UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-K   þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934For the
fiscal year ended December 31, 2004
   o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934For
the transition period from _________ to _________.
 Commission file number 1-12043 OPPENHEIMER HOLDINGS INC.  Ontario, Canada
(State or other jurisdiction of
incorporation or organization)
    
    98-0080034
(I.R.S. Employer
Identification No.)P.O. Box 2015, Suite 1110
20 Eglinton Avenue West
Toronto, Ontario, Canada
(Address of principal executive offices)
    
    M4R 1K8
(Zip Code)
 Registrants Telephone number, including area code: (416) 322-1515 Securities registered pursuant to Section 12(b) of the Act:Title of each class
Class A non-voting shares
    
    Name of each exchangeon which registered
New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:Title of each class
Not Applicable Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of the registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Securities Exchange Act of 1934). Yes þ No o The aggregate market value of the voting stock of the Company held by non-affiliates of the Company
cannot be calculated in a meaningful way because there is only limited trading in the class of
voting stock of the Company. The aggregate market value of the Class A non-voting shares held by
non-affiliates of the Company at June 30, 2004 was $371,701,000 based on the closing price of the
Class A non-voting shares on the New York Stock Exchange as at June 30, 2004 of $27.78. The number of shares of the Companys Class A non-voting shares and Class B voting shares (being
the only classes of common stock of the Company) outstanding on March 10, 2005 was 13,297,671 and
99,680 shares, respectively.


TABLE OF CONTENTS Item Number
    
    
    
    
    PagePART 11.
    
    Business
    
    
    22.
    
    Properties
    
    
    153.
    
    Legal Proceedings
    
    
    154.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16PART II5.
    
    Market for the Registrants Common Equity and Related
Stockholder Matters
    
    
    176.
    
    Selected Financial Data
    
    
    207.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    217a.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    348.
    
    Financial Statements and Supplementary Data
    
    
    379.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    659a.
    
    Controls and Procedures
    
    
    659b.
    
    Other Information
    
    
    65PART III10.
    
    Directors and Executive Officers of the Registrant
    
    
    6611.
    
    Executive Compensation
    
    
    6612.
    
    Security Ownership of Certain Beneficial Owners and
Management
    
    
    6613.
    
    Certain Relationships and Related Transactions
    
    
    6614.
    
    Principal Accounting Fees and Services
    
    
    67PART IV15.
    
    Exhibits, Financial Statement Schedules and Reports on
Form 8-K
    
    
    68Signatures
    
    
    69Certifications
    
    
    73


PART I 
 Item 1. BUSINESS Oppenheimer Holdings Inc., formerly called Fahnestock Viner Holdings Inc., prior to that called
E.A. Viner Holdings Limited and immediately prior to that called Goldale Investments Limited (the
Company), maintains its registered office and principal place of business at 20 Eglinton Avenue
West, Suite 1110, Toronto, Ontario Canada M4R 1K8 and its telephone number is (416) 322-1515. The Company was originally incorporated under the laws of British Columbia. Pursuant to its
Certificate and Articles of Continuation effective October 12, 1977, the Companys legal existence
was continued under the Business Corporation Act (Ontario) as if it had been incorporated as an
Ontario corporation. The Company is a holding company and carries on no active business. It owns, directly or through
intermediate subsidiaries, Oppenheimer & Co. Inc. (formerly called Fahnestock & Co. Inc. and prior
to that called Edward A. Viner & Co., Inc.), a New York corporation (Oppenheimer); Freedom
Investments, Inc., a Delaware corporation (Freedom); Oppenheimer Asset Management Inc. (formerly
called Hudson Capital Advisors Inc.), a New York corporation (OAM); Evanston Financial, Inc., a
New York corporation (Evanston); since September 17, 2001, Josephthal & Co. Inc., a New York
corporation (Josephthal); and since November 9, 2001, Prime Charter, Ltd., a Delaware corporation
(Prime). Oppenheimer, OAM and Freedom are sometimes collectively referred to as the Operating
Subsidiaries. Through the Operating Subsidiaries, the Company is engaged in the securities
brokerage and trading business and offers investment advisory and other related financial services.
Oppenheimer and OAM are the principal Operating Subsidiaries. Oppenheimer is engaged in the
securities brokerage business in the United States, operates in Toronto, Canada as an International
Dealer and, through the agency of local licensed broker-dealers, operates offices in Buenos Aires,
Argentina and Caracas, Venezuela. OAM is engaged in the investment advisory business in the United
States. In addition, Oppenheimer conducts investment advisory business under the name Fahnestock
Asset Management, a division of Oppenheimer. The business formerly conducted by Josephthal and
Prime is now conducted by Oppenheimer. The private client business acquired from CIBC World Markets
Inc. in January 2003 discussed below is being conducted by Oppenheimer. The asset management
business acquired from CIBC World Markets in June 2003 discussed below is being conducted by OAM.
The Company operates a discount brokerage business through Freedom. In March 2002, through Freedom, the Company purchased the business of BUYandHOLD Securities
Corporation and affiliates for cash consideration of $2,297,000. BUYandHOLD is an on-line brokerage
business headquartered in Edison, NJ. The combination of the Freedom and BUYandHOLD technology
platforms provides clients with a comprehensive and diversified suite of online financial services.
BUYandHOLD operates as a division of Freedom. The acquisition was accounted for by the purchase
method. In May 2002, Oppenheimer Trust Company received a charter as a limited purpose bank domiciled in
New Jersey. Oppenheimer Trust Company offers trust services to the clients of Oppenheimer and OAM. 2


On January 3, 2003, the Company acquired the U.S. Private Client Division of CIBC World Markets and
on June 4, 2003 acquired the U.S. Asset Management Division of CIBC World Markets (the Oppenheimer
divisions) for a total consideration of approximately $242 million, of which approximately $16
million was paid in cash at closing from cash on hand and the balance was paid from the proceeds of
the issuance of debt instruments. The private client business is being operated by Oppenheimer and
added approximately 620 account executives in 18 branches located in the major financial centers of
the United States to its business at the closing date. Client assets of the Private Client Division
were approximately $30 billion at the closing date. Assets under management in the Asset Management
Division were approximately $8.5 billion at the acquisition date. The asset management business is
being operated by OAM. The acquisition was accounted for by the purchase method. This transaction
more than doubled the Companys retail exposure and asset base. At December 31, 2004,
Oppenheimer employed approximately 1,667 full-time registered representatives
and approximately 1,187 other employees in trading, research, investment banking, investment
advisory services, public finance and support positions in the United States for Oppenheimer, OAM
and Freedom, for a total of approximately 2,854 full-time employees. Oppenheimer and Freedom are broker-dealers registered with the Securities and Exchange Commission
(the SEC) and in all other jurisdictions where their respective businesses require registration.
Oppenheimer, in addition to its United States operations, has two additional offices: it conducts
business in Caracas and Buenos Aires through local broker-dealers who are licensed under the laws
of Venezuela and Argentina, respectively. The Operating Subsidiaries are collectively engaged in a broad range of activities in the
securities brokerage business, including retail securities brokerage, institutional sales, bond
trading and investment banking  offering both corporate and public finance services, underwriting,
research, market making and investment advisory and asset management services. No material part of
the Companys revenues, taken as a whole, are derived from a single customer or group of customers. Oppenheimer is a member of the New York Stock Exchange, Inc. (NYSE), the National Association of
Securities Dealers, Inc. (NASD), the American Stock Exchange, Inc. (AMEX), the Chicago Stock
Exchange Incorporated (CSE), the Chicago Board Options Exchange, Inc. (CBOE), the New York
Futures Exchange, Inc. (NYFE), the National Futures Association (NFA) and the Securities
Industry Association (SIA). In addition, Oppenheimer has satisfied the requirements of the
Municipal Securities Rulemaking Board (MSRB) for effecting customer transactions in municipal
securities. Freedom is a member of the NASD. Oppenheimer, which acts as a clearing broker for Freedom and carries an omnibus account for the
BUYandHOLD Division of Freedom, which is itself a self-clearing firm, is also a member of the
Securities Investor Protection Corporation (SIPC), which provides, in the event of the
liquidation of a broker-dealer, protection for customers accounts (including the customer accounts
of other securities firms when it acts on their behalf as a clearing broker) held by the firm of up
to $500,000 for each customer, subject to a limitation of $100,000 for claims for cash balances.
SIPC is funded through assessments on 3


registered broker-dealers, which may not exceed 1% of a broker-dealers gross revenues (as
defined); SIPC assessments were a flat fee of $150 in 2004, 2003 and 2002. In addition, Oppenheimer
has purchased an additional excess SIPC policy protection from
Lloyds of London of an additional $74,500,000 (and $900,000 for claims for cash balances) per
customer. The excess SIPC policy has an aggregate limit of liability of $400,000,000. The
Company has entered into an indemnity agreement with Lloyds of London pursuant to which the Company
has agreed to indemnify Lloyds of London for losses incurred by Lloyds under the policy. The Companys internet address is www.opco.com. The Company makes available free of charge through
its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and other SEC filings and all amendments to those reports within 24 hours of such material
being electronically filed with or furnished to the SEC. SOURCES OF REVENUE:
The Company derives most of its revenues from the operations of its principal subsidiaries,
Oppenheimer and OAM. Although maintained as separate entities, the operations of the Companys
brokerage subsidiaries are closely related because Oppenheimer acts as clearing broker and omnibus
in transactions initiated by Freedom. Except as expressly otherwise stated, the discussion below
pertains to the operations of Oppenheimer. COMMISSIONS A significant portion of Oppenheimers revenues is derived from commissions from retail and, to a
lesser extent, institutional customers on brokerage transactions in exchange-listed and
over-the-counter corporate equity and debt securities. Brokerage commissions are charged on both
exchange and over-the-counter transactions in accordance with a schedule, which Oppenheimer has
formulated. Often, discounts are granted to customers, generally on large trades or to active
customers. Oppenheimer also provides a range of services in other financial products to retail and
institutional customers, including the purchase and sale of options on the CBOE, the AMEX and other
stock exchanges as well as futures on indexes listed on various exchanges. Commission business relies heavily on the services of financial consultants with good sales
production records and good reputations. Competition among securities firms for such personnel is
intense. Retail clients accounts are serviced by retail financial advisors (excluding the
institutional financial consultants referred to below) in Oppenheimers offices. Oppenheimers
institutional clients, which include mutual funds, banks, insurance companies, hedge funds, and
pension and profit-sharing funds, are serviced by institutional financial advisors. (For a
discussion of regulatory matters, see Regulation.) The institutional department is supported by
the equity research department which provides coverage of a number of commercial and industrial as
well as emerging growth companies and special situation investments. Securities Clearance Activities Oppenheimer provides a full range of securities clearance services to two non-affiliated securities
firms on a fully-disclosed basis. In addition to commissions and service charges, 4


Oppenheimer derives substantial interest revenue from its securities clearing activities. See
Interest  Securities Borrowed And Loaned. Oppenheimer provides margin financing for the clients
of the securities firms for which it clears, with the securities firms guaranteeing the accounts of
their clients. Oppenheimer also extends margin credit directly to its correspondent firms to the
extent that such firms hold securities positions for their own account. Because Oppenheimer must
rely on the guarantees and general credit of its
correspondent firms, Oppenheimer may be exposed to significant risks of loss if any of its
correspondents or its correspondents customers are unable to meet their respective financial
commitments. See Risk Management. Commodities Oppenheimer is a futures commission merchant and clears commodities transactions on a number of
commodities exchanges for its clients that trade commodities through a correspondent firm on an
omnibus basis. Such client commodity accounts contain significant leverage and thus have a greater
than average likelihood of becoming unsecured or for clients incurring substantial losses, that
ultimately could result in a loss to the Company. PRINCIPAL TRANSACTIONS In the regular course of its business, Oppenheimer takes securities positions as a market maker to
facilitate customer transactions and for investment purposes. In making markets and when trading
for its own account, Oppenheimer exposes its own capital to the risk of fluctuations in market
value.
Oppenheimer monitors its risk by maintaining its securities positions at or below certain
pre-established levels. These levels reduce certain opportunities to realize profits in the event
that the values of such securities increase. However, they also reduce the risk of loss in the
event of decreases in such values and result in controlled interest costs incurred on funds
provided to maintain such positions. Oppenheimer also attempts to minimize risk with respect to its
principal transactions by re-selling (or buying) to offset its positions quickly after establishing
positions, thereby reducing the need to hold securities inventory positions for even short periods
of time. Trading profits or losses depend on (i) the skills of those employees engaged in market-making
activities, (ii) the capital allocated to holding positions in securities and (iii) the general
trend of prices in the securities markets. Trading as principal requires the commitment of capital
and creates an opportunity for profits or an exposure to risk of loss due to market fluctuations.
Oppenheimer takes both long and short positions in those securities in which it makes a market. Equities.  Oppenheimer acts as both principal and agent in the execution of its customers orders
in the over-the-counter market. Oppenheimer buys, sells and maintains an inventory of a security in
order to make a market in that security. (To make a market in a security is to maintain firm
bid and offer prices by standing ready to buy or sell round lots at publicly quoted prices. In
order to make a market, it is necessary to commit capital to buy, sell and maintain an inventory of
a security.) In executing customer orders for over-the-counter securities in which it does not make
a market, Oppenheimer generally charges a commission and acts as agent, or will act as principal by
marking the security up or down in 5


a riskless transaction, working with another firm which is a market-maker acting as principal.
However, when the buy or sell order is in a security in which Oppenheimer makes a market,
Oppenheimer normally acts as principal and purchases from or sells to its customers at a price
which is approximately equal to the current inter-dealer market price plus or minus a mark-up or
mark-down. The stocks in which Oppenheimer makes a market also may include those of issuers which
are followed by Oppenheimers research department. Oppenheimer makes markets in over 800
over-the-counter equity securities, and trades securities for its own account, as well as to
facilitate customer transactions. As a result of the move to decimal trading in the NASDAQ, which began for all stocks in April 2001,
narrowing bid-ask spreads and smaller price increments are being experienced and are resulting in a
decrease in trading revenue earned from the Companys market making operations. Oppenheimer also
trades in OTC Bulletin Board and pink sheet securities. These securities are typically more
illiquid, have smaller capitalizations and may involve more risk than NASDAQ-traded securities. High Yield.Oppenheimer also trades and positions non-investment grade public and private debt
securities, as well as distressed securities. Risk of loss upon default by the borrower is
significantly greater with respect to unrated or less than investment grade corporate debt
securities than with other corporate debt securities. These securities are generally unsecured and
are often subordinated to other creditors of the issuer. These issuers usually have high levels of
indebtedness and are more sensitive to adverse economic conditions, such as recession or increasing
interest rates, than are investment grade issuers. There is a limited market for some of these
securities and market quotes are available only from a small number of dealers. Other Trading and Investment Activities Oppenheimer holds positions in its trading accounts in over-the-counter securities and in
exchange-listed securities in which it does not make a market and may engage from time to time in
other types of principal transactions in securities. Oppenheimer has several trading departments
including: a convertible bond department, a risk arbitrage department, a corporate bond dealer
department, a municipal bond department, a government/mortgage backed securities department, and a
department that underwrites and trades U.S. government agency issues, taxable corporate bonds, and
UITs. These departments continually purchase and sell securities and make markets in order to
make a profit on the inter-dealer spread. Although Oppenheimer from time to time holds an inventory
of securities, more typically, it seeks to match customer buy and sell orders. In addition,
Oppenheimer or OAM hold proprietary positions in equity or fixed income securities in which it may
not act as a dealer. The size of its securities positions on any one day may not be representative of Oppenheimers
exposure on any other day because securities positions vary substantially based upon economic and
market conditions, allocations of capital, underwriting commitments and trading volume. Also, the
aggregate value of inventories of stocks which Oppenheimer may carry is limited by the Net Capital
Rule. See Net Capital Requirements and Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and Capital Resources. In the case of OAM, it holds investments as general partner in a range of investment 6


partnerships (hedge funds), which are offered to Oppenheimer hedge fund qualified clients as well
as qualified clients of other broker-dealers. Investment Income Principal transactions with customers as well as market-making and other trading and investment
activities, dividends and interest earned on securities held in inventory, cash and cash
equivalents and cash and securities held in segregated accounts are treated as investment income. The Companys investment activities primarily include investing in equity and equity-related
securities and limited partnerships as well as general partnership interests in connection with
private investment transactions, either for the accounts of Company-sponsored private equity
partnerships, real estate partnerships or special purpose partnerships or for its own account.
These activities include mutual fund investments, insurance vehicles with investment options,
including those made in connection with its deferred compensation plans, venture capital
investments, and investments in portfolio and operating companies. The fair value of these
investments is subject to a higher degree of volatility and may include significant risks of loss
while attempting to obtain higher returns than those available from
publicly-traded securities. INTEREST Oppenheimer derives a substantial portion of its interest revenue, and incurs a substantial portion
of its interest expense, in connection with its securities borrowed/ securities loaned activity.
Oppenheimer also earns interest on its securities portfolio, on its operating and segregated
balances, on its margin lending activity and on certain of its investments. Oppenheimer also incurs
interest expense on its long-term debt, bank loans and free credit balances in the accounts of
customers. Securities Borrowed/ Securities Loaned.In connection with both its trading and brokerage
activities, Oppenheimer borrows securities to cover short sales and to complete transactions in
which customers have failed to deliver securities by the required settlement date and lends
securities to other brokers and dealers for similar purposes. Oppenheimer has an active securities
borrowed and lending matched book business (Matched Book), in which Oppenheimer borrows
securities from one party and lends them to another party. When Oppenheimer borrows securities,
Oppenheimer provides cash to the lender as collateral, which is reflected in the Companys
financial statements as receivable from brokers and dealers. OPCO earns interest revenues on this
cash collateral. Similarly, when Oppenheimer lends securities to another party, that party provides
cash to Oppenheimer as collateral, which is reflected in the Companys financial statements as
payable to brokers and dealers. Oppenheimer pays interest expense on the cash collateral received
from the party borrowing the securities. Margin Lending.Customers transactions are executed on either a cash or margin basis. In a
margin transaction, Oppenheimer extends credit to the customer, collateralized by securities and
cash in the customers account, for a portion of the purchase price, and receives income from
interest charged on such extensions of credit. Margin lending by Oppenheimer is subject to the
margin rules of the Board of Governors of the Federal Reserve System, NYSE margin requirements and
Oppenheimers internal policies. 7


The primary source of funds to finance customers margin account borrowings are collateralized and
uncollateralized bank borrowings, funds generated by lending securities on a cash collateral basis
in excess of the amount of securities borrowed and free credit balances in customers accounts.
Free credit balances in customers accounts, to the extent not required to be segregated pursuant
to SEC rules, may be used in the conduct of Oppenheimers business, including the extension of margin credit. Subject to applicable
regulations, interest is paid by Oppenheimer on most, but not all, of such free credit balances
awaiting reinvestment by customers. The customer is charged for such margin financing at interest
rates derived from the companys base rate as defined, as well as the
brokers loan rate, and LIBOR, to which is added an additional amount of up to 2%. To the extent
that the use of free credit balances reduces borrowings, interest expense is reduced. In permitting a customer to purchase securities on margin, Oppenheimer is subject to the risk that
a market decline could reduce the value of its collateral below the amount of the customers
indebtedness and that the customer might otherwise be unable to repay the indebtedness. In addition to monitoring the creditworthiness of its customers, Oppenheimer also considers the
trading liquidity and volatility of the securities it accepts as collateral for its margin loans.
Trading liquidity and volatility may be dependent, in part, upon the market in which the security
is traded, the number of outstanding shares of the issuer, events affecting the issuer and/or
securities markets in general, and whether or not there are any legal restrictions on the sale of
the securities. Oppenheimer considers all of these factors at the time it agrees to extend credit
to customers and continues to review its extensions of credit on an ongoing basis. The majority of Oppenheimers margin loans are made to United States citizens or to corporations
which are domiciled in the United States. Oppenheimer may extend credit to investors or
corporations who are citizens of foreign countries or who may reside outside the United States.
Oppenheimer believes that should such foreign investors default upon their loans and should the
collateral for those loans be insufficient to satisfy the investors obligations, it may be more
difficult to collect such investors outstanding indebtedness than would be the case if investors
were citizens or residents of the United States. Although Oppenheimer attempts to minimize the risk associated with the extension of credit in
margin accounts, there is no assurance that the assumptions on which Oppenheimer bases its
decisions will be correct or that it is in a position to predict factors or events which will have
an adverse impact on any individual customer or issuer, or the securities markets in general. INVESTMENT BANKING BUSINESS Oppenheimer offers corporations (primarily middle-market growth companies) a full range of
financial advisory services as well as debt, equity, and convertible financing 8


services. Products include acquisition financing, private placements and public offerings of debt
and equity securities, debt refinancings, restructuring, merger and acquisition and exclusive sales
advice, structured financings and securitizations. Investment banking activity involves both
economic and regulatory risks. An underwriter may incur losses if it is unable to sell the
securities it is committed to purchase or if it is forced to liquidate its commitments at less than
the agreed upon purchase price. In addition, under the Securities Act and other laws and court
decisions with respect to underwriters liability and limitations on indemnification of
underwriters by issuers, an underwriter is subject to substantial potential liability for material
misstatements or omissions in prospectuses and other communications with respect to underwritten
offerings. Further, underwriting commitments constitute a charge against net capital and
Oppenheimers underwriting commitments may be limited by the requirement that it must, at all
times, be in compliance with the Uniform Net Capital Rule 15c3-1 of the SEC. Oppenheimer intends to continue to pursue opportunities to provide services for its corporate
customers, which may require it to finance and/or underwrite the issuance of securities. Under
circumstances where Oppenheimer is required to act as an underwriter or to take a position in the
securities of its customers, Oppenheimer may assume greater risk than would normally be assumed in
its normal trading activity. Oppenheimer also participates as an underwriter in the syndication of
issues managed by other securities firms. INVESTMENT ADVISORY BUSINESS Oppenheimer (through its Fahnestock Asset Management and OMEGA Group divisions) and OAM provide
investment advisory services for a fee to its clients. These equity and debt management service
fees are based on the value of the portfolio under management. In addition to the management fee,
transactions executed for such accounts may be effected at standard rates of commission or at
discounts from Oppenheimer s customary commission schedule. At December 31, 2004, Oppenheimer and OAM had approximately $10.3 billion under management. The
agreements under which the portfolios are managed on behalf of institutions and other investors
generally provide for termination by either party at any time. OAM is a broad-based advisory platform that includes: Investment Advisory Services (IAS), Strategic
Asset Review (STAR), and Portfolio Advisory Services (PAS), collectively the consulting services;
Oppenheimer Investment Advisors (OIA), core internally managed client accounts; and Alternative
Investments Group, non-traditional investment strategies within SEC-registered funds. Fahnestock Asset Management and OMEGA Group (financial advisor discretionary fee-based advisory
accounts) provide customized discretionary investment management services and products to high net
worth individuals and families, endowments and foundations and institutions. They seek to provide
portfolio management, client service and other financial services in a disciplined manner that is
tailored to meet their clients particular needs and objectives. 9


Oppenheimer Institutional Management is a newly formed division to offer investment management
services to a class of clients that includes corporate pension plans, Taft-Hartley Plans,
endowments, and the pension plans of municipal and governmental units. The division is still in
formation and has not yet begun offering services. (See Importance of Investment Performance). Importance of Investment Performance.
The Company believes that investment performance is one of the most important factors for the
growth of assets under management for a company in the asset management business. Poor investment
performance could impair growth of the management business because existing clients might withdraw funds
and the Companys ability to attract funds from existing and new clients might diminish. Investment advisory and administrative contracts are generally terminable at will or upon
relatively short notice. Institutional and individual clients can terminate their relationships
with an asset manager, reduce the aggregate amount of assets under
management, or shift their funds to other types of accounts with different rate structures for any
number of reasons, including investment performance, changes in prevailing interest rates, loss of
key investment management personnel and financial market performance. In a declining stock market,
the withdrawal of assets from accounts could accelerate. Other Business The Company operates a mortgage banking business through Evanston Financial Corporation.
Evanston is an approved MAP/FHA lender and also a Ginnie Mae approved Multifamily Issuer.
Evanston directly provides all aspects of mortgage banking: origination, processing, underwriting,
closing, securitizing and servicing of FHA mortgage loans. RISK MANAGEMENT For a discussion of risk management, see Item 7A, Quantitative and Qualitative Disclosures about
Market Risk. ADMINISTRATION AND OPERATIONS Administration and operations personnel are responsible for the processing of securities
transactions; the receipt, identification and delivery of funds and securities; the maintenance of
internal financial controls; accounting functions; custody of customers securities; the handling
of margin accounts for Oppenheimer and its correspondents; and general office services. Oppenheimer
employs approximately 395 persons in its administration and operations departments at its head
office, approximately 65 persons in its administration and operations departments in Detroit and
over 200 administrative and operations persons located in its branch offices. There is considerable fluctuation during any year and from year to year in the volume of
transactions Oppenheimer must process. Oppenheimer records transactions and posts its 10


books on a daily basis. Operations personnel monitor day-to-day operations to assure compliance
with applicable laws, rules and regulations. Failure to keep current and accurate books and records
can render Oppenheimer liable for disciplinary action by governmental and self-regulatory
organizations. Oppenheimer executes its own and certain of its correspondents securities transactions on all
United States exchanges of which it is a member and in the over-the-counter market. Oppenheimer
clears all of its securities transactions (i.e., it delivers securities that it has sold, receives
securities that it has purchased and transfers related funds) through its own facilities and
through memberships in various clearing corporations and custodian banks. Oppenheimer believes that its internal controls and safeguards are adequate, although fraud and
misconduct by customers and employees and the possibility of theft of securities are risks inherent
in the securities industry. As required by the NYSE and certain other authorities, Oppenheimer
carries an insurance policy (a brokers blanket bond) covering loss or theft of securities, forgery
of checks and drafts, embezzlement, fraud and misplacement of securities. This bond provides
coverage of up to an aggregate of $15,000,000 with a self-insurance retention of $1,000,000. Our
businesses entail the inherent risk of liability related to litigation from clients or third party vendors and actions
taken by regulatory agencies. To help protect against these potential liabilities, we purchase
insurance in amounts, and against risks, that we consider appropriate. There can be no assurance,
however, that a claim or claims will be covered by insurance or, if covered, will not exceed the
limits of available insurance coverage, that any insurer will remain solvent and will meet its
obligations to provide us with coverage or that insurance coverage will continue to be available
with sufficient limits at a reasonable cost. Over the last several years, insurance expenses have
increased and we expect further increases to be significant going forward. In addition, certain
insurance coverage may not be available or may only be available at prohibitive costs. Renewals of
insurance policies may expose Oppenheimer to additional costs through higher premiums or the
assumption of higher deductibles or co-insurance liability. COMPETITION Oppenheimer encounters intense competition in all aspects of the securities business and competes
directly with other securities firms, a significant number of which have substantially greater
resources and offer a wider range of financial services. In addition, there has recently been
increasing competition from other sources, such as commercial banks, insurance companies and
certain major corporations that have entered the securities industry through acquisition, and from
other entities. Additionally, foreign-based securities firms and commercial banks regularly offer
their services in performing a variety of investment banking functions including: merger and
acquisition advice, leveraged buy-out financing, merchant banking, and bridge financing, all in
direct competition with U.S. broker-dealers. These developments have led to the creation of a
greater number of integrated financial services firms that may be able to compete more effectively
than Oppenheimer for investment funds by offering a greater range of financial services. Oppenheimer believes that the principal factors affecting competition in the securities industry
are the quality and ability of professional personnel and relative prices of services and products
offered. Oppenheimer and its competitors employ advertising and direct 11


solicitation of potential customers in order to increase business and furnish investment research
publications in an effort to retain existing, and attract potential, clients. Many of Oppenheimers
competitors engage in these programs more extensively than does Oppenheimer. There is substantial commission discounting by broker-dealers competing for institutional and
retail brokerage business. Recently, full service firms have begun offering on-line trading
services to their clients at substantial discounts to their regular pricing. Oppenheimer intends to
compete in this area, but it is likely to reduce profitability per transaction, unless offset by
higher transaction volume. The continuation of such discounting and an increase in the incidence
thereof could adversely affect Oppenheimer. However, an increase in the use of discount brokerages
could be beneficial to Freedom. DISASTER RECOVERY The events of September 11, 2001 heightened the need for comprehensive disaster recovery plans.
Disaster recovery plans exist for the Companys critical systems, and redundancies are built into
the systems as deemed appropriate. The Company believes
that its disaster recovery program, including off-site back-up technology and operational
facilities, is adequate to handle a reasonable business disruption. However, there can be no
assurances that a disaster directly affecting the Companys headquarters or its operations center
would not have a material adverse impact on the Company. Insurance and other safeguards might only
partially reimburse the Company for its losses. The Company also uses periodic self-assessments,
internal audit reviews and independent consultants as a further check on operational risk and
exposure. The Company maintains disaster recovery procedures and a site remote from its main operations at
which it houses back-up facilities to its main operations in New York City. Subsequent to 9/11/01,
the Company has substantially upgraded its investment in such procedures and facilities, but there
remains substantial risk and uncertainty with respect to the efficacy of such planning due to the
complications of moving its personnel and business to any such facility. REGULATION The securities industry in the United States is subject to extensive regulation under both federal
and state laws. The SEC is the federal agency charged with administration of the federal securities
laws. Much of the regulation of broker-dealers has been delegated to self-regulatory organizations
(SROs) such as the NASD and national securities exchanges such as the NYSE and the National Futures
Association. The NYSE has been designated Oppenheimers primary regulator with respect to
securities activities and the National Futures Association has been designated Oppenheimers
primary regulator with respect to commodities activities. The CBOE has been designated
Oppenheimers primary regulator with respect to options trading activities. The NASD has been
designated Freedoms primary regulator with respect to securities activities. These self-regulatory
organizations adopt rules (subject to approval by the SEC or the Commodities Futures Trading
Commission (CFTC), as the case may be) governing the industry and conduct periodic examinations
of Oppenheimers and Freedoms operations. Securities firms are also subject to regulation by state
securities commissions in the states in which they do 12


business. Oppenheimer and Freedom are each registered as a broker-dealer in the 50 states and
Puerto Rico. Oppenheimer is also registered as an International Dealer in Canada. The regulations to which broker-dealers are subject cover all aspects of the securities business,
including sales methods, trade practices among broker-dealers, the use and safekeeping of
customers funds and securities, capital structure of securities firms, record keeping and the
conduct of directors, officers and employees. The SEC has adopted rules requiring underwriters to
ensure that municipal securities issuers provide current financial information and imposing
limitations on political contributions to municipal issuers by brokers, dealers and other municipal
finance professionals. Additional legislation, changes in rules promulgated by the SEC, the CFTC
and by self-regulatory organizations, or changes in the interpretation or enforcement of existing
laws and rules may directly affect the method of operation and profitability of broker-dealers. The
SEC, self-regulatory organizations (including the NYSE) and state securities commissions may
conduct administrative proceedings which can result in censure, fine, issuance of cease and desist
orders or suspension or expulsion of a broker-dealer, its officers, or employees. These
administrative proceedings, whether or not resulting in adverse
findings, can require substantial expenditures and can have an adverse impact on the reputation of a broker-dealer.
The principal purpose of regulating and disciplining broker-dealers is to protect customers and the
securities markets rather than to protect creditors and shareholders of broker-dealers. During the last year, abuses by certain participants in the mutual fund industry, including
activities relating to market timing, late trading and selective disclosure of portfolio holdings,
prompted legislative and regulatory scrutiny of a wide range of fund-related activities. This
scrutiny resulted in the adoption of new rules and a number of legislative and regulatory proposals
relating to fund practices. In this regard, the SEC proposed rules designed to strengthen existing
prohibitions relating to late trading and adopted rules to enhance required disclosure of market
timing and pricing policies. The SEC also adopted and proposed additional rules requiring corporate
governance changes including the adoption of compliance policies and the requirement that funds and investment advisors designate a chief
compliance officer. Oppenheimer is also subject to regulation by the SEC and under certain state laws in connection
with its business as an investment advisor and in connection with its research department
activities. Margin lending by Oppenheimer is subject to the margin rules of the Board of Governors of the
Federal Reserve System and the NYSE. Under such rules, Oppenheimer is limited in the amount it may
lend in connection with certain purchases of securities and is also required to impose certain
maintenance requirements on the amount of securities and cash held in margin accounts. In addition,
Oppenheimer may (and currently does) impose more restrictive margin requirements than required by
such rules. See Customer Lending. Financial scandals have led to insecurity and uncertainty in the financial markets. In response to
these scandals, the Sarbanes-Oxley Act of 2002 effected significant changes to corporate
governance, accounting requirements and corporate reporting. 13


This law generally applies to all companies, including us, with equity or debt securities
registered under the Securities Exchange Act of 1934, as amended (the Exchange Act). We have
taken numerous actions, and incurred substantial expenses, over the last year and a half to comply
with the Sarbanes-Oxley Act, related regulations promulgated by the SEC and other corporate
governance requirements of the NYSE. NET CAPITAL REQUIREMENTS As registered broker-dealers and member firms of the NYSE (Oppenheimer) or the NASD (Freedom), the
Operating Subsidiaries are subject to certain net capital requirements pursuant to Rule 15c3-1 (the
Net Capital Rule) promulgated under the Exchange Act. The Net Capital Rule, which specifies
minimum net capital requirements for registered brokers and dealers, is designed to measure the
general financial integrity and liquidity of a broker-dealer and requires that at least a minimum
part of its assets be kept in relatively liquid form. Oppenheimer elects to compute net capital under an alternative method of calculation permitted by
the Net Capital Rule. (Freedom computes net capital under the basic formula as provided by the Net
Capital Rule.) Under this alternative method, Oppenheimer is required to maintain a minimum net
capital, as defined in the Net Capital Rule, at least equal to 2% of the amount of its aggregate
debit items computed in accordance with the Formula for Determination of Reserve Requirements for
Brokers and Dealers (Exhibit A to Rule 15c3-3 under the Exchange Act) or $250,000, whichever is
greater. Aggregate debit items are
assets that have as their source transactions with customers, primarily margin loans. Failure to
maintain the required net capital may subject a firm to suspension or expulsion by the NYSE, the
SEC and other regulatory bodies and ultimately may require its liquidation. The Net Capital Rule
also prohibits payments of dividends, redemption of stock and the prepayment of subordinated
indebtedness if net capital thereafter would be less than 5% of aggregate debit items (or 7% of the
funds required to be segregated pursuant to the Commodity Exchange Act and the regulations
thereunder, if greater) and payments in respect of principal of subordinated indebtedness if net
capital thereafter would be less than 5% of aggregate debit items (or 6% of the funds required to
be segregated pursuant to the Commodity Exchange Act and the regulations thereunder, if greater).
The Net Capital Rule also provides that the total outstanding principal amounts of a
broker-dealers indebtedness under certain subordination agreements (the proceeds of which are
included in its net capital) may not exceed 70% of the sum of the outstanding principal amounts of
all subordinated indebtedness included in net capital, par or stated value of capital stock, paid
in capital in excess of par, retained earnings and other capital accounts for a period in excess of
90 days. Net capital is essentially defined in the Net Capital Rule as net worth (assets minus liabilities),
plus qualifying subordinated borrowings minus certain mandatory deductions that result from
excluding assets that are not readily convertible into cash and deductions for certain operating
charges. The Net Capital Rule values certain other assets, such as a firms positions in
securities, conservatively. Among these deductions are adjustments (called haircuts) in the
market value of securities to reflect the possibility of a market decline prior to disposition. Compliance with the Net Capital Rule could limit those operations of the brokerage subsidiaries of
the Company that require the intensive use of capital, such as underwriting 14


and trading activities and the financing of customer account balances, and also could restrict the
Companys ability to withdraw capital from its brokerage subsidiaries, which in turn could limit
the Companys ability to pay dividends, repay debt and redeem or purchase shares of its outstanding
capital stock. Under the Net Capital Rule, broker-dealers are required to maintain certain records
and provide the SEC with quarterly reports with respect to, among other things, significant
movements of capital, including transfers to a holding company parent or other affiliate. The SEC
and/or the SROs may in certain circumstances restrict the Companys brokerage subsidiaries ability
to withdraw excess net capital and transfer it to the Company or to other of the Operating
Subsidiaries or to expand the Companys business. 
 Item 2. PROPERTIES The Company maintains offices at 20 Eglinton Avenue West, Toronto, Ontario, Canada for general
administrative activities. Most day-to-day management
functions are conducted at the executive offices of Oppenheimer at 125 Broad Street, New York, New
York. This office also serves as the base for most of Oppenheimer s research, operations and
trading and investment banking activities, though other offices also have employees who work in
these areas. Investment advisory services are offered from the Companys office at 200 Park Avenue,
New York, New York, although other offices also have employees who work
in this area. Generally, the offices outside of 125 Broad Street, New York serve as bases for sales
representatives who process trades and provide other brokerage services in co-operation with
Oppenheimer s New York office using the data processing facilities located there. Freedom conducts
its business from its offices located in Edison, N.J., where the Company also maintains its
disaster recovery site. Management believes that its present facilities are adequate for the
purposes for which they are used and have adequate capacity to provide for presently contemplated
future uses. The Company and its subsidiaries own no real property, but at December 31, 2004, occupied office
space totaling approximately 930,000 square feet in 84 locations under standard commercial terms
expiring between 2005 and 2015. If any leases are not renewed, the Company believes it could obtain
comparable space elsewhere on commercially reasonable rental terms. 
 Item 3. LEGAL PROCEEDINGS Many aspects of the Companys business involve substantial risks of liability. In the normal course
of business, the Company has been named as defendant or co-defendant in lawsuits creating
substantial exposure. The Company is also involved from time to time in governmental and
self-regulatory agency investigations and proceedings. There has been an increased incidence of
litigation and regulatory investigations in the financial services industry in recent years,
including customer claims seeking, in total, substantial damages. The Company is the subject of customer complaints, has been named as defendant or codefendant in
various lawsuits seeking, in total, substantial damages and is involved in certain governmental and
self-regulatory agency investigations and proceedings. These 15


proceedings arise primarily from securities brokerage, asset management and investment banking
activities. While the ultimate resolution of pending litigation and other matters cannot be
currently determined, in the opinion of management, after consultation with legal counsel, the
Company has no reason to believe that the resolution of these matters will have a material adverse
effect on its financial condition. However, the Companys results of operations could be materially
affected during any period if liabilities in that period differ from prior estimates. The
materiality of legal matters to the Companys future operating results depends
on the level of future results of operations as well as the timing and ultimate outcome of such
legal matters. 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Class B voting shares (the Class B Shares), the Companys only class of voting securities,
are not registered under the Exchange Act and are not required to be registered. The Class B Shares
are owned by fewer than 500 shareholders of record. Consequently, the Company is not required under
Section 14 of the Exchange Act to furnish proxy soliciting material or an information statement to
holders of the Class B Shares. However, the Company is required under applicable Canadian
securities laws to provide proxy soliciting material, including a management information circular,
to the holders of its Class B Shares. Pursuant to the Companys Articles of Incorporation, holders of Class A non-voting shares (the
Class A Shares), although not entitled to vote thereat, are entitled to receive notices of
shareholders meetings and to receive all informational documents required by law or otherwise to
be provided to holders of Class B Shares. In addition, holders of Class A Shares are entitled to
attend and speak at all meetings of shareholders, except class meetings not including the Class A Shares. In the event of either a take-over bid or an issuer bid (as those terms are defined in the
Securities Act (Ontario)) being made for the Class B Shares and no corresponding offer being made
to purchase Class A Shares, the holders of Class A Shares would have no right under the Articles of
Incorporation of the Company or under any applicable statute to require that a similar offer be
made to them to purchase their Class A Shares. No matters were submitted to the Companys shareholders during the fourth quarter of the Companys
2004 fiscal year. 16


PART II 
 Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Companys Class A Shares are listed and traded on The New York Stock Exchange (the NYSE) and
The Toronto Stock Exchange (the TSX) (trading symbol OPY). The Class B Shares are not traded on
any stock exchange in Canada or the United States and, as a consequence, there is only limited
trading in the Class B shares. The Company does not presently contemplate listing the Class B
Shares in the United States on any national or regional stock exchange or on Nasdaq. The following tables set forth the high and low sales prices of the Class A Shares on the TSX and
on the NYSE. Prices provided are in Canadian dollars or U.S. dollars as indicated and are based on
data provided by the TSX and the NYSE. Class A Shares:
    
    
    
    
    TSX
    
    
    NYSEHIGH
    
    
    LOW
    
    
    HIGH
    
    
    LOW(Cdn. Dollars)
    
    
    (U.S. dollars)2004
    
    
    1st Quarter
    
    $
    45.10
    
    
    $
    40.90
    
    
    $
    34.40
    
    
    $
    30.962nd Quarter
    
    $
    42.75
    
    
    $
    35.80
    
    
    $
    32.22
    
    
    $
    26.233rd Quarter
    
    $
    36.75
    
    
    $
    30.15
    
    
    $
    27.80
    
    
    $
    22.704th Quarter
    
    $
    30.00
    
    
    $
    27.00
    
    
    $
    27.00
    
    
    $
    21.252003
    
    
    1st Quarter
    
    $
    39.20
    
    
    $
    33.64
    
    
    $
    25.24
    
    
    $
    22.062nd Quarter
    
    $
    39.75
    
    
    $
    32.90
    
    
    $
    29.85
    
    
    $
    22.253rd Quarter
    
    $
    40.35
    
    
    $
    35.65
    
    
    $
    29.30
    
    
    $
    25.504th Quarter
    
    $
    46.11
    
    
    $
    39.00
    
    
    $
    35.10
    
    
    $
    29.15
 The following table sets forth information about the shareholders of the Company as at December 31,
2004 as set forth in the records of the Companys transfer agent and registrar: Class A Shares: Number of
    
    
    
    
    
    
    Number ofShareholders of record having addresses in:
    
    shares
    
    
    Percentage
    
    
    shareholdersCanada
    
    
    5,115,458
    
    
    
    38%
    
    
    
    157United States
    
    
    8,180,804
    
    
    
    62%
    
    
    
    170Other
    
    
    614
    
    
    
    
    
    
    
    6Total issued and outstanding
    
    
    13,296,876
    
    
    
    100%
    
    
    
    333
 17


Class B Shares Number of
    
    
    
    
    
    
    Number ofShareholders of record having addresses in:
    
    shares
    
    
    Percentage
    
    
    shareholdersCanada (1)
    
    
    97,813
    
    
    
    98%
    
    
    
    112United States
    
    
    1,739
    
    
    
    2%
    
    
    
    67Other
    
    
    128
    
    
    
    
    
    
    
    3Total issued and outstanding
    
    
    99,680
    
    
    
    100%
    
    
    
    182
 (1) The Company has been informed that 50,975 Class B shares held by Phase II Financial
Limited, an Ontario corporation, are beneficially owned by A.G. Lowenthal, Chairman, CEO and a
Director of the Company, a U.S. citizen and resident. See Item 12, Security Ownership of Certain
Beneficial Owners and Management. Dividends
The following table sets forth the frequency and amount of any cash dividends declared on the
Companys Class A and Class B Shares for the fiscal years ended December 31, 2004 and 2003 and the
first quarter of 2005. AmountType
    
    Declaration date
    
    Record date
    
    Payment date
    
    per shareQuarterly
    
    January 24, 2003
    
    February 14, 2003
    
    February 28, 2003
    
    $
    0.09Quarterly
    
    April 24, 2003
    
    May 9, 2003
    
    May 23, 2003
    
    $
    0.09Quarterly
    
    July 24, 2003
    
    August 8, 2003
    
    August 22, 2003
    
    $
    0.09Quarterly
    
    October 24, 2003
    
    November 7, 2003
    
    November 21, 2003
    
    $
    0.09Quarterly
    
    January 27, 2004
    
    February 6, 2004
    
    February 20, 2004
    
    $
    0.09Quarterly
    
    April 26, 2004
    
    May 7, 2004
    
    May 21, 2004
    
    $
    0.09Quarterly
    
    July 27, 2004
    
    August 6, 2004
    
    August 20, 2004
    
    $
    0.09Quarterly
    
    October 25, 2004
    
    November 5, 2004
    
    November 19, 2004
    
    $
    0.09Quarterly
    
    January 28, 2005
    
    February 11, 2005
    
    February 25, 2005
    
    $
    0.09
 Future dividend policy will depend upon the earnings and financial condition of the Operating
Subsidiaries, the Companys need for funds and other factors. Dividends may be paid to holders of
Class A Shares and Class B Shares (pari passu), as and when declared by the Companys Board of
Directors, from funds legally available therefor. CERTAIN TAX MATTERS The following paragraphs summarize certain United States and Canadian federal income tax
considerations in connection with the receipt of dividends paid on the Class A and Class B Shares
of the Company. These tax considerations are stated in brief and general terms and are based on
United States and Canadian law currently in effect. There are other potentially significant United
States and Canadian federal income tax considerations and state, provincial or local income tax considerations
with respect to ownership and disposition of the Class A and Class B Shares which are not discussed
herein. The tax considerations relative to ownership and disposition of the Class A and Class B
Shares may vary from taxpayer to taxpayer depending on the taxpayers particular status.
Accordingly, prospective purchasers should consult with their tax advisors regarding tax 18


considerations, which may apply to the particular situation.
United States Federal Income Tax Considerations Dividends on Class A and Class B Shares paid to citizens or residents of the U.S. or to U.S.
corporations (including any Canadian federal income tax withheld) will be subject to U.S. federal
income taxation as qualified dividends to the extent paid out of the Companys earnings and
profits, determined under U.S. tax principles, subject to tax at 15%. Such dividends will not be
eligible for the deduction for dividends received by corporations (unless such corporation owns by
vote and value at least 10% of the stock of the Company, in which case a portion of such dividend
may be eligible for such exclusion). U.S. corporations, U.S. citizens and U.S. residents will generally be entitled, subject to certain
limitations, to a credit against their U.S. federal income tax for Canadian federal income taxes
withheld from such dividends. Taxpayers may claim a deduction for such taxes if they do not elect
to claim such tax credit. No deduction for foreign taxes may be claimed by an individual taxpayer
who does not itemize deductions. Because the application of the foreign tax credit depends upon the
particular circumstances of each shareholder, shareholders are urged to consult their own tax
advisors in this regard. Canadian Federal Income Tax Considerations Dividends paid on Class A and Class B Shares held by non-residents of Canada will generally be
subject to Canadian withholding tax. This withholding tax is levied at the basic rate of 25%,
although this rate may be reduced by the terms of any applicable tax treaty. The Canada  U.S. tax
treaty provides that the withholding rate on dividends paid to U.S. residents on Class A and Class
B Shares is generally 15%. Normal Course Issuer Bid On July 16, 2004, the Company announced that during the year commencing July 22, 2004 it intended
to purchase up to 669,000 Class A Shares by way of a Normal Course Issuer Bid through the
facilities of the TSX and/or the NYSE, representing approximately 5% of the outstanding Class A
Shares. During the fourth quarter of 2004, the Company purchased 1,300 Class A Shares for $22.50
per share in the month of November. The Company purchased 132,100 Class A Shares in 2004 at an
average price of $23.62 per share under the current Normal Course
Issuer Bid. Any shares purchased by the Company pursuant to the Normal Course Issuer Bid are cancelled. The
Company may, at its option, apply to extend the program for an additional year. 19


Item 6. SELECTED FINANCIAL DATA The following table presents selected financial information derived from the audited consolidated
financial statements of the Company for the five years ended December 31, 2004. The selected
financial information should be read in conjunction with, and is qualified in its entirety by
reference to, the Consolidated Financial Statements and notes thereto included elsewhere in this
report. In 2003, the Company purchased the U.S. private client and asset management divisions of
CIBC World Markets. The 2003 amounts include the assets and liabilities and operating results of
the private client division for the entire year and the assets and liabilities and operating
results of the asset management division as of and subsequent to June 4, 2003. In 2002, the Company
purchased the business of BUYandHOLD Securities Corporation. The 2002 amounts include the assets
and liabilities and operating results of BUYandHOLD as of and subsequent to the period after March
12, 2002. In 2001, the Company purchased Josephthal and Prime. The 2001 amounts include the assets
and liabilities and operating results of Josephthal and Prime as of and subsequent to the period
after September 17, 2001 and November 9, 2001, respectively. See also Item 1, Business and Item
7, Managements Discussion and Analysis of Financial Condition and Results of Operations. 2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands of U.S. dollars except per share and share amounts)Revenue
    
    $
    655,140
    
    
    $
    689,993
    
    
    $
    283,333
    
    
    $
    261,261
    
    
    $
    316,499Net profit
    
    $
    22,501
    
    
    $
    28,696
    
    
    $
    9,321
    
    
    $
    19,150
    
    
    $
    40,901Net profit per share (1)- basic
    
    $
    1.68
    
    
    $
    2.26
    
    
    $
    0.75
    
    
    $
    1.55
    
    
    $
    3.38- diluted
    
    $
    1.31
    
    
    $
    1.65
    
    
    $
    0.73
    
    
    $
    1.50
    
    
    $
    3.29Total assets
    
    $
    1,802,473
    
    
    $
    1,701,213
    
    
    $
    1,031,226
    
    
    $
    710,275
    
    
    $
    697,482Total current liabilities
    
    $
    1,286,902
    
    
    $
    1,194,859
    
    
    $
    783,590
    
    
    $
    468,580
    
    
    $
    475,682Subordinated indebtedness,
including current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total long term liabilities
    
    $
    207,264
    
    
    $
    226,518
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends per Class A
Share and Class B share
    
    $
    0.36
    
    
    $
    0.36
    
    
    $
    0.36
    
    
    $
    0.36
    
    
    $
    0.31Shareholders equity
    
    $
    308,307
    
    
    $
    279,836
    
    
    $
    247,636
    
    
    $
    241,695
    
    
    $
    221,800Book value per share (1)
    
    $
    22.96
    
    
    $
    21.66
    
    
    $
    19.82
    
    
    $
    19.43
    
    
    $
    18.34Number of shares of capital
stock outstanding
    
    
    13,396,556
    
    
    
    12,919,200
    
    
    
    12,496,687
    
    
    
    12,436,765
    
    
    
    12,090,649
   (1)
    
    The Class A Shares and Class B Shares are combined because they are of equal rank for
purposes of dividends and in the event of a distribution of assets upon liquidation,
dissolution or winding up. 20


Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Companys financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The following discussion should be read in
conjunction with the consolidated financial statements and notes thereto which appear elsewhere in
this annual report. The Company engages in a broad range of activities in the securities industry, including
retail securities brokerage, institutional sales and trading, investment banking (both corporate
and public finance), research, market-making, and investment advisory and asset management
services. The Company provides its services from 81 offices in 21 states located throughout the
United States. The Company conducts business in 2 offices in Latin America through local
broker-dealers. Client assets entrusted to the Company as at December 31, 2004 totaled
approximately $48 billion. The Company provides investment advisory services through Oppenheimer
Asset Management Inc. and Fahnestock Asset Management and OMEGA Group, each of which operates as a
division of Oppenheimer. The Company provides trust services and products through Oppenheimer Trust
Company. The Company provides discount brokerage services through Freedom Investments Inc. and
through BUYandHOLD, a division of Freedom. At December 31, 2004, client assets under management by
the asset management groups totaled $10.3 billion. At December 31, 2004, the Company employed
approximately 2,854 people full time, of whom 1,667 were financial advisors. Critical Accounting Policies The Companys accounting policies are essential to understanding and interpreting the financial
results reported in the consolidated financial statements. The significant accounting policies used
in the preparation of the Companys consolidated financial statements are summarized in note 1 to
those statements. Certain of those policies are considered to be particularly important to the
presentation of the Companys financial results because they require management to make difficult,
complex or subjective judgments, often as a result of matters that are inherently uncertain. The
following is a discussion of these policies. Valuation of Securities and Other Assets Substantially all financial instruments are reflected in the consolidated financial statements at
fair value or amounts that approximate fair value. These include cash equivalents; deposits with
clearing organizations; securities owned; and securities sold but not yet purchased. Where
available, the Company uses prices from independent sources such as listed market prices, or broker
or dealer price quotations. In addition, even where the value of a security is derived from an
independent market price or broker or dealer quote, certain assumptions may be required to
determine the fair value. For instance, the Company generally assumes that the size of positions in
securities that the Company holds would not be large enough to affect the quoted price of the
securities if the Company were to sell them, and that any such sale would happen in an orderly
manner. However, these assumptions may be incorrect and the actual value 21


realized upon disposition could be different from the current carrying value. Intangible Assets and Goodwill Goodwill represents the excess cost of a business acquisition over the fair value of the net assets
acquired. SFAS No. 142, Goodwill and Other Intangible Assets, provides that goodwill is no
longer amortized and the value of identifiable intangible assets must be amortized over their
useful lives, unless the asset is determined to have an indefinite useful life. Goodwill relates to
the acquisitions of Oppenheimer, First of Michigan Capital Corporation, Grand Charter Group
Incorporated, Josephthal & Co. Inc. and the Oppenheimer divisions and has been allocated to the
private client reporting unit pursuant to SFAS No. 142. The Company obtained an independent
valuation of assets acquired and liabilities assumed with respect to the acquisition of the
Oppenheimer division in 2003. This valuation involved significant estimates, which were based on
historical data, revenue projections and industry experience. The Company has identified intangible
assets relating to customer relationships, which it is amortizing over their useful lives, and
trademarks and trade names, which are being evaluated for impairment on at least an annual basis.
The excess cost of the Oppenheimer division is being allocated to goodwill. The Company reviews its goodwill on at least an annual basis in order to determine whether its
value is impaired. Goodwill is impaired when the carrying amount of the reporting unit exceeds the
implied fair value of the reporting unit. In estimating the fair value of the reporting unit, the
Company uses valuation techniques based on multiples of revenues, earnings, book value and
discounted cash flows similar to models employed in analyzing the purchase price of an acquisition
target. If the value of the goodwill is impaired, the difference between the value of the goodwill
reflected on the financial statements and its current fair value is recognized as an expense in the
period in which the impairment occurs. Reserves The Company records reserves related to legal proceedings in other payables and accrued
expenses. The determination of the amounts of these reserves requires significant judgment on the
part of management. Management considers many factors including, but not limited to: the amount of
the claim; the amount of the loss in the clients account; the basis and validity of the claim; the
possibility of wrongdoing, if any, on the part of an employee of the Company; previous results in
similar cases; and legal precedents and case law as well as the timing of the resolution of such
matters. Each legal proceeding is reviewed with counsel in each accounting period and the reserve
is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded as a
charge to results in that period. The assumptions of management in determining the estimates of
reserves may be incorrect and the actual disposition of a legal proceeding could be greater or less
than the reserve amount. The Company also records reserves or allowances for doubtful accounts related to receivables from
clients and financial consultants. Client loans are collateralized by securities; however, if
there is a decline in the value of the collateral and the Company cannot obtain additional
collateral or collect on the loan, a reserve is established. The 22


Company also makes loans or pays advances to financial advisors as part of its hiring process.
Reserves are established on these receivables if the financial advisor is no longer associated with
the Company and the receivable has not been promptly repaid or if it is determined that it is
probable the amount will not be collected. The Company also estimates taxes payable and records income tax reserves. These reserves are based
on historic experience and may not reflect the ultimate liability. The Company monitors and adjusts
these reserves as necessary. Asset Management Operations Asset management fees are generally recognized over the period the related service is provided
based on the account value at the valuation date per the respective asset management agreements. In
certain circumstances, the firm is entitled to receive incentive fees when the return on assets
under management exceeds certain benchmark returns or other performance targets. Incentive fees are
generally based on investment performance over a 12-month period and are not subject to adjustment
once the measurement period ends. Accordingly, incentive fees are recognized in the consolidated
statements of earnings when the measurement period ends. Asset management fees and incentive fees
are included in Advisory fees in the consolidated statements of earnings. Assets under management
are not included as assets of the Company. Business Environment The securities industry is directly affected by general economic and market conditions,
including fluctuations in volume and price levels of securities and changes in interest rates,
inflation, political events, investor participation levels, legal and regulatory, accounting, tax
and compliance requirements and competition, all of which have an impact on commissions, firm
trading, fees from accounts under investment management, and investment income as well as on
liquidity. Substantial fluctuations can occur in revenues and net income due to these and other
factors. The Company faced poor market conditions in the second and third quarters of 2004, compared
with the same period of 2003, resulting in lower commission business and principal trading revenue
in fiscal 2004 compared to fiscal 2003. The Companys expenses in fiscal 2004 are lower compared to
fiscal 2003 due primarily to lower variable compensation costs although there has been an increased
burden of compliance and regulatory expenses. Interest rate changes also impact the Companys fixed income businesses as well as its cost of
borrowed funds. Fiscal 2004 produced rising rates and a less favorable rate environment compared to
the falling interest rate environment in fiscal 2003. Investor interest in fixed income securities
is driven by attractiveness of published rates, the direction of rates and economic expectations.
Volatility in bond prices also impacts opportunities for profits in fixed income proprietary
trading. Management constantly monitors its exposure to interest rate fluctuations to mitigate risk
of loss in volatile environments. 23


Regulatory Environment The brokerage business is subject to regulation by the SEC, the NYSE, the NASD and various state
securities regulators. Events in recent years surrounding corporate accounting and other activities
leading to investor losses resulted in the enactment of the Sarbanes-Oxley Act and have caused increased
surveillance of public companies. New regulations
and new interpretations and enforcement of existing regulations are creating increased costs of
compliance and increased investment in systems and procedures to comply with these more complex
requirements. Investigations by the SEC and state regulators into mutual fund trading practices are
another indication of the regulators heightened commitment to enforcement actions. Increasingly,
the various states are imposing their own regulations that make the uniformity of regulation a
thing of the past, and make compliance more difficult and more expensive to monitor. This
regulatory environment has resulted in increased costs of compliance with rules and regulations,in
particular, the impact of the rules and requirements that were created by the passage of the
Patriot Act, and the anti-money laundering regulations (AML) that are related thereto. The
Companys increased exposure to regulatory actions could potentially lead to the elimination of, or
material changes to, certain lines of business. The expectation is that the increased costs of
compliance in todays regulatory environment are not temporary. Mutual Fund Inquiry Since the third quarter of 2003, Oppenheimer has been responding to the SEC, the NY State Attorney
General and other regulators as part of an industry-wide review of market timing, late trading and
other activities involving mutual funds. The Company has answered several document requests and
subpoenas and there have been on-the-record interviews of Company personnel. The inquiries have
centered on Oppenheimers activities as a broker/dealer and as a clearing firm. The Company is
continuing to cooperate with the governmental and regulatory authorities. The Company believes that a limited number of its financial advisors may have engaged in activities
that are the subject of the SECs inquiry. There is no evidence that either the Company or its
employees were engaged in late trading. The Company continues to closely monitor its mutual fund
activities and the activities of its employees. The Company has determined that there is no need to
set up any reserves with respect to these inquiries at this time. Outlook The Companys long-term plan is to continue to expand existing offices by hiring experienced
professionals as well as through the purchase of operating branch offices from other broker
dealers, thus maximizing the potential of each office and the development of existing trading,
investment banking, investment advisory and other activities. Equally important is the search for
viable acquisition candidates. As opportunities are presented, it is the long-term intention of the
Company to pursue growth by acquisition where a comfortable match can be found in terms of
corporate goals and personnel and at a price 24


that would provide the Companys shareholders with incremental value. In the near term, the Company
will not be seeking additional significant acquisitions, but will continue to focus its attention
on the management of recent acquisitions. In addition, the Company is committed to improving its
technology capabilities to support client service and the expansion of its capital markets
capabilities. Results of Operations The results of the year ended December 31, 2004, compared to the same period of 2003, reflect the
comparatively unfavorable market conditions in 2004 compared to 2003 as well as the impact on the
2003 results of transition costs described below. On January 3, 2003 the Company acquired the U.S. private client business of CIBC World Markets and
then on June 4, 2003 acquired the U.S. asset management business of CIBC World Markets (together,
the Oppenheimer divisions). The Company began self-clearing substantially all of the private client
business at the end of May 2003. Until that time, CIBC provided operational and administrative
services to the Company on a transition basis. That arrangement precluded the attainment of certain
operating efficiencies and cost savings that became available to the Company post-conversion of the
client accounts to the Companys clearing platform. The U.S. economy has continued to pick up momentum as reflected in growth in fourth quarter GNP.
For much of 2004 factors including the Iraq war, the U.S. Presidential election, a slow U.S.
economic recovery and the prospect of increasing interest rates kept investor participation in the
markets at low levels. After the election, the equity markets experienced a rally that allowed all
of the major indexes to close up for the year. The weakness in the U.S. dollar impacted money flows
including foreign investment in U.S. markets. It is expected, however, to help corporate earnings
for many U.S. corporations with foreign operations. The level of the dollar in relation to other
currencies, oil prices and the U.S. deficits will be significant factors in determining the
direction of markets in the coming months. The following table sets forth the amount and percentage of the Companys revenues from each
principal source for each of the following years ended December 31. 2004
    
    
    %
    
    
    2003
    
    
    %
    
    
    2002
    
    
    %(Dollars in thousands, except percentages)Commissions
    
    $
    327,040
    
    
    
    50
    %
    
    $
    325,071
    
    
    
    47
    %
    
    $
    135,747
    
    
    
    48
    %Principal transactions, net
    
    
    112,277
    
    
    
    17
    %
    
    
    136,672
    
    
    
    20
    %
    
    
    58,227
    
    
    
    21
    %Interest
    
    
    45,418
    
    
    
    7
    %
    
    
    42,600
    
    
    
    6
    %
    
    
    27,622
    
    
    
    10
    %Investment banking
    
    
    44,804
    
    
    
    7
    %
    
    
    50,623
    
    
    
    7
    %
    
    
    22,760
    
    
    
    8
    %Advisory fees
    
    
    102,531
    
    
    
    16
    %
    
    
    80,550
    
    
    
    12
    %
    
    
    26,365
    
    
    
    9
    %Arbitration awards
    
    
    3,900
    
    
    
    
    
    
    
    21,750
    
    
    
    3
    %
    
    
    
    
    
    
    Other
    
    
    19,170
    
    
    
    3
    %
    
    
    32,727
    
    
    
    5
    %
    
    
    12,612
    
    
    
    4
    %Total revenues
    
    $
    655,140
    
    
    
    100
    %
    
    $
    689,993
    
    
    
    100
    %
    
    $
    283,333
    
    
    
    100
    %
 The Company derives most of its revenues from the operations of its principal subsidiaries, 25


Oppenheimer and OAM. Although maintained as separate entities, the operations of the Companys
brokerage subsidiaries are closely related because Oppenheimer acts as clearing broker and omnibus
clearing agent in transactions initiated by Freedom. Except as expressly otherwise stated, the
discussion below pertains to the operations of Oppenheimer. It is important to note when comparing the results of the year ended December 31, 2004, 2003
and 2002, that the 2003 first quarter results were substantially impacted by non-operating items
resulting from a favorable arbitration award in the amount of
$21,750,000. The following table and discussion summarizes the changes in the major revenue and expense
categories for the past two years (in thousands of dollars). Period to Period ChangeIncrease (Decrease)2004 versus 2003
    
    
    2003 versus 2002Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageRevenue -Commissions
    
    $
    1,969
    
    
    
    +1
    %
    
    $
    189,324
    
    
    
    +139
    %Principal transactions, net
    
    
    (24,395
    )
    
    
    -18
    %
    
    
    78,445
    
    
    
    +135
    %Interest
    
    
    2,818
    
    
    
    +7
    %
    
    
    14,978
    
    
    
    +54
    %Underwriting fees
    
    
    (5,819
    )
    
    
    -11
    %
    
    
    27,863
    
    
    
    +122
    %Advisory fees
    
    
    21,981
    
    
    
    +27
    %
    
    
    54,185
    
    
    
    +206
    %Arbitration awards
    
    
    (17,850
    )
    
    
    -82
    %
    
    
    21,750
    
    
    
    +100
    %Other
    
    
    (13,557
    )
    
    
    -41
    %
    
    
    20,115
    
    
    
    +159
    %Total revenue
    
    
    (34,853
    )
    
    
    -5
    %
    
    
    406,660
    
    
    
    +144
    %Expenses -Compensation
    
    
    (6,778
    )
    
    
    -2
    %
    
    
    265,215
    
    
    
    +156
    %Clearing and exchanges fees
    
    
    (5,188
    )
    
    
    -25
    %
    
    
    11,127
    
    
    
    +116
    %Communications and data
processing
    
    
    (4,381
    )
    
    
    -7
    %
    
    
    26,425
    
    
    
    +80
    %Occupancy costs
    
    
    (742
    )
    
    
    -2
    %
    
    
    21,868
    
    
    
    +82
    %Interest
    
    
    3,045
    
    
    
    +18
    %
    
    
    8,512
    
    
    
    +102
    %Other
    
    
    (10,456
    )
    
    
    -17
    %
    
    
    37,715
    
    
    
    +166
    %Total expenses
    
    
    (24,500
    )
    
    
    -4
    %
    
    
    370,862
    
    
    
    +137
    %Profit before taxes
    
    
    (10,353
    )
    
    
    -21
    %
    
    
    35,798
    
    
    
    +277
    %Income taxes
    
    
    (4,158
    )
    
    
    -21
    %
    
    
    14,649
    
    
    
    +273
    %Net profit
    
    $
    (6,195
    )
    
    
    -22
    %
    
    $
    21,149
    
    
    
    +280
    %
 Fiscal 2004 compared to Fiscal 2003 Revenue, other than interest
Commission income and, to a large extent, income from principal transactions depend on investor
participation in the markets. In the year ended December 31, 2004, 26


commission revenue increased by 1% compared to fiscal 2003 primarily as a result of overall
investor activity in the markets. The markets were relatively robust in the first quarter of 2004,
however, investor activity in the markets fell dramatically in the second and third quarters of
2004 only picking up again after the U.S. Presidential election was over. Net revenue from
principal transactions decreased by 18% in the year ended December 31, 2004 compared to fiscal 2003
due to the lack of volatility in the equity and fixed income markets as well as lower trading
volumes for much of 2004 compared to 2003. Investment banking revenues decreased 11% in the year
ended December 31, 2004 compared with fiscal 2003 due to the drop in new issue and secondary issuance in 2004 compared
to 2003. Advisory fees increased by 27% for the year ended December 31, 2004 compared to fiscal
2003. The year ended December 31, 2004 includes the operations of Oppenheimer Asset Management Inc.
for the full period, while the 2003 comparative period includes results following its acquisition
on June 4, 2003. Assets under management by the asset management group were $10.3 billion at
December 31, 2004 compared to $9.6 billion at December 31, 2003. Other revenue decreased by 41% in
the year ended December 31, 2004 compared to fiscal 2003 due to incentive fees received with
respect to 2003 in the amount of $10.7 million compared to approximately $1.4 million in 2004. Interest
Net interest revenue (interest revenue less interest expense) remained relatively unchanged in the
year ended December 31, 2004 compared to fiscal 2003. Interest revenue, which primarily relates to
revenue from customer margin balances and securities lending activities, remained relatively
unchanged in 2004 from 2003. Expenses, other than interest
Compensation expense decreased by 2% in the year ended December 31, 2004 compared to fiscal 2003.
Compensation expense has volume-related components and, therefore, will increase with the increased
level of commission business conducted in the year ended December 31, 2004, compared to fiscal
2003. The amortization of forgivable loans to financial advisors is included in compensation
expense. This expense is relatively fixed and is not influenced by increases or decreases in
revenue levels. The Companys notes receivable balance peaked in July 2003 as a result of the
acquisition of the Oppenheimer divisions, resulting in higher amortization levels beginning in the
third quarter of 2003, which will continue through most of 2006. The cost of clearing and exchange
fees decreased by 25% in the year ended December 31, 2004 compared to fiscal 2003. The change in
the year to year comparison is primarily due to the elimination of clearing costs of approximately
$9.4 million associated with the clearing of Oppenheimer private client division customer accounts
by CIBC World Markets during the transition period from the January 3, 2003 acquisition date
through the May 27, 2003 conversion of client accounts; however, the Companys employment costs and
associated expenses for self-clearing this additional business increased when compared to the same
periods of 2003. The cost of communications and technology decreased 7% in the year ended December
31, 2004, compared to fiscal 2003 due to costs associated with upgrading the technology base across
the firm after the conversion of the Oppenheimer private client division accounts in May 2003. The
level of investment tapered off in 2004. Occupancy costs decreased by 2% in the year
ended December 31, 2004 compared to fiscal 2003. Occupancy costs have been aggressively addressed
and previously underutilized space has been refitted and occupied and 27


overlapping offices have been integrated, resulting in a reduction in occupancy-related expenses in
2004 compared to 2003. Other expenses decreased by 17% for the year ended December 31, 2004
compared to fiscal 2003. Included in other expenses in 2004 is approximately $14 million of fee
expense paid to third party money managers by OAM ($8 million in 2003); approximately $3.8 million
of solicitor fee expense paid to third parties by Oppenheimer for introduced business ($4 million
in 2003); approximately $6 million in litigation and legal costs ($15 million in 2003);
approximately $2.6 million in audit and accounting fees ($1.7 million in 2003); and a credit of
approximately $1 million with respect to bad debt expense ($4.5 million charge in 2003). The
Company continued to be affected by litigation settlement costs. Much of the Companys
unfavorable litigation experience in the past several years arose from its acquisitions of
Josephthal Group Inc. and Prime Charter Inc. in 2001. These matters were substantially resolved by
the end of fiscal 2004. The Company may face additional unfavorable judgments in future quarters.
The Company has used its best estimate to provide adequate reserves to cover potential litigation
losses. Fiscal 2003 compared to Fiscal 2002 The results of the year ended December 31, 2003, compared to the same period of 2002, reflect the
changed face of the Company after the acquisition by the Company on January 3, 2003 and June 4,
2003 of the Oppenheimer divisions. This acquisition more than doubled the Companys private client
presence, adding approximately 620 financial advisors in 18 offices, at the date of closing. The
number of financial advisors increased to 1,704 at December 31, 2003 compared to 1,102 at December
31, 2002. Client assets entrusted to the Company were approximately $46 billion at December 31,
2003 compared to approximately $17.8 billion at December 31, 2002. The acquisition on June 4, 2003
of the U.S. Asset Management business of CIBC World Markets added new business lines and increased
managed assets from approximately $869 million at December 31, 2002 to approximately $9.6 billion
at December 31, 2003. Revenue, other than interest
Commission income (income realized in securities transactions for which Oppenheimer acts as agent)
increased by 139% for the year ended December 31, 2003 compared to fiscal 2002. This increase was
primarily the result of the additional business generated by the acquired Oppenheimer branches, as
well as improved market conditions. Revenues from principal transactions (revenues from
transactions in which Oppenheimer acts as principal in the secondary market trading of
over-the-counter equities and municipal, corporate and government bonds) increased by 135% for the
year ended December 31, 2003 compared to fiscal 2002 due to the business generated by the acquired divisions and stronger activity in the
trading of fixed income securities as a result of lower interest rates and higher bond prices in
2003 compared to 2002. Investment banking revenues increased by 122% for the year ended December
31, 2003 compared to fiscal 2002, related to increased participation in the issuance of closed-end
funds and debt securities, particularly as a result of the impact of the acquired Oppenheimer
divisions. Advisory fees increased by 206% for the year ended December 31, 2003 compared to fiscal
2002 primarily as a result of the acquisition of the U.S. Asset Management business of CIBC World
Markets in June 2003. In January 2003, the Company was awarded $21,750,000 in an arbitration award
in connection with a raiding case involving the sales force of First of Michigan Corporation, a
company acquired by the Company in 1997. Other revenue increased by 28


159% for the year ended December 31, 2003 compared to fiscal 2002 due to incentive fees of $10.7
million in 2003 derived from the OAM business acquired in June 2003. Interest
Net interest revenue (interest revenue less interest expense) increased by 36% in the year ended
December 31, 2003 compared to fiscal 2002 due to an increase in average customer margin balances
due to the conversion of the customer accounts of the acquired Oppenheimer branches in May 2003 and
lower interest rates in 2003 compared to 2002 and partially offset by interest expense of
$7,217,000 on the variable rate exchangeable debentures issued in January 2003 as part of the
purchase price of the Oppenheimer divisions. Expenses, other than interest
Compensation and related expenses in 2003 increased by 156% from 2002. Compensation expense has
volume-related components and increased with the increase in commission business conducted in 2003
compared to 2002. In addition, the increase in compensation expense reflects increased retention
and severance costs and a general increase in staff levels in both acquired branch offices and in
head office departments which were required to handle the business volume of the larger entity.
Retention costs relate to the amortization of broker notes acquired and new broker notes issued in
January and July as part of the acquisition of the Oppenheimer divisions. Amortization costs of
notes receivable amounted to $31.4 million in 2003 compared to $6.3 million in 2002. Clearing and
exchange fees in 2003 increased by 116% compared to 2002 due to increased volume generated by the
larger post-acquisition sales force. In addition, until May 2003, the business generated from the
acquired Oppenheimer branches was being cleared by a third party. The cost of third party clearing
is higher than the cost of clearing trades in-house. Transition costs related to clearing amounted
to approximately $9.4 million in 2003. Communications and data processing expenses in 2003
increased by 80% compared to 2002 reflecting additional costs of a larger branch system, after the
acquisition of the Oppenheimer divisions. Occupancy costs in 2003 increased by 82% compared to 2002
as a result of the increased size of the organization with the acquisition of the Oppenheimer
divisions. The increase in communications,
technology and occupancy expenses reflects the additional costs associated with connecting and
housing approximately 55% more financial consultants in 16 more branch offices in 2003 compared to
December 31, 2002, before the acquisitions of the Oppenheimer divisions. During 2003, the Company
was able to utilize previously underutilized space and was able to reassign employees to maximize
the usage of space. Other expenses increased by 166% in 2003 compared to 2002. The increase relates
primarily to increased levels of general and administrative expense due to the larger organization
size. Included in other expenses in 2003 is approximately $8 million of fee expense paid to third
party money managers by OAM (nil in 2002); approximately $4 million of solicitor fee expense paid
by Oppenheimer for introduced business ($nil in 2002); approximately $15 million in litigation and
legal costs ($6 million in 2002); approximately $1.7 million in audit and accounting fees ($900,000
in 2002); and approximately $4.5 million with respect to bad debt expense ($3.3 million in 2002).
Over 50% of the legal expenses relate to the Josephthal acquisition which was made in September
2001. 29


Liquidity and Capital Resources Total assets at December 31, 2004 increased by approximately 6% from December 31, 2003 due
primarily to an increase in receivables from brokers and clearing organizations and partly offset
by decreases in receivable from customers, securities owned and notes receivable. Current assets at
December 31, 2004 accounted for 89% of total assets, consistent with December 31, 2003. Current
assets at December 31, 2004 increased by 7% compared to the previous year-end because of an
increase of 7% in deposits paid for securities borrowed. The Company satisfies its need for funds from its own cash resources, internally generated funds,
collateralized and uncollateralized borrowings, consisting primarily of bank loans, and uncommitted
lines of credit. The amount of Oppenheimer s bank borrowings fluctuates in response to changes in
the level of the Companys securities inventories and customer margin debt, changes in stock loan
balances and changes in notes receivable from employees. Oppenheimer has arrangements with banks for borrowings on an
unsecured and on a fully collateralized basis. At December 31, 2004, $2,373,000 of such borrowings
were outstanding, a decrease of 97% compared to outstanding borrowings at December 31, 2003. At
December 31, 2004, the Company had available collateralized and uncollateralized letters of credit
of $124,000,000 In connection with the acquisition of the Oppenheimer divisions, the Company issued debentures in
the amount of approximately $161 million and a zero coupon promissory note in the amount of
approximately $66 million. The notes to the consolidated financial statements contain a description
of these instruments. The debentures, if exchanged, would represent the addition of approximately
35% of the then-issued Class A Shares of the Company. The interest due on the debentures is payable
semi-annually and is being financed from internally-generated funds. The principal payments on the
zero coupon promissory note are also being financed from internally-generated funds. The Company
believes that the necessary internally-generated funds will be available to service these
obligations from funds generated by normal operations, including funds generated by the acquired
business. In connection with the acquisition of the Oppenheimer divisions, the Company has arranged a credit
facility in the amount of $50 million with CIBC. In January 2003, the Company borrowed $25 million
under this facility and borrowed the balance in July 2003. The borrowings were used to finance
broker notes and are repayable, together with interest, at the CIBC U.S. base rate plus 2%, over
five years or earlier if any broker notes become due earlier. The interest and principal repayments
are being made out of internally-generated funds and the Company believes that the cash flow from
funds generated by normal operations, including funds generated by the acquired business, will be
adequate to enable the Company to meet its obligations. In accordance with the credit arrangement, the Company has
provided certain covenants to CIBC with respect to the maintenance of minimum debt/equity ratios
and net capital of Oppenheimer. In the Companys view, the most restrictive of the covenants
requires that Oppenheimer maintain minimum excess net capital of $100 million. As at December 31,
2004, the Company was in compliance with the covenants. The Company does not foresee any
difficulties in complying with the covenants. 30


The Company is committed to an on-going investment in its technology and communications
infrastructure including extensive business continuity planning and investment. These costs are
on-going and the Company believes that current and future costs will exceed historic levels due to
business and regulatory requirements. The Company believes that internally-generated funds from
operations are sufficient to finance its expenditure program. Funding Risk The following table summarizes the Companys cash flows for the years ended December 31, 2004, 2003
and 2002. 2004
    
    
    2003
    
    
    2002Cash provided by (used in) operations
    
    $
    121,992
    
    
    $
    (56,693
    )
    
    $
    (3,240
    )Cash used in investing activities
    
    
    (6,600
    )
    
    
    (27,826
    )
    
    
    (3,633
    )Cash provided by (used in) financing activities
    
    
    (116,480
    )
    
    
    102,882
    
    
    
    (1,229
    )Net increase (decrease) in cash and cash
equivalents
    
    $
    (1,088
    )
    
    $
    18,363
    
    
    $
    (8,102
    )
 The Company was successful in achieving strong cash inflows from operations in 2004 after the major
acquisition it undertook in 2003 with the purchase of the Oppenheimer divisions. With this cash
flow, in 2004 the Company was able to significantly reduce bank call loans as well as paying down
approximately $30 million of long-term debt. In 2003 the Company experienced large cash out-flows from operations despite strong earnings as it
adjusted to the larger size of the post-acquisition business. These out-flows as well as the cash
portion of the purchase price of the Oppenheimer divisions were covered by increases in both short
and long-term bank borrowings. Management believes that funds from operations, combined with the Companys capital base and
available credit facilities, are sufficient for the Companys liquidity needs in the foreseeable
future. (See factors affecting forward-looking statements). However, there is no guarantee that
the Company will continue to be able to meet its debt repayment and other obligations. Other Matters The Company paid cash dividends to its shareholders totaling $4,828,000, during 2004, from
internally-generated cash. During 2004, the Company purchased a total of 132,100 of its Class A non-voting shares at an
average cost of $23.62 per share through the facilities of the New York and Toronto Stock Exchanges
by way of a Normal Course Issuer Bid, using internally generated cash. The Company has expressed an intention to purchase up to 669,000 of its
shares from time to time between July 22, 2004 and July 21, 2005 from internally generated funds. Because of the Companys strong financial condition, size and earnings history, management believes
adequate sources of credit would be available to finance higher trading volumes, branch expansion,
and major capital expenditures, as needed. See 31


factors affecting forward-looking statements. The book value of the Companys Class A and Class B Shares was $22.96 at December 31, 2004, an
increase of approximately 6% compared to book value of $21.66 at December 31, 2003, based on total
outstanding shares of 13,396,556 and 12,919,200, respectively. Off-Balance Sheet Arrangements Information concerning the Companys off balance sheet arrangements is included in note 15 of the
Notes to the Consolidated Financial Statements. Such information is hereby incorporated by
reference. Contractual and Contingent Obligations The Company has contractual obligations to make future payments in connection with non-cancelable
lease obligations, certain retirement plans and debt assumed upon the acquisition of the
Oppenheimer divisions. The following table sets forth these contractual and contingent commitments as at December 31,
2004. Contractual Obligations
(In millions of dollars) Less than
    
    
    1  3
    
    
    3  5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsMinimum rentals
    
    $
    160
    
    
    $
    23
    
    
    $
    44
    
    
    $
    35
    
    
    $
    58Supplemental
Executive
Retirement Plan
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Bank loans
    
    
    25
    
    
    
    10
    
    
    
    15
    
    
    
    
    
    
    
    Debentures
    
    
    161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161Zero coupon notes
    
    
    35
    
    
    
    13
    
    
    
    14
    
    
    
    8
    
    
    
    Total
    
    $
    382
    
    
    $
    46
    
    
    $
    73
    
    
    $
    44
    
    
    $
    219
 Inflation Because the assets of the Companys brokerage subsidiaries are highly liquid, and because
securities inventories are carried at current market values, the impact of inflation generally is
reflected in the financial statements. However, the rate of inflation affects the Companys costs
relating to employee compensation, rent, communications and certain other operating costs, and such
costs may not be recoverable in the level of commissions charged. To the extent inflation results
in rising interest rates and has other adverse effects upon the securities markets, it may adversely
affect the Companys financial position and results of operations. 32


Newly Issued Accounting Standards The Financial Accounting Standards Board issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, FIN No. 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, FIN No. 46-R,
Consolidation of Variable Interest Entities, SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, and SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. The Company has adopted these
statements and interpretations and their adoption has not had a material impact on its financial
results. In December 2004, the FASB issued a revision to SFAS No. 123, Accounting for Stock-Based
Compensation, SFAS No. 123-R, Share-Based Payment. SFAS No. 123-R focuses primarily on transactions in which an entity exchanges its equity instruments for employee
services and generally establishes standards for accounting for transactions in which an entity
obtains goods or services in share-based transactions. SFAS No. 123-R is effective for the
Companys third quarter of 2005. The Company will commence expensing stock-based compensation
awards with respect to unvested options outstanding on July 1, 2005 as well as all grants made
subsequent to July 1, 2005 using the modified retrospective method. The Company anticipates that
the impact of the adoption of SFAS No. 123-R may be material to its statement of operations. Factors Affecting Forward-Looking Statements From time to time, the Company may publish Forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended ( the Act), and Section 21E of the Exchange
Act or make oral statements that constitute forward-looking statements. These forward-looking
statements may relate to such matters as anticipated financial performance, future revenues or
earnings, business prospects, projected ventures, new products, anticipated market performance, and
similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe harbor, the Company
cautions readers that a variety of factors could cause the Companys actual results to differ
materially from the anticipated results or other expectations expressed in the Companys
forward-looking statements. These risks and uncertainties, many of which are beyond the Companys
control, include, but are not limited to: (i) transaction volume in the securities markets, (ii)
the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in
regulatory requirements which could affect the cost of doing business, (v) fluctuations in currency
rates, (vi) general economic conditions, both domestic and international, (vii) changes in the rate
of inflation and the related impact on the securities markets, (viii) competition from existing
financial institutions and other new participants in the securities markets, (ix) legal
developments affecting the litigation experience of the securities industry, (x) changes in federal
and state tax laws which could affect the popularity of products sold by the Company,(xi) the
effectiveness of efforts to reduce costs and eliminate overlap, (xii) war and nuclear
confrontation, (xiii) the Companys ability to achieve its business plan, and (xiv) corporate governance issues. There can be
no assurance that the Company has correctly or completely identified and assessed all of the 33


factors affecting the Companys business. The Company does not undertake any obligation to publicly
update or revise any forward-looking statements. 
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Risk Management The Companys principal business activities by their nature involve significant market, credit and
other risks. The Companys effectiveness in managing these risks is critical to its success and
stability. As part of its normal business operations, the Company engages in the trading of both fixed income
and equity securities in both a proprietary and market-making capacity. The Company makes markets
in over-the-counter equities in order to facilitate order flow and accommodate its institutional and retail customers. The Company also makes markets in municipal
bonds, mortgage-backed securities, government bonds and high yield bonds. Market Risk.Market risk generally means the risk of loss that may result from the potential change
in the value of a financial instrument as a result of fluctuations in interest and currency
exchange rates and in equity and commodity prices. Market risk is inherent in all types of
financial instruments, including both derivatives and non-derivatives. The Companys exposure to
market risk arises from its role as a financial intermediary for its customers transactions and
from its proprietary trading and arbitrage activities. Oppenheimer monitors market risks through daily profit and loss statements and position reports.
Each trading department adheres to internal position limits determined by senior management and
regularly reviews the age and composition of its proprietary accounts. Positions and profits and
losses for each trading department are reported to senior management on a daily basis. In its market-making activities, Oppenheimer must provide liquidity in the equities for which it
makes markets. As a result of this, Oppenheimer has risk containment policies in place, which limit
position size and monitor transactions on a minute-to-minute basis. Credit Risk.Credit risk represents the loss that the Company would incur if a client, counterparty
or issuer of securities or other instruments held by the Company fails to perform its contractual
obligations. The Company follows industry practice to reduce credit risk related to various investing and financing activities by
obtaining and maintaining collateral. The Company adjusts margin requirements if it believes the
risk exposure is not appropriate based on market conditions. When Oppenheimer advances funds or
securities to a counterparty in a principal transaction or to a customer in a brokered transaction,
it is subject to the risk that the counterparty or customer will not repay such advances. If the
market price of the securities purchased or loaned has declined or increased, respectively,
Oppenheimer may be unable to recover some or all of the value of the amount advanced. A similar
risk is also present where a customer is unable to respond to a margin call and the market price of
the collateral has dropped. In addition, Oppenheimers securities positions are subject to
fluctuations in market value and liquidity. 34


In addition to monitoring the credit-worthiness of its customers, Oppenheimer imposes more
conservative margin requirements than those of the NYSE. Generally, Oppenheimer limits customer
loans to an amount not greater than 65% of the value of the securities (or 50% if the securities in
the account are concentrated in a limited number of issues). Particular attention and more
restrictive requirements are placed on more highly volatile securities traded in the NASDAQ market.
In comparison, the NYSE permits loans of up to 75% of the value of the equity securities in a
customers account. Further discussion of credit risk appears in Item 8, Notes to the
Consolidated Financial Statements. Operational Risk.Operational risk generally refers to the risk of loss resulting from the
Companys operations, including, but not limited to, improper or unauthorized execution and
processing of transactions, deficiencies in its operating systems, business disruptions and
inadequacies or breaches in its internal control processes. The Company operates in diverse markets
and it is reliant on the ability of its employees and systems to process high numbers of
transactions often within short time frames. In the event of a breakdown or improper operation of
systems, human error or improper action by employees, the Company could suffer financial loss,
regulatory sanctions or damage to its reputation. In order to mitigate and control operational risk, the Company has developed and
continues to enhance policies and procedures that are designed to identify and manage operational
risk at appropriate levels. With respect to its trading activities, the Company has procedures
designed to ensure that all transactions are accurately recorded and properly reflected on the
Companys books on a timely basis. With respect to client activities, the Company operates a system
of internal controls designed to ensure that transactions and other account activity (new account
solicitation, transaction authorization, transaction processing, billing and collection) are
properly approved, processed, recorded and reconciled. The Company has procedures designed to
assess and monitor counterparty risk. For a discussion of funding risk, see Item 7, Liquidity and
Capital Resources. Legal and Regulatory Risk. Legal and regulatory risk includes the risk of non-compliance with
applicable legal and regulatory requirements, client claims and the possibility of sizeable adverse
legal judgments. The Company is subject to extensive regulation in the different jurisdictions in
which it conducts its activities. Regulatory oversight of the securities industry has become
increasingly intense over the past few years and the Company, as well as others in the industry,
has been directly affected by this increased regulatory scrutiny. The Company has comprehensive procedures for addressing issues such as regulatory capital
requirements, sales and trading practices, use of and safekeeping of customer funds and securities,
granting of credit, collection activities, money laundering, and record keeping. The Company has
designated Anti-Money Laundering Compliance Officers who monitor compliance with regulations under
the U.S.A. Patriot Act. See further discussion on the Companys reserve policy under Item 7,
Critical Accounting Policies, Item 3, Legal Proceedings and Item 1, Regulation. Off-Balance Sheet Arrangements. The Company does not rely on off-balance sheet arrangements or
transactions with unconsolidated, special purpose or limited purpose entities to manage risk. 35


Value-at-Risk
Value-at-risk is a statistical measure of the potential loss in the fair value of a portfolio due
to adverse movements in underlying risk factors. In response to the Securities and Exchange
Commissions market risk disclosure requirements, the Company has performed a value-at-risk
analysis of its trading financial instruments and derivatives. The value-at-risk calculation uses
standard statistical techniques to measure the potential loss in fair value based upon a one-day
holding period and a 95% confidence level. The calculation is based upon a variance-covariance
methodology, which assumes a normal distribution of changes in portfolio value. The forecasts of
variances and co-variances used to construct the model, for the market factors relevant to the
portfolio, were generated from historical data. Although value-at-risk models are sophisticated
tools, their use can be limited as historical data is not always an accurate predictor of future
conditions. The Company attempts to manage its market exposure using other methods, including
trading authorization limits and concentration limits. At December 31, 2004 and 2003, the Companys value-at-risk for each component of market risk was as
follows (in thousands of U.S. dollars): Fiscal 2004
    
    
    As at December 31,High
    
    
    Low
    
    
    Average
    
    
    2004
    
    
    2003Interest rate risk
    
    $
    147
    
    
    $
    158
    
    
    $
    145
    
    
    $
    158
    
    
    $
    168Equity price risk
    
    
    585
    
    
    
    236
    
    
    
    368
    
    
    
    236
    
    
    
    412Diversification benefit
    
    
    (167
    )
    
    
    (105
    )
    
    
    (49
    )
    
    
    (105
    )
    
    
    (169
    )Total
    
    $
    565
    
    
    $
    289
    
    
    $
    464
    
    
    $
    289
    
    
    $
    411
 The potential future loss presented by the total value-at-risk generally falls within predetermined
levels of loss that should not be material to the Companys results of operations, financial
condition or cash flows. The changes in the value-at-risk amounts reported in 2004 from those
reported in 2003 reflect changes in the size and composition of the Companys trading portfolio at
December 31, 2004 compared to December 31, 2003, which include a larger position in equities on an
overall portfolio which is 18% less than at December 31, 2003. The Companys portfolio as at
December 31, 2004 includes approximately $15,097,000 ($15,781,000 in 2003) in corporate equities,
which are co-related to deferred compensation liabilities and which do not bear any value-at-risk
to the Company. The Company did not use derivative financial instruments to hedge market risk in
fiscal 2004 and 2003. Further discussion of risk management appears in Item 7, Managements
Discussion and Analysis of the Results of Operations and Item 1, Risk Management. The value-at-risk estimate has limitations that should be considered in evaluating the Companys
potential future losses based on the year-end portfolio positions. Recent market conditions
including increased volatility, may result in statistical relationships that result in higher
value-at-risk than would be estimated from the same portfolio under different market conditions.
Likewise, the converse may be true. Critical risk management strategy involves the active
management of portfolio levels to reduce market risk. The Companys market risk exposure is
continuously monitored as the portfolio risks and market conditions change. 36


Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OPPENHEIMER HOLDINGS INC. Managements Report on Internal Control over Financial Reporting
    
    
    38Reports of Independent Registered Public Accounting Firm
    
    
    39Consolidated Balance Sheets as at December 31, 2004 and 2003
    
    
    41Consolidated Statements of Operations for the three years ended
December 31, 2004, 2003 and 2002
    
    
    43Consolidated Statements of Changes in Shareholders Equity for the
three years ended December 31, 2004, 2003 and 2002
    
    
    44Consolidated Statements of Cash Flows for the three years ended December 31, 2004, 2003 and 2002
    
    
    45Notes to Consolidated Financial Statements
    
    
    4747
 37


Managements Report on Internal Control over Financial Reporting Management of Oppenheimer Holdings Inc., together with its consolidated subsidiaries (the Company),
is responsible for establishing and maintaining adequate control over financial reporting. The
Companys internal control over financial reporting is a process designed under the supervision of
the Companys principal executive and principal financial officers to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the Companys financial
statements for external reporting purposes in accordance with U.S. generally accepted accounting
principles. As of December 31, 2004, management conducted an assessment of the effectiveness of the Companys
internal control over financial reporting based on the framework
established in Internal Control 
Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on this assessment, management has determined that the Companys internal control
over financial reporting as of December 31, 2004 was effective. The Companys internal control over financial reporting includes policies and procedures that
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets; provide reasonable assurances that transactions are
recorded as necessary to permit preparation of financial statements in accordance with U.S.
generally accepted accounting principles, and that receipts and expenditures are being made only in
accordance with authorizations of management and the directors of the Company; and provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Companys assets that could have a material effect on the Companys financial
statements. Managements assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report appearing on page 39, which expresses
an unqualified opinion on managements assessment and on the effectiveness of the Companys
internal control over financial reporting as of December 31, 2004. A.G. Lowenthal,
Chairman of the Board
And Chief Executive Officer E.K. Roberts,
President and Treasurer March 10, 2005 38


REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Oppenheimer Holdings Inc.: We have completed an integrated audit of Oppenheimer Holdings Inc.s 2004 consolidated financial
statements and of its internal control over financial reporting as of December 31, 2004 and audits
of its 2003 and 2002 consolidated financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are
presented below. Consolidated financial statements In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of operations, changes in shareholders equity and cash flows present fairly, in all
material respects, the financial position of Oppenheimer Holdings Inc. and its subsidiaries at
December 31, 2004 and 2003, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit of financial
statements includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. As discussed in Note 1(g), in 2002 the Company adopted the Goodwill provisions of Statement of
Accounting Standards No. 142, Goodwill and Other Intangibles. Internal control over financial reporting Also, in our opinion, managements assessment, included in the accompanying Managements Report
on Internal Control Over Financial Reporting that the Company maintained effective internal
control over financial reporting as of December 31, 2004 based on criteria established in
Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004, based on criteria
established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Companys management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express
opinions on managements assessment and on the effectiveness of the Companys internal control
over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. An audit of internal control
over financial reporting includes obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and evaluating the 39


design and operating effectiveness of internal control, and performing such other procedures
as we consider necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP March 10, 2005 40


OPPENHEIMER HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2004
    
    
    2003(Expressed in thousands of U.S. dollars)ASSETSCurrent assetsCash and cash equivalents
    
    $
    33,390
    
    
    $
    34,478Restricted deposits
    
    
    15,291
    
    
    
    14,466Deposits with clearing organizations
    
    
    17,006
    
    
    
    17,858Receivable from brokers and clearing organizations
    
    
    474,523
    
    
    
    278,521Receivable from customers
    
    
    864,304
    
    
    
    906,487Securities owned, including amounts pledged, at market value
    
    
    78,445
    
    
    
    95,223Notes receivable
    
    
    70,070
    
    
    
    97,919Other, net
    
    
    53,063
    
    
    
    55,7061,606,092
    
    
    
    1,500,658Other assetsStock exchange seats (approximate market value
$3,643; $4,968 in 2003)
    
    
    2,994
    
    
    
    2,994Property, plant and equipment, net
    
    
    20,368
    
    
    
    23,807Intangible assets, net of amortization
    
    
    35,130
    
    
    
    35,865Goodwill
    
    
    137,889
    
    
    
    137,889196,381
    
    
    
    200,555$
    1,802,473
    
    
    $
    1,701,213
 41


OPPENHEIMER HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2004
    
    
    2003(Expressed in thousands of U.S. dollars)LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesDrafts payable
    
    $
    59,239
    
    
    $
    68,148Bank call loans
    
    
    2,373
    
    
    
    91,500Payable to brokers and clearing organizations
    
    
    671,953
    
    
    
    467,966Payable to customers
    
    
    383,700
    
    
    
    406,137Securities sold, but not yet purchased, at market value
    
    
    10,536
    
    
    
    10,687Accrued compensation
    
    
    73,086
    
    
    
    88,864Accounts payable and other liabilities
    
    
    60,478
    
    
    
    35,450Income taxes payable
    
    
    2,399
    
    
    
    67Current portion of bank loans
    
    
    10,119
    
    
    
    10,119Current portion of long term debt
    
    
    13,019
    
    
    
    15,9211,286,902
    
    
    
    1,194,859Long term liabilitiesBank loans
    
    
    14,524
    
    
    
    29,536Long term debt
    
    
    22,359
    
    
    
    34,954Exchangeable debentures
    
    
    160,822
    
    
    
    160,822Deferred income tax, net
    
    
    9,559
    
    
    
    1,206207,264
    
    
    
    226,518Commitments and contingencies (note 13)Shareholders equity
Share capital
13,296,876 Class A non-voting shares issued
(2003-12,819,520 shares issued)
    
    
    49,504
    
    
    
    41,52099,680 Class B voting shares issued
    
    
    133
    
    
    
    13349,637
    
    
    
    41,653Contributed capital
    
    
    8,780
    
    
    
    5,966Retained earnings
    
    
    249,890
    
    
    
    232,217308,307
    
    
    
    279,836$
    1,802,473
    
    
    $
    1,701,213
 The accompanying notes are an integral part of these consolidated financial statements. 42


OPPENHEIMER HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
    
    
    2003
    
    
    2002(Expressed in thousands of U.S. dollars, except per share amounts)REVENUE:Commissions
    
    $
    327,040
    
    
    $
    325,071
    
    
    $
    135,747Principal transactions, net
    
    
    112,277
    
    
    
    136,672
    
    
    
    58,227Interest
    
    
    45,418
    
    
    
    42,600
    
    
    
    27,622Underwriting fees
    
    
    44,804
    
    
    
    50,623
    
    
    
    22,760Advisory fees
    
    
    102,531
    
    
    
    80,550
    
    
    
    26,365Arbitration award
    
    
    3,900
    
    
    
    21,750
    
    
    
    Other
    
    
    19,170
    
    
    
    32,727
    
    
    
    12,612655,140
    
    
    
    689,993
    
    
    
    283,333EXPENSES:Compensation and related expenses
    
    
    428,247
    
    
    
    435,025
    
    
    
    169,810Clearing and exchange fees
    
    
    15,546
    
    
    
    20,734
    
    
    
    9,607Communications and data processing costs
    
    
    55,271
    
    
    
    59,652
    
    
    
    33,227Occupancy and equipment costs
    
    
    47,737
    
    
    
    48,479
    
    
    
    26,611Interest
    
    
    19,936
    
    
    
    16,891
    
    
    
    8,379Other
    
    
    50,041
    
    
    
    60,497
    
    
    
    22,782616,778
    
    
    
    641,278
    
    
    
    270,416Profit before income taxes
    
    
    38,362
    
    
    
    48,715
    
    
    
    12,917Income tax provision
    
    
    15,861
    
    
    
    20,019
    
    
    
    5,370Profit before cumulative effect of a change in
accounting principle
    
    
    22,501
    
    
    
    28,696
    
    
    
    7,547Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    1,774NET PROFIT FOR YEAR
    
    $
    22,501
    
    
    $
    28,696
    
    
    $
    9,321Earnings per shareBasic earnings per share
    
    $
    1.68
    
    
    $
    2.26
    
    
    $
    0.75- Before the effect of a change in accounting
principle
    
    $
    1.68
    
    
    $
    2.26
    
    
    $
    0.61- Cumulative effect of a change in accounting
principle
    
    
    
    
    
    
    
    
    
    $
    0.14Diluted earnings per share
    
    $
    1.31
    
    
    $
    1.65
    
    
    $
    0.73
 The accompanying notes are an integral part of these consolidated financial statements. 43


OPPENHEIMER HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2004
    
    
    2003
    
    
    2002(Expressed in thousands of U.S. dollars)SHARE CAPITALBalance at beginning of year
    
    $
    41,653
    
    
    $
    34,471
    
    
    $
    34,257Issue of Class A Shares
    
    
    11,104
    
    
    
    7,767
    
    
    
    3,503Repurchase of Class A Shares for cancellation
    
    
    (3,120
    )
    
    
    (585
    )
    
    
    (3,289
    )Balance at end of year
    
    $
    49,637
    
    
    $
    41,653
    
    
    $
    34,471CONTRIBUTED CAPITALBalance at beginning of year
    
    $
    5,966
    
    
    $
    5,028
    
    
    $
    4,113Tax benefit from employee stock options exercised
    
    
    2,814
    
    
    
    938
    
    
    
    915Balance at end of year
    
    $
    8,780
    
    
    $
    5,966
    
    
    $
    5,028RETAINED EARNINGSBalance at beginning of year
    
    $
    232,217
    
    
    $
    208,137
    
    
    $
    203,325Net profit for year
    
    
    22,501
    
    
    
    28,696
    
    
    
    9,321Dividends paid
    
    
    (4,828
    )
    
    
    (4,616
    )
    
    
    (4,509
    )Balance at end of year
    
    $
    249,890
    
    
    $
    232,217
    
    
    $
    208,137Total Shareholders Equity
    
    $
    308,307
    
    
    $
    279,836
    
    
    $
    247,636
 The accompanying notes are an integral part of these consolidated financial statements. 44


OPPENHEIMER HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2004
    
    
    2003
    
    
    2002(Expressed in thousands of U.S. dollars)Cash flows from operating activities:Net profit for year
    
    $
    22,501
    
    
    $
    28,696
    
    
    $
    9,321Adjustments to reconcile net profit to net cash provided
by (used in) operating activities:Non-cash items included in net profit:Depreciation and amortization
    
    
    10,774
    
    
    
    9,518
    
    
    
    4,864Write off of negative goodwill
    
    
    
    
    
    
    
    
    
    
    (1,774
    )Change in deferred tax, net
    
    
    8,353
    
    
    
    963
    
    
    
    57Tax benefit from employee stock options exercised
    
    
    2,814
    
    
    
    938
    
    
    
    915Amortization of notes receivable
    
    
    29,174
    
    
    
    31,405
    
    
    
    6,319Change in allowance for doubtful accounts
    
    
    3,100
    
    
    
    (3,577
    )
    
    
    2,056Decrease (increase) in operating assets, net of the effect of acquisitions
in 2002 and 2003:Restricted deposits
    
    
    (825
    )
    
    
    (7,026
    )
    
    
    (5,047
    )Deposits with clearing organizations
    
    
    852
    
    
    
    (14,252
    )
    
    
    4,080Receivable from brokers and clearing organizations
    
    
    (196,002
    )
    
    
    213,573
    
    
    
    (391,400
    )Receivable from customers
    
    
    42,183
    
    
    
    (513,558
    )
    
    
    71,057Securities owned
    
    
    16,778
    
    
    
    (32,267
    )
    
    
    699Notes receivable
    
    
    (1,325
    )
    
    
    (46,800
    )
    
    
    (10,841
    )Other assets
    
    
    (457
    )
    
    
    (10,259
    )
    
    
    (5,433
    )Increase (decrease) in operating liabilities, net of the effect of
acquisitions in 2002 and 2003:Drafts payable
    
    
    (8,909
    )
    
    
    46,495
    
    
    
    1,031Payable to brokers and clearing organizations
    
    
    203,987
    
    
    
    (52,777
    )
    
    
    341,531Payable to customers
    
    
    (22,437
    )
    
    
    243,794
    
    
    
    (26,044
    )Securities sold, but not yet purchased
    
    
    (151
    )
    
    
    1,081
    
    
    
    685Accrued compensation
    
    
    (15,778
    )
    
    
    47,543
    
    
    
    1,558Accounts payable and other liabilities
    
    
    25,028
    
    
    
    1,807
    
    
    
    (7,439
    )Income taxes payable
    
    
    2,332
    
    
    
    (1,990
    )
    
    
    565Cash provided by (used in) operating activities
    
    
    121,992
    
    
    
    (56,693
    )
    
    
    (3,240
    )Cash flows from investing activities:Purchase of the Oppenheimer divisions
    
    
    
    
    
    
    (15,611
    )
    
    
    Purchase of the business of BUYandHOLD
    
    
    
    
    
    
    
    
    
    
    (2,297
    )Proceeds from sale of exchange seat
    
    
    
    
    
    
    
    
    
    
    24Purchase of property, plant and equipment
    
    
    (6,600
    )
    
    
    (12,215
    )
    
    
    (1,360
    )Cash (used in) investing activities
    
    
    (6,600
    )
    
    
    (27,826
    )
    
    
    (3,633
    )
 45


OPPENHEIMER HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE YEAR ENDED DECEMBER 31, 2004
    
    
    2003
    
    
    2002(Expressed in thousands of U.S. dollars)Cash flows from financing activities:Cash dividends paid on Class A and
Class B Shares
    
    
    (4,828
    )
    
    
    (4,616
    )
    
    
    (4,509
    )Issuance of Class A Shares
    
    
    11,104
    
    
    
    7,767
    
    
    
    3,503Repurchase of Class A Shares for
cancellation
    
    
    (3,120
    )
    
    
    (585
    )
    
    
    (3,289
    )Zero coupon promissory note repayments
    
    
    (15,497
    )
    
    
    (14,639
    )
    
    
    Proceeds from issuance of bank loans
    
    
    
    
    
    
    50,000
    
    
    
    Bank loan repayments
    
    
    (15,012
    )
    
    
    (10,345
    )
    
    
    Increase (decrease) in bank call loans
    
    
    (89,127
    )
    
    
    75,300
    
    
    
    3,066Cash (used in) provided by financing activities
    
    
    (116,480
    )
    
    
    102,882
    
    
    
    (1,229
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,088
    )
    
    
    18,363
    
    
    
    (8,102
    )Cash and cash equivalents, beginning of year
    
    
    34,478
    
    
    
    16,115
    
    
    
    24,217Cash and cash equivalents, end of year
    
    $
    33,390
    
    
    $
    34,478
    
    
    $
    16,115
 The accompanying notes are an integral part of these financial statements 46


OPPENHEIMER HOLDINGS INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
December 31, 2004 GENERAL
Oppenheimer Holdings Inc. (OPY) is incorporated under the laws of Ontario. On September 2, 2003
the names of OPY and certain of its subsidiaries were changed. The consolidated financial
statements include the accounts of OPY and its subsidiaries (together, the Company). The
principal subsidiaries of OPY are Oppenheimer & Co. Inc. (Oppenheimer), a registered broker
dealer in securities, and Oppenheimer Asset Management Inc. (OAM), a registered investment
advisor under the Investment Advisors Act of 1940. Oppenheimer operates as Fahnestock & Co. Inc. in
South America. Oppenheimer owns Freedom Investments, Inc. (Freedom), a registered broker dealer
in securities, which also operates as the BUYandHOLD division of Freedom, offering on-line discount
brokerage and dollar-based investing services. Oppenheimer is a member of the New York Stock
Exchange, the American Stock Exchange and several other regional exchanges in the United States.
The Company engages in a broad range of activities in the securities industry, including retail
securities brokerage, institutional sales and trading, investment banking (both corporate and
public finance), research, market-making, trust services, and investment advisory and asset
management services. 1. Summary of significant accounting policies These consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America for purpose of inclusion in the Companys annual
report on Form 10-K and in its annual report to shareholders. The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. The most
significant estimates are related to income taxes and contingencies. Actual results could be
materially different from these estimates. Since operations are predominantly based in the United States of America, these consolidated
financial statements are presented in U.S. dollars. Certain prior period amounts in the balance sheet and the statements of operations and cash flows
have been reclassified to conform to the current presentation. The following is a summary of significant accounting policies followed in the preparation of these
consolidated financial statements: 47


(a) Basis of consolidation
The consolidated financial statements include the accounts of the Company and all subsidiaries. The
major subsidiaries, wholly-owned and operated in the United States of America, are as follows: Oppenheimer & Co. Inc.
            Oppenheimer Asset Management Inc.
            Freedom Investments, Inc.
    
    -broker/dealer in securities
-investment advisory services
-discount broker in securities
 Significant intercompany balances and transactions have been eliminated in the preparation of the
consolidated financial statements. (b) Brokerage operations
Transactions in proprietary securities and related revenues and expenses are recorded on a trade
date basis. Customers securities and commodities transactions are reported on a settlement date
basis, which is generally three business days after trade date. Related commission income and
expense is recorded on a trade date basis. Securities owned and securities sold, but not yet
purchased, are reported at market value generally based upon quoted prices. Realized and unrealized
changes in market value are recognized in principal transactions, net in the period in which the
change occurs. (c) Asset management operations
Asset management fees are generally recognized over the period the related service is provided
based on the account value at the valuation date per the respective asset management agreements. In
certain circumstances, OAM is entitled to receive incentive fees when the return on assets under
management exceeds certain benchmark returns or other performance targets. Incentive fees are
generally based on investment performance over a 12-month period and are not subject to adjustment
once the measurement period ends. Accordingly, incentive fees are recognized in the consolidated
statements of operations when the measurement period ends. Asset management fees and incentive fees
are included in advisory fees in the consolidated statements of earnings. Assets under management
are not included as assets of the Company. (d) Fair value
Securities owned, including those pledged; securities sold, but not yet purchased; and readily
marketable investments are valued using quoted market or dealer prices. Customer receivables,
primarily consisting of floating-rate loans collateralized by customer-owned securities, are
charged interest at rates similar to other such loans made throughout the industry. The Companys
remaining financial instruments are generally short-term in nature, and their carrying values
approximate fair value (e) Cash and cash equivalents
The Company defines cash equivalents as highly liquid investments with original maturities of less
than 90 days that are not held for sale in the ordinary course of business. (f) Drafts payable
Drafts payable represent amounts drawn by the Company against a bank. (g) Goodwill
The Company adopted Financial Accounting Standards Board Statement of Accounting Standards No.142,
Goodwill and Other Intangibles effective January 1, 2002 without restatement of prior periods.
Goodwill arose upon the acquisitions of Oppenheimer, First of Michigan Capital Corporation,
Josephthal & Co. Inc., Grand Charter Group Incorporated and the Oppenheimer divisions. Goodwill is
subject to at least an annual test for impairment to 48


determine if the fair value of goodwill of a reporting unit is less than its carrying amount.
Goodwill recorded as at December 31, 2004 has been tested for impairment and no such
impairment was recorded. On January 1, 2002, the Company wrote off unamortized negative goodwill in the amount of
$1,774,000, as required by the standard. Negative goodwill represents the excess fair value of net
assets acquired above the cost of acquisition. The write-off was recognized in the statement of
operations for the year ended December 31, 2002 as a gain from the cumulative effect of a change in
accounting principle. (h) Intangible Assets
Intangible assets arose upon the acquisition of the Oppenheimer divisions and are comprised of
customer relationships and trademarks and trade names. Customer relationships, carried at
$3,430,000 net of accumulated amortization of $1,470,000, are being amortized on a straight-line
basis over 80 months commencing in January 2003. Trademarks and trade names, carried at
$31,700,000, which are not amortized, are subject to at least an annual test for impairment to
determine if the fair value is less than its carrying amount. Trademarks and trade names recorded
as at December 31, 2004 have been tested for impairment and no such impairment was recorded. (i) Property, plant and equipment
Furniture, fixtures, equipment and leasehold improvements are stated at cost. Depreciation of
furniture, fixtures and equipment is provided on a straight-line basis generally over three to
seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the
life of the improvement or the remaining term of the lease. (i) Foreign currency translations
Canadian currency balances have been translated into U.S. dollars as follows: monetary assets and
liabilities at exchange rates prevailing at period end; revenue and expenses at average rates for
the period; and non-monetary assets and share capital at historical rates. (k) Income taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities arise
from temporary differences between the tax basis of an asset or liability and its reported amount
in the consolidated financial statements. Deferred tax balances are determined by applying the
enacted tax rates. (l) Securities
lending activities
Securities borrowed and securities loaned are carried at the amounts of cash collateral advanced or
received. Securities borrowed transactions require the Company to deposit cash or other collateral with the
lender. The Company receives cash or collateral in an amount generally in excess of the market
value of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis and may
require counterparties to deposit additional collateral or return collateral pledged, when
appropriate. Included in receivable from brokers and clearing organizations are deposits paid for securities
borrowed of $415,288,000 ($237,329,000 in 2003). Included in payable to brokers and clearing
organizations are deposits received for securities loaned of $641,393,000 ($444,977,000 in 2003). 49


(m) Resale and repurchase agreements
Transactions involving purchases of securities under agreements to resell (reverse repurchase
agreements) or sales of securities under agreements to repurchase (repurchase agreements) are
treated as collateralized financing transactions and recorded at their contractual resale or
repurchase amounts plus accrued interest. The Company obtains possession of collateral with a market value equal to or in excess of the
principal amount loaned under reverse repurchase agreements. Collateral is valued daily and
adjusted when appropriate. (n) Investment banking revenues
Investment banking fees are recorded on offering date, sales concessions on trade date and
underwriting fees at the time the transaction is substantially completed and income is reasonably
determinable. (o) Interest expense
Included in interest expense is interest on bank loans, debt, payments in lieu of interest on
securities loaned and interest paid with respect to repurchase agreements, when applicable. Interest expense relating to the variable rate exchangeable debentures is computed using the
interest method. The interest method requires the application of the effective interest rate over
the life of increasing rate debt instruments. The effective annual interest rate under the interest
method of the variable rate exchangeable debentures is 4.5% over the life of the debentures. (p) Stock-based compensation plans
The Company has a stock-based compensation plan. The Company accounts for stock based compensation
in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. No compensation expense is recognized for this plan when stock options are issued to
employees as the options are exercisable at the fair value at the date of grant. Any consideration
paid by employees on the exercise of stock options or purchase of stock is credited to share capital. See note 2 for further discussion. (q) Reserves
The Company records reserves related to legal proceedings in other payables and accrued
expenses. The determination of the amounts of these reserves requires significant judgment on the
part of management. Management considers many factors including, but not limited to: the amount of
the claim; specifically in the case of client litigation, the amount of the loss in the clients
account and the possibility of wrongdoing, if any, on the part of an employee of the Company; the
basis and validity of the claim; previous results in similar cases; and legal precedents and case
law as well as the timing of the resolution of such matters. Each legal proceeding is reviewed with
counsel in each accounting period and the reserve is adjusted as deemed appropriate by management.
Any change in the reserve amount is recorded as a charge to results in that period. The assumptions
of management in determining the estimates of reserves may be incorrect and the actual disposition
of a legal proceeding could be greater or less than the reserve amount. The Company also records reserves or allowances for doubtful accounts related to receivables from
clients and financial consultants. Client loans are collateralized by securities; however, if
there is a decline in the value of the collateral and the Company cannot obtain additional
collateral or collect on the loan, a reserve may be established. The Company also makes loans or
pays advances to financial advisors as part of its hiring process. Reserves are established on
these receivables if the financial advisor is no longer associated with the Company and the
receivable has not been promptly repaid or if it is determined that it is 50


probable the amount will not be collected. The Company also estimates taxes payable and records income tax reserves. These reserves are based
on historic experience and may not reflect the ultimate liability. The Company monitors and adjusts
these reserves as necessary. (r) Notes receivable
The Company has notes receivable from employees of approximately $70,070,000 at December 31, 2004,
which are recorded at face value net of accumulated amortization. These amounts represent retention
payments generally in the form of upfront loans to financial advisors and key revenue producers as
part of the Companys overall growth strategy. These loans are generally forgiven over a service
period 3-5 years from the initial date of the loan or based on productivity levels of employees
with respect to certain of these notes receivable and all such notes are contingent on their
continued employment with the Company. The unforgiven portion of the notes becomes due on demand in
the event the employee departs during the service period. Management monitors and compares
individual financial advisor production to each loan issued to ensure future recoverability.
Amortization of notes receivable is included in the statements of operations in compensation and
related expenses. 2. Recently Issued Accounting Standards The Financial Accounting Standards Board issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, FIN No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others, FIN No. 46-R, Consolidation
of Variable Interest Entities, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments
and Hedging Activities, and SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. The Company has adopted these statements and
interpretations and their adoption did not have a material impact on its financial results. In December 2004, the FASB issued a revision to SFAS No. 123, Accounting for Stock-Based
Compensation, SFAS No. 123-R, Share-Based Payment. SFAS No. 123-R focuses primarily on
transactions in which an entity exchanges its equity instruments for employee services and
generally establishes standards for accounting for transactions in which an entity obtains goods or
services in share-based transactions. The Company will commence expensing stock-based compensation
awards with respect to unvested options outstanding on July 1, 2005 as well as all grants made
subsequent to July 1, 2005 using the modified retrospective method. The Company anticipates that
the impact of the adoption of SFAS No. 123-R may be material to its statement of operations. 3. Restricted deposits
Deposits of $15,291,000 (2003  $14,466,000) were held at year-end in special reserve bank accounts
for the exclusive benefit of customers in accordance with regulatory requirements. To the extent
permitted, these deposits are invested in interest bearing accounts collateralized by qualified
securities. 51


4. Securities owned and Securities sold, but not yet purchased (at fair market value) 2004
    
    
    2003Securities owned consist of:Corporate equities
    
    $
    37,111,000
    
    
    $
    34,877,000Corporate and sovereign debt
    
    
    14,326,000
    
    
    
    24,962,000U.S. government and agency and state and
municipal government obligations
    
    
    23,592,000
    
    
    
    32,070,000Money market funds
    
    
    3,402,000
    
    
    
    3,288,000Other
    
    
    14,000
    
    
    
    26,000$
    78,445,000
    
    
    $
    95,223,000Securities sold, but not yet purchased
consist of:Corporate equities
    
    $
    5,321,000
    
    
    $
    3,128,000Corporate debt
    
    
    3,266,000
    
    
    
    5,115,000U.S. government and agency and state and
municipal government obligations and other
    
    
    1,949,000
    
    
    
    2,444,000$
    10,536,000
    
    
    $
    10,687,000
 Securities owned and Securities sold, but not yet purchased, consist of trading and investment
securities at fair market values. Included in securities owned at December 31, 2004 are corporate
equities with fair market values of approximately $15,097,000 ($15,781,000 in 2003), which are
correlated to deferred compensation liabilities to certain employees. At December 31, 2004, the
Company has pledged securities owned of approximately $3,333,000 ($1,427,000 in 2003) as collateral
to counterparties for securities loan transactions, which can be sold or repledged. 5. Property, plant and equipment
(Expressed in thousands of U.S. dollars) Accumulateddepreciation/
    
    
    2004
    
    
    2003Cost
    
    
    amortization
    
    
    Net book value
    
    
    Net book valueFurniture, fixtures
and equipment
    
    $
    45,532
    
    
    $
    32,637
    
    
    $
    12,895
    
    
    $
    14,671Leasehold
improvements
    
    
    16,298
    
    
    
    8,826
    
    
    
    7,473
    
    
    
    9,136$
    61,830
    
    
    $
    41,463
    
    
    $
    20,368
    
    
    $
    23,807
 Depreciation and amortization expense, included in occupancy and equipment costs, was $10,039,000,
$8,783,000 and $4,864,000 in the years ended December 31, 2004, 2003 and 2002, respectively. 52


6. Bank call loans
Bank call loans, primarily payable on demand, bear interest at various rates but not exceeding the
broker call rate, which was 4% at December 31, 2004. These loans, collateralized by firm and
customer securities with market values of approximately $17,000,000 and $74,741,000, respectively,
at December 31, 2004 are primarily with two U.S. money center banks. Details of the bank call loans
are as follows: 2004
    
    
    2003
    
    
    2002Year-end balance
    
    $
    2,373,000
    
    
    $
    91,500,000
    
    
    $
    16,200,000Weighted interest rate
(at end of year)
    
    
    2.6875%
    
    
    
    1.41%
    
    
    
    1.38%Maximum balance (at any
month end)
    
    $
    121,700,000
    
    
    $
    170,100,000
    
    
    $
    49,281,000Average amount
outstanding (during the
year) (1)
    
    $
    50,083,000
    
    
    $
    86,026,000
    
    
    $
    19,760,000Weighted average
interest rate (during
the year) (2)
    
    
    1.43%
    
    
    
    2.96%
    
    
    
    2.10%
   (1)
    
    The average amount outstanding during the year was computed by adding amounts outstanding at
the end of each month and dividing by twelve.(2)
    
    The weighted average interest rate during the year was computed by dividing the actual
interest expense by the average bank call loans outstanding at the end of each month. Aggregate interest paid on bank call loans by the Company on a cash basis during the years ended
December 31, 2004, 2003 and 2002 was $9,546,000, $6,523,000 and $6,473,000, respectively. 7. Long term liabilities Maturity
    
    
    
    
    
    December 31,Issued
    
    Date
    
    
    Interest Rate
    
    
    2004Bank loans (a)
    
    
    1/2/2008
    
    
    
    6.5%
    
    
    $
    24,643,000Less current portion
    
    
    
    
    
    
    
    
    
    
    10,119,000Long term portion of bank loans
    
    
    
    
    
    
    
    
    
    $
    14,524,000Zero Coupon Promissory Note,
issued January 2, 2003 (b)
    
    
    
    
    
    
    0%
    
    
    $
    35,378,000Less current portion
    
    
    
    
    
    
    
    
    
    
    13,019,000Long term portion of long-term debt
    
    
    
    
    
    
    
    
    
    $
    22,359,000First and Second Variable Rate
Exchangeable
Debentures,issued
January 6, 2003 and May 12, 2003,
respectively (c)
    
    
    1/2/2013
    
    
    
    4.5%
    
    
    $
    160,822,000
 53


(a)
    
    Bank loans are subject to a credit arrangement with Canadian Imperial Bank of Commerce (CIBC)
dated January 2, 2003 in the aggregate amount of $50 million dollars, and bear interest at the U.S.
base rate plus 2% per annum. The minimum annual principle repayment under the agreement is
approximately $10,119,000. The principle repayments are tied to certain employee notes receivable
issued during 2003 and repayments above the minimum level are triggered by the termination of
employment of these employees. In accordance with the credit arrangement, the Company has provided
certain covenants to CIBC with respect to the maintenance of minimum debt/equity ratios and net
capital of Oppenheimer. In the Companys view, the most restrictive of the covenants requires that
Oppenheimer maintain minimum excess net capital of $100 million. As at December 31, 2004, the
Company was in compliance with the covenants. Interest expense in 2004 on bank loans was $2,118,000
($2,021,000 in 2003), of which $2,177,000 ($1,802,000 in 2003) was paid on a cash basis.(b)
    
    The Zero Coupon Promissory Note is repayable as related employee notes receivable, which are
assigned to Oppenheimer, become due and are forgiven. Such payments are to be made notwithstanding
whether any of the employees loans default.(c)
    
    The first and second variable rate exchangeable debentures are exchangeable for approximately
6.9 million Class A Shares of the Company at the rate of $23.20 per share. The annual interest rate
is 3% in 2003, 4% in 2004  2006, and 5% in 2007 through maturity. The first and second variable
rate exchangeable debentures, which mature on January 2, 2013, contain a retraction clause, which
may be activated by the holder for a period of 120 days at the end of year seven. Interest is
payable semi-annually in June and December. Interest expense for the year ended December 31, 2004
on the first and second variable rate exchangeable debentures was $7,357,000 ($7,217,000 in 2003)
of which $6,540,000 ($4,811,000 in 2003) was paid on a cash basis. Under the interest method, the
effective annual interest rate over the life of the first and second variable rate exchangeable
debentures is 4.5%. 8. Share capital
The Companys authorized share capital, all of which is without par value, consists of (a) an
unlimited number of first preference shares issuable in series; (b) an unlimited number of Class A
non-voting shares (Class A Shares); and (c) 99,680 Class B voting shares (Class B Shares). The Class A and the Class B Shares are equal in all respects except that the Class A Shares are
non-voting. The Companys issued and outstanding share capital is as follows (no first preference shares have
been issued): 2004
    
    
    2003
    
    
    200213,296,876 (12,819,520 in
2003 and 12,397,007 in 2002)
Class A Shares
    
    $
    49,504,000
    
    
    $
    41,520,000
    
    
    $
    34,338,00099,680 Class B Shares
    
    
    133,000
    
    
    
    133,000
    
    
    
    133,000$
    49,637,000
    
    
    $
    41,653,000
    
    
    $
    34,471,000
 Issuance of shares
The Company issued 75,137 Class A Shares from Treasury for a total consideration of $2,547,000 to
the Companys 401(k) plan in the year ended December 31, 2004 (23,042 for $613,000 in 2003 and nil
in 2002). 54


In addition, the Company issued 534,319 Class A Shares from Treasury for a total consideration of
$8,557,000 pursuant to its Equity Incentive Plan in the year ended December 31, 2004 (425,171 for
$7,154,000 for 2003 and 211,322 for $3,503,000 in 2002). See note 12. Issuer Bid
The Company may purchase up to 669,000 Class A Shares by way of a Normal Course Issuer Bid through
the facilities of The Toronto Stock Exchange and/or the New York Stock Exchange until July 21,
2005. During the year ended December 31, 2004, the Company purchased 132,100 Class A Shares for a
total consideration of $3,120,000, pursuant to the Normal Course Issuer Bid (25,700 for $585,000 in
2003 and 151,400 shares for $3,289,000 in 2002). All shares purchased pursuant to the Normal Course
Issuer Bid have been cancelled. Dividends
In 2004, the Company paid cash dividends to holders of Class A and Class B Shares as follows ($0.36
in 2003 and 2002): Dividend per share
    
    Record Date
    
    Payment Date$0.09
    
    February 6, 2004
    
    February 20, 2004$0.09
    
    May 7, 2004
    
    May 21, 2004$0.09
    
    August 6, 2004
    
    August 20, 2004$0.09
    
    November 5, 2004
    
    November 19, 2004
 9. Contributed capital
Contributed capital represents the tax benefit on the difference between market price and exercise
price on employee stock options exercised. 10. Income taxes
The income tax provision shown in the consolidated statement of operations is reconciled to amounts
of tax that would have been payable (recoverable) from the application of combined federal, state,
provincial and local tax rates to pre-tax profit as follows: 2004
    
    
    2003
    
    
    2002Profit before income tax
    
    $
    38,362,000
    
    
    $
    48,715,000
    
    
    $
    12,917,000U.S. federal tax at 35%
    
    
    13,427,000
    
    
    $
    17,700,000
    
    
    $
    4,521,000Canadian tax at 44%
    
    
    
    
    
    
    
    
    
    
    74,000Combined state and local tax, net of
federal benefit
    
    
    2,535,000
    
    
    
    1,915,000
    
    
    
    497,000Income taxes at statutory rates
    
    
    15,963,000
    
    
    
    19,615,000
    
    
    
    5,092,000Tax effect of non-taxable interest and
dividends
    
    
    (343,000
    )
    
    
    (329,000
    )
    
    
    (148,000
    )Tax effect of business promotion expense
    
    
    548,000
    
    
    
    686,000
    
    
    
    484,000Impact of non-taxable death benefits
    
    
    (278,000
    )
    
    
    
    
    
    
    Other
    
    
    (29,000
    )
    
    
    47,000
    
    
    
    (58,000
    )Income taxes
    
    $
    15,861,000
    
    
    $
    20,019,000
    
    
    $
    5,370,000Profit before income tax provision:Canadian operations
    
    $
    (41,000
    )
    
    $
    (1,857,000
    )
    
    $
    (10,000
    )U.S. operations
    
    $
    38,403,000
    
    
    $
    50,572,000
    
    
    $
    12,927,000
 55


Income taxes included in the consolidated statements of operations represent the following: 2004
    
    
    2003
    
    
    2002Current:Canadian tax
    
    
    
    
    
    
    
    
    
    $
    74,000U.S. federal tax
    
    $
    18,263,000
    
    
    $
    18,776,000
    
    
    
    5,176,000State and local tax
    
    
    5,951,000
    
    
    
    3,493,000
    
    
    
    1,226,00024,214,000
    
    
    
    22,269,000
    
    
    
    6,476,000Deferred:U.S. federal tax
    
    
    (6,300,000
    )
    
    
    (1,819,000
    )
    
    $
    (885,000
    )State and local tax
    
    
    (2,053,000
    )
    
    
    (431,000
    )
    
    
    (221,000
    )(8,353,000
    )
    
    
    (2,250,000
    )
    
    
    (1,106,000
    )$
    15,861,000
    
    
    $
    20,019,000
    
    
    $
    5,370,000
 Deferred income taxes reflect the net tax effects of temporary differences between the financial
reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws
that will be in effect when such differences are expected to reverse. Significant components of the
Companys deferred tax assets and liabilities at December 31, 2004 and 2003 were as follows: December 31,2004
    
    
    2003Deferred tax assets:Employee deferred compensation plans
    
    $
    5,495,000
    
    
    $
    4,115,000Allowance for doubtful accounts
    
    
    1,168,000
    
    
    
    1,799,000Reserve for litigation and legal fees
    
    
    3,717,000
    
    
    
    3,780,000Interest method on exchangeable debentures
    
    
    1,354,000
    
    
    
    1,010,000Other
    
    
    231,000
    
    
    
    1,172,000Total deferred tax assets
    
    $
    11,965,000
    
    
    $
    11,876,000Deferred tax liabilities:Investment in partnerships
    
    $
    3,103,000
    
    
    
    Section 197 amortization of goodwill
    
    
    8,929,000
    
    
    $
    4,242,000Involuntary conversion
    
    
    6,891,000
    
    
    
    5,616,000Difference between book and tax depreciation
    
    
    2,601,000
    
    
    
    3,224,000Total deferred tax liabilities
    
    $
    21,524,000
    
    
    $
    13,082,000
 Goodwill arising from the acquisitions of Josephthal Group Inc. and the Oppenheimer divisions is
being amortized for tax purposes on a straight-line basis over 15 years. The difference between
book and tax is recorded as a deferred tax liability. On a cash basis, the Company paid income taxes for the years ended December 31, 2004, 2003 and 2002
in the amounts of $10,654,000, $13,342,000 and $8,411,000, respectively. 11. Earnings per share
Basic earnings per share was computed by dividing net profit by the weighted average number of
Class A and Class B Shares outstanding. Diluted earnings per share includes the weighted average
Class A and Class B Shares outstanding and the effects of exchangeable debentures using the if
converted method and Class A Share options using the treasury stock method. 56


Earnings per share has been calculated as follows: 2004
    
    
    2003
    
    
    2002Basic weighted average
number of shares outstanding
    
    
    13,365,453
    
    
    
    12,692,634
    
    
    
    12,429,264Net effect, if converted
method
    
    
    6,932,000
    
    
    
    6,932,000
    
    
    
    Net effect, treasury method
    
    
    100,916
    
    
    
    317,850
    
    
    
    280,278Diluted common shares (1)
    
    
    20,398,369
    
    
    
    19,942,484
    
    
    
    12,709,542Net profit, as reported
    
    $
    22,501,000
    
    
    $
    28,696,000
    
    
    $
    9,321,000Effect of dilutive
exchangeable debentures
    
    
    4,267,000
    
    
    
    4,186,000
    
    
    
    Net profit available to
shareholders and assumed
conversions
    
    $
    26,768,000
    
    
    $
    32,882,000
    
    
    $
    9,321,000Basic earnings per share
    
    $
    1.68
    
    
    $
    2.26
    
    
    $
    0.75-Before cumulative effect of
a change in accounting
principle
    
    $
    1.68
    
    
    $
    2.26
    
    
    $
    0.61-Cumulative effect of a
change in accounting
principle
    
    
    
    
    
    
    
    
    
    $
    0.14Diluted earnings per share
    
    $
    1.31
    
    
    $
    1.65
    
    
    $
    0.73(1) The diluted earnings per
share computations do not
include the antidilutive
effect of the following
options:Number of antidilutive
options, end of period
    
    
    739,116
    
    
    
    291,995
    
    
    
    509,630
 Stock-based compensation
Financial Accounting Standards Board Statement No. 123, Accounting for Stock-Based Compensation
(SFAS 123) was issued in 1995 and changed the method of accounting for stock compensation plans
similar to those of the Company. Adoption of SFAS 123s fair value recognition method is optional.
The Company has chosen to continue to apply Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its stock
compensation plans. In accordance with SFAS 123, the following presents the pro forma income and earnings per share
impact, using a fair value calculation, of the Companys stock-based compensation. Amounts are
expressed in thousands of U.S. dollars, except per share amounts. 57


Year ended December 31,2004
    
    
    2003
    
    
    2002Stock based employee compensation
expense included in reported net
income
    
    $
    808
    
    
    $
    468
    
    
    
    nilNet profit as reported
    
    $
    22,501
    
    
    $
    28,696
    
    
    $
    9,321Additional compensation expense
    
    
    1,561
    
    
    
    1,840
    
    
    
    1,906Pro forma net profit
    
    $
    20,940
    
    
    $
    26,856
    
    
    $
    7,415Basic profit per share as reported
    
    $
    1.68
    
    
    $
    2.26
    
    
    $
    0.75Diluted profit per share as reported
    
    $
    1.31
    
    
    $
    1.65
    
    
    $
    0.73Pro forma basic profit per share
    
    $
    1.57
    
    
    $
    2.12
    
    
    $
    0.60Pro forma diluted profit per share
    
    $
    1.24
    
    
    $
    1.56
    
    
    $
    0.58
 For purposes of the pro forma presentation, the Company determined fair value using the
Black-Scholes option pricing model with the following weighted average assumptions for grants in
fiscal 2004, 2003 and 2002, respectively: expected dividend yields of 1.1%, 1.3% and 1.4%;
risk-free interest rates ranging from 2.9% to 3.8%, 2.87% to 3.4% and 3.75% to 4.55%; expected
volatility ranging from 18% to 21%, 21% to 23%, and 27% to 28%; and expected life of 5 years. The
weighted average fair value of options granted during 2004, 2003 and 2002, respectively was
$2,961,000, $1,697,000 and $1,946,000. The fair value is being amortized over five years on an
after-tax basis, where applicable for purposes of pro forma presentation. Stock options generally
expire five years after the date of grant or three months after the date of retirement, if earlier.
Stock options generally vest over a five year period with 0% vesting in year one, 25% of the shares
becoming exercisable on each of the next three anniversaries of the grant date and the balance
vesting in the last six months of the option life. The vesting period is at the discretion of the
Compensation and Stock Option Committee and is determined at the time of grant. The calculation of fair value in this pro forma presentation is not indicative of future amounts
because it does not take into consideration future grants or any difference between actual and
assumed forfeitures. 12. Employee
Compensation PlansEquity Incentive Plan
Under the Companys 1996 Equity Incentive Plan as amended February 28, 2004 (EIP), the
compensation and stock option committee of the board of directors of the Company may grant options
to purchase Class A Shares to officers and key employees of the Company and its subsidiaries.
Grants of options are made to the Companys independent directors on a formula basis. Options are
generally granted for a five-year term and generally vest at the rate of 25% of the amount granted
for each year held. The aggregate number of Class A Shares that are available under the EIP is
4,615,000. 58


2004
    
    
    2003
    
    
    2002Weighted average
    
    
    
    
    
    
    Weighted average
    
    
    
    
    
    
    Weighted averageNumber of shares
    
    
    exercise price
    
    
    Number of shares
    
    
    exercise price
    
    
    Number of shares
    
    
    exercise priceOptions
outstanding,
beginning of year
    
    
    1,884,983
    
    
    $
    21.81
    
    
    
    1,978,959
    
    
    $
    20.16
    
    
    
    1,907,503
    
    
    $
    17.36Options granted
    
    
    510,606
    
    
    $
    32.58
    
    
    
    376,500
    
    
    $
    24.97
    
    
    
    383,128
    
    
    $
    27.14Options exercised
    
    
    (534,319
    )
    
    $
    16.02
    
    
    
    (425,171
    )
    
    $
    16.83
    
    
    
    (211,322
    )
    
    $
    16.57Options forfeited
    
    
    (201,900
    )
    
    $
    13.64
    
    
    
    (45,305
    )
    
    $
    22.34
    
    
    
    (100,350
    )
    
    $
    26.35Options
outstanding, end of
year
    
    
    1,659,370
    
    
    $
    27.19
    
    
    
    1,884,983
    
    
    $
    21.81
    
    
    
    1,978,959
    
    
    $
    20.16Options vested, end
of year
    
    
    312,171
    
    
    $
    23.45
    
    
    
    581,723
    
    
    $
    16.63
    
    
    
    462,185
    
    
    $
    16.13
 The following table summarizes stock options outstanding and exercisable as at December 31, 2004. Weighted average
    
    
    
    
    
    
    Weighted averageWeighted average
    
    
    exercise price
    
    
    
    
    
    
    exercise price ofRange of exercise
    
    
    
    
    
    remaining
    
    
    of outstanding
    
    
    Number exercisable
    
    
    vestedprices
    
    Number outstanding
    
    
    contractual life
    
    
    options
    
    
    (vested)
    
    
    options$14.938
 $25.00
    
    
    770,254
    
    
    2.06 years
    
    $
    23.17
    
    
    
    235,546
    
    
    $
    22.18$25.00     $34.51
    
    
    889,116
    
    
    3.27 years
    
    $
    30.68
    
    
    
    76,625
    
    
    $
    27.35$14.938  $34.51
    
    
    1,659,370
    
    
    2.69 years
    
    $
    27.19
    
    
    
    312,171
    
    
    $
    23.45
 Stock Appreciation Rights
The Company has granted Stock Appreciation Rights to certain employees as part of their
compensation package based on a formula reflecting gross production and length of service. The
value of Stock Appreciation Rights granted in 2004 total approximately $1,028,000 ($635,000 in 2003
and nil in 2002) and will vest five years from the end of the related fiscal year. The liability is
being recognized on a straight-line basis over the vesting period. Other stock-related compensation awards
In 2003, the Company awarded 36,110 Class A Shares to certain employees, which will vest if the
employees are continuously employed by the Company until January 3, 2006. The aggregate value of
this award has been estimated at $211,000. The liability is being recognized over the vesting
period. The amount expensed in 2004 for stock appreciation rights and other stock-related compensation
awards was $808,000 ($468,000 in 2003 and nil in 2002). Defined Benefit Plan
The Company, through its subsidiaries, maintains a defined contribution plan covering 59


substantially all full-time U.S. employees. The Oppenheimer & Co. Inc. 401(k) Plan provides that
Oppenheimer may make discretionary contributions. The Company made
contributions to the plans of $3,168,000, $3,491,000 and $1,398,000 in 2004, 2003 and 2002, respectively. FOM sponsors an unfunded Supplemental Executive Retirement Program (SERP), which is a
non-qualified plan that provides certain former officers additional retirement benefits. Benefits
payable under the SERP were approximately $955,000 at
December 31, 2004. Deferred Compensation Plans
The Company maintains an Executive Deferred Compensation Plan (EDCP) and a Deferred Incentive
Plan (DIP) in order to offer certain qualified high-performing financial advisors, a bonus based
upon a formula reflecting years of service, production, net commissions and a valuation of their
clients assets. The bonus amounts resulted in deferrals in fiscal 2004 of approximately $1,366,000
($1,254,000 in 2003 and $966,000 in 2002). These deferrals normally vest after five years. The
liability is being recognized over the vesting period. The Company maintains a company-owned life
insurance policy, which is designed to offset 60% of the EDCP liability. The EDCP liability is
being tracked against the value of a phantom investment portfolio held for this purpose. The Company is maintaining a Deferred Compensation Plan on behalf of certain employees who were
formerly employed by CIBC World Markets. The liability is being tracked against the value of an
investment portfolio held by the Company for this purpose. The total amount expensed in 2004 for the Companys deferred compensation plans was $2,440,000
($4,186,000 in 2003 and $373,000 in 2002). 13. Commitments and contingencies (a)

The Company and its subsidiaries have operating leases for office space and capital
leases for equipment expiring at various dates through 2014. Future minimum rental commitments
under such office and equipment leases as at December 31, 2004 are as follows:
 2005
    
    $
    23,095,0002006
    
    
    23,024,0002007
    
    
    21,248,0002008
    
    
    18,513,0002009
    
    
    16,249,0002010 and thereafter
    
    
    57,810,000Total
    
    $
    159,939,000
 Certain of the leases contain provisions for rent escalation based on increases in costs incurred
by the lessor.  (b)

The Companys rent expense for the years ended December 31, 2004, 2003 and 2002 was
$30,443,000, $31,028,000 and $14,108,000, respectively.(c)

At December 31, 2004, the Company had collateralized and uncollateralized letters of credit for
$124,000,000. Collateral for these letters of credit include marketable customer securities of
approximately $188,198,000, pledged to two financial institutions.(d)

Many aspects of the Companys business involve substantial risks of liability. In the
normal course of business, the Company has been named as defendant or co-defendant in lawsuits
creating substantial exposure. The Company is also involved from time to time in governmental and
self-regulatory agency investigations and proceedings. There has been an increased 60


incidence of litigation and regulatory investigations in the financial services industry in recent
years. The Company is the subject of customer complaints, has been named as defendant or
codefendant in various lawsuits seeking, in total, substantial damages and is involved in certain
governmental and self-regulatory agency investigations and proceedings. These proceedings arise
primarily from securities brokerage, asset management and investment banking activities. In
accordance with SFAS No. 5 Accounting for Contingencies, the Company has established provisions
for estimated losses from pending complaints, legal actions, investigations and proceedings. While
the ultimate resolution of pending litigation and other matters cannot be currently determined, in
the opinion of management, after consultation with legal counsel, the Company has no reason to
believe that the resolution of these matters will have a material adverse effect on its financial
condition. However, the Companys results of operations and cash flows could be materially affected
during any period if liabilities in that period differ from prior estimates. The materiality of
legal matters to the Companys future operating results depends on the level of future results of
operations as well as the timing and ultimate outcome of such legal matters. 14. Regulatory
RequirementsThe Companys major subsidiaries, Oppenheimer and Freedom, are subject to the uniform net
capital requirements of the Securities and Exchange Commission (SEC) under Rule 15c3-1 (the
Rule). Oppenheimer computes its net capital requirements under the alternative method provided
for in the Rule which requires that Fahnestock maintain net capital equal to two percent of
aggregate customer related debit items, as defined in SEC Rule 15c3-3. At December 31, 2004,
Oppenheimer had net capital of $201,002,000, which was $180,461,000 in excess of the $20,541,000
required to be maintained at that date. Freedom computes its net capital requirement under the
basic method provided for in the Rule, which requires that Freedom maintain net capital equal to
the greater of $250,000 or 6 2/3% of aggregate indebtedness, as defined. At December 31, 2004,
Freedom had net capital of $5,276,000, which was $5,026,000 in excess of the $250,000 required to
be maintained at that date. At December 31, 2004, Oppenheimer and Freedom had $4,241,000 and $11,050,000, respectively, in cash
and securities segregated under Federal and other regulations. Oppenheimer Trust Company is subject to regulation by the New Jersey Department of Banking. In accordance with the Securities and Exchange Commissions No Action Letter dated November 3,
1998, the Company has computed a reserve requirement for the proprietary accounts of introducing
firms as of December 31, 2004. The Company had no deposit requirements as of December 31, 2004. 15. Financial instruments with off-balance sheet risk and concentration of credit risk
In the normal course of business, the Companys securities activities involve execution, settlement
and financing of various securities transactions for customers. These activities may expose the
Company to risk in the event customers, other brokers and dealers, banks, depositories or clearing
organizations are unable to fulfill their contractual obligations. The Company is exposed to off-balance sheet risk of loss on unsettled transactions in the event
customers and other counterparties are unable to fulfill their contractual obligations. It is the
Companys policy to periodically review, as necessary, the credit standing of each counterparty
with which it conducts business. 61


Securities sold, but not yet purchased represent obligations of the Company to deliver the
specified security at the contracted price and thereby create a liability to repurchase the
security in the market at prevailing prices. Accordingly, these transactions result in
off-balance-sheet risk, as the Companys ultimate obligation to satisfy the sale of securities
sold, but not yet purchased may exceed the amount recognized on the balance sheet. Securities
positions are monitored on a daily basis. The Companys customer financing and securities lending activities require the Company to pledge
customer securities as collateral for various financing sources such as bank loans and securities
lending. At December 31, 2004, the Company had approximately $1.3 billion of customer securities
under customer margin loans that are available to be pledged of which the Company has repledged
approximately $321,069,000 under securities loan agreements. In addition, the Company has received
collateral of approximately $403,697,000 under securities borrow agreements of which the Company
has repledged approximately $316,872,000 as collateral under securities loans agreements. Included
in receivable from brokers and clearing organizations are receivables from three major U.S.
broker-dealers totaling $212,902,000. The Company monitors the market value of collateral held and the market value of securities
receivable from others. It is the Companys policy to request and obtain additional collateral when
exposure to loss exists. In the event the counterparty is unable to meet its contractual obligation
to return the securities, the Company may be exposed to off-balance sheet risk of acquiring
securities at prevailing market prices. At December 31, 2004 the Company had outstanding commitments to buy and sell of $98,000 and
$150,000, respectively, primarily of mortgage-backed securities on a when issued basis. These
commitments have off-balance sheet risks similar to those described above. The Company has a clearing arrangement with Pershing LLC to clear certain transactions in foreign
securities. Accordingly, the Company has credit exposures with this clearing broker. The clearing
broker can rehypothecate the securities held on behalf of the Company. The clearing broker has the
right to charge the Company for losses that result from a clients failure to fulfill its
contractual obligations. As the right to charge the Company has no maximum amount and applies to
all trades executed through the clearing broker, the Company believes there is no maximum amount
assignable to this right. At December 31, 2004, the Company has recorded no liabilities with regard
to this right. The Companys policy is to monitor the credit standing of this clearing broker, all
counterparties and all clients with which it conducts business. The Company has entered into an indemnity agreement with Lloyds of London pursuant to which the
Company has agreed to indemnify Lloyds for losses incurred by Lloyds under the excess SIPC
policy. 16. Segment Information
The Company has determined its reportable segments based on the Companys method of internal
reporting, which disaggregates its retail business by branch and its proprietary and investment
banking businesses by product. The Companys segments are: Private Client which includes all
business generated by the Companys 83 branches and Freedom, including commission and fee income
earned on client transactions, net interest earnings on client margin loans and cash balances, stock loan activities and financing
activities, as well as arbitration awards; Capital Markets which includes market-making activities
in over-the-counter equities, institutional trading in both fixed income and equities, structured
assets transactions, bond trading, trading in mortgage-backed securities, corporate underwriting
activities, public finance activities, and syndicate participation; and Asset Management which
includes fees from money market funds and the investment management services of Oppenheimer Asset
Management 62


Inc. and Oppenheimers asset management divisions employing various programs to professionally
manage client assets either in individual accounts or in funds. The Company evaluates the
performance of its segments and allocates resources to them based upon profitability. The Company has made changes to its reportable segments. Prior year results have been restated to
conform with the current year presentation. The table below presents information about the reported revenue and operating income (profit before
income taxes) of the Company for the years ended December 31, 2004, 2003 and 2002. The Companys
business is predominantly in the U.S. Asset information by reportable segment is not reported,
since the Company does not produce such information for internal use. Year ended December 31,2004
    
    
    2003
    
    
    2002Revenue:Private Client
    
    $
    502,547,000
    
    
    $
    525,812,000
    
    
    $
    202,356,000Capital Markets
    
    
    95,213,000
    
    
    
    120,109,000
    
    
    
    73,114,000Asset Management
    
    
    52,438,000
    
    
    
    39,809,000
    
    
    
    4,985,000Other
    
    
    4,942,000
    
    
    
    4,263,000
    
    
    
    2,878,000Total
    
    $
    655,140,000
    
    
    $
    689,993,000
    
    
    $
    283,333,000Operating Income:Private Client*
    
    $
    19,727,000
    
    
    $
    13,245,000
    
    
    $
    (5,959,000
    )Capital Markets
    
    
    15,839,000
    
    
    
    18,193,000
    
    
    
    14,008,000Asset Management**
    
    
    1,232,000
    
    
    
    14,347,000
    
    
    
    708,000Other
    
    
    1,564,000
    
    
    
    2,930,000
    
    
    
    4,160,000Total
    
    $
    38,362,000
    
    
    $
    48,715,000
    
    
    $
    12,917,000
   *
    
    Losses in the Private Client segment in 2002 were the result of unfavorable market conditions as
well as operating losses and acquisition costs relating to Josephthal, Prime Charter and BUYandHOLD
and included litigation, settlement costs, retention and severance costs and the costs of
under-utilized facilities.**
    
    OAM earned incentive fees of approximately $1.4 million in 2004 compared to approximately $10.7
million in 2003. These fees are based on the performance of certain limited partnerships (hedge
funds) of which OAM is a general partner. 17. Related party transactions
The Company does not make loans to its officers and directors except under normal commercial terms
pursuant to client margin account agreements. These loans are fully collateralized by such
employee-owned securities. 18. Subsequent events
On January 27, 2005, a cash dividend of U.S.$0.09 per share (totaling $1,214,000) was declared
payable on February 25, 2005 to Class A non-voting and Class B shareholders of record on February
11, 2005. 63


19. Quarterly Information
(unaudited)     (Expressed in thousands of dollars, except per share amounts) Fiscal QuartersYear ended December 31, 2004
    
    Fourth
    
    
    Third
    
    
    Second
    
    
    First
    
    
    TotalRevenue
    
    $
    172,307
    
    
    $
    142,321
    
    
    $
    154,743
    
    
    $
    185,769
    
    
    $
    655,140Profit before taxes
    
    $
    14,342
    
    
    $
    2,794
    
    
    $
    2,722
    
    
    $
    18,504
    
    
    $
    38,362Net profit
    
    $
    8,337
    
    
    $
    1,596
    
    
    $
    1,579
    
    
    $
    10,989
    
    
    $
    22,501Earnings per share:Basic
    
    $
    0.62
    
    
    $
    0.12
    
    
    $
    0.12
    
    
    $
    0.83
    
    
    $
    1.68Diluted
    
    $
    0.48
    
    
    $
    0.12
    
    
    $
    0.12
    
    
    $
    0.58
    
    
    $
    1.31Dividends per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.36Market price of Class A Shares:High
    
    $
    27.00
    
    
    $
    27.80
    
    
    $
    32.22
    
    
    $
    34.40
    
    
    $
    34.40Low
    
    $
    21.25
    
    
    $
    22.70
    
    
    $
    26.23
    
    
    $
    30.96
    
    
    $
    21.25Year ended December 31, 2003Revenue
    
    $
    188,341
    
    
    $
    176,404
    
    
    $
    164,397
    
    
    $
    160,851
    
    
    $
    689,993Profit before taxes
    
    $
    10,919
    
    
    $
    11,298
    
    
    $
    13,601
    
    
    $
    12,897
    
    
    $
    48,715Net profit
    
    $
    6,674
    
    
    $
    6,616
    
    
    $
    7,919
    
    
    $
    7,487
    
    
    $
    28,696Earnings per share:Basic
    
    $
    0.52
    
    
    $
    0.52
    
    
    $
    0.62
    
    
    $
    0.59
    
    
    $
    2.26Diluted
    
    $
    0.43
    
    
    $
    0.36
    
    
    $
    0.43
    
    
    $
    0.49
    
    
    $
    1.65Dividends per share
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.36Market price of Class A Shares:High
    
    $
    35.10
    
    
    $
    29.30
    
    
    $
    29.85
    
    
    $
    25.24
    
    
    $
    35.10Low
    
    $
    29.15
    
    
    $
    25.50
    
    
    $
    22.25
    
    
    $
    22.06
    
    
    $
    22.06
 The price quotations above were supplied by the New York Stock Exchange. 64


Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 
 Item 9A. CONTROLS AND PROCEDURES As of December 31, 2004, Oppenheimers management, including the Chief Executive Officer and the
Principal Financial Officer, evaluated the effectiveness of the design and operation of the
Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).
Based on that evaluation, the Companys management, including its Chief Executive Officer and its
Principal Financial Officer, concluded that the Companys disclosure controls and procedures were
effective in timely alerting management, including the Chief Executive Officer and the Principal
Financial Officer, of material information about the Company required to be included in periodic
Securities and Exchange Commission filings. However, in evaluating the disclosure controls and
procedures, management recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. There have been no changes in the Companys internal control over
financial reporting that occurred during the quarter ended December 31, 2004 that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting. Managements Report on Internal Control over Financial Reporting and the Report of Independent
Registered Public Accounting Firm thereon are set forth in Part II, Item 8 of this Annual Report on
Form 10-K. Section 303A.12(a) CEO Certification
The Company submitted a Section 12(a) CEO Certification to the New York Stock Exchange on May 17,
2004 with respect to fiscal 2003. Sarbanes-Oxley Act Section 302 CEO and CFO Certifications
The Company submitted the CEO and CFO Certifications required under Section 302 of the
Sarbanes-Oxley Act as exhibits to its annual report on Form 10-K /A (Amendment No. 1) for the year
ended December 31, 2003. 
 Item 9B. OTHER INFORMATION None 65


PART III 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item will be contained under the caption Election of Directors
in our definitive proxy statement for the 2005 Annual and Special Meeting of Shareholders.
Information about compliance with Section 16(a) of the Securities Exchange Act of 1934 required by
this form will be contained under the caption Compliance with Section 16(a) of the Securities Act
of 1934 in that proxy statement. That information is incorporated herein by reference to the proxy
statement. A copy of the Companys Statement of Corporate Governance Practices as well as copies of the
Charters of the Audit Committee, Compensation and Stock Option Committee and Nominating/Corporate
Governance Committee are posted on the Companys website at www.opco.com. These documents
can be requested by writing to the Company at its head office or by making an email request to
investorrelations@opy.ca. CODE OF ETHICS The Company has adopted a Code of Conduct and Business Ethics for Directors, Officers and
Employees, which can be found on its website at www.opco.com. These documents can be
requested by writing to the Company at its head office or by making an email request to
investorrelations@opy.ca. 
 Item 11. EXECUTIVE COMPENSATION The information required by this item will be contained under the captions Election of Directors
 Directors Compensation and Executive Compensation in our definitive proxy statement for the
2005 Annual and Special Meeting of Shareholders. That information is incorporated herein by
reference to the proxy statement. 
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item will be contained under the caption Security Ownership of
Beneficial Owners and Management in our definitive proxy statement for the 2005 Annual and Special
Meeting of Shareholders. That information is incorporated herein by reference to the proxy
statement. 
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item will be contained under the caption Indebtedness of
Directors and Executive Officers under (1) Securities Purchase and (2) Other Programs in our
definitive proxy statement for the 2005 Annual and Special Meeting of Shareholders. That
information is incorporated herein by reference to the proxy statement. 66


Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item will be contained under the caption Appointment of
Auditors in our definitive proxy statement for the 2005 Annual and Special Meeting of
Shareholders. That information is incorporated herein by reference to the proxy statement. 67


PART IV 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K  (a)
(i)
Financial Statements
See Item 8 (pages 37  64)(ii)
Financial Statement Schedules
Not Applicable.(iii)
Listing of Exhibits
The exhibits which are filed with this Form 10-K or are
incorporated herein by reference are set forth in the
Exhibit Index (pages 70  72)(b)

Reports on Form 8-K
None(c)

Exhibits
See the Exhibit Index included hereinafter.(d)

Financial Statement Schedules excluded from the annual
report to shareholders
None 68


SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on the 10th day of March, 2005. OPPENHEIMER HOLDINGS INC. BY: E.K. Roberts
E.K. Roberts, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature
    
    Title
    
    DateJ.L. Bitove
    
    Director
    
    March 10, 2005J.L. BitoveR. Crystal
    
    Director
    
    March 10, 2005R. CrystalA.G. Lowenthal
    
    Chairman, Chief Executive
    
    March 10, 2005A.G. Lowenthal
    
    Officer (Principal Executive
Officer), DirectorK.W. McArthur
    
    Director
    
    March 10, 2005K.W. McArthurA.W. Oughtred
    
    Secretary, Director
    
    March 10, 2005A.W. OughtredE.K. Roberts
    
    President & Treasurer,
    
    March 10, 2005E.K. Roberts
    
    (Principal Financial and Accounting
Officer), DirectorB. Winberg
    
    Director
    
    March 10, 2005B. Winberg
 69


EXHIBIT INDEX Unless designated by an asterisk indicating that such document has been filed herewith, the
Exhibits listed below have been heretofore filed by the Company pursuant to Section 13 or 15(d) of
the Exchange Act and are hereby incorporated herein by reference to the pertinent prior filing. Number
    
    
    Description
    
    
    Page2.1
    
    
    
    Asset Purchase Agreement dated as of December 9,
2002 and Amendment No. 1 to the Asset Purchase
Agreement dated as of January 2, 2003, by and among
Fahnestock Viner Holdings Inc., Viner Finance Inc.,
Canadian Imperial Bank of Commerce and CIBC World
Markets Corp. (previously filed as an exhibit to
Form 8-K dated January 17, 2003).2.2
    
    
    
    Asset Management Acquisition Agreement dated as of
January 2, 2003, by and among Fahnestock Viner
Holdings Inc., Fahnestock & Co. Inc., Canadian
Imperial Bank of Commerce and CIBC World Markets
Corp. (previously filed as an exhibit to Form 8-K
dated January 17, 2003).3(a)
    
    
    
    Articles of Incorporation, as amended, of Fahnestock
Viner Holdings Inc. (previously filed as exhibits to
Form 20-F for the fiscal year ended December 31,
1986 and 1988).3(b)
    
    
    
    By-Laws, as amended, of Fahnestock Viner Holdings
Inc. (previously filed as an exhibit to Form 20-F
for the fiscal year ended December 31, 1987).4.1
    
    
    
    Stakeholders Agreement dated December 9, 2002, by
and among Fahnestock Viner Holdings Inc., Canadian
Imperial Bank of Commerce, Albert G. Lowenthal,
Phase II Financial L.P., Phase II Financial Limited,
The Albert G. Lowenthal Foundation, Olga Roberts and
Elka Estates Limited (previously filed as an exhibit
to Form 8-K dated January 17, 2003).4.2
    
    
    
    Registration Rights Agreement dated January 2, 2003,
issued by Fahnestock Viner Holdings Inc. to Canadian
Imperial Bank of Commerce (previously filed as an
exhibit to Form 8-K dated January 17, 2003).4.3
    
    
    
    Exchangeable Debenture dated January 6, 2003, issued
by E. A. Viner International Co. to Canadian
Imperial Bank of Commerce (previously filed as an
exhibit to Form 8-K dated January 17, 2003).4.4
    
    
    
    Interim Exchangeable Debenture dated January 6,
2003, issued by E. A. Viner International Co. to
Canadian Imperial Bank of Commerce (previously filed
as an exhibit to Form 8-K dated January 17, 2003).4.5
    
    
    
    Exchangeable Debenture dated May 17, 2003, issued by
E. A. Viner International Co. to Canadian Imperial
Bank of Commerce (previously filed as an exhibit to
Form 10-K for the year ended December 31, 2003 dated
March 11, 2004).10(f)
    
    
    
    Fahnestock Viner Holdings Inc. 1996 Equity Incentive
Plan, Amended and Restated as at May 17, 1999
(previously filed as an exhibit to Form S-8 dated
May 15, 2000).
 70


Number
    
    
    Description
    
    
    Page10(k)
    
    
    
    Performance-Based Compensation Agreement between Fahnestock Viner
Holdings Inc. and Albert G. Lowenthal dated March 25, 1997
(previously filed as an exhibit filed to Form 10-K for the year
ended December 31, 1997).10(l)
    
    
    
    Securities Purchase Agreement dated June 11, 1997, between 1888
Limited Partnership and DST Systems Inc. and Purchaser (previously
filed as an exhibit to Schedule 14D-1 and Schedule 13D for First of
Michigan Capital Corporation dated June 18, 1997).10(m)
    
    
    
    Fahnestock Viner Holdings Inc. 1996 Equity Incentive Plan Amendment
No. 1 dated February 29, 2000 (previously filed as an exhibit to
Form 10-K for the year ended December 31, 1999).10(n)
    
    
    
    Fahnestock Viner Holdings Inc. 1996 Equity Incentive Plan Amendment
No. 2 dated May 19, 2001 (previously filed as an exhibit to Form
10-K for the year ended December 31, 2001).10(o)
    
    
    
    Performance-Based Compensation Agreement between Fahnestock Viner
Holdings Inc. and Albert G. Lowenthal dated January 1, 2001
(previously filed as an exhibit to Form 10-K for the year ended
December 31, 2001).10(p)
    
    
    
    Credit Agreement dated January 2, 2003, by and between Fahnestock
Viner Holdings Inc. and Canadian Imperial Bank of Commerce
(previously filed as an exhibit to Form 8-K dated January 17, 2003).10(q)
    
    
    
    Amended and Restated Promissory Note dated January 15, 2003, made by
Viner Finance Inc. for the benefit of CIBC World Markets Corp
(previously filed as an exhibit to Form 8-K dated January 17, 2003).10(r)
    
    
    
    Non-Competition Agreement dated January 2, 2003, by and among
Canadian Imperial Bank of Commerce and CIBC World Markets Corp.,
Fahnestock & Co. Inc. and Viner Finance Inc. (previously filed as an
exhibit to Form 8-K dated January 17, 2003).10(s)
    
    
    
    Non-Solicitation Agreement dated January 2, 2003 by and among
Fahnestock Viner Holdings Inc., Fahnestock & Co. Inc., Canadian
Imperial Bank of Commerce and CIBC World Markets Corp. (previously
filed as an exhibit to Form 8-K dated January 17, 2003).10(t)
    
    
    
    Clearing Agreement dated January 2, 2003 between Fahnestock & Co.
Inc. and CIBC World Markets Corp. (previously filed as an exhibit to
Form 8-K dated January 17, 2003).
 71


Number
    
    
    Description
    
    
    Page10(u)
    
    
    
    Shareholders Agreement dated December 9, 2002, by and among
Fahnestock Viner Holdings Inc., Albert G. Lowenthal, Phase II
Financial L.P., Phase II Financial Limited, The Albert G. Lowenthal
Foundation, Olga Roberts and Elka Estates Limited (previously filed
as an exhibit to Form 8-K dated January 17, 2003).31.1
    
    
    
    Rule 13a  14(a) 15d  14(a) Certification signed by A.G. Lowenthal
(filed herewith) *31.2
    
    
    
    Rule 13a  14(a) 15d  14(a) Certification signed by E.K. Roberts
(filed herewith) *32.1
    
    
    
    Certification pursuant to 18 U.S.C. Section 1350 signed by A.G.
Lowenthal (filed herewith) *32.2
    
    
    
    Certification pursuant to 18 U.S.C. Section 1350 signed by E.K.
Roberts (filed herewith) *
   72