in DundeeWealth’s capital markets
division declined by 46% to $33.1 million in 2008, compared with $61.4 million
earned in the previous year.  The mining and growth industrial sectors
dominated corporate finance activities in 2008, accounting for 77% of aggregate
new issue and advisory revenue.  The oil and gas sector accounted for
a further 12% of revenues in 2008, while the biotechnology, real estate and
alternative energy sectors combined for the remaining 11%.  During
2008, Dundee Securities participated in 158 (2007 – 210) public and private new
issue transactions.





Principal
trading revenue was $2.2 million in 2008 compared with revenue of $20.0 million
in 2007, as trading losses were experienced in the last two quarters due to
market declines.  Included in year-to-date principal trading revenue
is $1.2 million of realized gains on corporate finance inventory positions,
substantially all of which were realized earlier in the year.





Operating
expenses in DundeeWealth, adjusted for intersegment distribution fees, were
$679.3 million in 2008, compared with $726.8 million in the prior
year.





(in
      millions of dollars)For
      the years ended December 31,
              
              2008
              
              
              %
      Change
              
              
              2007OPERATING
      EXPENSESSelling,
      general and administrative
              
              $
              317.4
              
              
              
              0
              %
              
              $
              316.3Variable
      compensation
              
              
              229.2
              
              
              
              (19
              %)
              
              
              283.1Trailer
      service fees
              
              
              134.2
              
              
              
              4
              %
              
              
              129.4680.8
              
              
              
              (7
              %)
              
              
              728.8Intersegment
      distribution fees paid to Dundee Corporation
              
              
              (1.5
              )
              
              
              (25
              %)
              
              
              (2.0
              )Total
              
              $
              679.3
              
              
              
              (7
              %)
              
              $
              726.8


Certain
expenses, such as variable compensation costs and trailer service fees, as well
as the amortization of deferred sales commissions, have increased or decreased
in direct correlation with the change in corresponding revenue streams or AUM
levels.





Selling,
general and administrative (“SG&A”) costs have increased from $316.3 million
in 2007 to $317.4 million during 2008.  Expenses in 2008 also include
$8.5 million relating to the operations of Aurion and BHR, all of which were
incurred in the second half of the year.





Since the
beginning of the current year, and as part of the implementation of
DundeeWealth’s integration efforts, DundeeWealth incurred severance costs of
$23.6 million, which should result in annualized savings to DundeeWealth of
approximately $50 million.








DUNDEE
CORPORATION
 11





Trailer
service fees are paid to brokers and financial advisors to assist them in
providing ongoing support to clients who have invested in DundeeWealth’s
products.  Trailer service fees are calculated as a percentage of the
market value of the associated AUM and we would therefore expect to see
increases in trailer service fee expense corresponding to increases in our
average AUM during any given period.  As a percentage of average AUM,
excluding AUM in Aurion and BHR, trailer service fees paid in 2008 represented
approximately 33% (2007 – 32%) of total management fee revenue generated from
these assets.





On a
consolidated basis, amortization of deferred sales commissions was $81.9 million
in 2008 (2007 – $67.5 million).  During 2008, DundeeWealth paid
commissions of $108.9 million (2007 – $100.7 million).  The average
commission rate paid on asset gathering activities conducted on a deferred sales
charge basis is approximately 4% (2007 – 4%).  For accounting
purposes, DundeeWealth defers the amount of commissions paid each period and
reports it as deferred sales commissions on our consolidated balance
sheet.  These deferred sales commissions are then amortized on a
straight-line basis over five years. DundeeWealth regularly reviews the
carrying value of the deferred sales commissions with respect to any events or
circumstances that may indicate impairment.  At December 31, 2008,
there was no impairment in deferred sales commissions.





Ø
            CHANGES IN
      FINANCIAL CONDITION





Step
Acquisitions in DundeeWealth


During
2008, we purchased approximately 5.5 million common shares of DundeeWealth for
cash of $72.3 million.  During the same period, DundeeWealth paid cash
of $22.8 million to purchase and cancel 2,057,600 common shares pursuant to its
normal course issuer bid.  These transactions resulted in an overall
3.7% increase in our interest in DundeeWealth.  We accounted for this
increase as a step acquisition, with the aggregate purchase price allocated to
the fair value of the assets of DundeeWealth acquired as illustrated in the
following table.  The investment management contracts have an
indefinite life and are therefore not subject to amortization.




(in
      thousands of dollars)Net
      assets acquiredInvestment
      management contracts
            
            $
            77,619Other
      net assets
            
            
            23,262Future
      income tax liabilities
            
            
            (22,012
            )$
            78,869Aggregate
      purchase priceCash
            
            $
            71,497Cash
      attributed to non-controlling interest
            
            
            7,372$
            78,869






Exposure
to Asset-Backed Commercial Paper


As at
December 31, 2008, DundeeWealth continued to hold ABCP with a par value at
maturity of $379.4 million, which is being carried at $169.5
million.  These investments were originally made as part of the
investment portfolio of their now discontinued banking
operations.  The ABCP has not traded in active markets since
mid-August 2007 and there have been no market quotations available for these
securities.





A
restructuring plan implemented on January 21, 2009, exchanged affected ABCP for
longer-term, floating rate notes (“FRNs”) that were designed to match the
maturities of the underlying assets.





The
restructuring pooled certain assets of all the affected ABCP conduits, and
subsequently allocated them on a pro-rata basis to two newly created Master
Asset Vehicles referred to as MAV 1 and MAV 2.  Certain larger
investors participated in MAV 1 which required self-funding by participants
against possible margin calls in a margin funding facility.





DundeeWealth
is an investor in MAV 2, in which a third-party funding facility was established
and generally funded by a group of third-party lenders.  MAV 2 issued
Class A-1, Class A-2, Class B and Class C notes to ABCP
noteholders.  Each class of notes that DundeeWealth received was
supported by a portfolio of unleveraged and leveraged corporate CDOs,
traditional securitized assets and certain hybrid assets.





DUNDEE
CORPORATION
 12








Trusts
with ABCP supported solely by traditional securitized assets were placed in a
separate Master Asset Vehicle referred to as MAV 3 and noteholders received FRNs
with maturities based upon the maturities of the underlying
assets.  The FRNs are to amortize and be repaid as assets mature or
are sold.  DundeeWealth is also a participant in MAV 3.





Assets in
each Master Asset Vehicle, for which the credit quality is uncertain, are
designated as ineligible assets and are supported by notes designated as IA
Tracking Notes which bear interest at the net rate of return generated by the
corresponding designated tracking asset.





DundeeWealth
received their replacement notes immediately following approval of the
restructuring.  Approximately 71% of DundeeWealth’s original
investment in ABCP was replaced with senior Class A-1 and Class A-2 long-term
FRNs of MAV 2.  These notes have been assigned a rating of “A” by
DBRS.  The notes have a legal maturity date that extends into 2056,
although the expectation is that these notes will be repaid earlier than their
legal maturity, as the underlying assets pledged as collateral
mature.  DundeeWealth also received subordinated Class B and Class C
long-term FRNs of MAV 2 representing approximately 8% of their original ABCP
investment.  Assets in MAV 2 which have uncertain credit quality were
restructured on a transaction-by-transaction basis and DundeeWealth received
long-term FRNs as a result.  Additionally, the traditional securitized
assets in MAV 3 were also restructured on an individual
transaction-by-transaction basis and DundeeWealth has also received long-term
FRNs for these assets.  The individual notes issued from MAV 2 and MAV
3 received by DundeeWealth represent approximately 19% of their original
investment.  DundeeWealth has no recourse to recover the remaining 2%
of their ABCP portfolio.





Prior to
the restructuring, and at December 31, 2008, DundeeWealth’s investments in ABCP
were considered AFS financial instruments for accounting purposes and were
reported at their fair value.  Fair value, among other things, is a
function of the market’s perception of the risks associated with the
asset.  Given that, as at December 31, 2008, these assets were not
distributing interest and the new restructured securities were not yet issued,
DundeeWealth’s valuation approach was based on publicly available information,
either from DBRS or from the information statement outlining the restructuring
plan, to determine the type and characteristics of assets in each of the
affected trusts.  This information was assessed on a
transaction-by-transaction basis for each trust in which DundeeWealth owns
affected ABCP.  Using a valuation technique, DundeeWealth assigned
values to each asset type in each affected trust in which it holds
ABCP.  An overall dollar weighted average valuation across all
affected trusts was then calculated.





DundeeWealth’s
determination of the fair value of traditional assets continues to be based
primarily on discussions with third party dealers or, where available, the most
recent trading prices of similar securities.  As proxy for the fair
value of hybrid securitized assets, DundeeWealth considered credit indices on
structured finance products including the ABX, TABX and CMBX
indices.





Fair
value of leveraged and unleveraged corporate CDOs held within the ABCP
investments is determined using a pricing model which requires inputs of initial
and current credit spreads, a risky annuity and a leverage
factor.  Generally and with all other factors remaining constant
including the vintage of assets, the fair value of ABCP is expected to decline
in periods of increasing credit spreads.





Based on
the above analysis, DundeeWealth determined that it was necessary to recognize a
fair value adjustment in their ABCP investments as at December 31, 2008 of
$113.8 million, of which $75.9 million and $37.9 million were recorded in the
first and third quarters of 2008, respectively.  In the prior year,
DundeeWealth had provided $94.9 million against the carrying value of their
investment in ABCP, including $57.6 million that was included in discontinued
operations relating to the divestiture of the Dundee Bank of
Canada.  This equates to approximately 55% of the par value of ABCP
held.  DundeeWealth determined that the fair value adjustments
reflected an other-than-temporary impairment of ABCP investments and therefore
recognized the adjustment in net earnings.





While
DundeeWealth’s valuation technique, as outlined above, has taken into account
recent market volatility and the implementation of the restructuring plan,
including the receipt of $12.3 million in interest the Company received in
January 2009, there is no assurance that the pricing of these assets will not
increase or decline in future periods or that the restructured notes will trade
at similar prices to our values assigned.  Furthermore, there is no
assurance that DundeeWealth’s investments will trade





DUNDEE
CORPORATION
 13





at a
value equivalent to their fair value.  As a result of these
uncertainties, and the fact that their valuation methodology was based on
incomplete information, these estimates may change materially in subsequent
reporting periods.





Exposure
to Investments in Collateralized Loan Obligations (CLOs)


The fair
value of DundeeWealth’s portfolio of CLOs at December 31, 2008 was $16.6
million, representing a decline of $100.0 million or 86% from the original cost
of $116.6 million.  In the fourth quarter of 2008, DundeeWealth
recognized this decline in fair value as an other-than-temporary impairment
against the carrying value of their portfolio of CLOs, however, $69.6 million
was recognized in prior quarters as an adjustment to carrying value recorded in
OCI.  With the precipitous decline in the global economy and the
continued broadening of the credit crisis, DundeeWealth has determined that at
December 31, 2008, there was evidence of an other-than-temporary impairment in
their CLO investments.





CLO
market pricing dropped significantly from October to December 2008, reaching
record lows.  There are a number of factors that continue to exert
downward pressure on CLO pricing, including, at least in part, forced sales of
these products as hedge funds unwind leveraged positions and certain financial
institutions attempt to remove these investments from their balance
sheets.





Given the
curtailment in the availability of liquid capital and a decreasing demand for
financing high yield type credits, market participants are concerned about the
ability of underlying borrowers to refinance debt.  These
deteriorating credit conditions foster an expectation of increasing credit
defaults.  To some extent, these concerns have materialized within the
underlying securities that provide collateral to the CLO market, which
experienced increasing levels of defaults in December 2008 and during the first
quarter of 2009.  Exacerbating the effect of increased loan defaults
is an expected reduced recovery rate on defaulted arrangements.





At the
end of the third quarter of 2008, DundeeWealth concluded that there had been no
material deterioration in the credit quality of the underlying corporate loans
of CLOs that would lead to a conclusion that the market declines experienced
were other-than-temporary.  Declines in pricing prior to September
2008 were, in DundeeWealth’s view, a reflection of increases in credit spreads
and excess supply.  However, DundeeWealth noted that towards the end
of the third quarter of 2008, pricing of CLOs reflected market expectations of a
larger number of corporate defaults and the downgrading of credit
ratings.





DundeeWealth
uses various measures to monitor the credit quality of underlying loans
supporting their CLO investments, including two main macro measures that are
relatively standard in assessing the underlying credit quality of loans in each
CLO portfolio.





The first
measure is the weighted average rating factor (“WARF”) of each CLO
investment.  Each CLO has a WARF maximum which, if exceeded, prohibits
the manager from purchasing new loans that would otherwise further deteriorate
the WARF.  During the fourth quarter of 2008, the WARF increased by
two times the increase experienced during the first three quarters of
2008.  Furthermore, certain of the CLO portfolios had exceeded their
individual WARF maximums at December 31, 2008.  At September 30, 2008,
all investments complied with their WARF maximums.





A second
measure is the relative size of the CCC-rated bucket in each CLO portfolio,
generally referred to as the CCC content of the CLO.  Generally, an
increasing number of CCC-rated loans may be seen as a form of credit
deterioration and a precursor to default.  Similar to the WARF maximum
described above, each portfolio will generally have a CCC content
maximum.  If breached, the manager of the CLO is limited in its
ability to make further investments in CCC or lower-rated
assets.  Furthermore, the CCC content may result in a cash diversion
away from the equity and lower-rated tranches of the CLO
investment.  While there has been an increase in CCC content
throughout 2008, during the fourth quarter, a significant number of CLO
investments exceeded their CCC content limits.





The
deterioration in these two factors, along with various other measures that
DundeeWealth uses to assess credit quality indicated that there was objective
evidence of financial difficulty of the collateral supporting each CLO
investment and DundeeWealth concluded that the fair value adjustment was
other-than-temporary.





During
2008, DundeeWealth’s CLO portfolio earned investment income of $13.9 million,
representing an annualized return of 11.9% based on original acquisition
price.  Notwithstanding the concerns over the credit quality of the
underlying collateral, there have been no defaults in scheduled interest
payments on DundeeWealth’s CLO investments.





DUNDEE
CORPORATION
 14








As
previously noted, DundeeWealth has borrowed in U.S. and Euro currencies in order
to economically hedge foreign exchange fluctuations in their
foreign-currency-denominated CLO investments.  In prior periods, the
effect of changes in foreign exchange rates relating to amounts borrowed to
acquire these assets was reflected in net earnings while the effect of changes
in foreign exchange rates to the fair value of CLOs was reflected in
OCI.  With the recognition of impairment on CLO investments, the
cumulative effect of changes in foreign exchange fluctuations on CLO investments
has been recognized in net earnings.





Ø
            OTHER CHANGES
      IN FINANCIAL CONDITION




The
following is a discussion of the more significant changes in DundeeWealth’s
consolidated balance sheet items from December 31, 2007 to December 31,
2008.







Client
Accounts Receivable, and Client Deposits and Related Liabilities


Client
account balances represent funds owing from or belonging to clients, and amounts
due to or from brokers and dealers that are pending settlement.  While
the amounts may vary significantly on a day-to-day basis, they do not
necessarily reflect any meaningful change to DundeeWealth’s financial
position.  As at December 31, 2008, client accounts receivable were
$389.3 million (2007 – $408.8 million) and consist of $171.0 million in client
margin accounts (2007 – $244.2 million) and $218.3 million in day-to-day
settlement amounts (2007 – $164.6 million).  Client deposits and
related liabilities were $399.6 million (2007 – $418.3 million).





Margin
lending arrangements require clients to maintain certain collateral in their
margin accounts.  Current economic and credit conditions have reduced
the value of securities held as collateral against margin
loans.  However, this decrease did not result in a financial loss to
DundeeWealth at December 31, 2008, as margin deficiencies were resolved in a
timely fashion as they occurred.





Trading
Securities Owned and Securities Sold Short


Securities
owned and securities sold short represent trading positions in securities at
DundeeWealth’s dealer subsidiary, Dundee Securities.  Trading
positions may vary significantly on a day-to-day basis depending upon trading
strategies in response to market conditions and in anticipation of price
movements and do not necessarily reflect any meaningful changes to
DundeeWealth’s financial position.  Trading positions are recorded at
their fair value based on quoted prices where available, with changes in market
values being included in principal trading revenue.  As of December
31, 2008, securities owned and securities sold short totalled $86.0 million
(2007 – $263.7 million) and $44.0 million (2007 – $106.5 million),
respectively.





Bank
Indebtedness


Dundee
Securities has established call loan facilities for $93.3 million with two
Canadian chartered banks.  These call loan facilities are secured by
either unpaid client securities and/or securities borrowed or owned by Dundee
Securities and are used primarily to facilitate the securities settlement
process for both client and firm inventory positions and/or to finance margin
account activity.  Similar to client account balances, amounts
borrowed pursuant to these call loan facilities may vary significantly on a
day-to-day basis depending on securities trading activity, without necessarily
representing a change in DundeeWealth’s financial position.  Amounts
borrowed pursuant to these call loan facilities are reported as bank
indebtedness.  At December 31, 2008, DundeeWealth had not drawn
against these facilities as client credit and inventory positions were
sufficient to provide the necessary funding of amounts due from
clients.  At December 31, 2007, DundeeWealth had drawn $43.1 million
against these facilities.





Accounts
Receivable and Accounts Payable


DundeeWealth’s
accounts receivable balance at December 31, 2008 decreased to $108.9 million
from $216.1 million at the end of 2007.  Included in the December 31,
2007 balance are performance fees that were subsequently paid in the first
quarter of 2008.  These performance fees have associated direct
expenses which contributed to an increased balance in accounts payable as at
December 31, 2007 and their payment during the current year partially accounted
for the decrease in accounts payable at December 31, 2008.  At
December 31, 2008, there were no performance fees accrued in accounts receivable
and, similarly, there were no amounts accrued in accounts payable with respect
to performance fee expenses.








DUNDEE
CORPORATION
 15





Deferred
Sales Commissions


Deferred
sales commissions represent amounts paid to financial advisors for the sale of
investment products which are then deferred and amortized over a period of five
years.  The December 31, 2007 balance of $207.0 million increased by
$27.0 million representing $108.9 million in commissions funded during the year,
net of $81.9 million of amortization.





Corporate
Debt


DundeeWealth
has renewed its $500 million revolving term credit facility with a Canadian
chartered bank, extending the expiry date to September 9, 2009.  If
the facility is not renewed at the expiry date, it will convert into a four-year
term loan and any amounts borrowed as at the date of expiry will be due four
years after the scheduled expiry date.    The credit
facility is secured by a general security agreement over all the assets of
DundeeWealth and certain of its subsidiaries, including DWM Inc. and Goodman
& Company, Investment Counsel Ltd.





The
facility provides for certain financial covenants, including maintenance of
minimum levels of AUM and EBITDA, restrictions on the existence of secured
indebtedness and restrictions on the disposition of assets in excess of a
specified amount by certain subsidiaries.  At December 31, 2008,
DundeeWealth was in compliance with all covenants.





Series
1 Preference Shares, DundeeWealth (“DW Preference Shares”)


In 2007,
DundeeWealth issued 6,225,000 4.75% cumulative redeemable first preference
shares, Series 1 at a price of $25.00 per DW Preference Share.  The DW
Preference Shares entitle the holder to a fixed preferential cumulative dividend
at the rate of 4.75% per annum, payable quarterly.





The DW
Preference Shares may be redeemed, at DundeeWealth’s option, at any time after
March 13, 2007 at a price which declines over time in accordance with the terms
of the DW Preference Shares from $27.25, if such share is redeemed prior to
March 13, 2008, to $25.00 if such share is redeemed after March 13, 2016 (the
“DW Redemption Price Schedule”).





On
redemption, DundeeWealth may convert the DW Preference Shares to common shares
of DundeeWealth subject to regulatory approval.  If such election is
made, the shares will be converted on the basis of one DW Preference Share for
that number of common shares of DundeeWealth that is equal to the redemption
price at the time of the conversion determined in accordance with the DW
Redemption Price Schedule divided by the current market price of the
DundeeWealth common shares, determined in accordance with a
formula.  DundeeWealth has stated that it does not intend to make such
election if the shares are redeemed.





Ø
            OTHER WEALTH MANAGEMENT
      OPERATIONS





Our other
wealth management operations include the activities of Garda Corporation and
Dundee Merchant Bank which are carried out through offices in Bermuda and the
Cayman Islands, respectively and the operations of our newly created asset
management company, Ravensden Asset Management Inc.  During 2008,
operating EBITDA from these activities was $1.6 million compared with a loss in
EBITDA of $2.4 million in 2007.  These subsidiaries recorded net
earnings of $1.5 million on revenues of $9.5 million in 2008, compared to a net
loss of $5.4 million on revenues of $4.7 million during 2007.





REAL
ESTATE SEGMENT





Ø
            RESULTS OF
      OPERATIONS





Our real
estate segment reported earnings before taxes from continuing operations of
$72.2 million in 2008, compared with $123.9 million in 2007.  Earnings
in our real estate division during the prior year included an after tax gain of
$95.9 million relating to the sale of part of its real estate portfolio to GE.
The gain was reflected as discontinued operations in our consolidated financial
statements.








DUNDEE
CORPORATION
 16





Margins
from Land and Housing Operations


Land and
housing operations generated contribution margins of $104.2 million or 27.1% on
revenues of $384.6 million in 2008.  This compares with contribution
margins of $121.5 million or 34.7% on revenues of $349.9 million in
2007.




(in
      thousands of dollars)Twelve
      months to December 31, 2008
                
                
                Twelve
      months to December 31, 2007Components
      of Real Estate Operations*
                
                Revenue
                
                
                Costs
                
                
                Margin
                
                
                %
      Margin
                
                
                Revenue
                
                
                Costs
                
                
                Margin
                
                
                %
      MarginRevenue
      properties
                
                $
                34,387
                
                
                $
                26,855
                
                
                $
                7,532
                
                
                
                21.9
                %
                
                $
                39,980
                
                
                $
                27,556
                
                
                $
                12,424
                
                
                
                31.1
                %Land
                
                
                168,594
                
                
                
                109,671
                
                
                
                58,923
                
                
                
                34.9
                %
                
                
                203,497
                
                
                
                111,347
                
                
                
                92,150
                
                
                
                45.3
                %Housing
      and condominiums
                
                
                175,753
                
                
                
                143,895
                
                
                
                31,858
                
                
                
                18.1
                %
                
                
                98,432
                
                
                
                89,445
                
                
                
                8,987
                
                
                
                9.1
                %Other
                
                
                5,880
                
                
                
                -
                
                
                
                5,880
                
                
                
                N/A
                
                
                
                7,945
                
                
                
                -
                
                
                
                7,945
                
                
                
                N/A$
                384,614
                
                
                $
                280,421
                
                
                $
                104,193
                
                
                
                27.1
                %
                
                $
                349,854
                
                
                $
                228,348
                
                
                $
                121,506
                
                
                
                34.7
                %


*Excludes
selling, general and administrative expenses, interest expense and depreciation
and amortization





Revenue
Properties


Margins
earned from revenue properties were $7.5 million in 2008 compared with $12.4
million in 2007.  The decrease was mainly attributable to the disposal
of certain residential rental properties in the first quarter of 2007 that
resulted in the recognition of a gain on sale of approximately $6.3 million in
that period.  Excluding the impact of the gain on sale, operating
profits increased $1.5 million over the prior year.





Dundee
Realty’s ski area operations at Arapahoe Basin in Colorado experienced a very
successful fiscal year, with skier visits up 16% in 2007 resulting in a $0.9
million increase in operating profits.  The contribution margin from
the Bear Valley ski area decreased by $0.2 million compared to 2007 due to the
lack of snowfall in the California Sierras, which negatively impacted
results.  The outlook for 2009 is positive for the ski operations with
the increased capacity at Arapahoe and abundant snowfall at Bear Valley in 2009
to date.  In 2008, Dundee Realty had invested $2.6 million in capital
improvements at Arapahoe Basin and $0.3 million in Bear Valley.





The
Distillery Historic District in Toronto contributed $4.9 million to operating
profits in 2008, a $0.7 million increase compared to 2007.  The
increase was mainly the result of a $1.2 million bad debt provision recorded in
2007, offset by six months of vacancy in the current year.  The
defaulted space was occupied in the second half of the year resulting in a 12.3%
increase in the base rent per square foot.





Land


Revenue
from land sales was $168.6 million, generating operating profits of $58.9
million or 34.9% in 2008.  This compares with revenues of $203.5
million, generating operating profits of $92.1 million or 45.3% in
2007.  Operating profits in 2008 decreased by $33.2 million, mainly
reflecting the sales of various undeveloped land parcels in Calgary and Toronto
that contributed $28.7 million of operating profits in 2007 and positively
impacted margin percentages as these sales were completed at significantly
higher margins compared to developed land.  These land parcels were
not related to our residential land development operations and therefore, there
were no comparable sales in 2008. The remainder of the decrease is mainly
attributable to fewer lot sales in 2008 related to our 30% interest in Thornhill
Woods in Toronto.  Dundee Realty sold 920 lots at an average selling
price of $125,000 per lot in 2008 compared to 1,664 lots at an average selling
price of $105,000 per lot in 2007.  Excluding the impact of the sales
of undeveloped lands, Dundee Realty sold 215 acres of multi-family and
commercial land at an average selling price of $286,000 per acre in 2008 compare
to 56 acres sold at an average selling price of $374,000 per acre in
2007.





Saskatoon
land operations generated $7.7 million of operating profits in the year,
achieving higher average selling prices compared to 2007, and profit margins
were slightly higher at 34% as compared to 33%.  Operating profits
decreased by $6.6 million reflecting 221 fewer lots sold and 16 fewer parcel
acres.  Land operations in Regina contributed operating profits of
$18.7 million, an increase of $8.2 million compared to 2007 mainly reflecting
138 more multi-family and commercial parcel acres sold compared to 2007,
primarily in the Harbour Landing project.  Regina operations sold 88
fewer lots in 2008 due to timing of transitions to a new subdivision, but
achieved higher average selling prices to partially offset the impact of the
volume reduction. Higher sales contributed to the significant margin gains in
2008. Land operations in Calgary contributed operating profits of $20.2 million,
compared to $14.8 million in 2007, as a result of the sales of more than 200
lots from the Wentworth Glen project during 2008.  Parcel sales
decreased from 177 acres sold in 2007 to 10 in the current year mainly due to
the sale of 160





DUNDEE
CORPORATION
 17





undeveloped
acres in 2007 that were not in the scope of Dundee Realty’s normal operations as
well as a restriction placed on new development until 2009 by the City of
Calgary.  In Edmonton, operating profits decreased by $16.4 million,
mainly due to 403 fewer lots sold compared to 2007 as the market softened with
abundant supply, although this was partially offset as 44 more multi-family and
commercial acres were sold compared to 2007.





Housing
and Condominiums


Revenue
from sales of housing and condominium units increased in 2008 to $175.8 million
from $98.4 million in 2007, generating operating margins of $31.9 million and
$9.0 million, respectively.  The increase of $22.9 million is
primarily due to occupancies at the Pure Spirit condominiums in Toronto together
with growth at Dundee Realty’s housing operations in western
Canada.





In
Toronto, 360 of the 383 units, or 90%, of the Pure Spirit condominium units were
occupied in the fourth quarter of 2008 generating revenues of $98.6 million and
contributing $22.9 million to operating profits.  Registration and
receipt of proceeds is expected to occur in the second quarter of
2009.  Dundee Realty’s interest in the Thornhill Woods housing project
in Toronto contributed revenues of $6.0 million and a margin of $1.4 million on
the sale of 56 units in 2008 compared to sales of 116 units that generated a
profit of $3.3 million in 2007.





Housing
operations in Saskatoon and Regina experienced strong demand resulting in
margins increasing to 15.5% in 2008 from 6.8% in 2007.  During 2008,
housing operations in western Canada sold 229 units at an average selling price
of $321,000 per unit translating into a $6.1 million increase in operating
profits compared to $3.3 million in 2007 when 227 units were sold at an average
selling price of $263,000 per unit.  At the end of 2008, there were
155 housing units in inventory of which 108 were pre-sold.





During
2008, Dundee Realty realized $10.5 million of revenues and earnings of $1.2
million on the closing of the remaining 21 condominium units at the Princeton
project in Calgary.  In 2007, 56 condominium units were sold
generating a profit of $2.6 million.





Effective
January 1, 2008, a new accounting standard required general and administrative,
marketing and selling costs related to condominium development projects to be
expensed in the period incurred resulting in a reduction in operating margin of
$3.0 million in the current year.  Prior to 2008, the expenses were
capitalized as a component of development costs.





Management
Fees


Immediately
following the transaction with GE, Dundee Realty established an asset management
and advisory services business, Dundee Real Estate Asset Management
(“DREAM”).  DREAM is a fully diversified real estate investment and
asset management company with a scope of business that includes real estate
asset management and advisory services encompassing commercial real estate and
real estate development, as well as investments in Canadian renewable energy
infrastructure assets.  DREAM presently has in excess of $3 billion of
fee generating real estate assets under management on behalf of all of its
clients, which includes Dundee REIT.





Management
fee revenues increased to $16.3 million reflecting asset management, acquisition
and financing fees related to properties that DREAM currently
manages.  These revenues generated $10.2 million of operating profits,
representing a 62.5% operating margin and a $5.7 million increase over 2007,
mainly reflecting management contracts that commenced in the third quarter of
2007.





Subsequent
to December 31, 2008, by mutual agreement GE and DREAM terminated their
relationship, with GE paying a termination fee.





DUNDEE
CORPORATION
 18




Ø
            CHANGES IN FINANCIAL
      POSITION





Real
Estate Assets


Real
estate assets increased by approximately 10% since December 31, 2007 to $446.2
million at December 31, 2008.





(in
      thousands of Canadian dollars)As
      at December 31,
              
              2008
              
              
              %
      Change
              
              
              2007Land
              
              $
              285,346
              
              
              
              21
              %
              
              $
              235,123Housing
      and condominiums
              
              
              96,929
              
              
              
              (23
              %)
              
              
              125,824Revenue
      properties
              
              
              63,951
              
              
              
              40
              %
              
              
              45,738$
              446,226
              
              
              
              10
              %
              
              $
              406,685


Land
under Development and Land Held for Development


Dundee
Realty’s portfolio of land under development and held for development extends
across the country and into the United States.  The carrying value of
Dundee Realty’s portfolio of land under development and held for development
increased to $285.3 million, a 21% increase over $235.1 million at December 31,
2007.




(in
      thousands of dollars except for acres and number of lots)Land
      Held for Development
              
              
              Land
      Under DevelopmentNumber
      of
              
              
              TotalCost
              
              
              Acres
              
              
              Cost
              
              
              Lots
              
              
              CostSaskatoon
              
              $
              39,393
              
              
              
              2,160
              
              
              $
              37,981
              
              
              
              427
              
              
              $
              77,374Regina
              
              
              16,163
              
              
              
              1,178
              
              
              
              18,097
              
              
              
              152
              
              
              
              34,260Calgary
              
              
              64,323
              
              
              
              1,015
              
              
              
              16,644
              
              
              
              -
              
              
              
              80,967Edmonton
              
              
              35,451
              
              
              
              581
              
              
              
              41,068
              
              
              
              445
              
              
              
              76,519Toronto
              
              
              456
              
              
              
              -
              
              
              
              11,508
              
              
              
              4
              
              
              
              11,964USA
              
              
              4,262
              
              
              
              5
              
              
              
              -
              
              
              
              -
              
              
              
              4,262$
              160,048
              
              
              
              4,939
              
              
              $
              125,298
              
              
              
              1,028
              
              
              $
              285,346
  Aggregate
development costs on land were approximately $125.6 million during 2008 and were
incurred mainly in western Canada.  During 2008, Dundee Realty
completed several acquisitions for $25.6 million.  These land
acquisitions included 810.9 acres in east Saskatoon, 454.2 acres in Regina, 8.2
acres in Calgary and 4.0 acres in Edmonton.





(in
      thousands of Canadian dollars)Balance
      of land inventory, December 31, 2007
              
              $
              235,123New
      acquisitions completed during the year
              
              
              25,645Costs
      of development
              
              
              125,555Transfer
      to cost of goods sold
              
              
              (102,043
              )Other
              
              
              1,066Balance
      of land inventory, December 31, 2008
              
              $
              285,346





DUNDEE
CORPORATION
 19





Inventory
of Housing and Condominiums


Inventory
of housing and condominiums decreased 23% to $96.9 million as at December 31,
2008 compared with $125.8 million at December 31, 2007.




(in
      thousands of dollars)Balance
      of housing and condominium inventory, December 31, 2007
              
              $
              125,824New
      acquisitions completed during the year
              
              
              1,646Costs
      of development
              
              
              117,188Transfer
      to cost of goods sold
              
              
              (137,360
              )Other
              
              
              (10,369
              )Balance
      of housing and condominium inventory, December 31, 2008
              
              $
              96,929


Construction
is approximately 95% complete for the 383-unit Pure Spirit condominium at The
Distillery Historic District in Toronto with registration expected to occur in
the second quarter of 2009.  The southeast corner project, originally
a two-tower condominium development project on the Distillery site, has been
curtailed to a single tower (“Clear Spirit”) with planning reviews and
development parameters having been completed.  At December 31, 2008,
83% of the units of the Clear Spirit tower had been
pre-sold.  Construction on the 35-storey Clear Spirit tower is
expected to commence in June 2009 with closings scheduled for 2012.





Construction
continues on the Base Camp One project, a 64-unit flagship residential lodge in
a prime ski in/ski out location at the Sol Vista ski area located in Granby,
Colorado.  To date, 52% of the units have been pre-sold and the
project is on schedule for completion with initial closings in March
2009.





The table
below illustrates some of the more significant projects being undertaken by
Dundee Realty in the housing and condominium business:




(in
      thousands of dollars, except number of units)As
      at December 31, 2008
              Location
              
              Number
      of units
              
              
              CostSingle
      family homes
              Saskatoon
              
              69
              
              
              $
              17,233Regina
              
              88
              
              
              
              12,452Toronto
              
              4
              
              
              
              35030,035CondominiumsPure
      Spirit
              Toronto
              
              23
              
              
              
              8,464Clear
      Spirit
              Toronto
              
              354
              
              
              
              13,642Corktown
              Toronto
              
              493
              
              
              
              10,785Base
      Camp One
              Colorado
              
              64
              
              
              
              28,975Other
              
              
              2
              
              
              
              5,02866,894$
              96,929




Revenue
Properties


(in
      thousands of dollars)Balance
      of revenue properties, December 31, 2007
              
              $
              45,738New
      acquisitions completed during the year
              
              
              6,881Additions
      during the year
              
              
              5,117Depreciation
      and amortization
              
              
              (4,164
              )Transfer
      costs to/from housing and condominium development costs
              
              
              6,991Other
              
              
              3,388Balance
      of revenue properties, December 31, 2008
              
              $
              63,951








DUNDEE
CORPORATION
 20





During
2008, Dundee Realty, through its 20% interest in Firelight Infrastructure Fund,
invested $6.0 million in the Dalhousie Mountain windmill project in Nova
Scotia.  The investment was effected by converting loans and fees
receivable previously provided to Dalhousie Mountain into an equity
investment.  The investment was used to fund pre-delivery deposits for
wind turbines and site preparation costs.





Dundee
Realty entered into a joint venture in respect of three adjacent properties in
east Toronto for an aggregate cost of $0.9 million.  The properties
are currently earning rental income but the site will be used for condominium
development in the future.





In 2008,
Dundee Realty invested $2.6 million in capital improvements at Arapahoe Basin in
Colorado, mainly related to parking expansion and constructing a pedestrian
tunnel to meet increased skier demand as a result of the Montezuma Bowl
expansion.  Dundee Realty also incurred $0.3 million for capital
improvements at the Bear Valley property in California.





Real
Estate Debt


Real
estate debt as at December 31, 2008 was $268.8 million (2007 - $211.5 million)
including $85.4 million relating to a revolving term credit facility, with the
balance divided among mortgages on revenue properties, land servicing loans,
vendor take back financing of land purchases and housing construction loans.
Debt is generally secured by charges on specific properties to which the debt
relates.  As at December 31, 2008, $59.0 million (2007 - $38.9
million) of aggregate debt in our real estate segment is subject to a fixed,
weighted average interest rate of 6.26% (2007 – 8.04%) and matures between 2009
and 2017.  Further, $209.8 million (2007 - $172.7 million) of real
estate debt is subject to a weighted average variable interest rate of 4.29%
(2007 – 6.30%) and matures between 2009 and 2018.





During
2008, Dundee Realty amended the terms of its revolving term credit facility with
a Canadian chartered bank, increasing the amount available pursuant to the
facility from $100 million to $150 million.  The facility bears
interest at prime plus 0.625% or at corporate bankers’ acceptance rate plus
2.215%.  The facility is secured by a general security agreement and
first charges against lots, parcels, as well as certain land held for
development in Saskatoon, Regina, Calgary and Edmonton.  At December
31, 2008, Dundee Realty had drawn $121.1 million against its revolving term
credit facility, including $35.7 million in the form of letters of
credit.





Dundee
Realty’s current revolving term credit facility is renewable on an annual
basis.  There can be no assurance that the credit facility will be
renewed under the same terms and conditions as the current credit
facility.





Dundee
REIT


Dundee
REIT is an unincorporated, real estate investment trust and is a leading
provider of high quality, affordable business premises with a focus on mid-sized
urban and suburban office properties as well as industrial and prestige
industrial properties.  The majority of Dundee REIT’s properties are
located in western Canada.  At December 31, 2008, Dundee REIT had over
6.6 million square feet of leasable area of which approximately 75% was
office-based and 25% was industrial space.





As at
December 31, 2008, we owned 0.8 million Dundee REIT units and 3.5 million units
of DPLP, representing a combined 21% interest in Dundee REIT.  In
2008, we disposed of 12,669 Dundee REIT units to settle the exchange feature on
$0.4 million of our Exchangeable Debentures and realized a gain of $0.1
million.  In comparison, during 2007 we disposed of 1,863,594 units to
settle the exchange feature on $55.4 million of Exchangeable Debentures and
realized gains of $21.1 million.  Pursuant to the exchange feature of
our debentures, we have an obligation to deliver up to a maximum of 320,840 of
these units which, at December 31, 2008, had a value of $4.0
million.  We have pledged sufficient Dundee REIT units against this
liability to fully satisfy any potential obligation.





Included
in our equity earnings for the year ended December 31, 2008, is $1.5 million in
earnings from our investment in Dundee REIT.  This compares with
earnings from continuing operations of $15.9 million in 2007.  In
addition, in the prior year we recognized earnings of $95.9 million, net of tax,
in discontinued operations which represented our share of operating activities
and the associated gain resulting from Dundee REIT’s transaction with GE (See
“Sale of Portfolio Assets of Dundee REIT to GE Real Estate in
2007”).





DUNDEE
CORPORATION
 21





We
received distributions from Dundee REIT of $8.4 million during 2008 compared
with $14.7 million in 2007.  Approximately $3.9 million of these
distributions were received in cash with the balance of $4.5 million being used
to purchase additional units of Dundee REIT.





Sale
of Portfolio Assets of Dundee REIT to GE Real Estate in 2007


On August
24, 2007, Dundee REIT completed the sale of certain properties (the “Eastern
Portfolio”) to GE for aggregate consideration of $2.3 billion.  Dundee
REIT continues to own a portfolio of office and industrial properties, primarily
in western Canada (the “Western Portfolio”).  On closing, Dundee REIT
received cash of approximately $1.5 billion, which was subsequently utilized to
redeem approximately 29.9 million outstanding Dundee REIT units.  In
connection with the transaction, GE acquired approximately 3.5 million Dundee
REIT units, giving GE an approximate 16% interest in Dundee REIT.





The
Company elected to redeem 58% of its interest in Dundee REIT pursuant to the
transaction.  In the third quarter of 2007, the Company tendered
3,873,594 Dundee REIT units for redemption and received cash proceeds of $184.0
million.  As the Company tendered less than its proportionate share of
Dundee REIT units relative to other unitholders, the Company’s interest in
Dundee REIT increased from approximately 15% immediately prior to the
transaction to approximately 18% immediately thereafter.  As our
interest increased as a result of this transaction, we did not recognize a gain
on the redemption of units.  Rather, the aggregate redemption proceeds
have been applied as a reduction to the carrying value of the Company’s
investment in Dundee REIT.





Dundee
REIT reported a gain from discontinued operations in respect of the sale of the
Eastern Portfolio.  Our share of the gain, net of expected taxes, has
been presented separately as share of earnings of discontinued operations of
Dundee REIT.





RESOURCES
SEGMENT





The net
loss in the resources segment for the year ended December 31, 2008 was $191.8
million compared to earnings of $7.8 million in 2007.  Losses from
equity accounted investments were $37.2 million in 2008 compared with earnings
of $13.9 million in 2007.  In addition, our resources segment was
impacted by a fair value adjustment against the carrying value of our
resource-based investments of $149.5 million, including $114.2 million against
the carrying value of our equity-accounted investments.





Eurogas
Corporation





Spanish
Oil And Gas Projects


Eurogas'
73.7% owned subsidiary, Castor UGS Limited Partnership (“CLP”), holds a 33%
interest in the Castor Exploration Permit through its investment in Escal,
giving Eurogas an effective interest of 24.6% in the Castor UGS
Project.  The Castor Exploration Permit covers the abandoned Amposta
Oilfield, which will be utilized by Escal for its underground gas storage
project (“Castor UGS Project”).





Business
Reorganization of Escal


On
December 20, 2007, CLP entered into agreements with ACS Servicios Comunicaciones
y Energia, S.L. (“ACS”) and Enagas, S.A. (the “ACS Transaction”) pursuant to
which Escal issued shares to ACS for cash proceeds of $5.1 million such that ACS
increased its ownership in Escal from 5% to 66.67%, reducing CLP’s interest to
33.33% from 95%.  The completion of the ACS Transaction was
conditional on receipt of the Castor UGS Project development concession that was
received on May 16, 2008, at which time Eurogas deconsolidated the various
assets and liabilities of Escal previously included in its consolidated
financial statements and recorded an equity investment in Escal.  Our
results in 2008 include a dilution loss of $5 million on the deconsolidation of
Escal.





Under the
terms of the ACS Transaction, ACS agreed that it would repay to CLP most of the
amounts it previously invested in the Castor UGS Project.  As at
December 31, 2008, CLP had received $41.1 million (€25.7 million) pursuant to
this agreement.  Subsequent to December 31, 2008, CLP received a
further payment in the amount of $2.3 million (€1.4 million), which is the full
amount CLP expects to receive at this time.  CLP may receive further
amounts up to a maximum of $4.1 million (€2.6 million), at a future date, should
some or all of the expenditures associated with those investments be recognized
for remuneration within the Castor UGS Project.





DUNDEE
CORPORATION
 22








In 2007,
Eurogas had funded the CLP non-controlling limited partners’ portion of a $28
million cash call in respect of the funding of the Castor UGS Project prior to
the ACS Transaction, by way of demand secured promissory notes receivable with a
value of $7.4 million.  The notes were secured by a pledge of each of
the respective partners’ interests in CLP.  During 2008, and following
receipt of proceeds pursuant to the ACS Transaction, CLP completed a cash
distribution to all of its limited partners in an amount sufficient to repay
amounts previously outstanding pursuant to these demand secured notes receivable
and the demand secured notes receivable were cancelled.





In
accordance with the terms of the ACS Transaction, ACS is responsible for
providing equity and arranging project financing for the Castor UGS Project,
including providing all guarantees that may be required, from the day it became
a majority shareholder of Escal through to the inclusion of the underground
storage facility into the Spanish gas system.





Tunisian
Oil And Gas Projects





Business
Reorganization of Eurogas International Inc.


On August
5, 2008, Eurogas completed a restructuring plan that distributed 100% of its
common share interest in EII as a dividend-in-kind to shareholders of Eurogas
(the “Restructuring”), such that each shareholder of Eurogas received one newly
issued common share of EII for every five shares of Eurogas held.  The
newly issued common shares of EII distributed were placed in escrow for the
benefit of shareholders of Eurogas, pending a public listing of EII common
shares.





Prior to
the Restructuring, Eurogas exchanged its previous interest in the common shares
of EII for 32,150,000 newly issued Series A Preference Shares and 31,143,635
newly issued common shares of EII that were then distributed.  Eurogas
continues to hold the Series A Preference Shares which pay a fixed preferential
cumulative dividend of 4% per annum and have a redemption value of $32.1
million.  On March 27, 2009 the Canadian National Stock Exchange
(“CNSX”) approved the listing of EII shares.





Agreement
with Delta Hydrocarbons B.V.


On April
8, 2008, EII and Atlas Petroleum Exploration Worldwide Ltd. (“APEX”), its
operating partner, announced that they had entered into a series of agreements
(the “Delta Agreements”) with Amsterdam based Delta Hydrocarbons B.V. (“Delta”)
whereby Delta acquired a 50% interest in the Sfax Permit and the Ras El Besh
Concession (the “Joint Venture”) and a 50% interest in Innovative Production
Services, Ltd. (“IPS”) in exchange for the expenditure by Delta of an aggregate
of US$125 million.  Delta’s required spending included a cash payment
to EII and APEX and funding Delta’s, as well as EII’s and APEX’s share of future
Joint Venture and IPS expenditures, including future drilling, exploration and
development costs and the acquisition of facilities as and when required to a
maximum of US$125 million (the “Umbrella Agreement”).  The Umbrella
Agreement provides for the payment of US$80 million towards the Joint Venture
work program and US$45 million towards activities of IPS.  Spending
may be redirected to either program, with the consent of all Joint Venture
partners.  If Delta does not fulfill its spending commitment, the 50%
participating interest that was assigned to Delta is subject to reversal and
EII’s and APEX’s interest in the Joint Venture and IPS will revert to 45% and
55%, respectively.   The agreement received all regulatory
approvals.





The 2009
work program and a US$12.8 million budget on the Joint Venture have been
approved, subject to technical agreement between the Joint Venture
partners.  The budget also includes US$1 million to acquire onshore
lands from which the Salloum appraisal well could be drilled.  IPS
plans to spend additional funds to renovate and upgrade an oil and production
platform that it originally acquired for US$2.4 million and then transport it to
Tunisia.  It is estimated that the total cost to IPS for purchasing
and upgrading the platform would be approximately US$18 million, with a total of
US$14.1 million having been spent to February 2009.





Recent
Developments


To date,
Delta has expended a total of US$109.8 million, including US$79.2 million on the
work program and US$30.6 million on the IPS Program.  Of this amount,
approximately US$11.2 million was paid to EII, representing reimbursement of
previously incurred costs.








DUNDEE
CORPORATION
 23





On
January 27, 2009, Delta notified EII and APEX of its desire to market its
participating interest under these farmout arrangements.  Under the
terms of the joint operating agreement, EII has a right of first offer, and
together with APEX, responded with a settlement offer on February 26,
2009.  Discussions are underway between the Joint Venture
partners.  Depending on the outcome of the discussions, Delta’s
interest in the Joint Venture may be reversed and EII’s interest in the Joint
Venture and IPS may revert to 45%.  If reversed, EII would be
responsible for 45% of future expenditures, including expenditures related to
the 2009 work program, IPS activities, and reclamation costs.





Upon
completion of drilling and testing the REB-3 well, the Joint Venture partners
requested and received approval from the Tunisian government to temporarily
suspend the well and release the drilling rig, both of which were
done.  Agreement by the Tunisian government was subject to the
re-interpretation and remapping of seismic data.  The well must be
abandoned or re-entered by April 23, 2009.  The operator is planning
to request an extension from the Tunisian government to complete the seismic
work after which the Joint Venture partners will decide to either re-enter or
abandon the well.  In the event of abandonment, the estimated
aggregate cost to the Joint Venture is estimated at between US$6 million to
US$10 million.  If the decision is made to abandon the well, the Joint
Venture partners may have to adjust the 2009 work program and budget
accordingly.





Expiry
of Farmout Option Agreement with Anadarko Petroleum Corporation
(“Anadarko”)





EII and
APEX had entered into a farmout option agreement with Anadarko in May 2006
pursuant to which Anadarko acquired a 520 km2 3-D
seismic survey for $15.5 million.  Anadarko did not elect to proceed
under the terms of the farmout option agreement by April 1, 2008 and
accordingly, forfeited all rights to conduct work or receive any interest in the
farmout areas.





Working
Capital





Eurogas’
working capital increased to $80.9 million as at December 31, 2008 from $2.9
million as at December 31, 2007.  The increase in working capital
includes the receipt of $29.4 million pursuant to the completion of a rights
offering on April 24, 2008, $11.2 million as repayment of past expenditures on
the Tunisian program pursuant to the farmout agreement with Delta, and $41.1
million in loans to Escal recognized on deconsolidation of Escal and partially
repaid to Eurogas as part of the completion of the ACS Transaction.





Included
in working capital at December 31, 2008, are cash and short term deposits of
$2.4 million (2007 - $1.2 million) and a portfolio of investments, including
discounted notes and guaranteed investment certificates which have been issued
by a Canadian Schedule I chartered bank, with a market value of $75.5 million
(2007- $nil).  These investments have been classified and are being
reported as trading securities in these consolidated financial
statements.





Resource
Based Equity Accounted Investees





Breakwater
Resources Ltd.


Breakwater
is a mining, exploration and development company which produces zinc, copper,
lead and gold concentrates with operations in Canada, Chile and
Honduras.  Breakwater reported a net loss of $88.3 million on gross
revenues of $398.1 million compared with net earnings of $23.4 million on gross
revenues of $404.3 million in 2007.  The decrease is primarily due to
a write-down of mineral properties and fixed assets at its Myra Falls and
Mochito properties of $25.3 million and $8.3 million, respectively, and the
associated income tax provision due to write downs of future income tax assets.
Lower gross sales revenue due to a substantial decrease in the realized prices
of zinc, copper and lead, coupled with increases in marketing and direct
operating costs further contributed to a decrease in net earnings.





Gross
sales revenue from the sale of zinc, copper, lead, silver and gold concentrates
decreased by $6.2 million or 2% to $398.1 million in 2008, despite an increase
in concentrate sold of 42%. Gross sales were more than offset by decreases in
the realized prices of zinc, copper and lead respectively.  Direct
operating costs increased by $68.2 million to $229.8 million primarily due to
increased concentrate sales and higher costs of fuel, labour and
supplies.





DUNDEE
CORPORATION
 24





At
December 31, 2008, Breakwater had working capital of $29.2 million compared with
$82.6 million at December 31, 2007.  Earnings in Breakwater are
sensitive to operating performance, metal prices, smelter treatment changes and
the U.S. foreign exchange rate.





For the
majority of 2008, Breakwater’s concentrate production was derived from two mines
located in Canada, one each in British Columbia (Myra Falls) and Quebec
(Langlois); and a mine located in each of Chile (Toqui) and Honduras
(Mochito).  The Langlois mine began production in November 2006 and
commenced commercial production for accounting purposes on July 1,
2007.  On October 28, 2008, Breakwater announced the temporary
suspension of operations at both Langlois and Myra Falls.





This
decision was precipitated by the decline in commodity prices and the general
deterioration of the economic outlook globally, which mitigated the overall
operational improvements in production and costs at both mines.  At
Langlois, the temporary cessation of operations took full effect by November 2,
2008.  At Myra Falls, results of exploration activities caused
Breakwater to operate on a reduced scale with a smaller workforce. The Langlois
mine was placed on care and maintenance effective November 2,
2008.  Production may only resume at the Langlois mine and return to
prior levels at the Myra Falls mine if zinc prices significantly
increase.





Subsequent
to December 31, 2008, Breakwater filed a preliminary short form prospectus in
connection with a proposed marketed public offering of a minimum of $20 million
of common shares of Breakwater. The number of common shares to be distributed
and the price per common share will be determined at the time of pricing and the
completion of the transaction is subject to various market risks.





Breakwater
intends to use the net proceeds of the offering to pay trade creditors,
customers and restructuring fees, with the balance available for general
corporate purposes.  Dundee Corporation has advised Breakwater of its
intention to purchase common shares under the offering to maintain its
approximate pro rata ownership interest in Breakwater, conditional on a
successful financing of $20 million.





During
2008, Dundee Corporation purchased 5 million shares of Breakwater in the open
market for $2.9 million.  We continue to own approximately 113.0
million shares, representing a 25% interest.  Included in our equity
earnings for the year ended December 31, 2008 is a loss of $21.6 million,
representing our share of losses in Breakwater for this
period.  Offsetting these losses is a dilution gain of $3.1 million
following the issuance of common shares by Breakwater.  By comparison,
we recognized $6.2 million of earnings in 2007 from our investment in
Breakwater.





Based on
current commodity prices and projected production for 2009, cash generated from
operations would not be sufficient to fund Breakwater’s
operations.  However, it is believed that cash on hand and the net
proceeds of the offering, if completed, will be sufficient to fund their
operations in 2009 at current commodity prices and operating
expenses.  Should commodity prices realized by Breakwater in 2010 not
increase above current market prices, it may be required to generate funds from
other sources, including the sale of assets, the sale of royalties and/or the
issue and sale of equity or debt securities.  In addition, it may be
required to reduce operations at certain mines. In light of these circumstances,
we recorded a negative adjustment of $56.1 million against our investment in
Breakwater such that we are carrying this investment at $13.6 million at
December 31, 2008.





Dundee
Precious Metals Inc. (“Dundee Precious”)


Dundee
Precious is a mining, exploration and development company which produces gold,
copper and gold concentrates, with operations in Bulgaria and Armenia and
exploration programs in Bulgaria, Serbia, Armenia and Canada.  During
the year ended December 31, 2008, Dundee Precious reported a net loss of $79.2
million compared with earnings of $15.4 million in 2007. The significant
decrease in earnings was mainly due to a property impairment provision of $47.0
million to write down the carrying value of the Back River project, as well as
increased losses from mining operations.








DUNDEE
CORPORATION
 25





Gross
losses from mining operations were $4.6 million during 2008 compared with a
gross profit of $40.0 million in 2007.  The decrease in gross profits
from operations was due to lower deliveries of concentrates, unfavourable
marked-to-market adjustments relating to the open positions of provisionally
priced sales as a result of the significant decrease in copper prices in 2008,
and higher production costs at the Deno Gold and Chelopech
locations.  In addition, Dundee Precious reported investment income of
$23.0 million in 2008 compared with $39.7 million in 2007.  The
reduction reflects lower net realized gains on sales of investments, partially
offset by lower investment write-downs.  Net realized gains on sales
of investments totalled $28.1 million in 2008 compared to net realized gains on
sales of investments of $53.7 million in 2007.





Pursuant
to a memorandum of understanding with the Bulgarian government signed in July
2008, the Bulgarian government will own a 25% interest in a yet to be formed
joint stock company that will construct, own and operate the Chelopech Facility,
designed to process the Chelopech copper/gold concentrate into finished
metals.  Chelopech has also agreed to pay a higher royalty in
accordance with the Bulgarian Ordinance on Royalty Computation for all metals
that can be mined economically and to provide a financial guarantee for
environmental closure and rehabilitation costs for the Chelopech
mine.





In
response to adverse economic conditions, Dundee Precious announced that steps
were being taken to reduce, eliminate and/or defer all non-critical expenditures
and to potentially dispose of certain of its exploration
assets.  While operations in the Chelopech mining facilities will
continue their normal course, Dundee Precious temporarily suspended operations
at Deno Gold in November 2008.  Dundee Precious also ceased all
exploration and drilling activities on its Armenian and Serbian properties and
at its Back River project in the fourth quarter of 2008.





During
this same period, Dundee Precious entered into discussions surrounding strategic
opportunities for the advancement of the Back River project.  On March
30, 2009, Dundee Precious announced that it had reached an agreement to sell its
Back River project to Sabina Silver Corporation (“Sabina”) in exchange for $7.0
million in cash and shares and warrants of Sabina representing an approximate
19% interest.   The transaction with Sabina is subject to various
conditions, including stock exchange approval and approval of shareholders, as
may be required.





During
the last quarter of 2008, Dundee Precious successfully completed an equity
offering that raised net proceeds of $77.2 million.  Dundee
Corporation purchased 6.8 million common shares and 3.4 million purchase
warrants for $15.3 million under the offering.  The purchase warrants
give the holder the right to purchase one common share of the company at a price
of $3.25 per share until November 20, 2015.





During
2008, we recorded equity losses of $17.9 million in respect of our investment in
Dundee Precious.  In 2007, we had recorded earnings of $3.5
million.  At December 31, 2008, we held approximately 19.4 million
shares and 3.9 million warrants of Dundee Precious with an aggregate market
value of $29.1 million, representing a 20% interest.





As at
December 31, 2008, the market value of our interest in Dundee Precious was below
our carrying value.  In accordance with accounting guidelines, we
recorded a negative adjustment of $54.1 million against our carrying
value.





Other
Investments in Dundee Resources





Odyssey Resources Ltd. –Odyssey is a Canadian-based junior exploration company whose focus has
been in Morocco and Turkey.  As at December 31, 2008, we held 11.4
million shares of Odyssey with a market value of $1.3 million, representing a
43% interest.  Our share of losses from our investment in Odyssey were
$0.4 million in 2008, and in addition, we recorded an adjustment of $0.9 million
against our carrying value of $2.8 million.  At December 31, 2008, the
trading value of our investment in Odyssey was $1.3 million.





Valdez Gold Corporation –Valdez’ business is the acquisition, exploration and subsequent
development of mineral resource properties in Mexico, including the Los Jarros
and Jarros Norte properties in the province of Chihuahua, as well as other
geologically attractive countries with stable political and investment
climates.  As at December 31, 2008, we held 26.5 million shares of
Valdez with a market value of $2.1 million, representing a 33%
interest.  During 2008 and 2007, we realized a small loss in respect
of our share of earnings from this investment.





DUNDEE
CORPORATION
 26





Corona Gold Corporation –Corona is a resource-focused exploration, development and investment
company.  At December 31, 2008, we held approximately 5.0 million
shares of Corona with a market value of $1.5 million representing a 26%
interest.  We recorded a loss in 2008 of $0.3 million (2007 – $4.3
million) representing our share of losses incurred by Corona.  In
addition, we reduced our carrying value by $3.0 million, to $1.5
million.





OTHER INVESTMENTS AND CORPORATE
COSTS





Income
from Corporate Investments


Dundee
Corporation owns several other public and private investments in a variety of
industry sectors.  Revenues from these investments include net
realized gains on sales of investments and dividend and interest
income.  Gains and losses on investments are not recognized in
earnings until realized, although provisions for impairment in value are made
when deemed appropriate.  Unrealized gains and losses on securities
designated as AFS are recorded as a component of OCI.





Selling,
General and Administrative


Generally,
head office costs, including costs associated with corporate governance and
related public company costs, are accumulated and reported as head office costs
and are not allocated to other operating segments.  These costs were
$10.9 million and $12.2 million in 2008 and 2007, respectively.





Corporate
Interest Expense


Corporate
interest expense was $9.5 million in 2008 compared with $13.6 million in
2007.  The decrease is primarily a function of the reduction in the
average outstanding balance of the Company’s Exchangeable Debentures over the
year.





OTHER CONSOLIDATED BALANCES AND
CAPITAL STRUCTURE





Goodwill
and Other Intangible Assets




(in
      thousands of dollars)Investment
              
              
              InstitutionalManagement
              
              
              Management
              
              
              Funds
      under
              
              
              CustomerGoodwill
              
              
              Contracts
              
              
              Contracts
              
              
              Administration
              
              
              Relationships
              
              
              TOTALBalance,
      December 31, 2006
              
              $
              347,801
              
              
              $
              71,377
              
              
              $
              -
              
              
              $
              15,624
              
              
              $
              5,874
              
              
              $
              440,676Business
      acquisitions
              
              
              843
              
              
              
              218
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,061Allocation
      of step purchase fair value increase
              
              
              63,184
              
              
              
              203,150
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              266,334Amortization
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,302
              )
              
              
              (1,330
              )
              
              
              (2,632
              )Balance,
      December 31, 2007
              
              $
              411,828
              
              
              $
              274,745
              
              
              $
              -
              
              
              $
              14,322
              
              
              $
              4,544
              
              
              $
              705,439Business
      acquisitions
              
              
              7,691
              
              
              
              -
              
              
              
              16,417
              
              
              
              -
              
              
              
              -
              
              
              
              24,108Sale
      of subsidiary
              
              
              (25,314
              )
              
              
              (218
              )
              
              
              -
              
              
              
              (3,560
              )
              
              
              -
              
              
              
              (29,092
              )Allocation
      of step purchase fair value increase
              
              
              (18,238
              )
              
              
              62,021
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              43,783Amortization
              
              
              -
              
              
              
              -
              
              
              
              (821
              )
              
              
              (1,302
              )
              
              
              (1,331
              )
              
              
              (3,454
              )Balance,
      December 31, 2008
              
              $
              375,967
              
              
              $
              336,548
              
              
              $
              15,596
              
              
              $
              9,460
              
              
              $
              3,213
              
              
              $
              740,784


During
2008, DundeeWealth acquired Aurion and BHR which, together, resulted in an
increase of $7.7 million in goodwill and $16.4 million in institutional
management contracts.  The institutional management contracts will be
amortized over their estimated useful life of ten years.  The
disposition of DundeeWealth’s Quebec-based mutual fund dealer and insurance
distribution operations included a disposition of $25.3 million in goodwill and
$3.6 million in funds under administration.





Step
Acquisitions in DundeeWealth


The
remaining increase in the carrying value of the investment management contract
and the associated reduction in goodwill resulted from the step acquisition in
DundeeWealth as discussed under “Step Acquisitions of
DundeeWealth”.








DUNDEE
CORPORATION
 27





6,000,000
5.00% Cumulative Redeemable First Preference Shares, Series 1 (“Series 1
Shares”)


On June
28, 2006, we completed a public offering of 6 million Series 1
Shares.  The Series 1 Shares are generally non-voting except in
limited circumstances and they entitle the holder to a fixed preferential
cumulative dividend at the rate of 5% per annum, payable quarterly.





The terms
of the Series 1 Shares permit us to redeem the shares at any time after June 30,
2006 at a redemption price that declines over time, starting at $27.25 per
Series 1 Share if the shares are redeemed prior to June 30, 2007, to $25.00 per
share if the Series 1 Shares are redeemed after June 30, 2015 (the “Redemption
Price Schedule”).  We also have the right to convert the Series 1
Shares to Subordinate Shares on the basis of one Series 1 Share for that number
of Subordinate Shares that is equal to the redemption price in accordance with
the Redemption Price Schedule divided by the current market price of the
Subordinate Shares, determined in accordance with a formula.  We may
also repurchase the Series 1 Shares for cancellation, either in the open market
or through a private transaction.  The Series 1 Shares are retractable
by shareholders after June 30, 2016 at a price of $25.00 per Series 1
Share.





In
accordance with Canadian GAAP, certain terms of the Series 1 Shares require that
they be classified as debt rather than equity.  Accordingly, dividends
on the Series 1 Shares are included as interest expense on the consolidated
statement of operations on an accrual basis.





Corporate
Debt





(in
      thousands of dollars)$9.5
      million
              
              
              Revolving
      Term Credit Facilities
              
              
              RealExchangeable
              
              
              $150
      million
              
              
              $500
      million
              
              
              $150
      million
              
              
              EstateDebentures
              
              
              Corporate
              
              
              Subsidiary's
              
              
              Subsidiary's
              
              
              Debt
              
              
              TOTALBalance,  December
      31, 2007
              
              $
              10,809
              
              
              $
              5,737
              
              
              $
              127,655
              
              
              $
              59,047
              
              
              $
              152,466
              
              
              $
              355,714Conversion
      of exchangeable debentures
              
              
              (377
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (377
              )Revolving
      term credit facilities
              
              
              -
              
              
              
              76,223
              
              
              
              41,951
              
              
              
              26,361
              
              
              
              -
              
              
              
              144,535Changes
      in real estate debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30,899
              
              
              
              30,899Unrealized
      revaluation adjustment
              
              
              (1,314
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,314
              )Other
              
              
              50
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50Balance,
      December 31, 2008
              
              $
              9,168
              
              
              $
              81,960
              
              
              $
              169,606
              
              
              $
              85,408
              
              
              $
              183,365
              
              
              $
              529,507


Revolving Term Credit
Facilities ─ During the third quarter, the Company renewed its $150
million revolving term credit facility with a Canadian chartered bank, extending
the expiry date to September 9, 2009.  The credit facility continues
to provide for a tiered interest rate structure based on the Company’s public
debt rating.  Based on the Company’s current debt rating, draws on the
credit facility bear interest, at the Company’s option, at a Canadian chartered
bank’s prime lending rate plus 0.25% or Corporate Banker’s Acceptance rate plus
1.25%.  The Company is subject to a standby fee of 0.375% on unused
amounts under the facility.  In addition, the renewed credit facility
no longer requires that we pledge common shares of DundeeWealth as security
against amounts borrowed.  As at December 31, 2008, the Company had
borrowed $82.0 million pursuant to the credit facility.





The
credit facility provided to the Company is subject to renewal
annually.  There can be no assurance that the credit facility will be
renewed on September 9, 2009 under the same terms and conditions as provided in
the current credit facility.





5.85% Exchangeable Unsecured
Subordinated Debentures ─ On June 22, 2005, the Company issued 5.85%
exchangeable unsecured subordinated debentures (“Exchangeable Debentures”),
which mature on June 30, 2015.  Each $1,000 Exchangeable Debenture can
be exchanged, at the option of the holder, for 33.6134 units of Dundee REIT,
subject to certain conditions.  This represents an exchange price of
$29.75 per Dundee REIT unit.  At December 31, 2008, approximately $9.5
million remained outstanding pursuant to these Exchangeable
Debentures.  We have placed sufficient units into escrow to satisfy
any potential obligation pursuant to the Exchangeable
Debentures.  Interest on the Exchangeable Debentures is paid
semi-annually on June 30 and December 31 of each year.





DUNDEE
CORPORATION
 28





During  2008,
holders of Exchangeable Debentures exercised the conversion feature on $0.4
million of debt.  We released 12,669 Dundee REIT units in satisfaction
of the conversion feature, recognizing an associated gain on the disposition of
the Dundee REIT units of approximately $0.05 million.





Debt
of our Subsidiaries


A more
detailed discussion of corporate debt in each of our business segments is
discussed under “Segmented Results of Operations – Changes in Financial
Condition” in respect of each of our business segments.





Future
Income Tax Liabilities


Our net
future income tax liability at December 31, 2008 was $3.0 million which
represents future income tax assets of $212.4 million offset by future income
tax liabilities of $215.4 million, as compared to a net future income tax
liability of $134.9 million in 2007.  Of the significant decrease in
net future income tax liabilities, $113 million can be attributed to the
recognition by the Company of other-than-temporary impairments in respect of its
investment portfolio.  Details of the components of the Company’s
future income tax assets and future income tax liabilities are included in note
20 to the 2008 Audited Consolidated Financial Statements.





Future
income tax liabilities in respect of the wealth management segment include
$101.9 million (2007 – $79.2 million) relating to investment management
contracts acquired in business combinations and $73.8 million associated with
deferred sales commissions (2007 – $67.2 million).





Included
in future income tax assets at December 31, 2008, is $171.0 million (2007 –
$66.5 million) representing the Company’s estimate of the benefit realizable
from tax loss carry forwards.  The realized benefit from these tax
loss carry forwards at December 31, 2008 is based on aggregate losses of $633.7
million (2007 – $291.2 million), net of valuation allowances of $46.9 million
(2007 – $63.4 million).  As the majority of these losses were incurred
in recent years, we are subject to a 20-year carry forward period over which we
may realize the benefit of these losses.





Non-Controlling
Interest





Non-controlling
interest decreased during 2008 to $615.1 million from $726.4 million at the end
of 2007.




(in
      millions of dollars)Dundee
              
              
              
              
              
              DundeeWealth
              
              
              Eurogas
              
              
              Realty
              
              
              TOTALBalance,
      December 31, 2007
              
              $
              648.5
              
              
              $
              52.7
              
              
              $
              25.2
              
              
              $
              726.4Business
      acquisition
              
              
              12.6
              
              
              
              (5.1
              )
              
              
              -
              
              
              
              7.5Net
      income
              
              
              (95.9
              )
              
              
              (0.9
              )
              
              
              22.6
              
              
              
              (74.2
              )Other
      comprehensive income
              
              
              2.3
              
              
              
              0.4
              
              
              
              1.2
              
              
              
              3.9Cash
      distributions/dividends
              
              
              (6.1
              )
              
              
              (10.1
              )
              
              
              -
              
              
              
              (16.2
              )Public
      offerings of shares of subsidiaries
              
              
              -
              
              
              
              10.9
              
              
              
              -
              
              
              
              10.9Other
      transactions*
              
              
              (45.4
              )
              
              
              0.8
              
              
              
              1.4
              
              
              
              (43.2
              )Balance,
      December 31, 2008
              
              $
              516.0
              
              
              $
              48.7
              
              
              $
              50.4
              
              
              $
              615.1




*
            Included
      in other transactions for DundeeWealth is the effect of the step
      acquisitions completed during 2008 (See “Step Acquisitions in
      DundeeWealth”).





Share
Capital


As at
December 31, 2008, there were 71,139,788 Class A subordinate shares and
3,119,788 Class B common shares outstanding.During 2008, we issued
275,000 Class A subordinate shares on the exercise of options at an average
price of $7.39 per share.  As at December 31, 2008, we had granted
3,559,644 options with a weighted average exercise price of $6.63 of which
3,268,644 options were exercisable, as holders had met the vesting
criteria.  As at March 31, 2009, there were 71,119,088 Class A
subordinate shares and 3,119,788 Class B common shares outstanding.








DUNDEE
CORPORATION
 29





Pursuant
to a normal course issuer bid, the Company acquired 1,598,911 Class A
subordinate voting shares for cancellation at an aggregate cost of $20.4
million.  Subsequent to December 31, 2008, we acquired a further
260,700 Class A subordinate voting shares pursuant to this arrangement at a cost
of $1.1 million.





CONSOLIDATED LIQUIDITY AND
      CAPITAL RESOURCES





Significant
Sources and Uses of Cash and Cash Equivalents


As at
December 31, 2008, cash and cash equivalents were $167.6 million compared with
$126.9 million at December 31, 2007.  We incurred net cash inflows
from continuing operations during the current year of $40.5
million.





Significant
cash flows during 2008 are as follows:





Significant
Cash Flows from Operating Activities


ü
            The
      effect of changes in client account balances and securities owned and sold
      short will vary significantly on a day-to-day basis as previously
      noted.  These changes will cause movements in cash in our
      operating subsidiaries.  Changes in cash resulting from these
      types of transactions may not necessarily reflect any meaningful change in
      our own financial position, or that of DundeeWealth.  During
      2008, variations in these balances resulted in net cash inflows of $53.7
      million (2007 – $47.7 million cash
outflows).


ü
            Bank
      indebtedness, which reflects the use of DundeeWealth’s brokerage
      subsidiary’s call loan facilities may also vary significantly on a period
      by period basis.  During 2008, changes in call loan balances
      generated cash outflows of $43.1 million (2007 – $6.5
      million).


ü
            Dundee
      Realty generated cash of $29.0 million in respect of the development of
      land, housing and condominium inventory.  In 2007, these real
      estate activities required cash of approximately $17.6
      million.


ü
            Changes
      in working capital of our real estate segment are project driven and cash
      flows may be dependent on the period in which a development project is
      undertaken, completed, or sold.  In 2008, working capital
      requirements in our real estate division were $75.8 million (2007 - $9.6
      million).





Significant
Cash Flows from Investing Activities


ü
            During
      the first quarter of 2008, we paid cash of $69.9 million to complete
      market purchases of DundeeWealth as discussed under “Step Acquisition of
      DundeeWealth”.  In the second quarter, we spent $19.3 million to
      acquire additional shares of Eurogas pursuant to a rights offering, and we
      spent a further $5.6 million in the third quarter to acquire Aurion and
      BHR.


ü
            Gross
      additions of new AUM were $8.7 billion in 2008 (2007 – $7.3
      billion).  Sales commissions paid on these new AUM were $108.9
      million (2007 – $100.7 million).


ü
            During
      2008, we invested $102.9 million (2007 – $714.0 million) in new
      investments or in acquiring an increased interest in existing investment
      portfolio positions.  Proceeds from sales of corporate
      investments were $116.6 million in 2008 (2007 – $268.2
      million).


ü
            Real
      estate acquisitions and development activities (other than for inventory
      referred to above) required cash of $30.0 million in the year ended
      December 31, 2008 compared with $18.2 million in
  2007.





Significant
Cash Flows from Financing Activities


ü
            During
      2008, we purchased 1,598,911 Class A subordinate shares for cancellation
      under our normal course issuer bid at an aggregate cost of $20.4
      million.


ü
            In
      2008, DundeeWealth purchased its own common shares for cancellation under
      its normal course issuer bid at an aggregate cost of $22.8 million (2007 –
      $4.7 million).


ü
            During
      2008, DundeeWealth drew $42.0 million (2007 – $107.4 million) against its
      corporate revolving term credit
facility.


ü
            We
      drew $76.2 million against our own revolving term credit
      facility.


ü
            Our
      subsidiaries paid dividends to shareholders and/or distributions to
      non-controlling limited partners of $7.7
  million.





DUNDEE
CORPORATION
 30





Our main
operating subsidiaries in the wealth management segment function in regulated
environments and are therefore required to maintain levels of capital in liquid
assets in accordance with regulatory requirements.  At December 31,
2008, regulated entities exceeded required levels, with working capital of $45.2
million (2007 – $115.4 million) in DundeeWealth’s investment management
operations and excess regulatory capital of $64.2 million (2007 – $36.8 million)
in its brokerage operations.  In the case of DundeeWealth’s brokerage
operations, the amount of capital that exists within the regulated entity
dictates the level of business operations within the securities firm, including
margin lending, securities trading and corporate finance
commitments.  Furthermore, DundeeWealth’s ability to transfer cash
resources out of these regulated subsidiaries may be limited by the requirement
to comply with these formulas.





Cash
Requirements


The
Company’s $150 million revolving term credit facility allows us to manage our
cash flow requirements by not having to dispose of investments at an inopportune
time.  At December 31, 2008, we had drawn an aggregate of $82.0
million pursuant to the terms of this credit facility.





On an
ongoing and consolidated basis, the Company will require cash to support
regulatory capital in its regulated subsidiaries, to support new business
initiatives, to finance the sales commissions associated with new products, to
develop our real estate inventory and our resource related properties, to
purchase corporate investments, to meet the obligations under our other
contractual commitments and to finance interest and dividend payments on our
preferred shares and debt obligations.  The potential success of our
business initiatives may necessitate increased capital beyond anticipated
levels.





A
recurring capital requirement within DundeeWealth is the financing required for
mutual fund sales commissions, which DundeeWealth continues to fund internally,
thereby permitting it to retain all of the management fees associated with the
new assets and to benefit from the tax deduction associated with the commission
expense.  From time to time, DundeeWealth elects to be a seed investor
in new products which it launches.  As at December 31, 2008,
DundeeWealth had approximately $330 million in unutilized borrowings under its
bank credit facility.





As
discussed above, DundeeWealth’s brokerage operations must comply with a
regulatory capital formula.  The brokerage subsidiary will require
additional capital if its operating levels increase, and also if it incurs
significant losses or increases its exposures as determined by the capital
formula.  For example, in periods of significant decline in equity
values such as those experienced during the latter part of the third quarter,
additional levels of capital may be required to support client lending in margin
accounts.





Our real
estate segment will require working capital to finance development of planned
land and housing and condominiums projects.  The revolving term credit
facility of $150 million in our real estate segment, provides us with increased
flexibility to operate this business efficiently.





At
December 31, 2008, Eurogas had cash resources of approximately $67.9 million, of
which $65.5 million were invested in guaranteed investment certificates and
discounted notes issued by a Canadian Schedule I Chartered bank.  EII
had additional allocated cash reserves of $10 million.  EII may
require cash to finance drilling of its property in Tunisia in order to retain
its interest in the Joint Venture pursuant to the farmout agreement with
Delta.  EII will only be required to fund expenditures once Delta’s
commitment pursuant to the Delta agreement has been met.





We
believe that our operating cash flows, combined with our available lines of
credit, provide sufficient cash resources for the Company to conduct its
operations for the foreseeable future.







DUNDEE
CORPORATION
 31





SEGMENTED RESULTS OF
OPERATIONS


Three
months ended December 31, 2008 compared with the three months ended December 31,
2007


(in
      thousands of dollars)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2008Wealth
            
            
            
            
            
            
            
            
            Other
      InvestmentsFor
      the three months ended December 31, 2008
            
            Management
            
            
            Real
      Estate
            
            
            Resources
            
            
            and
      Corporate Costs
            
            
            Intersegment
            
            
            TOTALREVENUESManagement
      fees
            
            $
            94,068
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            94,068Redemption
      fees
            
            
            5,127
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,127Financial
      services
            
            
            70,024
            
            
            
            -
            
            
            
            -
            
            
            
            269
            
            
            
            (270
            )
            
            
            70,023Banking
      interest income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Real
      estate revenues
            
            
            -
            
            
            
            186,438
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            186,438Investment
      income
            
            
            4,357
            
            
            
            96
            
            
            
            987
            
            
            
            682
            
            
            
            (2,302
            )
            
            
            3,820173,576
            
            
            
            186,534
            
            
            
            987
            
            
            
            951
            
            
            
            (2,572
            )
            
            
            359,476EXPENSESSelling,
      general and administrative
            
            
            79,058
            
            
            
            2,542
            
            
            
            506
            
            
            
            1,772
            
            
            
            (269
            )
            
            
            83,609Variable
      compensation
            
            
            52,546
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            52,546Trailer
      service fees
            
            
            26,759
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            26,759Banking
      interest expense
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      costs, real estate
            
            
            -
            
            
            
            138,455
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            138,455158,363
            
            
            
            140,997
            
            
            
            506
            
            
            
            1,772
            
            
            
            (269
            )
            
            
            301,369OPERATING
      EBITDA
            
            
            15,213
            
            
            
            45,537
            
            
            
            481
            
            
            
            (821
            )
            
            
            (2,303
            )
            
            
            58,107Amortization
      of deferred sales commissions
            
            
            21,570
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            21,570Depreciation,
      depletion and amortization
            
            
            5,312
            
            
            
            970
            
            
            
            20
            
            
            
            475
            
            
            
            -
            
            
            
            6,777Fair
      value adjustment of available-for-sale securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Interest
      expense
            
            
            7,216
            
            
            
            2,530
            
            
            
            993
            
            
            
            3,334
            
            
            
            (3,121
            )
            
            
            10,952Equity
      losses (earnings)
            
            
            -
            
            
            
            (373
            )
            
            
            31,503
            
            
            
            -
            
            
            
            -
            
            
            
            31,130Fair
      value adjustments
            
            
            117,181
            
            
            
            -
            
            
            
            149,533
            
            
            
            4,751
            
            
            
            -
            
            
            
            271,465Foreign
      exchange loss (gains)
            
            
            11,556
            
            
            
            -
            
            
            
            (1,421
            )
            
            
            77
            
            
            
            -
            
            
            
            10,212Gain
      on exchangeable debentures
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -OPERATING
      EARNINGS (LOSS)BEFORE
      UNDERNOTED ITEMS
            
            
            (147,622
            )
            
            
            42,410
            
            
            
            (180,147
            )
            
            
            (9,458
            )
            
            
            818
            
            
            
            (293,999
            )Loss
      on sale of subsidiary
            
            
            (17,679
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (17,679
            )-Non-controlling
      interest
            
            
            65,130
            
            
            
            (14,459
            )
            
            
            (819
            )
            
            
            -
            
            
            
            -
            
            
            
            49,852NET
      (LOSS) EARNINGS BEFORE NON-SEGMENTED ITEMS
            
            
            (100,171
            )
            
            
            27,951
            
            
            
            (180,966
            )
            
            
            (9,458
            )
            
            
            818
            
            
            
            (261,826
            )Dilution
      gains
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,280Income
      taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            74,949Net
      (loss) earnings from continuing operations
            
            
            (100,171
            )
            
            
            27,951
            
            
            
            (180,966
            )
            
            
            (9,458
            )
            
            
            818
            
            
            
            (184,597
            )Earnings
      from discontinued operations of DundeeWealth,net
      of tax and non-controlling interest
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Share
      of earnings of discontinued operationsof
      Dundee REIT, net of tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -NET
      (LOSS) EARNINGS FOR THE PERIOD
            
            $
            (100,171
            )
            
            $
            27,951
            
            
            $
            (180,966
            )
            
            $
            (9,458
            )
            
            $
            818
            
            
            $
            (184,597
            )




(in
      thousands of dollars)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2007Wealth
              
              
              
              
              
              
              
              
              Other
      InvestmentsFor
      the three months ended December 31, 2007
              
              Management
              
              
              Real
      Estate
              
              
              Resources
              
              
              and
      Corporate Costs
              
              
              Intersegment
              
              
              TOTALREVENUESManagement
      fees
              
              $
              217,553
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              217,553Redemption
      fees
              
              
              3,465
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,465Financial
      services
              
              
              95,537
              
              
              
              -
              
              
              
              350
              
              
              
              987
              
              
              
              (487
              )
              
              
              96,387Banking
      interest income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Real
      estate revenues
              
              
              -
              
              
              
              122,660
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              122,660Investment
      income (loss)
              
              
              7,950
              
              
              
              4,873
              
              
              
              536
              
              
              
              6,258
              
              
              
              (2,568
              )
              
              
              17,049324,505
              
              
              
              127,533
              
              
              
              886
              
              
              
              7,245
              
              
              
              (3,055
              )
              
              
              457,114EXPENSESSelling,
      general and administrative
              
              
              97,421
              
              
              
              1,727
              
              
              
              1,867
              
              
              
              3,104
              
              
              
              (487
              )
              
              
              103,632Variable
      compensation
              
              
              65,436
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              65,436Trailer
      service fees
              
              
              34,166
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              34,166Banking
      interest expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Operating
      costs, real estate
              
              
              -
              
              
              
              80,548
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              80,548197,023
              
              
              
              82,275
              
              
              
              1,867
              
              
              
              3,104
              
              
              
              (487
              )
              
              
              283,782OPERATING
      EBITDA
              
              
              127,482
              
              
              
              45,258
              
              
              
              (981
              )
              
              
              4,141
              
              
              
              (2,568
              )
              
              
              173,332Amortization
      of deferred sales commissions
              
              
              18,065
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              18,065Depreciation,
      depletion and amortization
              
              
              3,812
              
              
              
              1,795
              
              
              
              1
              
              
              
              690
              
              
              
              -
              
              
              
              6,298Interest
      expense
              
              
              5,862
              
              
              
              2,887
              
              
              
              992
              
              
              
              2,647
              
              
              
              (3,386
              )
              
              
              9,002Equity
      losses (earnings)
              
              
              -
              
              
              
              (2,742
              )
              
              
              6,632
              
              
              
              -
              
              
              
              -
              
              
              
              3,890Fair
      value adjustment of available-for-sale securities
              
              
              37,607
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              37,607Foreign
      exchange (gains) loss
              
              
              (377
              )
              
              
              -
              
              
              
              (385
              )
              
              
              30
              
              
              
              -
              
              
              
              (732
              )Gain
      on exchangeable debentures
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,944
              )
              
              
              -
              
              
              
              (1,944
              )OPERATING
      EARNINGS (LOSS)BEFORE
      UNDERNOTED ITEMS
              
              
              62,513
              
              
              
              43,318
              
              
              
              (8,221
              )
              
              
              2,718
              
              
              
              818
              
              
              
              101,146Investment
      provision
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-controlling
      interest
              
              
              (26,389
              )
              
              
              (4,262
              )
              
              
              (4
              )
              
              
              -
              
              
              
              -
              
              
              
              (30,655
              )NET
      EARNINGS (LOSS) BEFORE NON-SEGMENTED ITEMS
              
              
              36,124
              
              
              
              39,056
              
              
              
              (8,225
              )
              
              
              2,718
              
              
              
              818
              
              
              
              70,491Dilution
      gains
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,125Income
      taxes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (21,559
              )Net
      earnings (loss) from continuing operations
              
              
              36,124
              
              
              
              39,056
              
              
              
              (8,225
              )
              
              
              2,718
              
              
              
              818
              
              
              
              51,057Earnings
      from discontinued operations of DundeeWealth,net
      of tax and non-controlling interest
              
              
              (3,935
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,935
              )Share
      of earnings of discontinued operationsof
      Dundee REIT, net of tax
              
              
              -
              
              
              
              689
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              689NET
      (LOSS) EARNINGS FOR THE PERIOD
              
              $
              32,189
              
              
              $
              39,745
              
              
              $
              (8,225
              )
              
              $
              2,718
              
              
              $
              818
              
              
              $
              47,811





DUNDEE
CORPORATION
 32








QUARTERLY
CONSOLIDATED RESULTS OF OPERATIONS


Three
months ended December 31, 2008 compared with the three months ended December 31,
2007





The net
loss in the fourth quarter of 2008 was $184.6 million, compared with net
earnings of $47.8 million in the fourth quarter of 2007.





SEGMENTED
EARNINGS INFORMATION FOR THE FOURTH QUARTER OF 2008





In the
fourth quarter of 2008, our wealth management segment earned EBITDA of $15.2
million, but incurred a net loss from continuing operations of $100.2 million,
after non-controlling interest.  This compares with EBITDA of $127.5
million and net earnings from continuing operations of $36.1 million, after
non-controlling interest, in the fourth quarter of 2007.





DundeeWealth
Inc.





During
the fourth quarter of 2008, DundeeWealth recognized a $117.2 million fair value
adjustment in the carrying value of AFS securities, which adversely affected the
operating results of this business segment. This compares with $37.6 million in
the fourth quarter of 2007.  The fourth quarter also includes a loss
on divestiture of DundeeWealth’s network of Quebec-based advisors of $17.7
million, a foreign currency loss of $11.6 million and an increase in severance
costs related to DundeeWealth’s integration plan launched in
2008.  Severance costs in the fourth quarter of 2008 were $11.0
million compared with severance costs of $2.7 million in the same period of
2007.





DundeeWealth
recognized net performance fee revenue of $79.0 million in the fourth quarter of
the prior year.  There was no performance fee revenue earned in the
fourth quarter of the current year.





In the
fourth quarter of 2008, market depreciation combined with net redemptions,
resulted in DundeeWealth’s average AUM, excluding acquisitions, decreasing to
$20.5 billion compared with $26.4 billion in the fourth quarter of
2007.  The decrease in average AUM resulted in a $25.6 million
decrease in management fee revenues.  The average management fee rate
earned on these assets decreased to 1.66% in the fourth quarter of 2008 from
1.73% in the same period of 2007, thereby reducing management fee revenue by a
further $3.8 million.  The acquisitions of Aurion and BHR added $3.2
million in management fees on average AUM of $3.6 billion, resulting in total
management fees earned in the quarter of $88.2 million.





Trailer
service fee expense, before intercompany eliminations, decreased to $28.2
million in the fourth quarter of this year compared with $36.0 million in the
fourth quarter of 2007, and is consistent with the decrease in average trailer
fee paying AUM.





DundeeWealth’s
financial segment generated gross margins of $23.1 million in the fourth quarter
of 2008 compared with $38.2 million in the same period of
2007.  Reflecting a significant reduction in capital markets
activities following continued market weakness, approximately 62% of gross
margin in the fourth quarter of 2008 was generated by retail distribution
activities.  SG&A costs in the fourth quarter of 2008 included
$6.7 million of severance costs related to DundeeWealth’s integration efforts,
compared with severance costs of $3.3 million in the same period of
2007.





Consistent
with results experienced throughout 2008, retail commissions and trailer service
fee revenues declined in the fourth quarter of 2008 compared with results in the
fourth quarter of 2007.  The combination of reduced investor activity
in financial markets during the quarter and the impact of current market
declines on DundeeWealth’s AUA resulted in an overall decline in revenues of
$22.9 million or 26% compared with the same period of 2007.





Variable
compensation expense relating to retail distribution activities was $54.7
million in the fourth quarter of 2008 (2007 – $69.0 million), which resulted in
a contribution margin of 21% (2007 – 26%).  The decrease in
contribution margin is a result of an increased proportion of advisor revenues
generating a higher compensation level due to greater prior year production
levels which formed the basis of 2008 compensation levels.





DUNDEE
CORPORATION
 33








Aggregate
revenues from capital markets activities were $17.6 million in the fourth
quarter of 2008 compared with $23.7 million in the same period of the prior
year.  DundeeWealth’s capital markets division experienced
substantially lower than anticipated financing activity as well as trading
losses.  This year over year decline is consistent with decreased
market activity and reduced public offerings within the industry.





New issue
and advisory revenue was $8.3 million in the fourth quarter of 2008, compared
with $12.6 million earned in the same period of the previous year, a decline of
34%, consistent with industry results as discussed above.  In the
three months ended December 31, 2008, Dundee Securities participated in 42 (2007
─ 46) public and private new issue transactions, with the resources sector
accounting for 67% of aggregate new issue revenue.  The industrial
sector accounted for a further 24% of revenues in the fourth quarter of 2008,
while deals in various other sectors, such as the real estate and biotechnology
sectors, account for the remaining 9%.





Variable
compensation expense relating to capital markets activities was $8.8 million in
the fourth quarter of 2008 compared with $10.1 million in the comparable period
of 2007.  This resulted in a gross margin on capital markets revenues
of 50% in 2008 compared with a gross margin of 57% in 2007, reflecting the
effect of departmental trading losses in the fourth quarter of
2008.





SG&A
costs were $79.1 million in the fourth quarter of 2008 compared with $97.4
million in the fourth quarter of 2007.  Included in prior year
SG&A expenses is approximately $16.8 million of expenses relating to
performance fee arrangements.  There is no comparable expense in
2008.  In addition, during the fourth quarter of 2008, DundeeWealth
accrued severance costs of approximately $11 million compared with severance
costs of $2.7 million in the fourth quarter of 2007.  After adjusting
for these items, SG&A expenses were $68.1 million in the fourth quarter of
2008 compared with $77.9 million in the fourth quarter of 2007.  The
decrease reflects the initiative undertaken by DundeeWealth during 2008 to
improve efficiencies.





Real
Estate Segment





Land and
housing operations in our real estate segment generated contribution margins of
$46.0 million or 25.1% on revenues of $183.2 million in the fourth quarter of
2008.  This compares with margins of $40.0 million or 33.6% on
revenues of $119.0 million in the fourth quarter of 2007.




(in
      thousands of dollars)Three
      months to December 31, 2008
              
              
              
              
              
              Three
      months to December 31, 2007Components
      of Real Estate Operations*
              
              Revenue
              
              
              Costs
              
              
              Margin
              
              
              %
      Margin
              
              
              Revenue
              
              
              Costs
              
              
              Margin
              
              
              %
      MarginRevenue
      properties
              
              $
              9,126
              
              
              $
              7,408
              
              
              $
              1,718
              
              
              
              18.8
              %
              
              $
              7,595
              
              
              $
              7,040
              
              
              $
              555
              
              
              
              7.3
              %Land
              
              
              57,193
              
              
              
              39,890
              
              
              
              17,303
              
              
              
              30.3
              %
              
              
              73,146
              
              
              
              43,936
              
              
              
              29,210
              
              
              
              39.9
              %Housing
      and condominiums
              
              
              115,279
              
              
              
              89,863
              
              
              
              25,416
              
              
              
              22.0
              %
              
              
              33,602
              
              
              
              28,011
              
              
              
              5,591
              
              
              
              16.6
              %Other
              
              
              1,580
              
              
              
              -
              
              
              
              1,580
              
              
              
              N/A
              
              
              
              4,614
              
              
              
              -
              
              
              
              4,614
              
              
              
              N/A$
              183,178
              
              
              $
              137,161
              
              
              $
              46,017
              
              
              
              25.1
              %
              
              $
              118,957
              
              
              $
              78,987
              
              
              $
              39,970
              
              
              
              33.6
              %
 *Excludes
selling, general and administrative expenses, interest expense and depreciation
and amortization





Revenue
from land sales in the fourth quarter of 2008 was $57.2 million, generating
operating profits of $17.3 million or 30.3%.  This compares with
revenues of $73.1 million generating operating profits of $29.2 million or 39.9%
in the same quarter of 2007.  Net operating profits have decreased
mainly as a result of fewer lot and parcel sales in Saskatoon, Edmonton, Calgary
and Toronto partially offset by increased lot and parcel sales in Regina and
Edmonton.  The average margin decreased to 30.3% from 39.9% in the
fourth quarter of 2007, primarily attributable to the sale of a 160-acre
undeveloped land parcel in Calgary in 2007 at a significantly higher margin
compared to sales of serviced land. Dundee Realty sold 152 lots at an average
selling price of $86,000 per lot in 2008 compared to 502 lots at an average
selling price of $115,000 per lot in 2007.  Excluding the impact of
the sales of undeveloped lands, Dundee Realty sold 162 acres of multi-family and
commercial land at an average selling price of $272,000 per acre in 2008
compared to 13 acres sold at an average selling price of $295,000 per acre in
2007.








DUNDEE
CORPORATION
 34





Revenue
from revenue properties increased to $9.1 million in the fourth quarter from
$7.6 million in the same period in 2007.  This growth generated
operating profits of $1.7 million, representing a margin of 18.8% and an
increase of $1.2 million over the same period in 2007.  The increase
is mainly attributable to a tenant termination that occurred in the fourth
quarter of 2007 at the Distillery Historic District in Toronto for which the
space was re-leased and fully occupied in 2008.  Dundee Realty’s ski
operations in Colorado contributed $0.5 million to operating profits,
representing a decrease of 28% from the prior year reflecting higher operating
expenses compounded by the appreciation of the US dollar.





Revenue
from sales of housing and condominium units increased in the fourth quarter to
$115.3 million from $33.6 million in the same period of 2007.  The
increase is primarily attributable to the Pure Spirit project in Toronto
reflecting the occupancy of 360 condominium units.  The remaining 23
units will be occupied in the first quarter of 2009 with condominium
registration and closings scheduled for April 2009.  Housing
operations in western Canada continued to achieve modest growth compared to 2007
that translated into a $1.6 million increase in operating profits, mainly as a
result of strong demand and higher average selling prices.  Partially
offsetting these improvements in the quarter are decreases related to housing
operations in Toronto which had no sales in the quarter compared to 116 in the
fourth quarter of 2007.  Housing operations in Saskatoon and Regina
experienced steady demand resulting in margins increasing to 18.7% in 2008 from
11.6% in 2007.  During the fourth quarter of 2008, housing operations
in western Canada sold 56 units at an average selling price of $298,000 per unit
translating into a $3.1 million operating profit compared to $1.6 million profit
in 2007 when 59 units were sold at an average selling price of $230,000 per
unit.  At the end of 2008, there were 155 housing units in inventory
of which 108 were pre-sold.





Management
fee revenues decreased to $3.3 million and generated $2.0 million of operating
profits representing a 60.3% operating margin. The $0.2 million decrease in
operating profit from 2007 is due to a reduction in acquisition fees earned as
DREAM did not complete any acquisitions on behalf of its clients in the fourth
quarter of 2008.





Resources
Segment


Operating
EBITDA in our resources segment was $0.5 million in the fourth quarter of 2008
compared with a loss in EBITDA in the fourth quarter of 2007 of $1.0
million.  The change in earnings is due to a decrease in operating
costs with respect to certain resource-based investments in the fourth quarter
of 2008, as a result of actions taken to reduce costs and increase efficiency in
response to current economic conditions.





As
discussed previously, the global economy has resulted in significant
difficulties for our resource-based equity accounted investees.  As a
result, our share of losses from our resource-based equity accounted investments
was $31.5 million in the fourth quarter of 2008 compared with losses of $6.6
million in the same period of 2007.  In addition, and as discussed
previously, during the fourth quarter of 2008, we recognized a fair value
adjustment of $149.5 million against the carrying values of our
investments.





Breakwater


In the
three months ended December 31, 2008, Breakwater incurred a net loss from mining
activities of $53.5 million, which includes a write-down of mineral properties
and fixed assets of $19.5 million, compared with $38.3 million in the fourth
quarter of 2007.  Gross sales revenues were $100.1 million in the
current quarter compared with $135.5 million in the fourth quarter of
2007.  While sales of concentrate increased by approximately 2%, this
was offset by a substantially lower zinc price, and Breakwater experienced
higher direct operating costs due to increased costs for fuel and
labour.





Our share
of the losses from our investment in Breakwater was $13.3 million in the fourth
quarter of this year compared with losses of $8.4 million in the fourth quarter
of 2007.





Dundee
Precious


In the
fourth quarter of 2008, Dundee Precious generated a net loss of $80.0 million
compared with a loss of $9.5 million in the fourth quarter of
2007.  Margins from mining operations were a loss of $19.2 million in
the current quarter compared with contribution margins from mining activities of
$3.3 million in the fourth quarter of 2007. The loss from mining operations
during the current quarter was primarily due to lower deliveries of
concentrates, unfavourable marked-to-market adjustments relating to the open
positions of provisionally priced concentrate sales and higher production costs
at Deno Gold and Chelopech.





DUNDEE
CORPORATION
 35





Earnings
in the current quarter reflect a property impairment provision of $48.8 million
and investment losses of $5.8 million.  This compares with investment
earnings of $8.3 million in the same period of last year, with a small property
impairment provision of $0.2 million.





Our share
of the losses from our investment in Dundee Precious was $17.7 million in the
fourth quarter of 2008 compared with losses of $2.5 million in the fourth
quarter of 2007.





CONSOLIDATED QUARTERLY
RESULTS




(in
      thousands of dollars, except per share amounts)2008
              
              
              
              
              
              2007For
      the three months ended,
              
              31-Dec
              
              
              30-Sep
              
              
              30-June
              
              
              31-Mar
              
              
              31-Dec
              
              
              30-Sep
              
              
              30-Jun
              
              
              31-MarRevenues
              
              $
              359,476
              
              
              $
              317,123
              
              
              $
              284,042
              
              
              $
              268,014
              
              
              $
              457,114
              
              
              $
              329,422
              
              
              $
              311,692
              
              
              $
              300,704Dilution
      gain (loss)
              
              
              2,280
              
              
              
              2,673
              
              
              
              (4,798
              )
              
              
              423
              
              
              
              2,125
              
              
              
              74,127
              
              
              
              3,263
              
              
              
              57,076Net
      (loss) earnings fromcontinuing
      operations
              
              
              (184,597
              )
              
              
              (1,916
              )
              
              
              6,585
              
              
              
              (16,333
              )
              
              
              51,057
              
              
              
              114,078
              
              
              
              17,034
              
              
              
              95,470Gain
      (loss) from discontinued operationsof
      DundeeWealth (a)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              69
              
              
              
              (3,935
              )
              
              
              (75,032
              )
              
              
              1,422
              
              
              
              (2,270
              )Share
      of earnings of discontinuedoperations
      of Dundee REIT (b)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              689
              
              
              
              93,063
              
              
              
              1,074
              
              
              
              1,083Net
      (loss) earnings for the period
              
              $
              (184,597
              )
              
              $
              (1,916
              )
              
              $
              6,585
              
              
              $
              (16,264
              )
              
              $
              47,811
              
              
              $
              132,109
              
              
              $
              19,530
              
              
              $
              94,283(Loss)
      earnings per shareBasicContinuing
      operations
              
              $
              (2.48
              )
              
              $
              (0.03
              )
              
              $
              0.09
              
              
              $
              (0.22
              )
              
              $
              0.68
              
              
              $
              1.51
              
              
              $
              0.23
              
              
              $
              1.27Discontinued
      operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (0.05
              )
              
              
              0.24
              
              
              
              0.03
              
              
              
              (0.02
              )$
              (2.48
              )
              
              $
              (0.03
              )
              
              $
              0.09
              
              
              $
              (0.22
              )
              
              $
              0.63
              
              
              $
              1.75
              
              
              $
              0.26
              
              
              $
              1.25DilutedContinuing
      operations
              
              $
              (2.48
              )
              
              $
              (0.03
              )
              
              $
              0.08
              
              
              $
              (0.22
              )
              
              $
              0.63
              
              
              $
              1.33
              
              
              $
              0.20
              
              
              $
              1.21Discontinued
      operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (0.04
              )
              
              
              0.30
              
              
              
              0.03
              
              
              
              (0.01
              )$
              (2.48
              )
              
              $
              (0.03
              )
              
              $
              0.08
              
              
              $
              (0.22
              )
              
              $
              0.59
              
              
              $
              1.63
              
              
              $
              0.23
              
              
              $
              1.20


(a)
            Net
      of tax and non-controlling interest


(b)
            Net
      of tax





Ø
            The
      fourth quarter of 2008 includes a fair value depreciation adjustment,
      before non-controlling interest, of $271.5 million, including $100.0
      million relating to DundeeWealth’s investments in CLOs, $114.2 million
      relating to certain of our equity accounted investments and $57.3 million
      relating to our AFS investments.


Ø
            The
      fourth quarter results include a loss on sale of a subsidiary of
      DundeeWealth, of $17.7 million, before non-controlling
      interest.


Ø
            Integration
      efforts implemented by DundeeWealth during 2008 resulted in severance
      costs of which $11.0 million were accrued in the fourth quarter of
      2008.


Ø
            The
      first and third quarters of 2008 include a fair value depreciation
      adjustment, before non-controlling interest, of $75.9 million and $37.9
      million, respectively, to DundeeWealth’s ABCP
      portfolio.  DundeeWealth had previously recognized a $37.6
      million fair value depreciation adjustment, before non-controlling
      interest, in this portfolio during the fourth quarter of 2007 as well as a
      $57.6 million fair value adjustment in the third quarter of 2007, which
      was included in the loss from discontinued operations, net of
      non-controlling interest.


Ø
            Primarily
      as a result of the sale of portfolio assets of Dundee REIT to GE, the
      Company recorded equity earnings, net of tax, of $93.1 million in the
      third quarter of 2007.  These earnings represent the Company’s
      share of the gain recognized by Dundee REIT in respect of the
      transaction.  The operations and resulting gain on sale of the
      assets have been recorded as our share of earnings of discontinued
      operations of equity accounted
investees.


Ø
            Also
      included in earnings during the third quarter of 2007 is a loss of $75.0
      million, representing the discontinued operations and resulting loss on
      sale realized by DundeeWealth on the sale of Dundee Bank of Canada and
      other banking operations.  This loss from sale includes the
      $57.6 million fair value adjustment to DundeeWealth’s ABCP portfolio
      referred to above, net of taxes and non-controlling
    interest.





DUNDEE
CORPORATION
 36








Ø
            In
      the third quarter of 2007, we recorded a significant dilution gain of
      $74.1 million, primarily as a result of the issuance of equity by
      DundeeWealth to The Bank of Nova Scotia in that quarter.  A
      similar dilution gain of $55.7 million was recorded in the first quarter
      of 2007 in respect of shares issued by DundeeWealth on the acquisition of
      the non-controlling shareholder’s
interest.


Ø
            Real
      estate operations are project driven.  Real estate revenue and
      associated real estate operating costs are only included in operations in
      periods where a development project is completed and
      sold.  Otherwise, these costs are deferred in real estate
      inventory.  This may also cause significant fluctuations in net
      operating earnings from period to
period.


Ø
            Revenues
      in the fourth quarter of 2007 from our wealth management operations,
      include performance fee revenues.  These performance fee
      revenues are based on the market values of the underlying portfolio as at
      the respective year end, and accordingly, they are recorded as revenues
      only when such year end values have been finalized.  Fourth
      quarter investment management revenues in 2007 included performance fee
      revenues of $96.5 million.  Associated performance fee related
      expenses have also been incurred in this period.   There
      was no performance fee revenue earned in the fourth quarter of
      2008.


Ø
            Consistent
      with activity in the wealth management industry, our brokerage and mutual
      fund dealer activities expect higher retail commissions and trailer
      service fee revenue in the first quarter of each year as this is the
      high-volume RRSP season.  However, in the first quarter of 2008,
      and consistent with general markets and industry activity, revenues were
      below those experienced in the first quarter of prior
    years.


Ø
            Investment
      income includes income earned from dispositions of our investment
      holdings.  Investment gains or losses are only recorded when we
      dispose of an investment and we therefore experience significant quarterly
      fluctuations in these amounts, depending on when we actually effect a
      disposition.


Ø
            Our
      share of earnings of equity accounted investees is included in net
      earnings for each quarter.  Earnings from each of our equity
      accounted investees and dilution gains and losses in investee companies
      may fluctuate significantly from period to period and may depend on market
      forces or other operating conditions that are not necessarily under our
      control.  During the third and fourth quarters of 2008, our
      resources segment experienced significant decreases in commodity prices
      and rising operating costs which had an adverse impact on our share of
      earnings.


Ø
            As
      discussed throughout this report, our results in the third and fourth
      quarters of 2008 were substantially impacted by significant global market
      declines.





CONTINGENCIES AND
COMMITMENTS


Contingencies
and commitments are detailed in note 24 to the 2008 Audited Consolidated
Financial Statements.  The following table summarizes payments due for
the next five years and thereafter in respect of our contractual obligations and
the obligations of our subsidiaries.





(in
      thousands of dollars)Expected
      Payments Schedule2010
      to
              
              
              2012
      to2009
              
              
              2011
              
              
              2013
              
              
              Thereafter
              
              
              TOTAL5.85%
      Exchangeable Debentures
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              9,545
              
              
              $
              9,545Bank
      debt (note i)
              
              
              167,368
              
              
              
              -
              
              
              
              169,606
              
              
              
              -
              
              
              
              336,974Real
      estate debt
              
              
              142,482
              
              
              
              8,032
              
              
              
              4,356
              
              
              
              30,399
              
              
              
              185,269Lease
      and other commitments (note ii and iii)
              
              
              34,901
              
              
              
              22,864
              
              
              
              16,958
              
              
              
              54,648
              
              
              
              129,371Interest
              
              
              15,072
              
              
              
              10,059
              
              
              
              6,017
              
              
              
              3,877
              
              
              
              35,025$
              359,823
              
              
              $
              40,955
              
              
              $
              196,937
              
              
              $
              98,469
              
              
              $
              696,184




(i)
            In
      2008, the Company renewed its revolving term credit facility, extending
      the maturity date to September 9, 2009.  On August 29, 2008,
      DundeeWealth renewed its $500.0 million revolving credit facility
      extending the expiry date to September 9, 2009, subject to a four year
      term-out.


(ii)
            Operating
      lease obligations include minimum lease commitments to landlords,
      suppliers and service providers.  Several of these leases oblige
      the Company or its subsidiaries to pay additional amounts if usage or
      transaction activity exceeds specified levels. The Company does not have
      any capital leases.(iii)
            DundeeWealth
      has entered into compensation arrangements with certain employees and
      advisors that provide for the delivery of shares or other forms of
      compensation in the future, subject to vesting requirements as provided in
      the terms of each arrangement.  In addition to awards issued
      pursuant to DundeeWealth’s share incentive arrangements and other forms of
      stock based compensation as outlined in note 19 to the 2008 Audited
      Consolidated Financial Statements, DundeeWealth has commitments of
      approximately $12.2 million in future compensatory awards for
      employees.  This amount has been included as “lease and other
      commitments” in the table
above.







DUNDEE
CORPORATION
 37





Wealth
Management Segment





ü
            In
      2006, DundeeWealth entered into a lease of office space for 215,900 square
      feet in downtown Toronto, Ontario in order to consolidate the operations
      of its various business units in one location.  The lease
      commenced January 1, 2007 and has a minimum term of 15
      years.  Future minimum lease payments, exclusive of any
      operating costs and realty taxes, are $77.2 million in aggregate and have
      been included in the table above.





ü
            DundeeWealth
      has established share incentive plans for its employees, officers,
      financial advisors and directors and those of its
      subsidiaries.  DundeeWealth has granted stock based compensation
      pursuant to these arrangements, with the issuance of such shares being
      contingent on certain conditions.  The conditions that must be
      met vary from grant to grant, but are generally designed to encourage the
      retention of employees and financial advisors over time, and/or to reward
      the attaining of certain predetermined performance
      criteria.  The potentially dilutive effect of issuing these
      shares has been factored into the determination of diluted earnings per
      share.  These future issuances are not reflected in the above
      table.





ü
            As
      part of the transaction with The Bank of Nova Scotia in August 2007,
      pursuant to which DundeeWealth sold its interest in Dundee Bank of Canada
      and The Bank of Nova Scotia subscribed for an approximate 18% interest in
      DundeeWealth, we entered into a shareholders’ agreement with The Bank of
      Nova Scotia outlining our respective rights and interests as shareholders
      of DundeeWealth.  The shareholders’ agreement includes matters
      relating to the purchase of shares, board representation, rights of first
      offer and matching offers in the event a shareholder wishes to dispose of
      their interest.  In specific circumstances, should we dispose of
      our share in DundeeWealth to a third party, The Bank of Nova Scotia may be
      entitled to a fee payable by DundeeWealth in an amount of between $20
      million and $40 million.





Real
      Estate Segment





Ö
            Dundee
      Realty has commitments under land purchase agreements totalling$2.8 million as at
      December 31, 2008 (2007 - $11.6 million) which will become payable in
      future periods upon the satisfaction of certain conditions pursuant to
      such agreements.  Estimated costs to complete land and housing
      and condominium projects which have not been accrued at December 31, 2008
      were $8.3 million (2007 - $5.8 million).  This future commitment
      has not been included in the above
table.





Ö
            The
      Company has entered into a shareholders’ agreement with the
      non-controlling shareholder of Dundee Realty pursuant to which the company
      agreed to repurchase the non-controlling shareholder’s shares in certain
      circumstances at fair market value at the time of
  purchase.





Ö
            Dundee
      Realty has commitments under a wind turbine purchase agreement through its
      joint venture investment in a windmill development project for $10.5
      million which will become payable upon delivery and installation of
      certain equipment.





Resources
Segment





Ö
            Subsequent
      to the year end, on January 19, 2009 the Tunisian Hydrocarbon Committee
      approved a two-year extension on the Sfax Exploration Permit which will
      extend the primary term to December 8, 2011.  The extension
      requires that Eurogas commit to the drilling of  one new
      exploration well during the extension
period.





Ö
            Upon
      completion of drilling and testing the REB-3 well in Tunisia, EII and its
      Joint Venture partners requested and received approval from the Tunisian
      government to temporarily suspend the well and release the drilling rig,
      both of which were done.  Agreement by the Tunisian government
      was subject to the re-interpretation and remapping of seismic data. The
      well must be abandoned or re-entered by April 23, 2009. The operator is
      planning to request an extension from the Tunisian government to complete
      the seismic work after which the Joint Venture partners will decide to
      either re-enter or abandon the well.  In the event of
      abandonment, the cost is estimated at between US$6 million and US$10
      million, of which EII’s share of the costs would be approximately
      22.5%.








DUNDEE
CORPORATION
 38





OFF-BALANCE
SHEET ARRANGEMENTS


In
the normal course of business, the Company executes agreements that provide for
indemnifications to third parties in transactions such as business
combinations.  We have also agreed to indemnify our directors and
officers and those of certain of our subsidiaries and to indemnify members of
the Board of Governors of our managed funds, to the extent permitted under
corporate law, against costs and damages that may be incurred by such
individuals as a result of lawsuits or any other proceedings in which they are
sued as a result of their services.  The nature of these agreements
precludes the possibility of making a reasonable estimate of the maximum
potential amount we could be required to pay third parties as the agreements
often do not specify a maximum amount and the amounts are dependent on the
outcome of future contingent events, the nature and likelihood of which cannot
be determined.  Historically, we have not made any payments under such
indemnification agreements.  No amounts have been recorded in these
consolidated financial statements with respect to these
indemnifications.





Dundee
Realty is contingently liable for letters of credit and security bonds that have
been provided to support land development in the amount of $39.9 million as at
December 31, 2008 (2007 - $24.5 million).





Dundee
Realty may conduct 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 $9.9 million as at December 31, 2008 (2007 - $6.9 million). The
Company would have available to it the other venturer’s share of assets to
satisfy the obligations, if any, that may arise.





FINANCIAL
INSTRUMENTS


From time
to time, our brokerage subsidiary may enter into various derivative contracts to
meet the needs of customers, earn trading income and manage exposure to market
or foreign exchange risk.  At December 31, 2008, the brokerage
subsidiary held foreign exchange contracts which are being used to mitigate
foreign exchange exposure.  The principles of hedge accounting were
not applied and, therefore, fluctuations in foreign exchange rates may impact
our operating results.  These foreign exchange contracts are included
in trading securities owned or trading securities sold short, as appropriate, on
our consolidated balance sheets.





We are
also exposed to market risk resulting from fluctuations in the price of other
financial instruments, including securities owned and securities sold short and
our AFS securities holdings.  Market risk may occur with volatility in
interest rates and global market conditions.  These fluctuations may
have an impact on our operating results.





RELATED PARTY
TRANSACTIONS





Other
than as disclosed elsewhere in this document, the particulars of related party
transactions as at and for the years ended December 31, 2008 and 2007 are
discussed below.





Ö
            As
      at December 31, 2008, we held mutual funds and other investments with a
      net carrying value of $68.8 million (2007 – $172.6 million) managed by our
      subsidiaries.  In addition, included in cash and cash
      equivalents at December 31, 2008 is $4.8 million (2007 - $0.9 million)
      invested in a money market fund that is managed by a subsidiary of
      DundeeWealth.  Transactions in respect of these investments are
      conducted on the same basis as those of other mutual fund
      investors.  No trailer service fees are paid in respect of these
      investments.


Ö
            A
      subsidiary of DundeeWealth acts as manager for Dynamic FundsTM(the
      “Funds”).  As manager, the subsidiary is responsible for all
      management services and all costs associated with the distribution of
      securities of the Funds.  A significant portion of management
      fees earned in 2008 and 2007 were from the Funds. At December 31, 2008,
      the subsidiary had $31.4 million (2007 - $148.5 million) receivable from
      the Funds.




DUNDEE
CORPORATION
 39





Ö
            In
      the normal course of business, DundeeWealth’s investment management
      division may trade securities through its brokerage subsidiary on behalf
      of mutual fund clients and other discretionary client
      portfolios.  These transactions are conducted at a discounted
      schedule from industry practice.Ö
            DundeeWealth’s
      brokerage subsidiary may, from time to time, participate in corporate
      finance related activities, including financial advisory activities for
      the Company, DundeeWealth, Eurogas and our equity accounted investees or
      fiduciary accounts managed by DundeeWealth’s investment management
      segment.


Ö
            Directors,
      officers and employees of the Company and its subsidiaries and other
      related parties may choose to use the brokerage facilities of Dundee
      Securities.  Transactions are conducted on normal market
      terms.


Ö
            In
      accordance with employment arrangements made with a Dundee Realty
      executive, Dundee Realty agreed to transfer 4% of its interest, net of
      debt, in The Distillery Historic District to the executive at its cost of
      approximately $0.4 million and permit the executive to participate in a
      $6.6 million loan made to the other co-owners of the project to a maximum
      of 10%.


Ö
            Dundee
      Realty provided a $0.5 million loan to a member of senior
      management.  This loan accrues interest at 3% per annum and is
      secured by a deed of trust on a residential
  property.


Ö
            In
      previous years, Dundee Realty issued a promissory note to the
      non-controlling shareholder in the amount of $8.9 million.  The
      note was subject to interest at prime plus 1% per annum and was due on
      demand.  The note was fully repaid during
  2008.


Ö
            Effective
      August 24, 2007, and subsequent to the disposition by Dundee REIT of
      certain properties to GE, Dundee Realty entered into an asset management
      agreement with Dundee REIT pursuant to which Dundee Realty provides
      certain asset management services to Dundee REIT and its
      subsidiaries.  The asset management agreement provides for a
      broad range of asset management services, the remuneration for which
      includes a base annual management fee, an incentive fee based on exceeding
      certain benchmarks relating to funds from operations, and certain other
      fees as defined in the agreement. During 2008, Dundee Realty received fees
      of $6.2 million (2007 - $2.1 million) in respect of these
      arrangements.





ACCOUNTING POLICIES AND
ESTIMATES





This
discussion and analysis of our consolidated financial condition and the results
of our operations are based upon the consolidated financial statements of the
Company.  These statements have been prepared in accordance with
Canadian GAAP.  The preparation of these consolidated financial
statements requires us to make assumptions, estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and the
related disclosure of contingent assets and liabilities.  We evaluate
our estimates on an ongoing basis.  We base our estimates on
historical experience and on various other assumptions that we believe are
reasonable under the circumstances, and we use these to form the basis for
making judgments about the carrying value of assets and liabilities and the
reported amounts of revenues and expenses that are not readily apparent from
other sources.  Our actual results may differ from these estimates
under different assumptions or conditions.





Our most
critical accounting policies are those that we believe are the most important in
portraying our financial condition and results of operations and those that
require the most subjectivity and estimates by management.  A summary
of our significant accounting policies applied during 2008 are included in notes
1 and 2 to the 2008 Audited Consolidated Financial Statements.  A
discussion of some of the more significant judgments and estimates made by
management is as follows:





Fair
Value of Financial Instruments


All of
our financial instruments are recorded on the consolidated balance sheet at
values that are representative of or approximate fair value, except our
preference shares, Series 1 and preference shares issued by
DundeeWealth.  Fair value is generally determined based on market
value or, where market prices are not readily available, on quoted market prices
for similar instruments or other third party evidence.  However, even
where a fair value of a financial instrument is derived from an independent
broker or dealer price quotes, a valuation adjustment for certain assumptions
may be required to determine the fair value.  Management uses judgment
in its assessment of fair value and imprecision in determining any of the
factors may affect the amount of unrealized gain or loss on comprehensive income
or the loss recorded for a particular instrument in a particular
period.  In addition, quoted market values at any point in time may
not represent what we would realize at the time that a financial instrument is
ultimately disposed of.  We believe our estimates of fair value are
reasonable and appropriate in the existing environment.  We also
review our valuation methodologies and assumptions on an ongoing basis to ensure
they continue to be appropriate.





DUNDEE
CORPORATION
 40








Fair
value of non-bank sponsored ABCP is estimated based on a review of the asset
classes, a review of the information concerning the particular conduits that we
own and a series of proxies and industry information.  Fair value of
the underlying assets is affected by a wide variety of factors including, but
not limited to, changes in corporate credit spreads, changes in credit
correlation, the current and expected default and delinquency experience for
assets underlying the affected ABCP, the weighted average life of the assets,
the vintage of asset origination and the global pricing of structured finance
assets.  Some observable market indices that we utilized in this
valuation approach included: tracking the changes in spreads for the investment
grade North American Credit Index and its European counterpart, obtaining
pricing of CDOs for asset-backed securities and market prices for reference
portfolios of various asset classes such as commercial mortgages, lines of
credit, equipment leases, auto leases and trade receivables.  However,
this valuation technique also requires management to make various assumptions
that may not be supported by observable market prices or rates.  The
valuation approach is performed by asset class, breaking down the assets into
leveraged and unleveraged categories.





Fair
value for CLOs and other structured products, for which market quotations are
not readily available, is provided by the third party underwriter of the
financial instrument in the form of an indicative bid value or, where available,
the most recent trading price of such individual security.  The third
party underwriter uses a valuation model that incorporates prevailing primary
and secondary market conditions and deal specific parameters.  These
deal specific parameters include interest rate yield curves, foreign exchange
rates and default estimations.  This valuation model is based, in
part, on assumptions that may not be supported by observable market prices or
rates.  Indicative bid values provided are independently assessed by
qualified professionals to ensure that they are reasonable.





Fair
value of mutual fund holdings is based on the published net asset value of the
respective fund.





AFS
securities are written down to fair value through net earnings when there is
objective evidence that the financial instrument is impaired and the decline in
fair value is other-than-temporary.  The determination of whether or
not other-than-temporary impairment exists is a matter of
judgment.  We review these securities regularly for possible
impairment that is other-than- temporary and this review typically includes an
analysis of the facts and circumstances of each investment and the expectations
for that investment’s performance.  Specifically, impairment of the
value of an investment may be indicated by conditions, such as significant
financial difficulty of the investment or its underlying collateral, a breach in
the terms and conditions of the security such as a default on interest or
principal payments, the granting of a concession to the issuer that would not
otherwise be considered and the disappearance of an active market for the
underlying security where one formerly existed.  During 2008, we
recorded an other-than-temporary impairment in our AFS securities of $271.1
million (2007 – $37.6 million), including impairment relating to our portfolio
of ABCP, CLOs and other investments.  While we believe that we have
accurately estimated the amount of other-than-temporary impairment in the value
of our investments, different assumptions could result in changes to the
recorded amounts in our consolidated financial statements.





Fair
Value of Equity Accounted Investments


Although
not classified as AFS securities, our portfolio of equity accounted investments
requires that we review for impairment the carrying value of our investments
against their fair value.  The determination of whether or not
other-than-temporary impairment exists is a matter of judgment and management
applies many of the same criteria that it applies to the determination of
other-than-temporary impairment in the value of its AFS
securities.  During 2008, we recorded an other-than-temporary
impairment in the value of our equity accounted investments of $114.2
million.  As with AFS securities, we believe that we have accurately
estimated the amount of other-than-temporary impairment to the value of these
investments. However, different assumptions could result in changes to the
recorded amounts in our consolidated financial statements.








DUNDEE
CORPORATION
 41





Deferred
Sales Commissions


Commissions
paid to financial advisors in connection with sales of mutual fund units sold on
a deferred sales charge basis are capitalized as deferred sales
commissions.  The asset is amortized over a period of five years,
which represents the period during which commissions are generally recovered
from management fee revenues.  We test the carrying value of deferred
sales commissions for impairment at least annually.  The carrying
value is written down to the extent that it exceeds the expected future revenue
on an undiscounted basis.  As at December 31, 2008 and 2007, there
were no indications of impairment in the deferred sales
commissions.  However, changes in the underlying values of the assets
sold on a deferred sales charge basis, or a change in the estimated period over
which we earn management fee revenues in respect of these assets, may impact the
recoverability of deferred sales commissions.





Real
Estate Assets


Land
under development and inventory of housing and condominiums are stated at the
lower of cost and net realizable value.  In calculating net realizable
value, management must estimate future cash flows and discount these estimated
cash flows at a rate that includes a risk factor appropriate for each particular
project.  These estimates are based on various assumptions, including
development or construction schedules and future costs to be
incurred.  If estimates are significantly different from actual
results, our land under development and inventory of housing and condominiums
may be overstated or understated on our consolidated balance sheets and
accordingly, earnings in a particular period may be overstated or
understated.





Land held
for development is stated at the lower of cost and net recoverable
amount.  The net recoverable amount is determined using estimated
future net cash flows from use, if any, plus any residual
value.  Estimates of residual values may be impacted by local and
overall real estate market conditions.  Therefore, estimates may vary
from actual residual values on disposition of land held for
development.





Real
estate assets are tested for recoverability whenever events or changes in
circumstances indicate that its carrying amount may not be recoverable.
 Recoverability is measured by comparing the carrying value of the real
estate asset to future undiscounted cash flows expected to be generated from
property operations and projected disposition. The cash flow projections take
into account the estimated cash flows for the life of each project, specific
business plans and management’s best estimate of the most probable set of
economic conditions anticipated to prevail in the market area. If the analysis
indicates that the carrying value is not recoverable from future cash flows, the
property is written down to the estimated fair value and an impairment loss is
recognized immediately in net earnings. Management uses judgment in performing
this recoverability test.  Imprecision in any assumptions and
estimates used could affect the valuation of real estate assets and the
determination of impairment.





Oil
and Gas Properties


Eurogas
is currently in the exploratory stage of a drilling program in Tunisia and
capitalizes all associated costs.  The recovery of the recorded costs
is contingent upon the existence of economically recoverable reserves and future
profitable production.  Activities in Spain are in the pre-development
phase.  All pre-development costs relating to the exploration permits
in Spain are capitalized.  The recovery of these costs is dependent
upon the economic viability of the underground natural gas storage
project.





Goodwill
and Other Intangible Asset Impairment


Goodwill
is not amortized but is assessed for impairment annually and more frequently if
events or changes in circumstances indicate that there may be an
impairment.  Goodwill is assessed for impairment by determining
whether the fair value of the reporting unit with which the goodwill is
associated is less than its carrying value.  When the fair value of
the reporting unit is less than its carrying value, the fair value of the
goodwill in that reporting unit is compared to its carrying value.  If
the fair value of the goodwill is less than its carrying value, goodwill is
considered impaired and a charge for impairment is recognized
immediately.





The fair
values used in the goodwill impairment assessment are generally based on an
income approach where estimated future cash flows are discounted to arrive at a
single present value amount.  Management uses judgment in estimating
the fair value and any imprecision in any assumptions and estimates used in the
fair value calculations could affect the valuation of goodwill and influence the
determination of goodwill impairment.  We also utilize a market
approach in the goodwill impairment assessments to provide a secondary fair
value by comparing this single point estimate with comparable company and
transaction multiples.  In assessing market data, judgment is required
in determining whether recent transactions are comparable to the Company in
nature, scope and size.





DUNDEE
CORPORATION
 42








Our
goodwill impairment assessments in fiscal 2008 and 2007 indicated that there was
no impairment.  Given the current economic environment, we repeated
these assessments at year end and reconfirmed that goodwill was not
impaired.  The most sensitive assumptions in our impairment
assessments were the estimate of cash flows and the determination of the
weighted average cost of capital, which is used as the discount rate to
determine present value.  A 3% decrease to our estimates of cash
flows, or a 3% increase in the discount rate would not change our assessment of
impairment of goodwill in DundeeWealth’s investment management
operations.  While our assessment of goodwill in DundeeWealth’s
brokerage business is able to sustain a 3% decrease in revenue growth, it would
not be able to sustain a 1% change in the weighted average cost of capital and a
further assessment would have to be completed in order to determine impairment
in the carrying value of goodwill.  Management of DundeeWealth
continues to closely monitor the factors that impact our assessment of the
underlying value of goodwill in this reporting segment.





Intangible
assets with an indefinite life include investment management
contracts.  These intangible assets are not amortized but are assessed
for impairment annually and more frequently if events or changes in
circumstances indicate that there may be an impairment.  Impairment is
recorded when the carrying value of the indefinite life intangible asset exceeds
its fair value.  In estimating the fair value of indefinite life
intangible assets, we use valuation techniques based on discounted cash flow
projections to be derived from these assets.  Cash flows require that
we estimate growth rates in AUM, both as a result of net sales activity and
performance related activity.  Any imprecision in assumptions and
estimates used in the fair value calculations could impact the results of the
indefinite life intangible asset impairment assessment.





Our
indefinite life intangible asset impairment assessments in fiscal 2008 and 2007
indicated that there was no impairment.  Management believes that the
assumptions and estimates used were reasonable and supportable in the existing
environment.  With respect to the 2008 indefinite life intangible
asset impairment assessment, a 3% increase in the discount rate or the impact of
revenues from a 3% reduction in our assumed AUM would not have changed the
conclusion.  Similar to the impairment assessments for goodwill, the
most sensitive assumptions in the indefinite life intangible asset impairment
assessment includes the estimate of cash flows and the determination of the
weighted average cost of capital, which is used as the discount rate to
determine present value.





Intangible
assets that derive their value from contractual customer relationships or
intangible assets that can be separated and sold, have been determined to have
finite useful lives.  Determining the estimated useful life of each of
these assets requires an analysis of the circumstances and is subject to
management’s judgment. These intangible assets are subsequently amortized over
their estimated useful lives. In estimating fair value for finite life
intangible assets, the Company uses valuation techniques based on undiscounted
cash flow projections.  Our finite life intangible assets were not
impaired as at December 31, 2008 and 2007.





Stock
Based Compensation


The
Company and its subsidiaries have a variety of share based compensation awards
that are utilized as retention tools for employees and financial
advisors.  When stock based awards are granted, the Company measures
the value of each award and amortizes it over the vesting
period.  Management makes a variety of assumptions in calculating this
value.  Firstly, we have not factored in a forfeiture rate for options
that may be cancelled before vesting criteria are met.  Secondly,
management uses the fundamentals of the Black-Scholes option pricing model in
determining the value of its stock based compensation
expense.  Application of the Black-Scholes option pricing model
requires estimates, which may not be ultimately correct, in expected dividend
yields, expected volatility of the underlying shares based on past volatility
experienced, and expected life of the stock option
granted.  Management has assumed that it will settle stock based
compensation obligations through equity.  Management reassesses each
of these factors with each grant of share based compensation.





Income
Taxes


The
provision for income taxes is determined on the basis of the anticipated tax
treatment of transactions recorded in net earnings.  The determination
of the provision for income taxes requires interpretation of tax legislation
from a number of jurisdictions.  If our interpretation of tax
legislation differs from that of the tax authorities, the provisions for income
taxes could increase or decrease in future periods.








DUNDEE
CORPORATION
 43





Future
income taxes are recorded to account for the effects of future taxes on
transactions occurring in the current period. Accounting for future income taxes
requires management’s judgment in the following key areas:




Ø
            Future
      income taxes are assessed for recoverability.  We record a
      valuation allowance when we believe, based on all available evidence, that
      it is more likely than not that all of the future tax assets will not be
      realized.  In this assessment, we review various factors
      including estimated future earnings based on internal forecasts,
      cumulative tax losses in recent years, the history of tax loss carry
      forwards as well as prudent and feasible tax planning
      strategies.  The amount of future income tax assets could be
      reduced in the future by a charge to earnings if forecasted earnings
      during the tax loss carry forward periods are not achieved or are not
      likely to be achieved.




Ø
            Future
      tax assets are calculated based on tax rates expected to be in effect in
      the period in which they will be realized.  Previously recorded
      tax assets and liabilities may change as a result of proposed or enacted
      governmental changes in the statutory rates of
  taxation.





Provision
for Litigation


The
Company and its subsidiaries are involved in various legal actions in the
ordinary course of business.  In our opinion, and based on current
information, the ultimate disposition of these actions, in the aggregate, will
not have a material adverse effect on the financial condition of the
Company.





Litigation
loss accruals are established when it becomes probable that we will incur an
expense and the amount can be reasonably estimated.  The Company’s
management and internal and external experts are involved in assessing the
probability and in estimating any amounts involved.  Changes in these
assessments may lead to changes in recorded loss accruals. Each claim is
reviewed on a case by case basis, taking into consideration all information
available to the Company.  The claims are reviewed at least quarterly
or as new information becomes available.  The actual costs of
resolving these claims may be substantially higher or lower than the amounts
accrued.  In certain cases, legal claims may be covered under the
Company’s various insurance policies.





Consolidation
of Variable Interest Entities


The
Company is required to consolidate any variable interest entities (“VIEs”) in
which it is the primary beneficiary.  An entity is a VIE when, by
design, one or both of the following conditions exist: (a) total equity
investment at risk is insufficient to permit the entity to finance its
activities without additional subordinated support from others; or (b) as a
group, the holders of the equity investment at risk lack certain essential
characteristics of a controlling financial interest.  The primary
beneficiary is the entity that is exposed, through variable interests, to a
majority of the VIE’s expected losses or is entitled to a majority of the VIE’s
expected residual returns, or both.





Management
uses a significant amount of judgment in assessing whether an entity is a VIE
and whether we are the primary beneficiary of a VIE.  We use a variety
of complex estimation processes involving both qualitative and quantitative
factors to determine whether an entity is a VIE, and, if required, to analyze
and calculate the expected losses and the expected residual
returns.





Business
Combinations


Management
uses its best judgment in applying the purchase method of accounting for
business combinations and, specifically, in identifying and valuing intangible
assets and liabilities acquired on acquisitions.  In certain cases,
intangible assets are valued using a discounted cash flow model which is subject
to a variety of assumptions.  Further, the period of benefit of
intangible assets is based on a number of subjective factors, such as the length
of client and other business relationships, which could prove to be incorrect as
the future unfolds.  The value placed on the acquired assets and
liabilities, including identifiable intangible assets, will have an effect on
the amount of goodwill that the Company records on acquisitions.








DUNDEE
CORPORATION
 44





Allowance
for Credit Losses


In the
brokerage segment and in accordance with brokerage industry practice, client
transactions are entered into on either a cash or margin basis.  When
credit is extended to a client to purchase securities, the securities are held
as collateral for the amounts loaned.  Clients purchasing securities
on margin must maintain collateral in their accounts in accordance with
regulatory or Company guidelines.  The Company has established an
allowance for credit losses based on management’s estimate of probable
unrecoverable amounts.  This provision for credit losses is determined
by comparing the amount loaned to each client with the market value of
securities held in such accounts.  Judgment is required as to the
timing of establishing an allowance for credit losses and the amount of the
required specific allowance.  The market value of the securities held
as collateral may fluctuate daily based on market forces, which could lead
either to an unexpected increase in the provision or to additional credit
losses.





FUTURE ACCOUNTING
CHANGES





Asset
Recognition including Goodwill and Intangible Assets


Amendments
to CICA handbook section 1000, “Financial Statement Concepts”
and new CICA handbook section 3064, “Goodwill and Intangible
Assets”, which replaces CICA handbook section 3062, “Goodwill and Other Intangible
Assets”, have been issued and apply to interim and annual financial
statements relating to fiscal years beginning on or after October 1,
2008.  This guidance reinforces the principle-based approach to the
recognition of assets only in accordance with the definition of an asset and the
criteria for asset recognition.  Under the amendments to CICA handbook
section 1000, effective January 1, 2009, the deferral and matching of operating
expenses over future revenues is no longer appropriate.  The Company
is currently assessing the impact of this new accounting guidance.





Business
Combinations


In
January 2009, the CICA issued CICA handbook section 1582, “Business Combinations”,
section 1601, “Consolidations”, and section
1602, “Non-controlling
Interests”.  These sections replace the former CICA handbook
section 1581, “Business
Combinations” and section 1600, “Consolidated Financial
Statements” and establish a new section for accounting for a
non-controlling interest in a subsidiary.





CICA
handbook section 1582 establishes standards for the accounting for a business
combination. It provides the Canadian equivalent to International Financial
Reporting Standard (“IFRS”) 3, “Business Combinations”
(January 2008).  The section applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after January 1,
2011.  CICA handbook section 1601 establishes standards for the
preparation of consolidated financial statements.  CICA handbook
section 1602 establishes standards for accounting for a non-controlling interest
in a subsidiary in consolidated financial statements subsequent to a business
combination.  It is equivalent to the corresponding provisions of IFRS
IAS 27, “Consolidated and
Separate Financial Statements” (January 2008).





CICA
handbook section 1601 and section 1602 apply to interim and annual consolidated
financial statements relating to fiscal years beginning on or after January 1,
2011.  Earlier adoption of these sections is permitted as of the
beginning of a fiscal year.  All three sections must be adopted
concurrently.  The Company is currently evaluating the impact of the
adoption of these sections.





International
Financial Reporting Standards


In
February 2008, the CICA Accounting Standards Board (“AcSB”) confirmed that
Canadian GAAP for publicly accountable enterprises will be converged with IFRS
effective in calendar year 2011, with early adoption being allowed starting in
calendar year 2009.  IFRS uses a conceptual framework similar to
Canadian GAAP, but there may be significant differences on recognition,
measurement and disclosure that may materially impact the Company's consolidated
financial statements.  The Company does not intend to early adopt
these standards.








DUNDEE
CORPORATION
 45





The
implementation of IFRS will apply to the Company's interim and annual financial
statements beginning on or after January 1, 2011, including the restatement of
comparative amounts for 2010.  As a result, the Company has
established an IFRS implementation committee with a mandate to oversee the
conversion process, including any impact that the conversion may have on
business practices, systems and internal controls over financial
reporting.  The IFRS implementation committee consists of senior
management from accounting and finance, internal audit, information technology,
and business operations.





In order
to prepare for the conversion to IFRS, the IFRS implementation committee
developed an IFRS conversion plan. The conversion plan addresses first time
adoption and transition activities, including, but not limited to:




ü
            Overall
      characteristics of IFRS financial statements that differ from Canadian
      GAAP;




ü
            Training
      and education requirements;




ü
            Resource
      requirements;




ü
            An
      assessment of information technology and data systems
    impacts;




ü
            An
      assessment of IFRS impacts on business groups and
    functions;




ü
            An
      assessment of impacts on internal controls over financial reporting and
      disclosure controls and procedures;
and




ü
            The
      development of a communication plan for both internal and external
      stakeholders.





The IFRS
implementation committee provides periodic updates of the status and
effectiveness of the IFRS conversion plan to the Company’s senior executives,
and the Audit Committee.





During
the year, the implementation committee completed the following aspects of the
conversion plan:




ü
            Initiated
      an analysis of the key differences between IFRS and the Company's current
      accounting policies, as well as an assessment of the impact of various
      accounting alternatives offered pursuant to
  IFRS;




ü
            Implemented
      an education program for key employees responsible for financial
      reporting; and




ü
            Engaged
      consultants to assist with our analysis and the implementation of the IFRS
      conversion plan.





In
addition, key elements of the IFRS conversion plan that are currently in
progress include, but are not limited to:




ü
            A
      detailed assessment of key differences between IFRS and the Company's
      current accounting policies and the related impact on business
      activities;




ü
            A
      detailed assessment of the application of IFRS 1 “First-time Adoption of
      International Financial Reporting Standards”, which provides
      guidance for an entity’s initial adoption of IFRS, and provides for
      limited optional exemptions in specified areas of certain IFRS
      standards;




ü
            The
      development of solutions to address identified issues and documentation of
      recommended accounting policies;




ü
            The
      development of an ongoing education program for key employees responsible
      for financial reporting; and




ü
            The
      review and preparation of IFRS disclosure
  requirements.





The
process of evaluating the potential impact of IFRS to the consolidated financial
statements is an ongoing process as the International Accounting Standards Board
and the AcSB continue to issue new standards and recommendations.





As the
Company continues to assess the impact of IFRS adoption on its business
activities, processes and accounting policies, it will implement a communication
strategy, as appropriate, aimed at all stakeholders, including employees, rating
agencies, and shareholders, to assist in their understanding of its transition
to IFRS.  Additionally, the IFRS implementation committee will
continue to revisit the conversion plan and accordingly, changes to the plan may
be required, as more information on the Company’s adoption of IFRS becomes
known.








DUNDEE
CORPORATION
 46





CHANGES IN ACCOUNTING
POLICIES





Financial
Instruments and Capital Disclosures


On
January 1, 2008, the Company adopted the provisions of CICA handbook sections
1535, “Capital
Disclosures”, 3862, “Financial Instruments -
Disclosures” and 3863, “Financial Instruments -
Presentation”.  These new sections enhance requirements to
provide both qualitative and quantitative disclosures on the nature and extent
of risks arising from financial instruments and how the entity manages those
risks.  Furthermore, such disclosures enable users of financial
statements to evaluate the entity’s objectives, policies and processes for
managing capital.





Inventories


Effective
January 1, 2008, the Company adopted the provisions of CICA handbook section
3031, “Inventories”.The
standard provides guidance on the determination of costs and their subsequent
recognition as expenses, including any write-downs to net realizable
values.  It also provides guidance on cost formulas that are used to
assign costs to inventories. Any adjustments to the Company’s financial
statements, as a result of adopting section 3031 on January 1, 2008, were
recognized by an adjustment to opening retained earnings.





Reclassification
of Financial Assets


In
October 2008, the AcSB issued amendments to CICA handbook sections 3855 “Financial Instruments – Recognition
and Measurement”, 3861 “Financial Instruments – Disclosure
and Presentation” and 3862 “Financial Instruments –
Disclosures”.  These amendments, which were made with the
intention of providing consistency between Canadian GAAP and IFRS, provide
Canadian companies with the ability to reclassify financial assets out of the
held-for-trading and AFS categories in certain circumstances.  The
Company has considered the impact of these amendments, specifically in respect
of its investments in ABCP and CLOs.  The amendments do not permit a
reclassification of ABCP and CLOs as these products do not meet the definition
of a loan or receivable pursuant to section 3855.  There are no other
significant impacts resulting from these amendments.





CONTROLS AND
PROCEDURES




Disclosure
Controls and Procedures


As at
December 31, 2008, management evaluated, under the supervision of and with the
participation of the Chief Executive Officer and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures as defined in National
Instrument 52-109.  Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as at December 31, 2008.





Management’s
Report on Internal Control Over Financial Reporting


The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
GAAP.  The Company’s management has used the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) framework to evaluate the
effectiveness of the Company’s internal control over financial
reporting.





As at
December 31, 2008, management assessed the effectiveness of the Company’s
internal control over financial reporting and, based on that assessment,
concluded that such internal control over financial reporting was effective and
that there were no material weaknesses in the Company’s internal control over
financial reporting that have been identified by management.








DUNDEE
CORPORATION
 47





MANAGING
RISK




The
following risk factors relating to Dundee Corporation are most likely to
influence an investor’s decision to buy, sell or hold securities of the
Company.




Risk
of Sustained Economic Downturn


During
2008, global capital markets continued to deteriorate, leading to the current
global economic downturn.  A sustained global economic downturn
characterized by higher unemployment, lower commodity prices, lower family
incomes and corporate earnings, lower consumer spending and business investments
could have a myriad of effects on the Company’s business, including reduced
demand for DundeeWealth’s investment products, an increased likelihood of higher
redemption rates, decreased demand for real estate properties and decreases in
resource prices.  Moreover, these economic conditions, if realized,
will impact the risk profile of many of the other financial and market risks
described below and in note 22 to the 2008 Audited Consolidated Financial
Statements.





Furthermore,
a prolonged economic downturn may give rise to a higher level of strategic risks
including those associated with industry restructuring, new competitive dynamics
and significant changes in the legal, regulatory and tax regimes in which the
Company’s businesses operate.





WEALTH
MANAGEMENT




Market
Influences and Current Financial Conditions


Negativity
in domestic and international capital markets may create specific challenges for
the Company’s wealth management subsidiary.  Since the third quarter
of 2008, global financial markets have been subject to unprecedented
volatility.  The movement of capital markets is beyond the control of
DundeeWealth but, to a significant degree, may impact our overall
profitability.  Revenues from DundeeWealth’s investment management
activities are based on the market values of AUM, generally determined using
trading values of underlying securities in global markets.  The state
of the capital markets in general and the unpredictability of the global economy
may also affect retail and institutional clients’ willingness to actively trade
in capital markets, impacting commission revenues as well as trading and
corporate finance activities in DundeeWealth’s brokerage
segment.  Declining interest rates may reduce the interest spread
earned on amounts loaned to clients in margin accounts.  Any decline
in the financial markets or lack of sustained growth in such markets may result
in a corresponding decline in performance and may adversely affect
DundeeWealth’s AUM, fees and/or revenues and cash flows.




Creating,
Attracting and Retaining AUM and AUA


The
profitability of DundeeWealth is directly related to its ability to create,
attract and retain AUM and AUA.  These assets are subject to a fee,
generally calculated as a percentage of their net asset value.  The
level of AUM is influenced by three factors: (i) sales, (ii) redemption rates,
and (iii) investment performance.  Sales and redemptions may fluctuate
depending on market and economic conditions, investment performance and other
factors.  Recent market volatility has contributed to significant
redemptions and diminished sales for many participants in the Canadian wealth
management industry.   The fees earned by the Company vary with
the types of assets being managed, with higher fees earned on actively managed
equity and balanced accounts and lower fees earned on fixed income
accounts.   In addition, fees may be impacted by the nature of
the underlying client, with institutional money management earning lower fees
than would be earned from retail clients.  Accordingly, the Company’s
revenues may decline if clients shift their investments into products that earn
lower fees, or if the ratio of institutional AUM increases relative to retail
AUM.   If the funds and other assets managed by DundeeWealth’s
subsidiaries are unable to achieve investment returns that are competitive with
or superior to those achieved by other comparable investment products offered by
competitors, and/or should a significant number of clients seek to terminate
their agreements and withdraw their assets or should the market value of assets
decline, there would be a material adverse effect on DundeeWealth’s management
fee revenue, certain capital costs including deferred sales commissions and
certain intangible assets and profitability.







DUNDEE
CORPORATION
 48





Performance
Based Fee Arrangements May Increase Volatility of Revenues


A portion
of DundeeWealth’s investment management advisory and fee revenues may
potentially be derived from performance fees.  If the investment
return of the fund or portfolio does not meet or exceed the investment return
benchmark for a particular period, no performance fees will be generated, and,
if the performance fee is based on cumulative returns, DundeeWealth’s ability to
earn performance fees in the future may be impaired.  In particular,
as compared to fiscal 2007, when our subsidiary recorded $81.5 million in
performance fee revenues, no performance fee revenues were earned in the year
ending December 31, 2008.





Market
Risk in Trading Activities and Investments


Market
risk is the potential for loss from an adverse movement in the value of a
financial instrument.  DundeeWealth incurs market risks in its trading
positions, underwriting activities and in its portfolio of investment
securities.  DundeeWealth’s investment dealer subsidiary engages in
various capital market activities that are very sensitive to price
fluctuations.  These include active positioning in trading securities
in anticipation of price movements and commitments to underwrite the issuance of
securities.  DundeeWealth’s portfolio of corporate investments,
including CLOs, is also exposed to market risk from fluctuations in fair
values.  In addition, although the ABCP investments held by
DundeeWealth have been replaced with long term notes, the maturity date of such
notes extends into 2056.  There is no assurance that the pricing of
the value of these assets will not continue to decline in future periods or that
the restructuring of the ABCP into replacement notes will result in the
development of a liquid market.  These values may change materially in
subsequent periods.




DundeeWealth
manages market risk as part of our risk management framework, which comprises
various controls and procedures to ensure that the risk exposures are monitored
closely and that positions taken are duly authorized.  These
procedures and controls include:




Ö
            Procedures
      for the daily mark-to-market valuation of positions to measure risk
      exposure, including procedures to assess market prices of positions which
      are not actively traded;




Ö
            Setting
      of trading exposure limits and loss limits in compliance with our approved
      trading strategies, taking into account our trading experience, market
      volatility, the liquidity of the position, interest rates, and our
      tolerance for market risk; and




Ö
            Procedures
      to identify significant market risk concentration and risk exposure, and
      to escalate the reporting of these risk positions to senior management and
      risk personnel for monitoring.




There can
be no assurance that these controls and procedures will be effective or
sufficient to manage or mitigate these market risks.




Competition


DundeeWealth
operates in a highly competitive environment that includes other providers of
wealth management products and services such as mutual fund companies, private
client investment managers, financial advisors, investment dealers, banks and
insurance companies, some of which have greater financial or other resources
than DundeeWealth.  Competition is based on a wide range of factors,
including brand recognition, investment performance, the types of products
offered by the competitor, business reputation, financial strength, continuity
of institutional, management and sales relationships, and quality of
service.  In order to remain competitive, DundeeWealth will continue
to be innovative in the development of financial products and solutions for
clients, to monitor its investment performance and to provide the highest level
of service to clients.




In
addition, there may be competitive pressures from time to time to lower the fees
that are charged on DundeeWealth’s products and services which may impact the
ability to retain clients in the future.  While DundeeWealth believes
that its current fee structure is competitive with industry peers, changes to
management fee rates, commission rates and trailer service fee revenue rates
will affect the operating results of DundeeWealth.  There can be no
assurance that DundeeWealth will maintain its current standing in the market or
its current market share, and the business, financial condition or operating
results of DundeeWealth may be adversely affected should circumstances
change.







DUNDEE
CORPORATION
 49





Regulatory
and Litigation Risk


The
regulatory operating environment for wealth management and financial services
operations in Canada continues to expand, becoming more extensive and
complex.  DundeeWealth supports regulatory changes that enhance the
integrity and reputation of our industry and that protect the interests of its
client base.  Compliance personnel actively participate in the
development of new legislation and regulations.  New regulatory
requirements, however, may involve changes to the way DundeeWealth currently
conducts business or may increase the cost and associated profitability of our
business.  Laws and regulations applied at the national and provincial
levels generally grant governmental agencies and self regulatory bodies broad
administrative discretion over the activities of the Company’s subsidiaries,
including the power to limit or restrict such business
activities.  Possible sanctions include the revocation or imposition
of conditions on licenses or registrations to operate certain businesses, the
suspension or expulsion from a particular market of any of the Company’s
business segments or their key personnel or financial advisors, and the
imposition of fines.  There is also the potential that the laws or
regulations governing the Company’s operations or particular investment products
or services could be amended or interpreted in a manner that is adverse to the
Company.  We believe that our ability to comply with all applicable
laws and regulations including emerging changes is dependent upon the
establishment, implementation and maintenance of extensive compliance policies
and procedures.  DundeeWealth has a team of experienced compliance
personnel that works full time on these efforts.  When an acquisition
is completed, it is possible that the acquired company’s compliance standards
may have been insufficient or not as developed as those of
DundeeWealth.  We attempt to identify material compliance issues
through the due diligence review; however, it is possible that such a review
will not identify all existing issues.




Commitment
of Key Personnel and Financial Advisors


DundeeWealth’s
strategic focus is dependent on the abilities, experience and efforts of the
members of its executive team. Accordingly, the recruitment and retention of
competent personnel and continuous training and transfer of knowledge are key
activities that are essential to DundeeWealth’s performance.




In
addition, the growth in total AUM in the industry and the reliance on investment
performance to sell financial products has increased the demand for experienced
and high-performing portfolio managers.  Compensation packages for
these managers may increase at a rate well in excess of inflation and well above
the rates of increase observed in other industries.  The loss of these
individuals or an inability to attract, retain and motivate a sufficient number
of qualified personnel could affect DundeeWealth’s business.




As well,
the market for financial advisors is extremely competitive and is increasingly
characterized by movement of financial advisors among different
firms.  Individual independent financial advisors have regular direct
contact with clients, which can lead to a strong and personal client
relationship based on the client’s trust in the individual financial
advisor.  The loss of a significant number of financial advisors could
lead to the loss of client accounts which could have a material adverse effect
on the results of operations and prospects of DundeeWealth.  Although
DundeeWealth uses a combination of competitive compensation structures,
including equity incentive arrangements with vesting provisions, as a means of
seeking to retain financial advisors, there can be no assurance that financial
advisors will remain with the Company.




Capital
Requirements


Subsidiaries
of DundeeWealth operate in regulated environments and are subject to minimum
regulatory capital requirements.  Accordingly, DundeeWealth may be
required to keep sufficient cash and other liquid assets on hand to maintain
capital requirements.  Although each regulated entity currently has
sufficient capital, growth of the business may necessitate additional capital
requirements and the failure to maintain required regulatory capital may subject
the relevant registrant to fines, suspension or revocation of registration or
could prohibit the Company from expanding.  In certain instances,
regulatory capital requirements may increase due to a change in the market value
of securities held, some of which are beyond our
control.  DundeeWealth monitors the level of regulatory capital
required in each of its business units on an ongoing basis to ensure it meets
the minimum requirements.




DundeeWealth
currently finances commissions associated with mutual funds sold on a deferred
sales charge basis through internal means.  When asset growth in
mutual funds increases significantly, the funding required for these new mutual
fund assets also increases.  In periods where the value of mutual fund
units sold on a deferred sales charge basis is high, sources of funding other
than cash flow from operations may be required in order to pay dealer
commissions and it is not certain that such additional funding, if needed, will
be available on terms attractive to the Company, or at all.







DUNDEE
CORPORATION
 50





Operational
Risk


Operational
risk is generally regarded as the risk of loss resulting from insufficient or
failed internal processes, people and systems, or external
events.  Operational risk is inherent in the activities of financial
institutions, and includes incorrect or unauthorized trade execution, failed
settlement and transaction processing, documentational errors, fiduciary
breaches, improper disclosures involving securities and investment management
activities, theft and fraud.  The impact of any of these can result in
significant financial loss, reputational harm, and regulatory censure and
penalties.  While operational risks cannot be eliminated, they can be
managed with proper internal control processes and procedures and the deployment
of qualified personnel.  DundeeWealth has established a framework for
operational risk management, which includes procedures and control measures, the
deployment of qualified and competent compliance and audit personnel, a process
for regular review of controls by senior management and the use of external
insurance coverage where appropriate.




Business
Infrastructure


DundeeWealth
relies on third party service providers for key components of its business
infrastructure including the brokerage accounting system in its investment
dealer and mutual fund dealer operations, the unit holder and fund accounting
systems in its investment management business, as well as critical data
connections for trade execution and business communications.  A
failure of any key component of its infrastructure could result in significant
disruptions to the business and would likely have a materially adverse effect on
results of operations.  While DundeeWealth has addressed this risk by
instituting various procedures and plans for business continuity and redundancy,
there can be no assurance that material disruptions can be averted in the event
of a failure of a key component.




Credit
Risks in Securities Transactions


DundeeWealth
is exposed to the risk that third parties that owe the Company cash, securities
or other assets may not fulfill their obligations, due to lack of liquidity,
bankruptcy, operational failure or other causes.  These parties
include trading counterparties, customers, clearing agents, exchanges, clearing
houses, other financial intermediaries, and issuers whose securities are held by
DundeeWealth.  Credit risks associated with customers include amounts
loaned in margin accounts.  While credit exposure to specific clients,
counterparties and other debtors is monitored, default risk may arise from
events or circumstances that are otherwise difficult to detect.  The
type and value of securities held as collateral for margin loans is also
reviewed.  An unexpected decline in the value of any such securities
held as collateral may expose DundeeWealth to additional credit
losses.




Risks
of Underwriting Activities


The
underwriting business operated by DundeeWealth’s brokerage subsidiary involves
both economic and regulatory risks.  Underwriting activities may
decline for a number of reasons, impacting DundeeWealth’s
revenues.  An underwriter may incur losses if it is unable to resell
the securities it is committed to purchase or if it is forced to liquidate its
commitment at less than the agreed purchase price.  The brokerage
subsidiary may also be subject to liability for material misstatements or
omissions in prospectuses and other communications with respect to underwritten
offerings and may be exposed to claims and litigation arising from such
offerings.




REAL
ESTATE




Real
Estate Ownership


Real
estate ownership is generally subject to numerous risks, including changes in
general economic conditions, such as the availability and cost of mortgage
funds, local economic conditions (such as an oversupply of office, industrial
and retail properties or a reduction in demand for real estate in the area), the
attractiveness of properties to potential tenants or purchasers, the ability of
tenants to meet their lease obligations, competition for available space, and
other factors.




Illiquidity
of Real Estate Investments


An
investment in real estate is relatively illiquid.  Such illiquidity
will tend to limit our ability to vary our portfolio promptly in response to
changing economic or investment conditions.  In recessionary times it
may be difficult to dispose of certain types of real estate.  The
costs of holding real estate are considerable and during an economic recession
we may be faced with ongoing expenditures with a declining prospect of incoming
receipts.  If we are unable to refinance our mortgages on acceptable
terms, or at all, we may need to dispose of one or more of our real estate
assets.  In such circumstances, it may be necessary for us to dispose
of properties at lower prices in order to generate sufficient cash for
operations.  Additionally, financial or operating difficulties of
other owners resulting in distress sales could depress asset values in the
markets in which we operate in times of illiquidity.  These conditions
could reduce our ability to respond to changes in the performance of our
investments and accordingly could adversely affect our financial condition and
results of operations.







DUNDEE
CORPORATION
 51




Market
Influences




As a
result of market conditions, we may not be able to, or may not wish to develop
our land holdings.  Development of land holdings and properties that
are to be constructed are subject to a variety of risks, not all within our
control.  Such risks include lack of funding, variability in
construction costs and unforeseeable delays.




Regulatory
and Environmental Risks


As an
owner of real estate property, we are subject to various federal, provincial and
state laws relating to environmental matters.  Such laws provide that
we could be liable for the costs of removal and remediation of certain
hazardous, toxic substances released on or in the Company’s properties or
disposed of at other locations, as well as potentially significant
penalties.  The Company has insurance and other policies and
procedures in place to review and monitor environmental exposure, which it
believes mitigates these risks to an acceptable level.  Some of the
properties owned by Dundee Realty or Dundee REIT have or had tenants that use
hazardous substances or create waste.  Such uses can potentially
create environmental liabilities.  A few issues have been identified
through site assessments, including the need to remediate or otherwise address
certain contaminations.  These issues are being carefully managed with
the involvement of professional consultants.  Where circumstances
warrant, designated substance surveys and/or environmental assessments are
conducted.  Although environmental assessments provide us with some
assurance, we may become liable for undetected pollution or other environmental
hazards on our properties against which we cannot insure, or against which we
may elect not to insure where premium costs are disproportionate to our
perception of relative risk.  We do not currently anticipate material
expenditures in respect of any required remediation.




Credit
Risk


Real
estate investments are often made as joint ventures or partnerships with third
parties.  These structures involve certain additional risks, including
the possibility that the co-venturers/partners may, at any time, have economic
or business interests inconsistent with ours, the risk that such
co-venturers/partners could experience financial difficulties which could result
in additional financial demands on Dundee Realty or Dundee REIT to maintain and
operate such properties or repay debt in respect of such properties, and the
need to obtain the co-venturers’/partners’ consents with respect to certain
major decisions in respect of such properties.  The Company attempts
to mitigate these risks by performing due diligence procedures on potential
partners and contractual arrangements, and by closely monitoring and supervising
the joint venture or partnership.




Development
Risks


In
connection with its real estate operations, the Company must comply with
extensive regulations affecting the real estate development
process.  In particular, governmental authorities regulate such
matters as zoning and permitted land uses, levels of density, and building
standards.  The Company must obtain approvals from various
governmental authorities and comply with local provincial and federal laws,
including laws and regulations concerning the protection of the environment in
connection with such development projects.  Obtaining such approvals
and complying with such laws and regulations may result in delays which cause
the Company to incur additional costs which impact the profitability of a
development project, or may restrict development activity altogether with
respect to a particular project.




As well,
the Company’s real estate operations are impacted by its ability to hire and
retain sufficient skilled and experienced contractors required to develop its
real estate projects in a cost effective and timely manner.  An
inability to hire or retain skilled workers or changes in the relationship with
its workforce could result in work stoppages which may have a material adverse
effect on the profitability of its real estate development
activities.




The
Company’s real estate development activities are also sensitive to the credit
and financial stability of counterparties.  The Company’s income would
be adversely affected if purchasers of real estate properties or land and
housing holdings were to become unable or unwilling to meet their obligations to
the Company or if the Company were unable to close the sale of a significant
number of units in a development project on economically favourable
terms.  This could have an adverse impact on the Company’s liquidity
and could reduce its ability to pursue further acquisitions or meet other
financial obligations.  If there are significant adverse changes in
economic or real estate market conditions, the Company may have to sell
properties at a loss or hold undeveloped land or developed properties in
inventory longer than planned.  Inventory carrying costs can be
significant and may result in losses in a poorly performing project or
market.





DUNDEE
CORPORATION
 52





Operational
Risk


Our
revenue properties and Dundee REIT’s portfolio of properties generate income
through rent payments made by tenants.  Upon the expiry of any lease,
there can be no assurance that the lease will be renewed or the tenant
replaced.  Certain significant obligations, including property taxes,
maintenance costs, mortgage payments, insurance costs and related charges must
be made regardless of whether or not a property is producing sufficient income
to pay such expenses.  Upon the expiry of the term of the financing of
any particular property, refinancing may not be available or may not be
available on reasonable terms.  Distributions from Dundee REIT are not
guaranteed and may fluctuate with its financial performance.




Capital
Requirements


Our real
estate assets may be financed through debt.  Upon the expiry of the
term of the financing of any particular property, refinancing may not be
available or may be available only on terms less favourable to us than existing
financing.  Our real estate segment, including Dundee REIT, may
require additional financing in order to grow and expand our real estate
operations.




Changes
in Income Tax Legislation and Implications to Business Structure


On June
12, 2007, amendments to the Income Tax Act were substantively enacted and
subsequently received Royal Assent on June 22, 2007.  These amendments
modify the tax treatment of certain publicly traded trusts and partnerships that
are specified investment flow-through trusts (“SIFTs”).  Under the
SIFT rules, a publicly traded REIT will be considered a SIFT unless it qualifies
for a certain exception.  As a result of a reorganization completed by
Dundee REIT on December 31, 2007, Dundee REIT believes that it has met the
exception required and therefore the SIFT rules should not apply to Dundee REIT
after 2007; however, no assurances can be made in this regard. If Dundee REIT
does not qualify continuously for the exception, the SIFT rules may have an
adverse impact on Dundee REIT and the holders of units of Dundee REIT, on the
value of the units of Dundee REIT and the ability of Dundee REIT to undertake
financings and acquisitions, and if the SIFT rules were to apply, distributable
cash of Dundee REIT may be materially reduced.





The
effect of the recently enacted SIFT rules on the market for the Dundee REIT
units is uncertain. Since the SIFT rules have only recently been enacted, the
Canada Revenue Agency’s administrative policies regarding the interpretation of
the SIFT rules and their application to the trusts and partnerships in which a
publicly traded income fund holds a direct or indirect interest are still under
review. As such, there may be a possible interpretation of the legislation under
which Dundee REIT’s subsidiary partnerships would be viewed as SIFTs. Management
of Dundee REIT does not believe this to be the intent of the legislation and
believes there to be valid technical arguments supporting the fact the
partnerships are not SIFTs.







RESOURCES




The
Resources Industry


The
resources industry is highly competitive and, in addition, involves a number of
risks.  Revenues and profits depend on market prices for resource
commodities, which can fluctuate materially.  Adverse fluctuations can
have a significant negative effect on our revenues and
profitability.  Resource mining and exploration involves a high degree
of risk, which even a combination of experience, knowledge and careful
evaluation may not be able to overcome.  These risks include
environmental hazards, industrial accidents, unusual or unexpected formations,
pressures, cave-ins and flooding that could result in damage to life or
property, environmental damage and possible legal liability.  It is
also highly capital intensive and the ability to complete a development or
exploration project may be dependent on the entity’s ability to raise additional
capital.  Access to public financing has been negatively impacted by
current global financial conditions.  This may impact our ability and
those of our resource based subsidiaries and equity accounted investees to
obtain equity or debt financing in the future and, if obtained, on favourable
terms.  In certain cases, this may be achieved only through joint
ventures or other relationships that would reduce the entity’s ownership
interest in the project.  There is no assurance that additional
resources or reserves in commercial quantities will be discovered, or that
development operations will prove successful.




Competition


The
resources industry is competitive in all its phases.  The Company
competes with numerous other participants in the search for the acquisition of
mining and oil and natural gas properties and in the marketing of the resulting
products.  The Company’s ability to increase reserves in the future
will depend not only on its ability to develop its present properties, but also
on its ability to select and acquire suitable producing properties or prospects
for exploratory drilling.  Competitive factors in the distribution and
marketing of resource products include price and methods of reliability of
delivery.


DUNDEE
CORPORATION
 53


Competition
in the resources industry includes companies which have greater financial
resources, staff and facilities than those of the Company’s
investees.  Our investees may not be fully insured against all risks
relating to their operations, including those related to
expansion.  Some of those risks may not be insurable.




Insurance


Resource
operations are subject to all the risks and hazards typically associated with
such operations, including hazards such as fire, explosion, blowouts, cratering
and oil spills, each of which could result in substantial damage to production
facilities or other property and the environment, or in personal
injury.  As is the case with other participants in the resources
industry, the Company is not fully insured against all of these risks, nor are
all such risks insurable.  Although the Company will maintain
liability insurance in an amount which it considers adequate and consistent with
industry practice, the nature of these risks is such that liabilities could
exceed policy limits, in which event the Company could incur significant costs
that could have a material adverse effect upon its financial
condition.




Political
and Regulatory


Many of
our resource investees operate in jurisdictions which cause their operations to
be subject to business risks inherent in those jurisdictions, in addition to
business risks generally inherent to the resources industry.  These
may involve matters arising out of government policies, receipt and maintenance
of necessary permits and title to properties, imposition of special taxes or
similar charges by regulatory bodies, foreign exchange rate fluctuations and
controls, access to capital markets, civil disturbances, deprivation or
unenforceability of contract rights or the taking of property without fair
compensation, lack of adequate infrastructure and credit risk.  It is
important that the entities operating in a jurisdiction maintain good
relationships with the governments of such jurisdictions.  This may
not be possible if the government of a country changes.




Certain
regions in which our investee companies operate have been subject to political
and economic instability.  Operating in foreign jurisdictions may
necessitate capital expenditures being denominated in several different
currencies, while the Company is reporting in Canadian
dollars.  Fluctuations in the rates of exchange may affect the ability
of investee companies to carry out their exploration and development
programs.  Future development costs may be higher than currently
envisioned due to unforeseen events such as currency fluctuations.




Environmental,
Health and Safety Regulations


Environmental,
health and safety legislation affects nearly all aspects of the Company’s and
its resource investees’ resource operations including mine development, worker
safety, waste disposal, emission controls and protection of endangered and
protected species.  Compliance with environmental, health and safety
legislation can require significant expenditures and failure to comply with
environmental, health and safety legislation may result in the imposition of
fines and penalties, the temporary or permanent suspension of operations,
clean-up costs arising out of contaminated properties, damages and the loss of
important permits.  Exposure to these liabilities arises not only from
existing operations, but from operations that have been closed or sold to third
parties.  The companies engaged in resource activities may be required
to reclaim properties after mining is completed and specific requirements vary
among jurisdictions.  In some cases, financial assurances as security
for reclamation costs may be required which may exceed estimates for such
costs.  The Company may also be held liable for worker exposure to
hazardous substances and for accidents causing injury or death.  There
can be no assurances that the Company or its resource investees will at all
times be in compliance with all environmental, health and safety regulations or
that steps to achieve compliance would not materially adversely affect our
business.




Environmental,
health and safety laws and regulations are evolving in all jurisdictions where
the Company operates.  The Company is not able to determine the
specific impact that future changes in environmental, health and safety laws and
regulations may have on our operations and activities, and our resulting
financial position; however, we anticipate that capital expenditures and
operating expenses will increase in the future as a result of the implementation
of new and increasingly stringent environmental, health and safety
regulations.  For example, emissions standards are expected to become
increasingly stringent as are laws relating to the use and production of
regulated chemical substances.  Further changes in environmental,
health and safety laws, new information on existing environmental, health and
safety conditions or other events, including legal proceedings based upon such
conditions or an inability to obtain necessary permits, could require increased
financial reserves or compliance expenditures or otherwise have a material
adverse effect on the Company.




Commodity
Prices and Estimating Quantities of Reserves


Commodity
prices, including oil and natural gas prices, are unstable and subject to
fluctuations.  Any material decline in prices could result in a
reduction in revenues of our investees.  The economics of producing
from some wells may change as a result of





DUNDEE
CORPORATION
 54


lower
prices.  From time to time, resource investees may enter into
agreements to fix prices on their production to mitigate these risks, however,
this will not permit them to benefit from future increases in commodity
prices.  The market prices of securities of resource companies have
experienced volatility in the past, often based on factors unrelated to the
financial performance or prospects of the underlying company, which include
general economic conditions and cycles and macroeconomic
developments.




There are
numerous uncertainties inherent in estimating quantities of reserves and cash
flows to be derived therefrom, including factors that are beyond the control of
the Company and our investees.  These evaluations include a number of
assumptions relating to factors such as initial production rates, production
decline rates, ultimate recovery of reserves, timing and amount of capital
expenditures, marketability of production, future prices of the underlying
commodity, operating costs and royalties and other government levies that may be
imposed over the producing life of the reserves.  Actual production
and cash flows derived therefrom will vary from these evaluations and such
variations could be material.




Skilled
Labour and Availability of Equipment


The
resources industry involves risks regarding labour and employment
matters.  Currently, the mining industry is generally facing a
shortage of skilled labour as well as a lack of availability of suitable mining
equipment.  If resource companies are unable to hire and retain
sufficient skilled employees, the ability to operate optimally will be
impaired.  Also, many of the resource investees are dependent on the
services of their senior management and a small number of highly skilled and
experienced executives and personnel.  The loss of these key personnel
could have a material adverse effect on the operations.  Adverse
changes in the scheme of labour relations which may be introduced by
governmental authorities may have a material effect on the business, results of
operations and financial condition.




Resource
activities are dependent on the availability of drilling and related equipment
in the particular areas where such activities will be
conducted.  Demand for such limited equipment or access restrictions
may affect the availability of such equipment to the Company and may delay
exploration and development activities.  To the extent that the
Company is not the operator of its resource properties, the Company will be
dependent on such operators for the timing of activities related to such
properties and will be largely unable to direct or control the activities of the
operators.




GENERAL
BUSINESS RISKS




Reputational
Risk


Reputational
risk is the potential that adverse publicity to our corporate image, whether
true or not, will or may cause a decline in our earnings, liquidity, share price
or client base.  Reputational risk is inherent in virtually all of our
business transactions, even when the transaction is fully compliant with legal
and regulatory requirements.  Reputational risk cannot be managed in
isolation, as it often arises as a result of operational, regulatory and other
risks inherent to our business.  For these reasons, our framework for
reputational risk management is integrated into all other areas of risk
management and is a key component of the codes of business conduct and ethics of
which our employees are expected to observe.  We place a high emphasis
on safeguarding our reputation, as once compromised, it can be difficult to
restore.




Investing
in a Variety of Industry Sectors


Our
investments are in a variety of industry sectors and therefore, each investment
will be subject to specific risks inherent in the unique business environment in
which it operates.  In the case of equity accounted investments, we
are required to record our share of income or loss from these investments and
related dilutions and accordingly, our earnings may be affected by these
amounts.  Further, to the extent that the investment is a public
company, the investment is subject to market forces which may fluctuate beyond
our control.  Certain of our private company holdings are illiquid and
disposition may be difficult.  We may realize lower proceeds of
disposition in the event that we are required to dispose of an investment at a
point in time when market prices are low.  We mitigate this risk by
utilizing our revolving credit facilities so that we can maximize the timing of
any dispositions.




Capital
Requirements


The
Company and/or its subsidiaries may be required to raise additional debt or
equity funds through public or private financing, strategic relationships or
other arrangements for a variety of purposes, including business acquisitions,
to capitalize on unanticipated opportunities, as well as to respond to
competitive pressures.  Continued disruption in the financial markets
may limit the Company’s access to capital in the event that the Company is
required to seek additional liquidity to operate its
business.  Additional equity funding in investee companies may reduce
the percentage ownership interest of the Company in such investee companies and
may cause the Company to lose its majority or significant influence
stake.  Additional equity funding of the


DUNDEE
CORPORATION
 55


Company
may reduce the percentage ownership of the existing shareholders of the Company
and may dilute net book value per share.  It is also possible that any
such equity funding may involve securities which have rights or privileges
senior to those of existing shareholders or that any debt financing, if
available, may involve restrictive covenants.  There can be no
assurance that such additional funding, if needed, will be available on economic
terms, or at all. These developments may also impair the Company’s ability to
renew its current credit facility on favourable terms, resulting in increased
costs to the Company.




Compliance
with Debt Covenants


The
Company’s current credit facility contains numerous restrictive covenants that
limit the discretion of the Company with respect to certain business
matters.  These covenants place significant restrictions on, among
other things, the ability of the Company and certain of its subsidiaries to
create liens or other encumbrances, to make certain other payments, loans and
guarantees and to sell or otherwise dispose of assets and merge or consolidate
with another entity.  In addition, the credit facility contains a
number of financial covenants that require the Company and certain of its
subsidiaries to meet certain financial ratios and financial condition
tests.  A failure to comply with the obligations in the Company’s
credit facility could result in a default which, if not cured or waived, could
result in an acceleration of the relevant indebtedness.  If the
indebtedness under the Company’s current credit facility were to be accelerated,
the financial condition of the Company would be adversely affected.





Corporate
Insurance


Regardless
of our effectiveness in monitoring and administering established compliance
policies and procedures, the Company, and any of its directors, officers,
employees and agents, may be subject to liability or fines which may limit the
ability of each to conduct business.  We maintain various types of
insurance to cover certain potential risks and continuously evaluate the
adequacy of this coverage.  In recent years, the cost of obtaining
insurance has increased while the number of insurance providers has
decreased.  As a result of the introduction of the secondary market
civil liability regime, the ability to obtain insurance on reasonable economic
terms may be even more difficult in the future.  To date, we have
chosen not to obtain directors and officers insurance.





The
Ability to Execute Business Plans and Integration


The
Company’s growth strategy has relied in part on acquisitions and the associated
realization of operating synergies.  A successful acquisition requires
the Company to identify suitable candidates for purchase on acceptable terms and
the acquired business to be successfully integrated in a timely and
non-disruptive manner designed to minimize the risk of loss of client
business.  Even with the investment of management and financial
resources, an acquisition may not produce the anticipated revenue, earnings or
business synergies anticipated at the time of acquisition.  In
addition, acquisitions can involve non-recurring charges and if not successful,
the write-off of amounts of goodwill and other intangible assets that could have
an adverse effect on the financial results.  Management performs an
extensive review of the value of goodwill and other intangible assets, which
review has not identified any required adjustments during 2008 and
2007.  However, there can be no assurance that the Company will not
incur significant costs in the future in connection with such potential
liabilities.




Litigation
Risk


Litigation
risk is inherent in each of the business lines of the Company as well as in
operations that may be acquired by the Company.  Litigation risk
cannot be eliminated, even if there is no legal cause of action.  The
legal risks facing the Company, its directors, trustees, officers or employees
in this respect include potential liability for violations of securities laws,
breach of fiduciary duty and misuse of investors’ funds.  It is
possible that litigation and in particular, class action litigation, may
increase in Canada as a result of the introduction of the secondary market civil
liability regime.




Possible
Volatility of Stock Price


The
market price of the Company’s shares has been, and may in future, be subject to
significant fluctuation in response to numerous factors, including variations in
the annual or quarterly financial results of its subsidiaries or their
competitors, the timing of announcements of acquisitions by its subsidiaries or
their competitors, conditions in the economy in general or in the financial
services, real estate, or resources sectors in particular, changes in applicable
laws and regulations, rumours and speculation, and other
factors.  Moreover, from time to time, the stock market experiences
significant price and volume volatility that may affect the market price of the
Company’s shares for reasons unrelated to the performance of the Company or its
subsidiaries.  No prediction can be made as to the effect, if any,
that future sales of shares or the availability of shares for future sale
(including shares issued under share based compensation arrangements) will have
on the market price of the shares existing from time to time.  Sales
of substantial numbers of such shares or the perception that such sales could
occur, could adversely affect the price of the shares.


DUNDEE
CORPORATION
 56


Other


The
Company cautions that the preceding discussion of factors that may affect future
results is not exhaustive.  Dundee Corporation’s performance may also
be affected by other specific risks that may be highlighted from time to time in
public filings of the Company or its subsidiaries which may be available on the
Canadian Securities Administrators’ website at www.sedar.com.  Investors
and others should carefully consider these factors, as well as other
uncertainties, assumptions and industry and company specific factors that may
adversely affect future results.  The Company assumes no obligation,
except as required by law, to update or revise its risk disclosure to reflect
new events or circumstances.




FORWARD
LOOKING STATEMENTS




Dundee
Corporation’s public communications may include written or oral forward looking
statements.  Statements of this type are included in this Management’s
Discussion and Analysis (“MD&A”), and may be included in other filings with
the Canadian and United States securities regulators, stock exchanges or in
other communications.  All such statements are made pursuant to the
“safe harbour” provisions of applicable Canadian and U.S. Securities
laws.  Forward looking statements may include, but are not limited to,
statements about anticipated future events including comments with respect to
our objectives and priorities for 2009 and beyond, strategies or further actions
with respect to the Company, its products and services, business operations,
financial performance and condition.  Forward looking statements are
statements that are predictive in nature, depend upon or refer to future events
or conditions or include words such as “expects”, “anticipates”, “intends”,
“plans”, “believes”, “estimates” or similar expressions.  Such
statements are based on current expectations of management of the Company and
inherently involve numerous risks and uncertainties, known and unknown,
including economic factors and those affecting the financial services, real
estate and resources industries generally.  The forward looking
information contained in this MD&A is presented for the purpose of assisting
our shareholders in understanding our business operations and strategic
priorities and objectives as at the periods indicated and may not be appropriate
for other purposes.




The
risks, uncertainties and other factors that may influence actual results are
referenced in the section entitled “Managing Risk” in this
MD&A.  Actual results may differ materially from the forward
looking statements contained in this MD&A, depending upon, among other
factors, general economic and market conditions, our ability to execute our
strategic plans and meet financial obligations, the performance of the Company’s
principal subsidiaries and the Company’s ability to raise additional capital;
creating, attracting and retaining AUM and AUA in light of the global recession
and steep declines in global equity markets; competition faced by the Company;
regulation of the Company’s businesses; risks associated with the Company’s real
estate and resources businesses and the Company’s investment holdings in
general, including risks associated with oil and gas and mining exploration,
development and processing activities, environmental risks, inflation, changes
in interest rates, commodity prices and other financial exposures; maintenance
of minimum regulatory capital requirements for certain of the Company’s
subsidiaries and the ability of the Company and its subsidiaries to attract and
retain key personnel.  The preceding list is not exhaustive of all
possible risk factors that may influence actual results, and are identified
based upon information available as of March 31, 2009.




Assumptions
about the future performance of the Canadian and U.S. economies were material
factors considered by management when setting the Company’s strategic priorities
and objectives, and when determining our financial targets.  In
determining our expectations for economic growth in the financial services, real
estate and resource sectors, we considered historical economic data provided by
the Canadian government and its agencies and current market conditions,
including the status of the current economic and credit crisis.




Forward
looking statements contained in this MD&A are not guarantees of future
performance and actual events and results could differ materially from those
expressed or implied by forward looking statements made by the
Company.  Prospective investors are cautioned to consider these and
other factors carefully when making decisions with respect to the Company and
not place undue reliance on forward looking statements.  As evidenced
by the events of the past year, market volatility and the recent economic and
credit crisis, circumstances affecting the Company may change
rapidly.  Except as may be required by applicable law, the Company
does not undertake any obligation to update publicly or revise any such forward
looking statements, whether as a result of new information, future events or
otherwise.







DUNDEE
CORPORATION
 57





INFORMATION
CONCERNING DUNDEE CORPORATION




Additional
information concerning Dundee Corporation, including a copy of the Company’s
Annual Information Form may be found on SEDAR at www.sedar.com.




Toronto,
Ontario




March 31,
2009
















58