building on a tradition of 130 years - opco.com on a tradition of 130 years ... 80 90 100 03 04 05...
TRANSCRIPT
Center point of Downtown Manhattan
Aftermath of Hurricane Sandy at 85 Broad Street
Hurricane Sandy causes evacuation of our new headquarters for 37 days
Oppenheimer, through its principal
subsidiaries, Oppenheimer & Co.
Inc. (a U.S. broker-dealer) and
Oppenheimer Asset Management
Inc., offers a wide range of
investment banking, securities,
investment management and
wealth management services from
94 offices in 26 states and through
local broker-dealers in five foreign
jurisdictions. OPY Credit Corp.
offers syndication as well as trading
of issued corporate loans.
Oppenheimer employs over 3,500
people. Oppenheimer offers trust
and estate services through
Oppenheimer Trust Company.
Oppenheimer Multifamily Housing
& Healthcare Finance, Inc. is
engaged in mortgage brokerage
and servicing. In addition, through
its subsidiary, Freedom Investments,
Inc. and the BUYandHOLD division
of Freedom, Oppenheimer offers
online discount brokerage and
dollar-based investing services.
Despite having 800
employees displaced by
Hurricane Sandy,
Oppenheimer continued to
service its clients.
1
** In past years we have actually disclosed registered personnel, not financial advisors in the chart
Client Assets($ billions)
Financial Advisors**Assets UnderManagement($ billions)
Branch Offices
FINANCIAL HIGHLIGHTS—Annual Report 2012
(In thousands of dollars except per share amounts)
2012 2011 2010 2009 2008
Gross Revenue $952,612 $958,992 $1,036,273 $990,480 $919,823
Profit (loss) before income taxes ($527) $17,848 $67,991 $37,067 ($36,565)
Net profit (loss)* ($3,613) $10,316 $38,532 $20,824 ($19,980)
Basic earnings (loss) per share* ($0.27) $0.76 $2.89 $1.59 ($1.51)
Total assets $2,678,020 $3,527,439 $2,515,062 $2,162,582 $1,506,073
Shareholders’ equity* $500,740 $508,070 $504,330 $461,012 $433,954
Book value per share* $36.80 $37.16 $37.73 $34.88 $33.38
Total shares outstanding 13,608 13,672 13,368 13,218 12,999
Number of employees 3,521 3,576 3576 3,616 3,399
Net Profit*($ thousands)
Shareholders’ Equity($ thousands)
Gross Revenue($ thousands)
* Attributable to Oppenheimer Holdings Inc.
Book Value Per Share($)
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Markets performed quite well in 2012,
but participation rates were low, as inves-
tors were consumed with the European
sovereign debt crisis, the U.S. fiscal cliff
and a virulent domestic national elec-
tion. While the economy moved with fits
and starts, broad based market averages
closed the year 14% higher than where
they began. As I am writing this letter,
averages have begun to hit new highs,
exceeding the level reached in 2007. It
is a welcome sign and one from which
Oppenheimer is positioned to benefit.
Client assets under administration
totaled approximately $80.3 billion, a
new milestone, while client assets under
management in fee-based programs
totaled approximately $20.9 billion at
December 31, 2012, also at record levels,
compared to $76 billion and $18.6 billion,
respectively, at December 31, 2011.
During 2012, the Company reported rev-
enues of $953 million, a decrease of .6%
from $959 million in the prior year. We
reported a loss of $3.6 million, compared
to a profit of $10.3 million earned in 2011.
The loss per share was $0.27 ($0.27 fully
diluted) compared to a profit of $.76 per
share ($.74 fully diluted) in the prior year.
At December 31, 2012, the Company had
a total of 13,607,998 shares outstanding
and the book value per share was $36.80
compared to $37.16 at the end of 2011.
Our results were negatively impacted
by expenses associated with significant
litigation costs, the build out of our new
headquarters and low interest rates. On
the positive side, results from our fixed
income businesses, Oppenheimer Mul-
tifamily Housing & Healthcare Finance
and somewhat higher incentive fees from
managed client assets made a meaningful
contribution during the year.
Dealing with the litigation resulting from
the financial crisis proved to be an extraor-
dinarily expensive undertaking again this
past year. We continue to see redemptions
of client-held Auction Rate Securities and
the holdings by clients eligible for firm
tenders were down to $213 million at year-
end as opposed to total client holdings of
$2.8 billion when the auction rate market
failed in 2008. On January 31, 2013, we
received the decision of an arbitration
panel on the U.S. Airways litigation first
filed in 2009. The adverse result with the
panel ordering us to pay $30 million (com-
pared to a claim of approximately $140
million) was a bitter disappointment and
in our view clearly contrary to prevailing
case law. This amount, which was booked
to 2012 results, caused us to show a loss
for the year.
While our results in 2012 were lower
than we would expect in a more normal
environment, we are making progress
in rebuilding profitability in our core
business. With the economy improving,
we believe this trend should continue in
2013. This year will bring its own mix of
successes and challenges, but our direc-
tion is clear. We will be diligent with what
we can control: providing our clients with
the best service and most comprehensive
financial solutions in the marketplace and
doing our best to deliver the high quality
advice and guidance that our clients have
a right to expect. We take very seriously
the responsibilities we have to help our
clients succeed.
Our move to our new headquarters pro-
ceeded quite well and uneventfully up
until the onslaught of Hurricane Sandy in
late October. Both our old headquarters
and our new one saw their basements
DEAR FELLOW SHAREHOLDERS
The year just ended was consumed with dealing with crisis-induced issues arising in years past.
Litigation stemming from the 2008-2009 period dogged us throughout the year. This, combined with
continued low interest rates and equity capital markets that continued to be impaired by a slow
growing economy, dramatically affected our results. These issues may, however, finally be moving to
the rearview mirror. We expect less litigation expense and modestly higher interest rates as we move
into 2013 and are seeing equity markets jumping off to a very strong start in this New Year.
3
filled with millions of gallons of salt water,
ruining building infrastructure and making
both of them un-inhabitable for over 30
days. The combined effects of dislocating
over 800 of our employees, the issues
faced by many of them with homes with
no power, as well as a city whose electric
power and transportation systems were
crippled, were quite daunting. While we
will never know the revenue lost from so
many of our people working from tempo-
rary locations and from home, we are quite
proud of our ability to continue to provide
essential uninterrupted service to all of
our clients and our employees at offices
in unaffected regions of the country. We
are deeply grateful to the tireless efforts of
so many of our infrastructure employees
who spent sustained periods of time away
from their homes and families, during a
time when they were sorely needed there.
All in all, it was quite an experience.
Final construction of the new floors of
our headquarters has resumed, and we
expect to reach full occupancy by late
spring. Accounting for the move had a
decidedly negative effect on our earnings
in 2012, despite the long-term savings
that will be realized over the life of our
occupancy; however, we will begin to
enjoy the benefit of those savings in 2013.
During the past year we showed progress
in a number of areas:
• We hired 66 experienced financial
advisors across the country, adding to
recently opened offices as well as long
established ones.
• We increased our ability to transact in
emerging market debt around the world
by adding traders and experienced sales
talent as well as opening relationships with
institutional clients throughout Europe,
Asia and the U.S. We saw increased reve-
nues as a result and great opportunities as
the economies of these nations accelerate.
• We finished the year with 34 senior
publishing equity analysts covering ap-
proximately 600 public companies.
• We added new funds to our alterna-
tives platform and saw significant ac-
ceptance among sophisticated investors.
Increasingly, investors want and expect to
see differentiated opportunities from their
advisors, and we believe we remain in the
forefront in offering such investments.
Risk management is an integral part of
our business operations. Our goal is to
set a tone and create a risk manage-
ment culture in which every employee is
empowered to raise an issue or express
a concern. That means having a well-de-
fined, clear-cut business model, a strate-
gy that puts that model into practice and
operating principles to guide the thou-
sands of daily decisions that are made
by managers across the company. Given
our recent experience with Hurricane
Sandy, we are putting specific emphasis
on improving operational risk awareness
and execution throughout the company.
The investments we continue to make in
our people and the build out of our busi-
ness lines are yielding results. I am grateful
to the men and women of Oppenheimer
for their continued commitment to serv-
ing clients. The relationships arising from
this dedication have never been more
important or more productive as our
many professionals assist in navigating
a volatile environment.
We will pay particular attention to areas of
our business that appear most promising
– including a goal of reaching $1.25 billion
in revenues by 2018. This requires con-
tinuing to add productive financial advi-
sors, attracting experienced investment
banking talent and adding market and
trading expertise in the emerging markets
that we expect will outgrow traditional
developed markets in the years ahead.
The problems afflicting the world econ-
omy today are real and troubling. They
may even cause the opportunities we
foresee for this business to take shape
with less vigor than we would hope.
However, we think those opportunities
will surely materialize – the vast accumu-
lation of wealth will support demand for
investment services well into the future.
Oppenheimer’s future rests on a foun-
dation of enduring principles. Our core
values – integrity, quality, commitment
– have sustained the loyalty of genera-
tions of clients and continue to motivate
talented employees. These values also
have supported the kind of business
performance that can result in solid
shareholder returns over many years.
These beliefs support our confidence
in the company’s present course and
in our ability to deliver value to clients
and to our investors in the years ahead.
Ultimately, we will be judged by our abil-
ity to generate profits and by our stock
price, which clearly does not yet reflect
much of the work we are doing or the
progress we have made.
I want to personally thank Elaine Roberts,
the President of our Holding Company,
who for over 35 years has been a sup-
portive and close associate to me and to
the Company. Elaine will be retiring at the
end of the first quarter but has agreed
to remain as a director. We look forward
to her counsel for many years to come.
Let me close by expressing my appre-
ciation to the Oppenheimer team and
my gratitude to you, our shareholders,
for your unwavering support. I trust
you share our excitement about your
Company’s future and the way in which
we are building on our past to build an
even brighter future.
Albert G. Lowenthal
Chairman of the Board
4
We ended 2012 with over $80 billion
of client holdings entrusted to our
firm, an all time high. During 2012,
we hired 66 experienced Financial
Advisors, adding meaningfully to our
highly capable and well trained staff
of investment professionals.
Low interest rates, extremely low by
historical standards, have created a
challenge for our advisors to provide
investment advice that would gradually
help clients to reallocate their invest-
ments to vehicles and strategies that
would work toward them achieving
longer-term objectives. This includes the
use of alternatives designed to provide
attractive returns compared to those
available in either short- or longer-term
fixed income securities, with the intent
of preserving purchasing power and
with the possibility of future growth.
These investment alternatives include
research-followed equities, equity strat-
egies with attractive dividend returns,
open- and closed-ended mutual funds,
preferred stocks, adjustable-rate secu-
rities and convertibles as well as bonds
and annuities.
We also believe that managed portfolios
offer attractive long-term returns with the
benefit of a dedicated and experienced
money manager, chosen for expertise in
a specific investment sector. Our partner,
Oppenheimer Asset Management, helps
us find the “best of breed” within our
clients’ desired allocation.
Our Chief Investment Strategist, John
Stoltzfus, whose weekly written research
pieces and frequent media appearances
along with regular client meetings pro-
vided direction and context to a complex
investment environment. He has helped
form an effective synergy with our Chief
Market Technician, Carter Worth, in advis-
ing our Financial Advisors and clients.
Professional Development
The Oppenheimer Professional Devel-
opment Department is charged with
ensuring that our Financial Advisors are
positioned to remain current and fully
trained in the rapidly evolving investment
world that we face. Our advisors’ role
has changed to a highly consultative
“counseling” model and they must be
prepared to counsel our most sophisti-
cated clients.
The experience of the last 5 years has
resulted in a recognition by clients and
advisors that they must realign their
priorities. Clients are focusing on basic
financial organization, crafting formal
financial blueprints for their lifetimes,
analyzing household cash flows, looking
more closely at their existing lifestyle
needs and crafting retirement living
strategies that incorporate enjoyable and
meaningful work, along with plenty of
opportunities for family.
Wealth transfer is of keen importance
to clients, concerned to assure that their
accumulated savings can be passed on
to future generations. We see this hap-
pening through meetings and discussions
with clients on a multi-generational
basis. The sure knowledge of higher
taxes has made it all the more important
that we keep our clients in touch with
constructive solutions to this dilemma.
Oppenheimer Trust Company
Oppenheimer Trust Company is a leader
in delivering innovative investment man-
agement, asset and fund administration
and fiduciary services to affluent indi-
viduals, corporations and institutions.
In the midst of change, there is a need
for some things that remain constant.
Today, more than ever, our clients need
a strong foundation and a fiduciary to
rely on as their financial affairs become
more complex.
During 2012, Oppenheimer Trust had
a 31% growth in revenue and a 15%
growth in fiduciary assets under our
management and care. At year-end,
PRIVATE CLIENT SERVICES
Oppenheimer’s Private Client Services area continues to be the
cornerstone of our firm. Our entrepreneurial culture and our focused
business environment has differentiated us from other financial service
providers and allowed us to offer our clients significant flexibility and
solutions that are customized and tailored to their goals, objectives and
unique circumstances.
5
assets held by us stood at $2.2 billion
as we continued to service the fiduciary
needs of clients.
Oppenheimer Life Agency, Ltd.
Oppenheimer’s insurance platform is
designed to offer our clients sophisti-
cated planning techniques that provide
innovative solutions for long-term goals.
In 2012, our annuity platform continued
to focus on guaranteeing clients lifetime
income with variable annuities. Given the
ongoing low interest rate environment,
annuities as well as life insurance are an
asset class which provides protection and
yield to clients planning for retirement.
Our life insurance platform was broad-
ened to assist our Financial Advisors in
focusing not only on the changing tax
landscape and its impact on our clients’
overall estate planning objectives, but to
also educate our clients on the crucial
role life insurance can play in planning.
Our Financial Advisors are able to coun-
sel their clients on life insurance as an
irreplaceable solution to legacy planning.
Advisors are able to address clients’
concerns regarding wealth transfer by
establishing and designing appropriate
plans utilizing life insurance and long-
term care insurance as a part of their
overall investment strategy.
Our advanced executive benefit plat-
form, which includes corporate owned
life insurance, provides our corporate
clients with a means to provide enhanced
wealth-building benefits to their employ-
ees. Oppenheimer continues to stand
out as we offer our corporate clients
innovative employee paid benefit pro-
grams as well as advice to control the
future cost of such benefits.
Executive Services
The Executive Service Group offers a
range of sophisticated strategies to
corporate executives to protect and
enhance the value of their assets. These
individuals are frequently concerned
with the risks associated with concen-
trated portfolios, where employer stock
overwhelms all other assets. The desire
to address this concentration risk may
also be influenced by tax considerations
or by regulatory requirements. Our expe-
rience and advice surround the sale of
stock under SEC Rule 10b5-1 and/or
Rule 144 , as well as a variety of hedging
strategies that may provide qualified
clients with diversification, liquidity and
downside protection. Executive Services
also works with corporate sponsors of
equity benefit plans to help find tailored
and effective solutions.
Retirement Services
The Retirement Services Department
consults with individuals, small employ-
ers and institutions to develop strategies
that will meet investors’ retirement goals.
Various retirement plan designs may be
utilized to help meet both employer and
employee goals in providing retirement
income. Retirement account assets for
Oppenheimer clients increased to over
$20 billion at year-end 2012. The increase
was due in large part to new client assets
in our retirement advisory programs, now
at more than $4.5 billion in assets. As
company-funded pension plans contin-
ue to diminish in importance, our focus
on a process of prudent advice to plan
fiduciaries has helped increase 401(k)
plan advisory assets under management.
Professional Alliance Group
The Professionals Alliance Group (PAG)
supports third-party professional firms
in expanding their businesses by pro-
viding financial services to their clients,
further enhancing the partner’s role as
a trusted advisor. PAG has relationships
with accounting firms, business man-
agers, sports agents, consultants and
other professionals throughout the world
and represents over $2 billion in assets
deposited with our firm.
6
Our investment team, advisory process
and analytical capabilities are the cor-
nerstone of who we are and what we
do. During the past year, we enhanced
our traditional and alternative investment
capabilities. We launched two new hedge
funds and added additional high convic-
tion managers to our recommended list
of traditional managers. Throughout our
history, we have sought to help our clients
invest in specialized, niche areas where we
find investment opportunities managed
by talented investment professionals with
strong credentials.
We are increasingly being called upon
to provide financial planning services for
clients seeking to unify their financial life.
Our effort requires having opinions, views
and ideas developed through an effort
dedicated to proprietary investment
research and market analysis. Our ser-
vices will provide an ongoing program
so that clients can be prepared to fund
education expenses and retirement in a
systematic manner. In coordination with a
client’s Financial Advisor, our profession-
al staff collect the required information
from clients, consult extensively with the
client and ultimately review the results
with the client to ensure that the plan
provides a financial roadmap for them,
both now, and in the future.
Consulting Group
The Consulting Group provides val-
ue-added services in asset allocation,
manager selection, portfolio construc-
tion and manager-of-manager investment
programs. Over the course of 2012, the
Consulting Group continued increas-
ing the number of unique investment
managers and high conviction strategies
offered. Each of these must have the
flexibility and nimbleness to successful-
ly navigate difficult markets. Assets in
the discretionary and non-discretionary
programs exceeded $9 billion.
The fastest growing offerings include the
Portfolio Advisory Service (PAS), a fee-
based mutual fund advisory program and
the Unified Managed Account (UMA) pro-
gram, which allows for multiple investment
managers, mutual funds and/or ETFs to be
ASSET MANAGEMENT
Oppenheimer Asset Management’s mission is to provide investment
advice that best serves the needs and objectives of our clients, to
implement effective solutions and innovative investment strategies
and to protect and grow capital with appropriate risk controls. In 2012,
revenues generated, client accounts serviced and assets ($20.9 billion)
under management reached an all-time high.
7
combined into a single custodial account.
The Managed Allocation Series (MAS),
part of the discretionary offerings available
in separate account or mutual fund struc-
tures, continued its strong growth as well
as excellent risk-adjusted performance for
clients. The MAS portfolios combine the
Consulting Group’s asset allocation, man-
ager research and portfolio construction
philosophy with a dynamic overlay process
designed to respond opportunistically to
changing market conditions.
Oppenheimer Investment Advisers
(OIA)/Oppenheimer Investment
Management (OIM)/ Fahnestock
Asset Management (FAM)
The OIA and OIM investment teams pro-
vide fixed income strategies that share
a common philosophy emphasizing a
disciplined investment process and a long-
term perspective focused on managing
risk. The primary objective is to reduce
risk by focusing on a diversified selection
of higher quality investment-grade bond
issues. OIA and OIM managers have a
broad capability and extensive experi-
ence managing taxable and tax-exempt
investment portfolios. Assets under man-
agement exceed $2.1 billion.
FAM provides a balanced approach to
investing with exposure to both equity and
debt investments. Its experienced man-
agers manage in excess of $700 million.
OIA, FAM and OIM offer clients direct
access to Oppenheimer portfolio man-
agers as well as a customized approach
that allows the creation of a variety of
portfolios to meet specific client needs.
Alternative Investments
The Alternative Investments Group ended
2012 with $2.5 billion in assets under man-
agement across a select number of invest-
ment partnerships. AIG provides alternative
investment research and consulting and
offers single-strategy, multi-strategy and
separate account management for hedge
funds and private equity. In January 2012,
the AIG investment team was strengthened
by the addition of new personnel with
wide-ranging experience and capabilities.
The team reconstituted the existing fund
of hedge funds, the Advantage Advisers
Whistler Fund, to embody their investment
philosophy of finding managers with strong
pedigrees, specialized in a single area of
expertise and a demonstrated ability to
produce above market returns. In addition,
we also launched two niche single strategy
hedge funds, the Chichester Commodities
U.S. Feeder Fund, a relative value commod-
ities fund, and the Susa European Equities
Fund, an equity long short fund focused
on European companies. In 2013, the team
aims to introduce additional new strategies
with an ongoing focus on performance
across all investments.
Advisor-Directed Portfolio
Management
The OMEGA Program of discretionary
portfolio management strategies contin-
ued to grow in 2012. Assets at year-end
stood at over $1.9 billion reflecting 26%
growth for the year. The momentum
behind this trend has been the addition
of experienced Financial Advisor Portfolio
Managers to our firm. These advisors utilize
a variety of investment approaches in their
efforts to achieve consistent returns for
clients over time. The Preference Advisory
program is a non-discretionary, fee-based
advisory program for clients who want to
select their investments with the flexibility
to change investment direction without
additional costs or commissions. Program
assets at year-end were $2.9 billion.
We are increasingly being called upon to provide financial planning services for clients seeking to unify their financial life.
8
Oppenheimer’s Equity Sales and
trading department has continued
to provide the firm’s clients with a
consistent and high quality research
product coupled with a global trade
execution capability. Our trading desks
in New York, London, Boston, Chica-
go, San Francisco and most recently
in Hong Kong continue to serve more
than 1,000 institutional clients around
the world. The Oppenheimer name in
all these markets represents a value
added, alpha generating service offer-
ing that continues to be ranked in the
top 30 financial services firms around
the world.
The Oppenheimer equity franchise contin-
ues to grow and the firm is participating
in an increasing number of equity transac-
tions across multiple industry verticals. As
the world economy stabilizes, we expect
that there will be an increase in investor
appetite for equities in the coming year
and a corresponding increase in all types
of equity activity including IPOs.
Our client base continues to broaden
in the U.S., Europe and Asia and there
is demand from mutual funds, hedge
funds and pension funds for high quality
equity offerings. Oppenheimer has built
its equity distribution platform to focus
primarily on small and mid cap equity
investors giving us a strong opportunity
to underwrite equity offerings in growth
and emerging growth verticals.
During this past year, Oppenheimer
completed over 75 public, private equity
and equity-linked offerings raising an
aggregate of approximately $30 billion
on behalf of our clients. Oppenheimer
was an active book-runner in the Health-
care, Industrial, Energy and Technology
sectors. The firm is renewing its focus
in the Financials Sector where we see
high levels of activity emerging in the
next several years.
While 2012 saw lower volumes in
offerings of Chinese companies,
Oppenheimer has continued to maintain
CAPITAL MARKETS
During 2012, Oppenheimer focused on the need for a robust re-evaluation of our business, and
especially on ensuring our product is being delivered efficiently to a client base that is receptive
and prepared to compensate us for the value we bring to their investment process. Concerns about
the European economy and sovereign debt, coupled with a growing disappointment in the pace of
the recovery in the U.S., kept many investors sidelined throughout the year. The challenge posed by
the deadlock in Washington kept overall volumes low with commissionable volume declining 15%
versus 2011. However, market indices rose throughout the year with large-cap equities, especially
companies with global reach and high dividends as major beneficiaries.
EQUITY CAPITAL MARKETS
9
an active dialogue with potential major
Chinese issuers. We expect that in 2013 we
will see a return of these companies to the
U.S. capital markets as valuations of exist-
ing China listed equities have improved.
The past year was particularly active in
offerings related to the energy sector. New
technology has significantly increased natu-
ral gas and oil production in North America,
which in turn has required ever increasing
amounts of new capital. There has been and
will continue to be record levels of issuance
from energy companies, including those
providing infrastructure, transportation and
production enhancement. As this process
continues, we anticipate broad opportunities
for middle market companies, such as those
for which we can be a significant partner.
Oppenheimer’s Equity Research Depart-
ment continues to provide our clients with
high-quality, differentiated research. At
year-end, our research group consisted
of 34 senior research analysts covering
approximately 600 companies across six
major sectors: Consumer & Business Services;
Energy; Financial Institutions; Health-
care; Industrial Growth; and Technol-
ogy, Telecom & Internet. In addition,
we provide Special Situations research,
as well as Investment Strategy and
Technical research.
As we have become increasingly global,
among U.S. investment banks, we have the
largest coverage of U.S.-listed China based
companies, with three analysts following over
40 companies and new areas of coverage in
the Hong Kong, Singapore, China and India
markets. In London, we will begin offering
specialized research on a top- down basis to
investors looking for additional perspective
on companies based in Europe and trading
exclusively on European markets.
The September 2011 Top Picks portfolio
which launched September 29, 2011
and consisted of each analyst’s top idea
for the following 12-month period gen-
erated a total return of 32%, after fees
and expenses. It outperformed the S&P
500 index by over 600 basis points. The
department has raised over $125 million
to date across the three Top Picks Portfolio
UITs, and will continue to introduce similar
products for clients.
We conducted 11 investor conferences,
providing an in depth look at many aspects
of our research coverage. Over 500 public
and private companies were provided a
forum to meet with approximately 2,000
institutional investors. These events were
accompanied by our robust Corporate
Access program, where we provide com-
panies the opportunity to travel with our
professional staff to meet with institutional
investors in their offices around the U.S.,
London and in Hong Kong. In 2012 we
provided this service to over 500 compa-
nies, which participated in thousands of
meetings around the world.
Looking forward, our attention in the
coming year will be focused on ensuring
Sales and Trading staff are deepening the
penetration of our product with existing
clients, and to broaden the reach of our
product to develop new clients as we
have done in Hong Kong with the addi-
tion of four seasoned Equity professionals
and local research product to the existing
team. We are now covering 13 Asian
markets and are offering Asia Equity
execution to the Firm’s global clients.
Oppenheimer has built its equity distribution platform to focus primarily on small and mid cap equity investors giving us a strong opportunity to underwrite equity offerings in growth and emerging growth verticals.
10
Oppenheimer’s investment banking business
results were led by our mergers and acqui-
sitions practice during 2012. As corporate
clients continued to re-position their business
for a changing global environment, they
engaged Oppenheimer to render actionable
advice and to assist them in executing on
their strategy. Increasingly, middle market
corporate clients and private equity firms
rely on us for advice in our sectors of focus
where we have proven expertise and possess
strong industry knowledge.
The firm acted as strategic financial advi-
sor on 21 mergers and acquisitions, with
a transaction value of $2.7 billion in 2012.
Overall M&A activity in 2012 continued
to be constrained by uncertain macroeco-
nomic conditions. Momentum slowed as
the year progressed, as buyers and sellers
became more cautious. Confidence levels
are increasing, and a stronger econo-
my, a strong stock market and early
announcements of M&A transactions
will continue to stimulate increased M&A
activity throughout 2013.
During 2012, Oppenheimer completed a
number of significant strategic advisory
assignments, including the $635 million
sale of Decision Resources to Piramal
Healthcare Ltd., the $295 million sale of
Things Remembered to Madison Dearborn
Partners, the $240 million sale of Reach
Medical Holdings, Inc. to Air Medical Group
Holdings, Inc., the $193 million sale of Flan-
ders to Insight Equity, the sale of Secure-24
to Pamlico Capital, and the recapitalization
of Connolly, Inc. by Advent International.
During the downturn in the first half of
2012, many non-U.S. publicly-listed com-
panies have looked to “go private;” we
were active in this area as well. With our
full-service suite of capabilities, Oppen-
heimer continues to be a partner of choice.
In the first half of the year, Oppenheimer
was active in supporting our clients in their
issuance of equity securities to the public
markets through initial public offerings and
secondary offerings. We also assisted clients
in the private placement of equity securities.
During the year, Oppenheimer completed
76 public equity offerings and two private
placements, raising approximately $31.3
billion in capital. The firm experienced the
most equity raising activity in the healthcare
and energy sectors. The firm also contin-
ues to build on its capabilities in Asia and
Europe, where it works with companies in
the region to access the U.S. capital markets.
In mid-2012, Oppenheimer formalized its
collaborative relationship with RBS Citizens
Bank to provide Mergers & Acquisitions
and Equity Capital Markets expertise
to RBS Citizens’ middle market clients,
while simultaneously offering credit and
commercial banking solutions from RBS
Citizens Bank to Oppenheimer’s middle
market clients. This relationship leverages
complementary middle market commer-
cial and investment banking products, ser-
vices and expertise and we are optimistic
about the potential of the relationship.
This unique collaboration between Oppen-
heimer and RBS Citizens Bank has result-
ed in several early successes in leveraged
finance situations where Oppenheimer’s
advisory relationships secured significant
financing transactions for RBS Citizens
Bank. Notable transactions in 2012 include
RBS Citizens acting in the Lead Arranger
role in the $105,000,000 financing for
the acquisition of TaxAct by Infospace, a
Co-Lead Arranger role in a $170,000,000
financing for PMC Group in support of
their acquisition of Arkema’s global tin
stabilizer and catalyst business, and the
Lead Arranger role in a $120,000,000
refinancing for Geo Specialty Chemicals.
In 2012, we had a change in leadership
in the Investment Banking Group leading
to a renewed focus on growing the busi-
ness and capitalizing on the dislocation
and uncertainty at many of our investment
banking peers. The new leadership team
has embarked on a number of key initiatives
to drive growth, including: (i) expanding our
coverage and expertise in industry sectors
that we believe will experience significant
growth, (ii) expanding our relationships with
middle-market oriented private equity firms,
(iii) driving alignment with the Equity and
Debt Capital Markets Groups, (iv) leverag-
ing opportunities within our large private
client network, and (v) developing the RBS
Citizens relationship to generate additional
opportunities. Looking forward to 2013, we
believe we are on course to leverage our
key strengths and capitalize on stabilizing
capital markets and increased M&A activity.
INVESTMENT BANKING A Leading Middle Market Investment Bank
10
Selected M&A Transactions
Undisclosed $635,000,000 $295,000,000 $166,175,000 $72,450,000 $120,000,000
Advisor on Recapitalization by
Advent International Exclusive Financial Advisor
Advisor on Sale to Piramal Healthcare Ltd.
Joint Sell Side Advisor
Sale toMadison Dearborn
Partners, LLCExclusive Financial Advisor
Hybrid OvernightFollow-On Offering
Lead Manager
Initial Public OfferingLead-Left Bookrunner
Senior Credit FacilityExclusive Financial
Advisor
July 2012 June 2012 May 2012 February 2012 February 2012 October 2012
Selected Equity & Leveraged Finance Transactions
11
Municipal finance continues to be the
backbone for states, cities and public
entities to continue to serve the needs
of their residents through the con-
struction and rehabilitation of needed
infrastructure and to finance long-term
services. Oppenheimer’s Public Finance
Group operates a business model geared
toward service to clients throughout
the public sector. Oppenheimer offers
a broad suite of services: underwriting
of fixed and variable rate transactions,
placement of short-term notes, finan-
cial advisory services on general market
transactions as well as project finance
to issuers both within and beyond the
mainstream municipal market.
In addition to achieving an all-time high in
gross revenues, the Public Finance Group
made strides in 2012 toward developing
new business strategies that position
bankers to increase the number of trans-
actions and revenue in 2013 and beyond.
These include the opening of four new
offices in Dallas, TX, Fort Lauderdale,
FL, Houston, TX, and Leawood, KS and
collaboration with both Oppenheimer’s
short-term municipal desk and Oppen-
heimer Multifamily Housing & Healthcare
Finance, Inc. Indeed, as several of the
industry’s most prominent public finance
groups have scaled back operations or
shuttered entirely, Oppenheimer has
capitalized on the retrenchment to
strategically add talent.
Public Finance is positioned to achieve
success due to the wide array of expe-
rience and performance spanning a
broad spectrum of sectors and credits.
Oppenheimer’s 2012 transactions reflect
a banking strategy integrating both tra-
ditional governmental issuers and other
transactions, that are tax-exempt by
virtue of the 501(c)3 status of the bor-
rower or a federal tax-exempt allocation.
Education finance continues to be of high
importance to state and local issues. In
2012, Oppenheimer managed over $500
million in education-related debt, ranging
in principal amount from under $500,000
to $65 million. The Topeka office originat-
ed over $50 million on behalf of Kansas
school districts, and the recently opened
Texas office has already begun to finance
independent school districts.
In the Midwest, Oppenheimer had
strong success serving as co-senior
manager of approximately $1.5 billion of
bond issues for the Illinois Department
of Employment Security. In addition,
we again assisted Jackson County,
Missouri to refinance the Truman Med-
ical Center, this year for $39 million.
In addition, Oppenheimer served the
City of Carmel, Indiana, with the sale
of two series of Lease Rental Revenue
Multipurpose Bonds. The bonds were
used to finance a parking facility for a
public building in the City Center and
to restructure the existing debt of the
City and the District.
Oppenheimer served as co-manager on
over $26 billion of bond issues nation-
wide in 2012. Major issuers included the
Dormitory Authority of the State of New
York, the Metropolitan Transportation
Authority, the New York City Transitional
Finance Authority, the State of California
and the County of Los Angeles.
PUBLIC FINANCE
Significant Financings by the Municipal Capital Markets Group in 2012
$1,469,940,000State of IllinoisUnemployment Insurance Fund Building Receipts Revenue Bonds
$185,145,000City of Carmel (Indiana) Redevelopment District Lease Rental Revenue Multipurpose Bonds
$135,000,000Wayne County, MichiganGeneral Obligation Limited Tax Notes
$101,322,000Rockland County, New YorkVarious Purpose Bonds and Revenue Anticipation Notes
$48,244,000Hudson County (New Jersey) Improvement AuthorityCounty Guaranteed Pooled Notes
$46,875,000Jefferson County (Texas) Industrial Development CorporationHurricane Ike Disaster Area Revenue Bonds
$53,190,000Township of Lyndhurst, New JerseyBond Anticipation Notes
$39,025,000Jackson County, MissouriSpecial Obligation Refunding Bonds
$38,800,000Space Coast Infrastructure AgencyInfrastructure Improvement Revenue Bonds
$31,645,000North Kansas City School District No. 74General Obligation Refunding Bonds
Oppenheimer’s Public Finance Group operates a business model geared toward service to clients throughout the public sector.
11
12
The Fixed Income division had another
year of solid performance. While the U.S.
Presidential election, the debt ceiling and
the fiscal cliff provided a colorful backdrop
to the rates and credit markets, the over-
whelming influence on the bond market
was the Federal Reserve QE3 (Quantita-
tive Easing 3) program. Risk Free rates
remained at historic lows and the total
amount of outstanding U.S. Treasury debt
reached record levels once again. U.S.
corporations continued to issue record
amounts of debt at advantageous interest
rates. U.S. home owners continued to
refinance their mortgages at historically
low rates and these low cost attractive
rates began to fuel new construction
and the beginning of a recovery of the
housing market as new levels of afford-
ability opened this critical market to new
participants. In addition to buying by the
U.S. Federal reserve, U.S. private investors
continued to allocate their savings to the
bond market fueling professional money
managers to easily deploy the resulting
fund inflows into bond portfolios across
the spectrum of risk appetite from emerg-
ing market, to high yield, to highly con-
servative U.S. Treasuries.
Investor demand for higher yields led many
buyers to purchase bonds from sovereign
and corporate issuers who had been effec-
tively locked out of the debt markets for
nearly 5 years through lack of investor
demand. Corporations throughout the
emerging and developed world found a
receptive market for their debt, leading to
record new issuance of Emerging Market
corporate debt. As global banks continue
to pull back their financial exposure outside
of their home countries to non-domestic
borrowers, those same borrowers increas-
ingly found the bond market a suitable
replacement. While Oppenheimer does not
focus on Emerging Market bond origina-
tion, we do transact with many domestic
and international clients who are active
participants in the secondary markets.
Oppenheimer consolidated the leader-
ship of the Taxable and Municipal bond
divisions in 2012. This change took effect
mid-year and has already resulted in the
rationalization of some duplicative costs.
We also created a growing number of
revenue enhancing synergies as a result of
the combination. During the year, we set
the stage for new growth in this import-
ant market by adding additional municipal
traders, sales people and public finance
bankers. While these new capabilities are
already contributing to the profitability
of the division, we anticipate that these
enhancements will lay the groundwork
for further expansion in the coming years.
By staying attuned to news and events
in the municipal markets, we were able
to find opportunities to find real value
for clients as “bad news” for some issu-
ers was misinterpreted by the markets
and presented unusual value to “smart
buyers” with an ability to understand
how fragmented the municipal market
can be with neighboring issuers having
completely different credit profiles. Such
opportunities have prompted us to begin
offering municipal research specializing in
opportunity investing as well as services
to advise municipal investors on portfo-
lio construction and on the attraction of
taking advantage of “swaps” to increase
yield and shorten duration and better
position portfolios for a rising interest
rate environment.
We continued to expand the number of
Fixed Income accounts covered and were
able to improve our overall market share
across all fixed income asset classes. This
was accomplished through our hiring of
experienced sales, trading and research
personnel, while maintaining our com-
mitment to providing clients with high
quality service and market leading ideas.
DEBT CAPITAL MARKETS Fixed Income Sales, Trading and Research
13
Our client-facing business model insulated
us from the risks associated with extreme
volatility and market exposures often asso-
ciated with large proprietary trading desks.
The expected near term effectiveness of
the Volcker Rule, which severely curtails
proprietary trading by banks, will not
impact Oppenheimer’s business because
we continue to operate as a broker and
a dealer, and not as a commercial bank.
Our business remains primarily focused
on servicing our clients with value added
research and conflict-free trading capabil-
ities. Our ability to offer execution across
broad areas of fixed income, including U.S.
Government and Agency debt, high grade
corporate debt, mortgage debt, high yield
corporate debt, emerging market debt
and preferred shares, is unique among
our competitors. Given our relationship
with Oppenheimer Multifamily Housing
& Healthcare Finance, we effectively and
promptly distributed over $1 billion in new
issues of FHA insured securitized debt
in 2012.
While we deal with larger institutions on
a regular basis, the majority of our institu-
tional clients are “middle market” accounts
and thus remain largely underserviced by
our larger competitors. The high level of
service we provide to these clients has won
us a dedicated and loyal base and permits
us to earn the opportunity to fill many
of their needs. In 2012, we continued to
build our business by hiring experienced
professionals located throughout the
United States, as well as in London, Tel
Aviv and Hong Kong.
Although the domestic financial markets
have generally recovered from the credit
crisis, many large firms have been forced
by the upcoming Volcker Rule to priori-
tize their origination efforts and curtail
proprietary risk activities. This has created
a void in the market that Oppenheimer is
uniquely positioned to serve. Additionally,
small boutiques that were once considered
safe harbors during the crisis are increasingly
challenged in the new environment. With-
out capital, research or a diversified mix of
clients and trading capabilities, these firms
have had difficulty maintaining the attention
of large institutional clients. Our focus on
middle market customers and niche trading
capabilities continues to be an advantage
in the post credit crisis environment.
Oppenheimer Europe
Oppenheimer continued to grow its
fixed income franchise outside the
United States. With an increase in the
size of our fixed income trading group
in London and our newly opened facility
on the island of Jersey, we believe that
we can continue to grow our business.
Our growth will be sourced in the UK as
well as the rest of Europe through our
unique ability to service inquiries from
institutions requiring higher levels of
service and attention.
Oppenheimer Asia
In Asia, we hired new leadership on the
trading desk in Hong Kong. We have since
made significant progress in generating
consistent revenue and profitability. We will
continue to recruit talented professionals in
Hong Kong and through a small dedicated
staff, we intend to continue focusing on
offering Asian owners and issuers of debt
access to niche markets in Europe, the U.S.
and Asia.
DEBT CAPITAL MARKETS Fixed Income Sales, Trading and Research
14
As a leading commercial mortgage
banker, we provide customers with a
full range of services such as origination,
underwriting, closing, securitizing and
servicing of their mortgage loans.
In 2012, we closed 97 loans for just under
$900 million. These loans represented
a wide range of properties including
apartments, hospitals and healthcare
facilities. Fiscal 2012 saw us among the
top five lenders for FHA Multifamily Ini-
tial Endorsements and the top 10 of all
lenders of for FHA Firm Commitments.
Our servicing portfolio increased by
36.4% from 2011 to 2012. We faced
increased competition to refinance loans
from the existing OMHHF portfolio. Pro-
actively, we identified all loans eligible for
refinance and contacted those borrowers
well in advance. As a result, we were
able to keep a high percentage of the
refinanced loans.
Another advantage is our ability to collab-
orate with other Oppenheimer divisions to
cross-sell products, with the opportunity
to raise capital from the equity markets
or through healthcare financing in the
municipal market. These products create
additional value for Oppenheimer’s clients.
We continue to pursue correspondent
relationships to leverage our infrastructure
while sharing revenue with well established
unrelated mortgage bankers.
We find we are able to create addition-
al efficiencies and economies by using
OMHHF team members to perform all
necessary services in-house. We were
helped in this effort by Oppenheimer’s
name and reputation. Both proved attrac-
tive to the seasoned candidates whom we
successfully brought on board in all areas
of our business, including Originations,
Underwriting and Servicing.
Another ongoing challenge is the
impact of rapid technological growth
on our business. Our customers’ need
for more information more quickly can
only increase. We are stepping up our
efforts to devise real-time, automated
methods of providing these data on a
robust and secure platform.
Going into 2013, we continue to
pursue relationships with firms that
can provide our clients with the abil-
ity to finance commercial properties
with non-FHA financing alternatives to
expand our ability to provide one-stop
shopping. We intend to also sell other
Oppenheimer products to eligible and
interested clients.
Representative Properties
Financed by OMHHF in 2012
Ellis Hospital 2 New York$54,850,000
Lebanon Ridge Texas$31,474,800
Hawthorne Hill Colorado$28,240,000
Shores at K-Rock Oklahoma $28,119,500
Amberleigh Shores North Carolina$26,560,500
Bethel Health & Rehabilitation Center
Connecticut$26,268,700
Sunlake at Edgewater Apartments
Alabama$21,000,000
Wembly at Overlook
Georgia$20,427,800
Waterford Park Apartments
Texas$16,479,600
COMMERCIAL MORTGAGE BANKING
Oppenheimer Multifamily Housing & Healthcare Finance (OMHHF) is a
licensed FHA mortgagee and GNMA Seller/Servicer. Its role is to assist
owners of multifamily apartment properties and healthcare facilities,
including nursing home and assisted living properties, to employ a
government-assisted mortgage program in financing or re-financing
their mortgages cost effectively.
Bethel Health & Rehabilitation Center, Connecticut
15
Our Annual Report on Form 10-K for the year ended December 31, 2012 also serves as
our 2012 Annual Report to Stockholders. It is available to view and print online on our
website at www.opco.com on the Investor Relations page. A stockholder who wants
to receive a paper or email copy of our Annual Report on Form 10-K for the year
ended December 31, 2012 must request one. The report is available, without charge,
except for exhibits to the report, by (i) writing to Oppenheimer Holdings Inc., 85
Broad Street, 22nd Floor, New York, New York 10004, Attention: Secretary, (ii) calling
1-800-221-5588, or (iii) emailing us with your request at [email protected]. Exhibits will
be provided upon request and payment of a reasonable fee.
16 | Oppenheimer Holdings Inc.
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Oppenheimer Holdings Inc. | 17
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Principal OfficesOppenheimer Holdings Inc.85 Broad StreetNew York, NY 10004(212) 668-8000FAX (212) [email protected]
Oppenheimer & Co. Inc.Corporate Headquarters85 Broad StreetNew York, NY 10004(212) 668-8000FAX (212) 943-8728
Capital Markets85 Broad StreetNew York, NY 10004(212) 856-4000www.opco.com
Oppenheimer AssetManagement Inc.85 Broad StreetNew York, NY 10004(212) 907-4000FAX (212) 907-4080www.opco.com
Oppenheimer TrustCompany18 Columbia TurnpikeFlorham Park, NJ 07932(973) 245-4635FAX (973) 245-4699www.opco.com
OPY Credit Corp.85 Broad StreetNew York, NY 10004(212) 885-4489FAX (212) 885-4933
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Photography by Lisa Houlgrave and John Madere
OfficersA.G. LowenthalChairman of the Boardand Chief Executive Officer
E.K. RobertsPresident and Treasurer
J.J. AlfanoExecutive Vice President and Chief Financial Officer
D.P. McNamara, Esq.Secretary
Board of DirectorsR. CrystalG
W. Ehrhardt*°M. Keehner*°G
A.G. LowenthalK.W. McArthur*A.W. Oughtred°G
E.K. Roberts
* members of the audit commit-tee
° members of the compensation committee
G members of the nominating/corporate governance commit-tee
Auditors
PricewaterhouseCoopers LLP
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The Company’s financial information and press releases are available on its website, www.opco.com, under “Investor Relations”.
A copy of the Company’s AnnualReport on Form 10-K is available by request from [email protected]