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Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2003, for Fahnestock Viner Holdings Inc. (announced name change to Oppenheimer Holdings Inc. effective September 2, 2003). The Company is a diversified financial services firm engaged in retail securities brokerage, institutional sales and trading, investment banking, and asset management. The reporting period is significantly impacted by the January 2003 acquisition of the U.S. Private Client Division of CIBC World Markets (operating as the Oppenheimer & Co. division) and the June 2003 acquisition of its U.S. Asset Management Division.

Key Financial Metrics

Note: Revenue and profit figures are expressed in thousands of U.S. dollars in the source text.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 141% for the quarter and 135% for the six-month period compared to 2002. This surge is primarily attributed to the acquisition of the Oppenheimer & Co. division.
• Profitability: Net profit increased approximately 800% for the quarter and 259% for the six-month period year-over-year.
• Balance Sheet Expansion: Total assets increased 102% from December 31, 2002, driven by the acquisition and the conversion of Oppenheimer client accounts to the Company's clearing platform in May 2003.
• Expense Increases: Total expenses rose 128% (quarter) and 123% (six months) due to volume-related compensation, integration costs, and transition service fees paid to CIBC World Markets prior to the May 2003 clearing conversion.
• Segment Performance: The Private Client segment reported a loss of $10.2 million for the six months ended June 30, 2003, due to transition service costs and litigation settlements, contrasting with a profit in the Capital Markets and Asset Management segments.

Guidance, Outlook, and Risks

Management Commentary: Management expects operating margins to improve in coming quarters as integration completes and overlapping services are eliminated. The Company successfully converted client accounts to its own clearing platform on May 27, 2003, ending reliance on CIBC for transition services. The Company anticipates cost savings post-conversion.

Outlook: The Company remains confident in the transformative nature of the acquisitions. Market conditions in Q2 2003 were favorable, with strong equity rallies and low interest rates.

Risks and Contingencies:

• Integration Risks: The Company encountered client service issues and operational difficulties during the massive account conversion, though these were largely rectified by the end of Q2.
• Litigation: The Company faces ongoing litigation risks, including a $500,000 NYSE fine settled in June 2003 regarding mutual fund position transfers. Management maintains reserves but notes potential for additional unfavorable judgments.
• Market Risk: Value-at-Risk (VaR) for the trading portfolio increased to $475,000 (95% confidence, one-day holding) from $247,000 in 2002, reflecting a larger equity position.
• Debt Obligations: The Company issued approximately $161 million in debentures and a $66 million zero-coupon promissory note to finance the acquisitions. Interest and principal payments are expected to be serviced by internally generated funds.

Investor Verification Checklist

• Integration Progress: Verify the extent of cost savings realized post-May 2003 clearing conversion and the status of remaining transition service fees.
• Debt Servicing: Confirm the Company's ability to service the new $204.3 million long-term debt and $190.2 million in bank borrowings using cash flows from the acquired business.
• Private Client Segment: Monitor the Private Client segment's ability to return to profitability as one-time transition and litigation costs subside.
• Regulatory Compliance: Review the implementation of recommendations from the independent consultant retained following the NYSE settlement.
• Share Repurchases: Track the execution of the new Normal Course Issuer Bid announced July 8, 2003, to purchase up to 636,000 Class A Shares.