Edgar Filing: RAYMOND JAMES FINANCIAL INC

k10093008.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2008

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-9109

RAYMOND JAMES FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Florida		No. 59-1517485
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

880 Carillon Parkway, St. Petersburg, Florida		33716
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code

(727) 567-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, $.01 Par Value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

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 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 x 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 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer oSmaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo x

As of March 31, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant computed by reference to the price at which the common stock was last sold was $2,173,106,435.

The number of shares outstanding of the registrant’s common stock as of November 19, 2008 was 120,296,903.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held February 19, 2009 are incorporated by reference into Part III.

	RAYMOND JAMES FINANCIAL, INC. TABLE OF CONTENTS
		Page
PART I

Item 1	Business	2
Item 1A	Risk Factors	15
Item 1B	Unresolved Staff Comments	21
Item 2	Properties	21
Item 3	Legal Proceedings	21
Item 4	Submission of Matters to a Vote of Security Holders	22

PART II

Item 5	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	23
Item 6	Selected Financial Data	24
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	56
Item 8	Financial Statements and Supplementary Data	64
Item 9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	118
Item 9A	Controls and Procedures	118
Item 9B	Other Information	121

PART III

Item 10	Directors, Executive Officers and Corporate Governance	121
Item 11	Executive Compensation	121
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	121
Item 13	Certain Relationships and Related Transactions, and Director Independence	121
Item 14	Principal Accountant Fees and Services	121

PART IV

Item 15	Exhibits, Financial Statement Schedules	122
	Signatures	125

PART I

ITEM 1. BUSINESS

Raymond James Financial, Inc. (“RJF”), the parent company of a business established in 1962 and a public company since 1983, is a holding company headquartered in St. Petersburg, Florida whose subsidiaries are engaged in various financial services businesses predominantly in the United States of America (“U.S.”) and Canada. At September 30, 2008, its principal subsidiaries include Raymond James & Associates, Inc. (“RJA”), Raymond James Financial Services, Inc. (“RJFS”), Raymond James Ltd. ("RJ Ltd."), Eagle Asset Management, Inc. (“Eagle”), Heritage Asset Management, Inc. (“Heritage”) and Raymond James Bank, FSB (“RJBank”). All of these subsidiaries are wholly owned by RJF. RJF and its subsidiaries are hereinafter collectively referred to as the “Company”.

PRINCIPAL SUBSIDIARIES

RJF's principal subsidiary, RJA, is the largest full service brokerage and investment firm headquartered in the state of Florida and one of the largest retail brokerage firms in North America. RJA is a self-clearing broker-dealer engaged in most aspects of securities distribution, trading, investment banking and asset management. RJA also offers financial planning services for individuals and provides clearing services for RJFS, other affiliated entities and several unaffiliated broker-dealers. In addition, RJA has six institutional sales offices in Europe. RJA is a member of the New York Stock Exchange (“NYSE”), American Stock Exchange, and most regional exchanges in the U.S. It is also a member of the Financial Industry Regulatory Authority (“FINRA”) and Securities Investors Protection Corporation (“SIPC”).

RJFS is one of the largest independent contractor brokerage firms in the U.S. Financial Advisors affiliated with RJFS may offer their clients all products and services offered by RJA. RJFS is a member of FINRA and SIPC, but not of any exchange, as it clears all of its business on a fully disclosed basis through RJA.

RJ Ltd. is the Company's Canadian broker-dealer subsidiary which engages in both retail and institutional distribution and investment banking. RJ Ltd. is a member of the Toronto Stock Exchange (“TSX”) and the Investment Industry Regulatory Organization of Canada (“IIROC”). Its U.S. broker-dealer subsidiary is a member of FINRA.

Eagle is a registered investment advisor serving as the discretionary manager for individual and institutional equity and fixed income portfolios.

Heritage acts as the manager of the Company's internally sponsored Heritage Family of Mutual Funds.

RJBank provides traditional banking products and services to the clients of the Company's broker-dealer subsidiaries and to the general public.

BUSINESS SEGMENTS

The Company has eight business segments: Private Client Group; Capital Markets; Asset Management; RJBank; Emerging Markets; Stock Loan/Borrow; Proprietary Capital and certain corporate activities combined in the "Other" segment. Financial information concerning RJF for each of the fiscal years ended September 30, 2008, September 30, 2007, and September 30, 2006, is included in the consolidated financial statements and notes thereto.

PRIVATE CLIENT GROUP

The Company provides securities transaction and financial planning services to approximately 1.8 million client accounts through the branch office systems of RJA, RJFS, RJ Ltd., and Raymond James Investment Services Limited (“RJIS"), a joint venture in the United Kingdom. The Company's Financial Advisors offer a broad range of investments and services, including both third party and proprietary products, and a variety of financial planning services. The Company charges sales commissions or asset-based fees for investment services it provides to its Private Client Group clients based on established schedules. Varying discounts may be given, generally based upon the client's level of business, the trade size, service level provided, and other relevant factors. In fiscal year 2008, asset-based fees, including mutual fund and insurance trail annuity commissions, represented 59% of the Private Client Group's commission and fees.

The majority of the Company’s U.S. Financial Advisors are also licensed to sell insurance and annuity products through its general insurance agency, Planning Corporation of America (“PCA”), a wholly owned subsidiary of RJA. Through the Financial Advisors of the Company's broker-dealer subsidiaries, PCA provides product and marketing support for a broad range of insurance products, principally fixed and variable annuities, life insurance, disability insurance and long-term care coverage.

The Company's Financial Advisors offer a number of professionally managed load mutual funds, as well as a selection of no-load funds. RJA and RJFS maintain dealer sales agreements with most major distributors of mutual fund shares sold through broker-dealers, including funds managed by Heritage. Commissions on such sales generally range up to 5% of the dollar value of the transaction. The majority of mutual fund purchases includes a front-end sales charge or occur at net asset value (“NAV”) in fee-based accounts. In addition, there is typically an annual charge in the form of a fund expense.

Private Client Group Securities Commission and Fees

For the Fiscal Years Ended:

	September 30,	% of	September 30,	% of	September 30,	% of
	2008	Total	2007	Total	2006	Total
	($ in 000's)

Listed Equities	$ 187,891	12%	$ 188,120	13%	$ 188,031	15%
OTC Equities	58,814	4%	56,847	4%	55,706	5%
Fixed Income Products	54,097	4%	36,414	3%	37,911	3%
Mutual Funds	379,964	25%	354,647	24%	294,586	23%
Fee-Based Accounts	550,489	36%	487,988	34%	390,691	31%
Insurance and Annuity Products	219,878	14%	233,878	16%	228,888	18%
New Issue Sales Credits	69,204	5%	94,005	6%	66,938	5%
Total Private Client Group
Commissions And Fees	$ 1,520,337	100%	$ 1,451,899	100%	$ 1,262,751	100%

Net interest revenue in the Private Client Group is generated by customer balances, predominantly the earnings on margin loans and assets segregated pursuant to regulations less interest paid on customer cash balances. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this report for financial information regarding the Company’s net interest revenues.

Clients' transactions in securities are effected on either a cash or margin basis. In margin transactions, the client pays a portion of the purchase price, and RJA makes a loan to the client for the balance, collateralized by the securities purchased or by other securities owned by the client. Interest is charged to clients on the amount borrowed to finance margin transactions. The financing of margin purchases is an important source of revenue to RJA, since the interest rate paid by the client on funds loaned by RJA exceeds RJA's cost of short-term funds. The interest charged to a client on a margin loan is based on current interest rates and on the size of the loan balance in the client's account.

Typically, broker-dealers utilize bank borrowings and equity capital as the primary sources of funds to finance clients' margin account borrowings. RJA's primary source of funds to finance clients' margin account balances has been cash balances in brokerage clients' accounts (Client Interest Program), which are funds awaiting investment. In addition, pursuant to written agreements with clients, broker-dealers are permitted by the Securities and Exchange Commission (“SEC”) and FINRA rules to lend client securities in margin accounts to other financial institutions. SEC regulations, however, restrict the use of clients' funds derived from pledging and lending clients' securities, as well as funds awaiting investment, to the financing of margin account balances; to the extent not so used, such funds are required to be deposited in a special segregated account for the benefit of clients. The regulations also require broker-dealers, within designated periods of time, to obtain possession or control of, and to segregate, clients' fully paid and excess margin securities.

No single client accounts for a material percentage of this segment's total business.

Raymond James & Associates

RJA employs 1,180 Financial Advisors in 156 retail branch offices and 50 satellite offices concentrated in the Southeast, Midwest, Southwest and Mid-Atlantic regions of the U.S. RJA's Financial Advisors work in a traditional branch setting supported by local management and administrative staffs. The number of Financial Advisors per office ranges from one to 31. RJA Financial Advisors are employees and their compensation includes both commission payments and participation in the firm’s benefit plans (including Profit Sharing and ESOP programs). Experienced Financial Advisors are hired from a wide variety of competitors. In addition, between 40 and 50 new Financial Advisors are trained each year at the Robert A. James National Training Center in St. Petersburg, Florida.

Raymond James Financial Services

RJFS supports 3,149 independent contractor Financial Advisors in providing products and services to their Private Client Group clients in 1,364 offices and 570 satellite offices throughout all 50 states. The number of Financial Advisors in RJFS offices ranges from one to 43. Independent contractors are responsible for all of their direct costs and, accordingly, are paid a larger percentage of commissions and fees. They are permitted to conduct other approved businesses unrelated to their RJFS activities such as offering insurance products, independent registered investment advisory services, and accounting and tax services, among others, with the approval of the RJFS compliance department.

The Financial Institutions Division (“FID”) is a subdivision of RJFS. Through FID, RJFS offers securities to customers of financial institutions such as banks, thrifts and credit unions. FID consists of 588 Financial Advisors in 196 branches and 243 satellite offices. RJFS also provides custodial, trading, and other services (including access to clients' account information and the services of the Asset Management segment) to unaffiliated independent investment advisors through its Investment Advisor Division (“IAD”). IAD’s 93 investment advisory firms are able to conduct daily business online with RJFS.

Raymond James Ltd.

RJ Ltd. is a self-clearing broker-dealer in Canada with its own operations and information processing personnel. RJ Ltd. has 19 private client branches with 202 employee Financial Advisors and 189 independent Financial Advisors in 70 branch locations.

Raymond James Investment Services Limited

The Company is a 75% shareholder of RJIS. This entity operates an independent contractor network in the United Kingdom which currently has 42 branch locations and 89 Financial Advisors. RJIS also provides custodian and execution services to independent investment advisory firms.

RJA – Operations and Information Technology

RJA's operations personnel are responsible for the execution of orders, processing of securities transactions, custody of client securities, support of client accounts, receipt, identification and delivery of funds and securities, compliance with certain regulatory and legal requirements and general office administration for most of the Company's securities brokerage operations. At September 30, 2008, RJA employed 777 persons in its operations areas who provide services primarily to the Private Client Group, but also support the Company's other segments.

The Company's businesses are supported by, and are dependent upon, an extensive system of electronic data processing. These computer systems are largely developed and maintained by the 838 employees in the Company’s information technology department.

Since the Company’s principal operations are located in St. Petersburg, the Company has continued to enhance certain aspects of its business continuity plan to deal with the possible impact of future hurricanes or other events by expanding its operational and processing capabilities in Southfield, Michigan. As of September 30, 2008, 25% and 7% of the employees in RJA’s operational and information technology areas, respectively, are located in Southfield. The Company’s business continuity plan is designed to permit continued operation of critical business functions in the event of disruptions to the St. Petersburg facility; all mission critical business departments have developed operational plans for such disruptions, and the Company has a staff which devotes their full time to monitoring and facilitating those plans., The Company maintains computer capacity to support mission critical functions at its Southfield location, and conducts some of its daily operational activities from that site. Systems have been designed so that the Company can transfer all mission critical processing activities to Southfield. Personnel have been identified who are assigned responsibility for this role, including some personnel who will be required to temporarily relocate to Southfield to carry out these activities if necessary.

CAPITAL MARKETS

Capital Markets activities consist primarily of equity and fixed income products and services. No single client accounts for a material percentage of this segment's total business.

Institutional Sales

Institutional sales commissions account for a significant portion of this segment's revenue, which is fueled by a combination of general market activity and the Capital Markets group’s ability to identify and promote attractive investment opportunities. The Company's institutional clients are serviced by the RJA and RJ Ltd. Institutional Equity Departments, the RJA Fixed Income Department, RJA’s European offices, and Raymond James Financial International Ltd, an institutional UK broker-dealer located in London. The Company charges its commissions on equity transactions based on trade size and the amount of business conducted annually with each institution. Fixed income commissions are based on trade size and the characteristics of the specific security involved.

Capital Markets Commissions

For the Fiscal Years Ended:

	September 30,	% of	September 30,	% of	September 30,	% of
	2008	Total	2007	Total	2006	Total
	($ in 000's)

Equity	$ 237,920	70%	$ 210,343	83%	$ 217,840	84%
Fixed Income	99,870	30%	44,454	17%	41,830	16%

Total Commissions	$ 337,790	100%	$ 254,797	100%	$ 259,670	100%

The 117 domestic and overseas professionals in RJA's Institutional Equity Sales and Sales Trading Departments maintain relationships with over 1,250 institutional clients, principally in North America and Europe. In addition to the Company's headquarters in St. Petersburg, Florida, RJA has institutional equity sales offices in New York City, Boston, Chicago, Los Angeles, San Francisco, London, Geneva, Brussels, Dusseldorf, Luxembourg and Paris. European offices also provide services to high net worth clients. RJ Ltd. has 32 institutional equity sales and trading professionals servicing predominantly Canadian institutional investors from offices in Montreal, Toronto and Vancouver.

RJA distributes to its institutional clients both taxable and tax-exempt fixed income products, primarily municipal, corporate, government agency and mortgage backed bonds. RJA carries inventory positions of taxable and tax-exempt securities in both the primary and secondary markets to facilitate its institutional sales activities. In addition to St. Petersburg, the Fixed Income Department maintains institutional sales and trading offices in New York City, Chicago and 20 other cities throughout the U.S.

Equity Research

The 47 domestic senior analysts in RJA's research department support the Company's institutional and retail sales efforts and publish research on approximately 701 companies. This research primarily focuses on U.S. companies in specific industries including Technology, Telecommunications, Consumer, Financial Services, Business and Industrial Services, Healthcare, Real Estate and Energy. Proprietary industry studies and company-specific research reports are made available to both institutional and individual clients. RJ Ltd. has an additional 15 analysts who publish research on approximately 200 companies focused in the Energy, Energy Services, Mining, Forest Products, Biotechnology, Technology, Clean Technology, Consumer and Industrial Products, REIT and Income Trust sectors. These analysts, combined with nine additional analysts located in France (whose services are obtained through a joint venture there), represent the Company’s global research effort within the Capital Markets segment.

Equity Trading

Trading equity securities in the over-the-counter ("OTC") and TSX markets involves the purchase and sale of securities from/to clients of the Company or other dealers. Profits and losses are derived from the spreads between bid and asked prices, as well as market trends for the individual securities during the holding period. RJA makes markets in approximately 678 common stocks in listed and OTC markets. Similar to the equity research department, this operation serves to support both the Company's institutional and Private Client Group sales efforts. The RJ Ltd. Institutional and Private Client Group trading desks not only support client activity, but also take proprietary positions. RJ Ltd. also provides specialist services through its Registered Traders in approximately 124 TSX listed common stocks.

Equity Investment Banking

The 70 professionals of RJA's Investment Banking Group, located in St. Petersburg with additional offices in Atlanta, New York City, Nashville, Chicago, San Francisco, Dallas, and Houston, are involved in a variety of activities including public and private equity financing for corporate clients, and merger and acquisition advisory services. RJ Ltd.'s Investment Banking Group consists of 21 professionals located in Calgary, Toronto and Vancouver providing equity financing and financial advisory services to corporate clients. The Company's investment banking activities provide a comprehensive range of strategic and financial advisory services tailored to our clients’ business evolution life cycle and backed by our strategic industry focus.

Syndicate

The Syndicate department consists of professionals who coordinate the marketing, distribution, pricing and stabilization of lead and co-managed equity underwritings. In addition to managed and co-managed offerings, this department coordinates the firm's syndicate and selling group activities in transactions managed by other investment banking firms.

Fixed Income Trading

RJA trades both taxable and tax-exempt fixed income products. The 18 taxable and 16 tax-exempt RJA fixed income traders purchase and sell corporate, municipal, government, government agency, and mortgage backed bonds, asset backed securities, preferred stock and certificates of deposit from/to clients of the Company or other dealers. RJA enters into future commitments such as forward contracts and “to be announced” securities (e.g. securities having a stated coupon and original term to maturity, although the issuer and/or the specific pool of mortgage loans is not known at the time of the transaction). Low levels of proprietary trading positions are also periodically taken by RJA for various purposes and are closely monitored within well defined limits. In addition, a subsidiary of RJF, RJ Capital Services Inc., participates in the interest rate swaps market as a principal, both for economically hedging RJA fixed income inventory and for transactions with customers.

Fixed Income Investment Banking

Fixed income investment banking includes debt underwriting and public finance activities. The 48 professionals in the RJA Public Finance division operate out of 18 offices (located in St. Petersburg, Birmingham, Boston, New York City, Chicago, Atlanta, Nashville, Orlando, Dallas, Naples, Sarasota, Charleston (WV), Indianapolis, Philadelphia, Pittsburgh, Red Bank (NJ), Grosse Point Farms (MI) and San Antonio). The Company acts as a financial advisor or underwriter to various municipal agencies or political subdivisions, housing developers and non-profit health care institutions.

RJA acts as a consultant, underwriter or selling group member for corporate bonds, mortgage backed securities, agency bonds, preferred stock and unit investment trusts. When underwriting new issue securities, RJA agrees to purchase the issue through a negotiated sale or submits a competitive bid.

Raymond James Tax Credit Funds, Inc.

Raymond James Tax Credit Funds, Inc. (“RJTCF”) is the general partner or managing member in a number of limited partnerships and limited liability companies. RJTCF either invests in, or through its wholly owned subsidiary Raymond James Multi-Family Finance, Inc., provides loans to multi-family, real estate project entities that qualify for tax credits under Section 42 of the Internal Revenue Code. RJTCF has been an active participant in the tax credit program since its inception in 1986, and currently focuses on tax credit funds for institutional investors that invest in a portfolio of tax credit eligible multi-family apartments. The investors’ expected return on investment from these funds are primarily derived from tax credits and tax losses that investors can use to reduce their federal tax liability. During fiscal 2008, RJTCF invested over $154.5 million for large institutional investors in 45 real estate transactions for properties located throughout the U.S. From inception, RJTCF has raised over $1.9 billion in equity and has sponsored 53 tax credit funds, with investments in approximately 1,200 tax credit apartment properties in 42 states.

ASSET MANAGEMENT

The Company's asset management segment includes proprietary asset management operations, internally sponsored mutual funds, non-affiliated private account portfolio management alternatives, and other fee based programs. No single client accounts for a material percentage of this segment's total business.

Effective November 1, 2008, the Company reorganized its asset management segment and Eagle became the advisor to the Heritage Family of Funds, renamed Eagle Family of Funds. Heritage was renamed Eagle Fund Services, Inc. and continues to serve as the transfer agent and fund accountant to the funds as noted above. In addition, this reorganization will include the renaming of Heritage Fund Distributors, Inc.

Eagle Asset Management, Inc.

Eagle is a registered investment advisor with $12.6 billion under management at September 30, 2008, including approximately $1.9 billion for the Heritage Family of Mutual Funds. Eagle offers a variety of equity and fixed income objectives managed by seven portfolio management teams. Eagle's clients include individuals, pension and profit sharing plans, foundations, endowments, variable annuities and mutual fund portfolios. These accounts are managed on a discretionary basis in accordance with the investment objective(s) specified by the client. Eagle manages $6.8 billion for institutional clients, including funds managed as a sub-advisor to variable annuity accounts and mutual funds (including Heritage), and $5.8 billion for private client accounts. Eagle also manages non-discretionary assets of $161 million.

The investment management fee paid to Eagle for discretionary accounts generally ranges from 0.20% to 1.00% of asset balances per year depending upon the size and investment objective(s) of the account.

Heritage Asset Management, Inc. (Now known as Eagle Fund Services, Inc.)

Heritage serves as investment advisor to the Heritage Family of Mutual Funds and certain short-term fixed income accounts. Heritage also serves as transfer agent for all of the funds and as fund accountant for all Heritage funds except the International Equity Fund. Heritage internally manages the largest of its portfolios, the Heritage Cash Trust Money Market Fund, which has $4.3 billion in assets as of September 30, 2008. Portfolio management services for the Core Equity Fund, Diversified Growth Fund and the Mid-Cap Stock Fund are sub-advised by Eagle. Portfolio management services for the Small Cap Stock Fund are sub-advised by both Eagle and Eagle Boston Investment Management, Inc. (“EBIM”). Unaffiliated advisors are utilized for the Municipal Money Market Fund, Capital Appreciation Trust, High Yield Bond Fund, Growth and Income Fund, and the International Equity Fund.

Heritage also serves as an advisor to RJBank to make recommendations and monitor the Bank's liquid assets, investments in mortgages and mortgage related securities.

Total assets under management at September 30, 2008 were $9.2 billion, of which approximately $6.1 billion were money market funds.

Heritage Fund Distributors, Inc. (To be renamed)

Heritage Fund Distributors, Inc. (“HFD”) is a registered broker-dealer engaged in the distribution of the Heritage Family of Mutual Funds. Heritage Fund Distributors, Inc. is a wholly owned subsidiary of Heritage Asset Management.

Eagle Boston Investment Management, Inc.

EBIM is a registered investment advisor that primarily manages small cap equity portfolios. At September 30, 2008, EBIM had approximately $634 million under management, including approximately $172 million of the Heritage Small Cap Stock Fund. EBIM's clients include individuals, pension and profit sharing plans, retirement funds and mutual fund portfolios. Accounts are managed on a discretionary basis in accordance with the investment objective(s) specified by the client. The investment management fee paid to EBIM for discretionary accounts generally range from 0.25% to 1.00% of asset balances annually depending upon the size and investment objective(s) of the account.

Asset Management Services

RJA's Asset Management Services (“AMS”) Department manages several investment advisory programs. The primary advisory services offered are the Raymond James Consulting Services program, which offers a variety of both affiliated and non-affiliated advisors, and the Eagle High Net Worth program. Both programs maintain an approved list of investment managers, provide asset allocation model portfolios, establish custodial facilities, monitor performance of client accounts, provide clients with accounting and other administrative services, and assist investment managers with certain trading management activities. AMS earns fees generally ranging from 0.35% to 0.85% of asset balances per annum, a portion of which is paid to the investment managers who direct the investment of the clients' accounts. In addition, AMS offers the Freedom and Russell Model Strategy programs. Freedom’s investment committee manages portfolios of mutual funds and exchange traded funds on a discretionary basis. The Russell Model Strategy is a similar program managed jointly by AMS and Russell Investment Management. At September 30, 2008, these four programs had approximately $15.8 billion in assets under management, including approximately $2.6 billion managed by Heritage, Eagle and EBIM.

Additional advisory programs AMS offers include Passport, Ambassador, Opportunity, and the Managed Investment Programs. For these accounts, AMS provides quarterly performance reporting and other accounting and administrative services. Advisory services are provided by PCG Financial Advisors. Fees are based on the individual account size and are also dependent on the type of securities in the accounts. Total client fees generally range from 0.50% to 3.00% of assets, which are predominantly allocated to the Private Client Group. As of September 30, 2008, these programs had approximately $22.7 billion in assets. RJFS offers a similar advisory fee based program called IMPAC. As of September 30, 2008, IMPAC had $8.4 billion in assets serviced by RJFS Financial Advisors.

In addition to the foregoing programs, AMS also administers fee-based programs for clients who have contracted for portfolio management services from nonaffiliated investment advisors that are not part of the Raymond James Consulting Services program.

Raymond James Trust, National Association

Raymond James Trust Company, now known as Raymond James Trust, National Association, (‘RJT”) converted from a state to a federally chartered institution effective January 1, 2008. Effective July 1, 2008, the Company merged its second state-chartered trust company, Raymond James Trust Company West, into RJT.

RJT provides personal trust services primarily to existing clients of the broker-dealer subsidiaries. Portfolio management of trust assets is often subcontracted to the asset management operations of the Company. This subsidiary had a total of approximately $1.7 billion in client assets at September 30, 2008, including $86 million in the donor-advised charitable foundation known as the Raymond James Charitable Endowment Fund.

RAYMOND JAMES BANK, FSB

RJBank is a federally chartered savings bank, regulated by the Office of Thrift Supervision (“OTS”), which provides residential, consumer and commercial loans, as well as Federal Deposit Insurance Corporation (“FDIC”) -insured deposit accounts, to clients of the Company's broker-dealer subsidiaries and to the general public. RJBank also purchases residential whole loan packages and is active in bank participations and corporate loan syndications. RJBank generates revenue principally through the interest income earned on loans and investments, offset by the interest expense it incurs on client deposits and on its borrowings. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this report for financial information regarding RJBank’s net interest revenues.

RJBank is in the application process of converting from a federal savings bank to a nationally-chartered commercial bank, which would change its regulator from the OTS to the Office of the Comptroller of the Currency (“OCC”). This change also requires that RJF become a bank holding company, as required by law, and then elect to become a financial holding company. Once the financial holding company status is achieved, RJF would be under regulation of the Federal Reserve.

RJBank operates from a single branch location adjacent to the Company’s headquarters complex in St. Petersburg, Florida. Access to RJBank's products and services is available nationwide through the offices of its affiliated broker-dealers as well as through telephonic and electronic banking services. As of September 30, 2008, RJBank had total assets of $11.4 billion, which were mostly comprised of loans that are either originated or purchased by RJBank and include commercial and residential mortgage loans, as well as consumer loans. RJBank’s total liabilities primarily consist of deposits that are cash balances swept from the investment accounts of RJA and RJFS clients. These balances are held in the FDIC insured Raymond James Bank Deposit Program administered by RJA. RJBank does not have any significant concentrations to any one industry or customer other than large deposits at the Federal Home Loan Bank of Atlanta (FHLB) from time to time, and does not have significant exposure to any counterparty exceeding RJBank Board approved counterparty limits. Long-term debt issued by FHLB, a Government Sponsored Enterprise, is rated AAA by Moody’s and AAA by Standard and Poor’s.

EMERGING MARKETS

Raymond James International Holdings, Inc. (“RJIH”) currently has interests in joint ventures in Latin America and Turkey. These joint ventures operate securities brokerage, investment banking, asset management and equity research businesses. No single client accounts for a material percentage of this segment's total business.

STOCK LOAN/BORROW

This activity involves the borrowing and lending of securities from and to other broker-dealers, financial institutions and other counterparties, generally as an intermediary. The borrower of the securities puts up a cash deposit, commonly 102% of the market value of the securities, on which interest is earned. Accordingly, the lender receives cash and pays interest. These cash deposits are adjusted daily to reflect changes in current market value. The net revenues of this operation are the interest spreads generated. No single client accounts for a material percentage of this segment's total business.

PROPRIETARY CAPITAL

This segment consists of the Company’s principal capital and private equity activities including: various direct and third party private equity and merchant banking investments, short-term special situations and bridge investments (“Special Situations Investments”), Raymond James Employee Investment Funds I and II (the “EIF Funds”), and three private equity funds sponsored by the Company: Raymond James Capital Partners, L.P., a merchant banking limited partnership and Ballast Point Ventures, L.P. and Ballast Point Ventures II, L.P., which are both venture capital limited partnerships (the “Funds”) along with their management companies. The Company, through wholly owned subsidiaries, earns management fees for services provided to the Funds and participates in profits or losses through both general and limited partnership interests. Additionally, the Company incurs profits or losses as a result of direct merchant banking investments and Special Situations Investments. The EIF Funds are limited partnerships, for which the Company is the general partner, that invest in the merchant banking and private equity activities of the Company and other unaffiliated venture capital limited partnerships. The EIF Funds were established as compensation and retention vehicles for certain qualified key employees of the Company.

OTHER

This segment includes various corporate activities of Raymond James Financial, Inc.

COMPETITION

The Company is engaged in intensely competitive businesses. The Company competes with many larger, better capitalized providers of financial services, including other securities firms, most of which are affiliated with major financial services companies, insurance companies, banking institutions and other organizations. The Company also competes with a number of firms offering on-line financial services and discount brokerage services, usually with lower levels of service, to individual clients. The Company competes principally on the basis of the quality of its associates, service, product selection, location and reputation in local markets.

In the financial services industry, there is significant competition for qualified associates. The Company's ability to compete effectively in its businesses is substantially dependent on its continuing ability to attract, retain, and motivate qualified associates, including successful Financial Advisors, investment bankers, trading professionals, portfolio managers and other revenue-producing or specialized personnel.

REGULATION

The following discussion sets forth some of the material elements of the regulatory framework applicable to the financial services industry and provides some specific information relevant to the Company. The regulatory framework is intended primarily for the protection of customers and the securities markets, depositors and the Federal Deposit Insurance Fund and not for the protection of creditors or shareholders. Under certain circumstances, these rules may limit the ability of the Company to make capital withdrawals from its broker-dealer subsidiaries.

To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. A change in applicable statutes, regulations or regulatory policy may have a material effect on the Company’s business.

Broker-dealers are subject to regulations that cover all aspects of the securities business, including:

· sales methods

· trading practices

· uses and safekeeping of clients' funds and securities

· capital structure and financial soundness

· record keeping

· the conduct of directors, officers and employees

· internal controls

· insurance requirements

The financial services industry in the U.S. is subject to extensive regulation under federal and state laws. The SEC is the federal agency charged with administration of the federal securities laws. Financial services firms are also subject to regulation by state securities commissions in those states in which they conduct business. RJA and RJFS are currently registered as broker-dealers in all 50 states. In addition, financial services firms are subject to regulation by various foreign governments, securities exchanges, central banks and regulatory bodies, particularly in those countries where they have established offices. The Company has offices in Europe (including, Turkey), Canada and Latin America.

Much of the regulation of broker-dealers in the U.S. and Canada, however, has been delegated to self-regulatory organizations ("SROs"), principally FINRA, the IIROC and other securities exchanges. These SROs adopt and amend rules (which are subject to approval by government agencies) for regulating the industry and conduct periodic examinations of member broker-dealers.

The SEC, SROs and state securities commissions may conduct administrative proceedings that can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. Such 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 Company's U.S. broker-dealer subsidiaries are required by federal law to belong to SIPC. When the SIPC fund falls below a certain amount, members are required to pay annual assessments of up to 1% of adjusted gross revenues. As a result of adequate SIPC fund levels, each of the Company's domestic broker-dealer subsidiaries was required to pay only the minimum annual assessment of $150 in fiscal 2008. The SIPC fund provides protection for securities held in customer accounts up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances. In December 2003, RJA joined with other major U.S. securities brokerage firms to form Customer Asset Protection Company (“CAPCO”), a licensed Vermont insurance company, to provide excess SIPC coverage. CAPCO provides account protection for the total net equity of client accounts of participating firms with no aggregate limit. CAPCO has received a financial strength rating of A+ from Standard and Poor’s, however, this rating is currently under a negative credit watch. These coverages do not protect against market fluctuations.

RJ Ltd. is currently registered in all provinces and territories in Canada. The financial services industry in Canada is subject to comprehensive regulation under both federal and provincial laws. Securities commissions have been established in all provinces and territorial jurisdictions which are charged with the administration of securities laws. Investment dealers in Canada are also subject to regulation by SROs which are responsible for the enforcement of and conformity with securities legislation for their members and have been granted the powers to prescribe their own rules of conduct and financial requirements of members. RJ Ltd. is regulated by the securities commissions in the jurisdictions of registration as well as by the SROs, and the IIROC.

RJ Ltd. is required by the IIROC to belong to the Canadian Investors Protection Fund ("CIPF"), whose primary role is investor protection. The CIPF Board of Directors determines the fund size required to meet its coverage obligations and sets a quarterly assessment rate. Dealer members are assessed the lesser of 0.1875% of revenue or a risk based assessment. RJ Ltd. paid CDN$91,000 in 2008. The CIPF provides protection for securities and cash held in client accounts up to CDN$1.0 million per client with separate coverage of CDN$1.0 million for certain types of accounts. This coverage does not protect against market fluctuations.

See Note 18 of the Notes to Consolidated Financial Statements for further information on SEC, FINRA and IIROC regulations pertaining to broker-dealer regulatory minimum net capital requirements.

The Company's investment advisory operations, including the Company-sponsored mutual funds, are also subject to extensive regulation. The Company's U.S. asset managers are registered as investment advisors with the SEC and are also required to make notice filings in certain states. Virtually all aspects of the asset management business are subject to various federal and state laws and regulations. These laws and regulations are primarily intended to benefit the asset management clients and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict an investment advisor from conducting its asset management business in the event that it fails to comply with such laws and regulations. Possible sanctions that may be imposed for a failure include the suspension of individual employees, limitations on the asset managers engaging in the asset management business for specified periods of time, the revocation of registrations, and other censures and fines. A regulatory proceeding, regardless of whether it results in a sanction, can require substantial expenditures and can have an adverse effect on the reputation of an asset manager.

The Company is a “unitary savings and loan holding company,” as defined by federal law, which owns one savings association, RJBank, and is under the supervision of, and subject to periodic examination by, the OTS. Since the Company was a savings and loan holding company prior to May 4, 1999, the Company is exempt from certain restrictions that would otherwise apply under federal law to the activities and investments of a savings and loan holding company. These restrictions would become applicable to the Company if RJBank fails to meet a qualified thrift lender test established by federal law. As of September 30, 2008, RJBank was in compliance with qualified thrift lender standards.

RJBank is under the supervision of, and subject to periodic examination by, the OTS, and is subject to the rules and regulations of the OTS, the Federal Reserve Board, and the FDIC. In addition, since RJBank has FDIC insurance, it is subject to the Federal Deposit Insurance Act.

RJBank is subject to various regulatory capital requirements established by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on RJBank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, RJBank must meet specific capital guidelines that involve quantitative measures of RJBank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. RJBank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require RJBank to maintain minimum amounts and ratios of Total and Tier I capital to risk-weighted assets (as defined in the regulations). See Note 18 of the Notes to the Consolidated Financial Statements for further information and capital analysis.

The Company recently announced its plans to seek financial holding company status as a result of RJBank’s planned conversion from a thrift to a nationally-chartered commercial bank. The Company’s plan includes an application to become a bank holding company, and then the election to become a financial holding company. Once the financial holding company status is achieved, the Company would be under regulation of the Federal Reserve.

The Company's federally chartered trust company is subject to regulation by the OCC. This regulation focuses on, among other things, ensuring the safety and soundness of the trust company’s provision of fiduciary services.

As a public company whose common stock is listed on the NYSE, the Company is subject to corporate governance requirements established by the SEC and NYSE, as well as federal and state law. Under the Sarbanes-Oxley Act, the Company is required to meet certain requirements regarding business dealings with members of the Board of Directors, the structure of its Audit Committee, and ethical standards for its senior financial officers. Under SEC and NYSE rules, the Company is required to comply with other standards of corporate governance, including having a majority of independent directors serve on its Board of Directors, and the establishment of independent audit, compensation and corporate governance committees.

Under Section 404 of the Sarbanes-Oxley Act, the Company is required to complete an assessment of its internal controls over financial reporting and to obtain a report from its independent auditors regarding their opinion of the Company's internal control over financial reporting. This requirement has imposed additional costs on the Company, reflecting internal staff and management time, as well as additional audit fees since the Act went into effect.

EXECUTIVE OFFICERS OF THE REGISTRANT

Executive officers of the registrant (which includes officers of certain significant subsidiaries) who are not Directors of the registrant are as follows:

Jennifer C. Ackart	44	Controller and Chief Accounting Officer

Paul D. Allison	52	Co-President and Co-CEO – Raymond James Ltd. since August, 2008; Executive Vice President and Vice Chairman, Merrill Lynch Canada, December, 2007 – August, 2008; Executive Vice President and Managing Director, Co-Head of Canada Investment Banking, Merrill Lynch Canada, March, 2001 – December, 2007

Richard G. Averitt, III	63	Chairman and CEO - Raymond James Financial Services, Inc.

Peter A. Bailey	66	Co-President and Co-CEO – Raymond James Ltd. since August, 2008; President and CEO – Raymond James Ltd., February, 2006 – August, 2008; Executive Vice President, August, 2001 – February, 2006

Angela M. Biever	55	Chief Administrative Officer since May, 2008; Director, RJF, May, 1997 – April, 2008; Vice President, Intel Capital and Managing Director, Consumer Internet Sector, November, 2006 – May, 2008; General Manager, Intel New Business Initiatives, January, 1999 – November, 2006

George Catanese	49	Senior Vice President and Chief Risk Officer since October, 2005; Director, Internal Audit, November, 2001 – October, 2005

Tim Eitel	59	Chief Information Officer - Raymond James & Associates

Jeffrey P. Julien	52	Senior Vice President - Finance and Chief Financial Officer, Director and/or officer of several RJF subsidiaries

Paul L. Matecki	52	Senior Vice President - General Counsel, Director of Compliance – RJF since August, 2004; Corporate Counsel, April, 1989 – August, 2004

Steven M. Raney	43	President and CEO – Raymond James Bank, FSB since January, 2006; Partner and Director of Business Development, LCM Group, February, 2005 – December, 2005; various executive positions in the Tampa Bay area, Bank of America, June, 1988 – January, 2005

Richard K. Riess	59	Executive Vice President - RJF,
		CEO and Director of both Eagle and Heritage

Van C. Sayler	53	Senior Vice President - Fixed Income, Raymond James & Associates

Thomas R. Tremaine	52	Executive Vice President - Operations and Administration, Raymond James & Associates

Jeffrey E. Trocin	49	Executive Vice President - Equity Capital Markets, Raymond James & Associates

Dennis W. Zank	54	President - Raymond James & Associates

Except where otherwise indicated, the executive officer has held his or her current position for more than five years.

EMPLOYEES AND INDEPENDENT CONTRACTORS

The Company’s employees are vital to the Company’s success in the financial services industry. As of September 30, 2008, the Company employed approximately 6,900 people. As of September 30, 2008, the Company had approximately 3,400 independent contractors affiliated with it.

OTHER INFORMATION MADE AVAILABLE BY THE COMPANY

The Company's internet address is www.raymondjames.com. The Company makes available, free of charge, through links to the U.S. Securities and Exchange Commission website, the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. Investors can find financial information under “About Our Company – Investor Relations – Financial Reports – SEC Filings”. These reports are available through the Company’s website as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC. The Company also makes available on its website its Annual Report to Shareholders and its proxy statements in PDF format under “About Our Company- Investors Relations – Financial Reports.”

Additionally, the Company makes available on its website under “About Our Company – Investor Relations – Corporate Governance”, a number of its corporate governance documents. These include; the Corporate Governance Principles, the charters of the Audit Committee and the Corporate Governance, Nominating and Compensation Committee of the Board of Directors, the Senior Financial Officers’ Code of Ethics and the Codes of Ethics for Employees and the Board of Directors. Printed copies of these documents will be furnished to any shareholder who requests them. The information on the Company's websites are not incorporated by reference into this report.

The information on the Company’s Internet site is not incorporated by reference.

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, and Section 21E of the Securities and Exchange Act of 1934, as amended, 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, are discussed in Item 1A, “Risk Factors” in this report. The Company does not undertake any obligation to publicly update or revise any forward-looking statements.

ITEM 1A. RISK FACTORS

The Company’s operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect its business, financial condition, results of operations, cash flows, and the trading price of its common stock.

The Company is Affected by Difficult Conditions in the Global Financial Markets and Economic and Political Conditions Generally

The Company is engaged in various financial services businesses. As such, the Company is affected by economic and political conditions. These conditions may directly and indirectly impact a number of factors that may be detrimental to the operating results of the company, including the inflation rate and the related impact on the securities markets, fluctuations in interest and currency rates, reduced investor confidence, a slowdown in economic activity, and changes in volume and price levels of the securities markets. These conditions historically have reduced the Company’s trading volume and net revenues and adversely affected its profitability. Additionally, a decline in the strength of the U.S. economy can lead to deterioration in credit quality and decreased loan demand. Continued or further credit dislocations or sustained market downturns may result in a decrease in the volume of trades the Company executes for its clients, a decline in the value of securities it holds in inventory as assets, and reduced investment banking revenues given that associated fees are directly related to the number and size of transactions in which the Company participates. In addition, declines in the market value of securities generally result in a decline in revenues from fees based on the asset values of client portfolios, in the failure of buyers and sellers of securities to fulfill their settlement obligations, and in the failure of the Company’s clients to fulfill their credit and settlement obligations. During market downturns, the Company’s counterparties may be less likely to complete transactions. Also, the Company permits its clients to purchase securities on margin. During periods of steep declines in securities prices, the value of the collateral securing client accounts margin purchases may drop below the amount of the purchaser’s indebtedness. If the clients are unable to provide additional collateral for these loans, the Company may lose money on these margin transactions. This may cause the Company to incur additional expenses defending or pursuing claims or litigation related to counterparty or client defaults. Dramatic declines in the housing market over the past year, with increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by other financial institutions, including government-sponsored entities as well as major commercial and investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other derivative securities, in turn have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have ceased to provide funding to even the most credit-worthy borrowers. These lender concerns are particularly severe with respect to financial institution borrowers. As described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources,” the resulting lack of available credit and lack of confidence in the financial markets could materially and adversely affect the Company’s financial condition and results of operations as well as its access to capital.

Lack of Liquidity or Access to Capital Could Impair the Company’s Business and Financial Condition

Liquidity, or ready access to funds, is essential to the Company’s business. A compromise to the Company’s liquidity could have a significant negative effect on the Company. Some potential conditions that could negatively affect the Company’s liquidity include illiquid or volatile markets, diminished access to debt or capital markets, unforeseen cash or capital requirements and adverse legal settlements or judgments (including, among others, risks associated with auction rate securities). The Company’s largest subsidiaries operate in highly regulated industries. These subsidiaries require access to funds in order to maintain certain net capital requirements. If existing internal sources of liquidity resources do not satisfy the Company’s needs, it may have to seek outside financing or scale back or curtail its operations, including limiting its efforts to recruit additional Financial Advisors, selling assets at prices that may be less favorable to the Company, cutting or eliminating the dividends it pays to its shareholders and reducing its operating expenses. The availability of outside financing, including access to the capital markets and bank lending, depends on a variety of factors, such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services sector and the Company’s credit ratings. The Company’s cost and availability of funding have been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. In addition, a reduction in the Company’s credit ratings could adversely affect its liquidity and competitive position, increase its borrowing costs, limit its access to the capital markets or trigger its obligations under certain financial agreements. As a result of concern about the stability of the markets generally and the strength of counterparties specifically, many lenders have reduced, and in some cases, ceased to provide funding to borrowers, including the Company. As such, the Company may not be able to successfully obtain outside financing to fund its operations on favorable terms, or at all. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Liquidity and Capital Resources,” for additional information on liquidity and how the Company manages its liquidity risk.

The Company is Exposed to Market Risk

The Company, directly and indirectly, is affected by changes in market conditions. Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions. For example, changes in interest rates could adversely affect the Company’s net interest spread – the difference between the yield the Company earns on its assets and the interest rate the Company pays for deposits and other sources of funding – which could in turn affect the Company’s net interest income and earnings. Market risk is inherent in the financial instruments associated with the Company’s operations and activities including loans, deposits, securities, short-term borrowings, long-term debt, trading account assets and liabilities, and derivatives. Market conditions that may shift from time to time, thereby exposing the Company to market risk, include fluctuations in interest rates, equity prices, and price deterioration or changes in value due to changes in market perception or actual credit quality of an issuer. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report for additional information regarding the Company’s exposure to and approaches to managing market risk.

The Company Is Exposed to Credit Risk

The Company is exposed to the risk that third parties that owe it money, securities or other assets will not perform their obligations. These parties may default in their obligations to the Company due to bankruptcy, lack of liquidity, operational failure or other reasons. Deterioration in the credit quality of third parties who are indebted to the Company could result in losses. In addition, the credit quality of the Company’s loan and investment portfolios can have a significant impact on earnings. Due to the growth in RJBank’s loan portfolio, credit risk at RJBank has become more significant. Continued declines in the housing market or a sustained economic downturn may cause the Company to have to write-down the value of some of the loans in RJBank’s’s portfolio. Credit quality generally may also be affected by adverse changes in the financial performance or condition of the Company’s debtors or deterioration in the strength of the U.S. economy, such as the U.S. is currently experiencing. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report for additional information regarding the Company’s exposure to and approaches to managing credit risk.

The Market Price of the Company’s Common Stock May Continue to be Volatile

The market price of the Company’s common stock has been, and is likely to continue to be more volatile than in prior years and subject to fluctuations. Stocks of financial institutions have experienced significant downward pressure in connection with the current economic downturn and may continue to experience such pressures in the future. Significant declines in the market price of the Company’s common stock or failure of the market price to increase could harm its ability to recruit and retain key employees, reduce its access to debt or equity capital and otherwise harm the Company’s business or financial condition.

The Company’s Business Depends on Fees Generated from the Distribution of Financial Products and on Fees Earned from the Management of Client Accounts By the Company’s Asset Management Subsidiaries

A large portion of the Company’s revenues are derived from fees generated from the distribution of financial products such as mutual funds and variable annuities. Changes in the structure or amount of the fees paid by the sponsors of these products could directly affect the Company’s revenues, business and financial condition. In addition, if these products experience losses, or increased investor redemptions, the Company may receive reduced fees from the investment management and distribution services it provides on behalf of the mutual funds and annuities. The investment management fees the Company is paid may also decline over time due to factors such as increased competition, renegotiation of contracts and the introduction of new, lower-priced investment products and services. In addition, changes in market values or in the fee structure of asset management accounts would affect the Company’s revenues, business and financial condition. Asset management fees often are comprised of base management and incentive fees. Management fees are primarily based on assets under management. If the Company experiences losses in its managed accounts, its fees will decline. In addition, the relative investment performance of these accounts could affect the Company’s ability to attract and retain clients and thus affect the Company’s revenues, business and financial condition.

The Company Faces Intense Competition

The Company is engaged in intensely competitive businesses. The Company competes on the basis of a number of factors, including the quality of its Financial Advisors and associates, its products and services and location and reputation in local markets. Over time there has been substantial consolidation and convergence among companies in the financial services industry which has significantly increased the capital base and geographic reach of the Company’s competitors. Because of recent market unrest and increased government intervention, this trend toward consolidation has intensified. See the section entitled “Competition” of Item 1 of this report for additional information about the Company’s competitors. The Company’s ability to develop and retain its client base depends on the reputation, judgment, business generation capabilities and skills of its employees and Financial Advisors. As such, to compete effectively, the Company must attract, retain, and motivate qualified associates, including successful Financial Advisors, investment bankers, trading professionals, portfolio managers and other revenue-producing or specialized personnel. Competitive pressures experienced by the Company could have an adverse affect on its business, results of operations, financial condition and liquidity.

Regulatory and Legal Developments Could Adversely Affect the Company’s Business and Financial Condition

The securities industry is subject to extensive regulation and broker-dealers and investment advisors are subject to regulations covering all aspects of the securities business. The Company could be subject to civil liability, criminal liability, or sanctions, including revocation of its subsidiaries’ registrations as investment advisors or broker-dealers, revocation of the licenses of its Financial Advisors, censures, fines, or a temporary suspension or permanent bar from conducting business, if it violates such laws or regulations. Any such liability or sanction could have a material adverse effect on the Company’s business, financial condition and prospects. The Company’s banking operations also expose it to a risk of loss resulting from failure to comply with banking laws. In light of current conditions in the U.S. financial markets and the economy, regulators have increased their focus on the regulation of the financial services industry, including by introducing proposals for new legislation. The Company is unable to predict whether any of these proposals will be implemented and in what form, or whether any additional or similar changes to statutes or regulations, including the interpretation or implementation thereof, will occur in the future. Any such action could affect the Company in substantial and unpredictable ways and could have an adverse effect on its business, financial condition and results of operations. The Company also may be adversely affected as a result of changes in federal, state or foreign tax laws, or by changes in the interpretation or enforcement of existing laws and regulations. See the section entitled “Business – Regulation” of Item 1 of this report for additional information regarding the Company’s regulatory environment and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report regarding the Company’s approaches to managing regulatory risk. Legal actions brought against the Company may result in judgments, settlements, fines, penalties or other results adverse to the Company, which could materially adversely affect the Company’s business, financial condition or results of operation, or cause it serious reputational harm.

In turbulent times such as these, the volume of claims and amount of damages sought in litigation and regulatory proceedings against financial institutions have historically increased. These risks include potential liability under securities or other laws for alleged materially false or misleading statements made in connection with securities offerings and other transactions, issues related to the suitability of its investment advice based on the Company’s clients' investment objectives (including auction rate securities), the ability to sell or redeem securities in a timely manner during adverse market conditions, contractual issues, employment claims, and potential liability for other advice it provides to participants in strategic transactions. The Company has received inquiries from the SEC, the FINRA and several state regulatory authorities requesting information concerning auction rate securities. The Company has also been named in a civil class action lawsuit relating to sales of auction rate securities. The Company is working with other industry participants in order to resolve issues relating to auction rate securities and is exploring a range of potential solutions. If the Company were to determine, in order to resolve pending claims, inquiries or investigations, to repurchase at par value auction rate securities from certain of its clients, the Company would be required to assess whether it has sufficient regulatory capital and cash or borrowing capacity to do so, and there can be no assurance that the Company would have such capacity. See Item 3, “Legal Proceedings,” of this report for a discussion of the Company’s legal matters (including auction rate securities) and Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report regarding the Company’s approaches to managing legal risk.

The Company’s Risk Management Policies and Procedures May Leave it Exposed to Unidentified or Unanticipated Risk

The Company seeks to manage, monitor and control its operational, legal and regulatory risk through operational and compliance reporting systems, internal controls, management review processes and other mechanisms, however, there can be no assurance that its procedures will be fully effective. Further, the Company’s risk management methods may not effectively predict future risk exposures, which could be significantly greater than the historical measures indicate. In addition, some of the Company’s risk management methods are based on an evaluation of information regarding markets, clients and other matters that are based on assumptions that may no longer be accurate. In addition, RJBank has undergone significant growth in recent years. A failure to adequately manage the growth of RJBank, or to effectively manage the Company’s risk, could materially and adversely affect its business and financial condition. The Company must also address potential conflicts of interest that arise in its business. The Company has procedures and controls in place to address conflicts of interest, but identifying and managing potential conflicts of interest can be complex and difficult and the Company’s reputation could be damaged if its fails, or appears to fail, to deal appropriately with conflicts of interest. For more information on how the Company monitors and manages market and certain other risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report.

The Company Is Exposed to Operational Risk

The Company’s diverse operations are exposed to risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The Company’s business depends on its ability to process and monitor, on a daily basis, a large number of transactions. The Company’s financial, accounting, data processing or other operating systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially beyond its control, adversely affecting its ability to process these transactions or provide these services. Operational risk exists in every activity, function, or unit of the Company, and can take the form of internal or external fraud, employment and hiring practices, an error in meeting a professional obligation, business disruption or system failures, and failed transaction processing. Also, increasing use of automated technology has the potential to amplify risks from manual or system processing errors, including outsourced operations. The Company also faces the risk of operational failure, termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other financial intermediaries that it uses to facilitate its securities transactions. In recent years there has been significant consolidation among clearing agents, exchanges and clearing houses, which has increased the Company’s exposure to certain financial intermediaries the Company uses and could affect its ability to find adequate and cost-effective alternatives in such events. Any such failure, termination or constraint could adversely affect the Company’s ability to effect transactions, service its clients and manage its exposure to risk. In addition, significant operational loss could damage the Company’s reputation. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report for additional information regarding the Company’s exposure to and approaches to managing operational risk.

The Company’s Business Depends on Technology

The Company’s businesses rely extensively on electronic data processing and communications systems. In addition to better serving clients, the effective use of technology increases efficiency and enables firms to reduce costs. The Company’s continued success will depend, in part, upon its ability to successfully maintain and upgrade the capability of its systems, its ability to address the needs of its clients by using technology to provide products and services that satisfy their demands and its ability to retain skilled information technology employees. Failure of its systems, which could result from events beyond the Company’s control, or an inability to effectively upgrade those systems or implement new technology-driven products or services, could result in financial losses, liability to clients and damage to the Company’s reputation. The Company’s operations rely on the secure processing, storage and transmission of confidential and other information in its computer systems and networks. Although the Company takes protective measures and endeavors to modify them as circumstances warrant, the computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact. If one or more of these events occur, this could jeopardize the Company’s or its clients’ or counterparties’ confidential and other information processed, stored in and transmitted through its computer systems and networks, or otherwise cause interruptions or malfunctions in the Company’s, its clients’, its counterparties’ or third parties’ operations. The Company may be required to expend significant additional resources to modify its protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications, and it may be subject to litigation and financial losses that are either not insured or not fully covered through any insurance it maintains. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in this report for additional information regarding the Company’s exposure to and approaches to managing this type of operational risk.

The Company’s Business and Financial Condition Could be Adversely Affected by New Regulations to Which It Expects to Become Subject as a Result of Becoming a Financial Holding Company

In September 2008, the Company announced that it will seek approval from the Federal Reserve Board to become a bank holding company and subsequently elect to become a financial holding company. Although the Company has a statutory grace period of two years, with the possibility of three one-year extensions for a total grace period of five years, to conform existing activities and investments to the restrictions on nonbanking activities that apply to financial holding companies, and although it expects to be able to continue to engage in the vast majority of the activities in which it currently engages after such time, it is possible that certain of the Company’s existing activities will not be deemed to be permissible under applicable regulations. In addition, as a financial holding company, the Company will become subject to the comprehensive, consolidated supervision and regulation of the Federal Reserve Board, including risk-based and leverage capital requirements and information reporting requirements, and, as a nationally-chartered commercial bank, RJBank will be subject to the functional supervision and regulation of the OCC. See the section entitled “Business –Regulation” of Item 1 of this report for additional information.

The Company’s Operations Could Be Adversely Affected By Serious Weather Conditions

The Company’s principal operations are located in St. Petersburg, Florida. While the Company has a business continuity plan that permits significant operations to be conducted from its Southfield, Michigan location (see Item 1, “Business” in this report), the Company’s operations could be adversely affected by hurricanes or other serious weather conditions that could affect processing of transactions and communications. For the past several years, the Company has been unable to obtain meaningful hurricane-related insurance coverage at a reasonable cost for its headquarters complex in St. Petersburg, Florida. Due to the modest hurricane activity during the past three seasons, such coverage has become more readily available and, effective May 15, 2008, the Company has increased its limits to levels management considers adequate for such a catastrophe. Notwithstanding this coverage, the Company’s business continuity plan continues to be enhanced and tested to allow for continuous business processing in the event of weather-related or other interruptions of operations at the headquarters complex. The Company has also developed a business continuity plan for its Private Client Group branches in the event these branches are impacted by severe weather. Each branch is assigned a “contingency branch” in another part of the country that allows the impacted branch the ability to communicate through the contingency branch.

Insurance Risks

The Company’s operations and financial results are subject to risks and uncertainties related to its use of a combination of insurance, self-insured retention and self-insurance for a number of risks, including, without limitation, property and casualty, workers’ compensation, general liability, and the Company-funded portion of employee-related health care benefits.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Company's headquarters is located on approximately 55 acres within the Carillon office park in St. Petersburg, Florida. The headquarters complex currently includes four main towers which encompass a total of 884,000 square feet of office space, the Raymond James Bank building, which is a 42,000-square-foot two-story building, including the newly completed 16,000-square-foot building addition, and two five-story parking garages. At this location, the Company has the ability to add approximately 474,000 square feet of new office space. Raymond James also has 30,000 square feet of leased space near Carillon. The Company’s Michigan operations are conducted from an 84,000-square-foot building on 14 acres in Southfield, Michigan. The Company’s facilities are used to conduct the current operations of its segments.

The Company leases offices in various locations throughout the U.S. and in certain foreign countries. With the exception of a Company-owned RJA branch office building in Crystal River, FL, RJA branches are leased with various expiration dates through 2018. RJ Ltd. leases premises for main offices in Vancouver, Calgary, and Toronto and for branch offices throughout Canada. These leases have various expiration dates through 2020. RJ Ltd. does not own any land or buildings. See Note 12 to the Consolidated Financial Statements for further information regarding the Company's leases.

Leases for branch offices of RJFS, the independent contractors of RJ Ltd. and RJIS are the responsibility of the respective independent contractor Financial Advisors.

ITEM 3. LEGAL PROCEEDINGS

Raymond James Yatyrym Menkul Kyymetler A. S., (“RJY”), the Company’s Turkish affiliate, was assessed for the year 2001 approximately $6.8 million by the Turkish tax authorities. The authorities applied a significantly different methodology than in the prior year’s audit which the Turkish tax court and Council of State affirmed. RJY is vigorously contesting most aspects of this assessment and has sought reconsideration of the Turkish Council of State. The Turkish tax authorities, utilizing the 2001 methodology, assessed RJY $5.7 million for 2002, which is also being challenged. Audits of 2003 and 2004 are anticipated and their outcome is unknown in light of the change in methodology and the pending litigation. Subsequent to the fiscal year end, RJY was notified by the Capital Markets Board of Turkey that the technical capital inadequacy resulting from RJY’s provision for this case required an additional capital contribution, and as a result, RJY has had to halt all trading activities until the capital requirements are met. The Company has recorded a provision for loss in its consolidated financial statements for its full equity interest in this joint venture. As of September 30, 2008, RJY had total capital of approximately $8.1 million, of which the Company owns approximately 50%.

Sirchie Acquisition Company, LLC (“SAC”), an 80% owned indirect unconsolidated subsidiary acquired as a merchant banking investment has been advised by the Commerce and Justice Departments that they intend to seek civil and criminal sanctions against it, as the purported successor in interest to Sirchie Finger Print Laboratories, Inc. (“Sirchie”), based upon alleged breaches of Department of Commerce suspension orders by Sirchie and its former majority shareholder that occurred prior to the acquisition. Discussions are ongoing, and the impact, if any, on the value of this investment is indeterminate at this time.

In connection with auction rate securities (“ARS”), the Company's primary broker dealers, RJA and RJFS, have been subject to ongoing investigations, with which they are cooperating fully, by the Securities and Exchange Commission (“SEC”), the New York Attorney General's Office and Florida’s Office of Financial Regulation. The Company is also named in a class action lawsuit similar to that filed against a number of brokerage firms alleging various securities law violations, which it is vigorously defending. The Company announced in April 2008 that customers held approximately $1.9 billion of ARS, which as of September 30, 2008, had declined to approximately $1 billion due to the redemption and refinancing of such securities by the issuers of the ARS. Additional information regarding ARS can be found at http://www.raymondjames.com/auction_rate_preferred.htm. The information on the Company’s Internet site is not incorporated by reference.

Several large banks and brokerage firms, most of who were the primary underwriters of and supported the auctions for, ARS have announced agreements, usually as part of a regulatory settlement, to repurchase ARS at par from some of their clients. Other brokerage firms have entered into similar agreements. The Company, in conjunction with other industry participants is actively seeking a solution to ARS’ illiquidity. This includes issuers restructuring and refinancing the ARS, which has met with some success. Should these restructurings and refinancings continue, then clients’ holdings could be reduced further, however, there can be no assurance these events will continue. If the Company were to consider resolving pending claims, inquiries or investigations by offering to repurchase all or some portion of these ARS from certain clients, it would have to have sufficient regulatory capital and cash or borrowing power to do so, and at present it does not have such capacity. Further, if such repurchases were made at par value there could be a market loss if the underlying securities’ value is less than par and any such loss could adversely affect the results of operations.

The Company is a defendant or co-defendant in various lawsuits and arbitrations incidental to its securities business. The Company is contesting the allegations in these cases and believes that there are meritorious defenses in each of these lawsuits and arbitrations. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. In the opinion of the Company's management, based on current available information, review with outside legal counsel, and consideration of amounts provided for in the accompanying consolidated financial statements with respect to these matters, ultimate resolution of these matters will not have a material adverse impact on the Company's financial position or results of operations. However, resolution of one or more of these matters may have a material effect on the results of operations in any future period, depending upon the ultimate resolution of those matters and upon the level of income for such period.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock is traded on the NYSE under the symbol “RJF”. At November 19, 2008 there were approximately 18,000 holders of the Company's common stock. The following table sets forth for the periods indicated the high and low trades for the common stock:

	Fiscal Year 2008		Fiscal Year 2007
	High	Low	High	Low
First Quarter	$ 37.60	$ 28.04	$ 33.63	$ 28.53
Second Quarter	32.73	19.38	32.52	27.38
Third Quarter	31.36	21.76	34.62	29.10
Fourth Quarter	38.25	22.60	36.00	28.65

See Quarterly Financial Information in Item 8 for the amount of the quarterly dividends paid.

See Note 18 of the Notes to Consolidated Financial Statements for information regarding the Company’s intentions for paying cash dividends and the related capital restrictions.

See Note 14 of the Notes to Consolidated Financial Statements for information regarding repurchased shares of the Company's common stock.

ITEM 6. SELECTED FINANCIAL DATA

		Year Ended
		September 30,		September 30,		September 30,		September 30,		September 24,
		2008		2007		2006		2005		2004
		(in 000’s, except per share data)
Operating Results:

Total Revenues		$ 3,204,932		$ 3,109,579		$ 2,645,578		$ 2,168,196		$ 1,829,776
Net Revenues		$ 2,812,703		$ 2,609,915		$ 2,348,908		$ 2,050,407		$ 1,781,259
Net Income		$ 235,078		$ 250,430		$ 214,342		$ 151,046		$ 127,575
Net Income per
Share - Basic: (1)		$ 2.02		$ 2.17		$ 1.90		$ 1.37		$ 1.16
Net Income per
Share - Diluted: (1)		$ 1.97		$ 2.11		$ 1.85		$ 1.33		$ 1.14

Weighted Average
Common Shares
Outstanding - Basic: (1)		116,383		115,608		112,614		110,217		110,093
Weighted Average
Common and
Common Equivalent
Shares Outstanding -
Diluted: (1)		119,059		118,693		115,738		113,048		111,603
Cash Dividends
per Common Share (1)		$ 0.44		$ 0.40		$ 0.32		$ 0.21		$ 0.17

Financial Condition:

Total Assets		$ 20,731,859	(2)	$ 16,254,168		$ 11,516,650		$ 8,369,256		$ 7,621,846
Long-Term Debt		$ 197,910	(3)	$ 214,864	(3)	$ 286,712	(3)	$ 280,784	(3)	$ 174,223

Shareholders' Equity		$ 1,883,905		$ 1,757,814		$ 1,463,869		$ 1,241,823		$ 1,065,213
Shares Outstanding (1)		116,434	(4)	116,649	(4)	114,064	(4)	113,394		110,769

Book Value per Share
at End of Period (1)		$ 16.18		$ 15.07		$ 12.83		$ 10.95		$ 9.62

(1)	2005 and 2004 amounts have been adjusted for the March 22, 2006 3-for-2 stock split.
(2)	Total assets include $1.9 billion in cash, offset by an equal amount in overnight borrowing to meet point-in-time regulatory balance sheet composition requirements related to RJBank’s qualifying as a thrift institution.
(3)	Includes loans payable related to investments by variable interest entities in real estate partnerships, which are non-recourse to the Company.
(4)	Excludes non-vested shares.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following Management’s Discussion and Analysis is intended to help the reader understand the results of operations and the financial condition of the Company. Management’s Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, the Company’s consolidated financial statements and accompanying notes to the consolidated financial statements.

The Company’s results continue to be correlated to the direction of the U.S. equity markets and are subject to volatility due to changes in interest rates, valuation of financial instruments, economic and political trends and industry competition. During 2008, the market was impacted by volatile energy prices, a housing market slowdown, the subprime lending collapse that led to an overall credit crisis, a weakening U.S. dollar and declining interest rates. The Company’s Private Client Group’s recruitment and retention of Financial Advisors was positively impacted by industry consolidation. RJBank benefited from the widening interest rate spreads and what management feels are quality loans available for purchase that resulted from a desire for liquidity in the markets in response to the credit crisis.

Results of Operations - Total Company

The Company currently operates through the following eight business segments: Private Client Group; Capital Markets; Asset Management; RJBank; Emerging Markets; Stock Loan/Borrow; Proprietary Capital and certain corporate activities in the Other segment.

The following table presents consolidated and segment financial information for the Company for the years indicated:

	Year Ended
	September 30,	September 30,	September 30,
	2008	2007	2006
	(in 000's)
Total Company
Revenues	$ 3,204,932	$ 3,109,579	$ 2,645,578
Pre-tax Earnings	386,854	392,224	342,066

Private Client Group
Revenues	1,950,292	1,938,154	1,679,813
Pre-tax Earnings	177,696	219,864	168,519

Capital Markets
Revenues	506,007	506,498	487,419
Pre-tax Earnings	50,169	68,966	78,221

Asset Management
Revenues	236,928	234,875	207,821
Pre-tax Earnings	58,865	60,517	48,749

RJBank
Revenues	405,304	279,572	114,692
Pre-tax Earnings	112,282	27,005	16,003

Emerging Markets
Revenues	41,269	59,083	55,263
Pre-tax (Loss) Earnings	(3,260)	3,640	2,857

Stock Loan/Borrow
Revenues	36,843	68,685	59,947
Pre-tax Earnings	7,034	5,003	8,001

Proprietary Capital
Revenues	22,775	8,280	17,312
Pre-tax Earnings	7,341	3,577	8,468

Other
Revenues	5,514	14,432	23,311
Pre-tax (Loss) Earnings	(23,273)	3,652	11,248

Year ended September 30, 2008 Compared with the Year ended September 30, 2007 - Total Company

The Company had record annual gross and net revenues for the year, exceeding the prior year by 3% and 8%, respectively. Gross revenues were fueled by strong institutional sales commissions offset by trading losses, while net revenues also benefited from record net interest earnings. Non-interest expenses grew by 9%, thus net income declined 6% from the prior year. Three of the Company’s four major segments experienced increases in revenues, but only RJBank generated an increase in pre-tax income.

Year ended September 30, 2007 Compared with the Year ended September 30, 2006 - Total Company

The Company had record earnings for the fourth consecutive year, with 2007 total revenues surpassing $3 billion and net income surpassing $250 million. Revenues exceeded the prior year by 18% while net income exceeded the prior year by 17%. Net revenues were $2.6 billion, or up 11% over the prior year, thus positive operating leverage was realized. Non-interest expenses also rose by 11%. Once again, results were driven by an increase in net interest earnings, which were up 31%. All of the Company’s four major segments had higher revenues and three of the four had higher pre-tax income than in the prior year.

Net Interest Analysis

The following table presents average balance data and interest income and expense data for the Company, as well as the related net interest income:

	Year Ended
	September 30, 2008				September 30, 2007			September 30, 2006
		Operating		Average		Operating	Average		Operating		Average
	Average	Interest		Yield/	Average	Interest	Yield/	Average	Interest		Yield/
	Balance	Inc./Exp.		Cost	Balance	Inc./Exp.	Cost	Balance	Inc./Exp.		Cost
	($ in 000's)
Interest-Earning Assets:
Margin Balances	$1,559,305	$ 83,856	5.38%		$1,401,931	$ 108,368	7.73%	$1,327,121	$ 98,417	7.42%
Assets Segregated Pursuant
to Regulations and Other
Segregated Assets	4,264,868	126,556	2.97%		3,738,106	195,356	5.23%	2,983,853	141,741	4.75%
Interest-Earning Assets
of RJBank (1)	7,740,036	407,123	5.26%		4,544,875	278,248	6.12%	1,967,225	114,065	5.80%
Stock Borrow		36,843				68,685			59,947
Interest Earnings of Variable
Interest Entities		657				955			1,008
Other		69,028				75,380			54,803

Total Interest Income		724,063				726,992			469,981

Interest-Bearing Liabilities:
Client Interest Program	$5,412,303	137,511	2.54%		$4,619,292	204,158	4.42%	$3,793,570	143,428	3.78%
Interest-Bearing Liabilities
of RJBank (1)	7,279,182	191,537	2.63%		4,187,365	193,747	4.63%	1,796,481	73,529	4.09%
Stock Loan		26,552				59,276			47,593
Interest Expense of Variable
Interest Entities		5,604				6,972			8,368
Other		31,025				35,511			23,752

Total Interest Expense		392,229				499,664			296,670

Net Interest Income		$ 331,834				$ 227,328			$ 173,311

(1) See Results of Operations - RJBank in Item 7 of Part II for details.

Net interest income at RJBank increased over 155%, representing greater than 100% all of the $105 million increase in the Company’s net interest earnings. Average interest-earning assets at RJBank increased 70% over the prior year. Average bank loan balances increased 93% from $3.2 billion to $6.1 billion. This increase was funded by the growth in new client cash balances which are a result of the positive recruiting results and the third bulk transfer of client cash deposits of $550 million in March 2008 as well as clients raising cash to historically high levels in their accounts.

Average customer margin balances grew only modestly during 2008, thus the increased client cash balances in the firm’s Client Interest Program led to an increase in assets segregated pursuant to regulations. Net interest on the stock loan/borrow business increased 9%, due to increased spreads primarily on hard-to-locate securities. Other interest revenue and expense include earnings on corporate cash, inventory balances, interest on overnight borrowings and the mortgage on the headquarters facility.

Results of Operations - Private Client Group

The following table presents consolidated financial information for the Private Client Group segment for the years indicated:

	Year Ended
	September 30,	% Incr.	September 30,	% Incr.	September 30,
	2008	(Decr.)	2007	(Decr.)	2006
	($ in 000's)
Revenues:
Securities Commissions And Fees	$ 1,520,337	5%	$ 1,451,899	15%	$ 1,262,751
Interest	233,796	(26%)	317,378	28%	248,709
Financial Service Fees	91,042	7%	85,018	(9%)	93,421
Other	105,117	25%	83,859	12%	74,932
Total Revenues	1,950,292	1%	1,938,154	15%	1,679,813

Interest Expense	140,952	(27%)	192,722	38%	139,593
Net Revenues	1,809,340	4%	1,745,432	13%	1,540,220

Non-Interest Expenses:
Sales Commissions	1,132,191	6%	1,070,479	14%	940,567
Admin & Incentive Comp and Benefit Costs	295,851	12%	265,038	13%	233,684
Communications and Information Processing	59,150	7%	55,224	4%	53,064
Occupancy and Equipment	69,503	21%	57,310	12%	51,101
Business Development	64,391	13%	57,216	13%	50,555
Clearance and Other	10,434	(49%)	20,449	(52%)	42,836
Total Non-Interest Expenses	1,631,520	7%	1,525,716	11%	1,371,807
Income Before Taxes and Minority Interest	177,820	(19%)	219,716	30%	168,413
Minority Interest	124		(148)		(106)
Pre-tax Earnings	$ 177,696	(19%)	$ 219,864	30%	$ 168,519
Margin on Net Revenues	9.8%		12.6%		10.9%

The following table presents a summary of Private Client Group Financial Advisors as of the periods indicated:

		Independent	2008	2007
	Employee	Contractors	Total	Total
Private Client Group - Financial Advisors:
RJA	1,180	-	1,180	1,087
RJFS	-	3,149	3,149	3,068
RJ Ltd	202	189	391	325
RJIS	-	89	89	81
Total Financial Advisors	1,382	3,427	4,809	4,561

Year ended September 30, 2008 Compared with the Year ended September 30, 2007 – Private Client Group

The Private Client Group (“PCG”) revenues continue to benefit from the successful recruiting of employee Financial Advisors, however this has been offset by the impact of the uncertain market conditions on investor confidence. As a result, commission revenue increased $68 million, only 5% over the prior year, with $56 million of that increase in RJA due to the recruitment of 184 employee Financial Advisors in fiscal 2008 (for a net increase of 93) and 153 in fiscal 2007 (for a net increase of 59). It generally takes newly recruited Financial Advisors two years to reach their previous production levels. Average production per employee Financial Advisor increased to $515,000 in fiscal 2008 driven by the recruiting of above-average producers.

RJFS recruited 398 independent contractor Financial Advisors in fiscal 2008 (for a net increase of 81). Independent contractor Financial Advisor average production increased from $316,000 in fiscal 2007 to $330,000 in fiscal 2008, again driven by recruiting above average producers. As a result of these two factors, RJFS’s securities commissions and fees increased $10 million despite the difficult market environment.

Offsetting this modest increase in securities commissions and fees was a 26% decrease in gross and net interest from the prior year as interest rates declined and spreads narrowed. Sales commission expense increased 6% in comparison to the 5% increase in commission revenue as it includes the increased expenses associated with recruiting such as hiring bonuses and guaranteed payout amounts. Total non-interest expenses increased 7% as a result of company growth. Administrative expense includes the compensation for additional support personnel, primarily in branch offices. Business development expense includes transition expense (i.e. account transfer fees) and the direct expenses associated with recruiting such as bringing Financial Advisors to the corporate headquarters. Occupancy expense includes the expenses associated with the opening of new branch offices. RJA added 19 offices during fiscal 2008 and 14 during fiscal 2007.

The 7% increase in non-interest expense exceeded the 4% increase in net revenues, resulting in a 19% decline in pre-tax earnings from the prior year. Overall PCG margins decreased from 12.6% to 9.8%. While over half of the Private Client Group’s revenues are recurring in nature, much of that is asset based. With the decline in the equity markets, client assets have declined and revenues based on these balances will be lower until the market values recover. Historically, in uncertain markets individual investors within PCG execute fewer transactions as they often prefer to wait and see, hoping for positive market movement. Both of these factors will have a negative impact on PCG revenues in the near term. Meanwhile the turmoil within the financial services industry has led to increased opportunities to recruit successful Financial Advisors.

Year ended September 30, 2007 Compared with the Year ended September 30, 2006 – Private Client Group

The Private Client Group was significantly impacted by the successful recruiting of employee Financial Advisors and increased productivity throughout domestic PCG. RJA added a net 59 employee Financial Advisors and increased average production per Financial Advisor 22% to $493,000, resulting in a 31% increase in RJA PCG securities commissions and fees. Average assets under management per RJA Financial Advisor increased 24% to $72 million. RJA continues to benefit from the industry consolidation and the resultant unrest and Financial Advisor turnover. Securities commissions and fees increased 10% in RJFS despite a 6% decline in the number of Financial Advisors, most of which was by design in the strategic upgrading initiative. The increased commission and fee revenue is the result of a 16% increase in average production to $316,000 per Financial Advisor. RJ Ltd’s 4% increase in number of Financial Advisors generated a 6.5% increase in securities commissions and fees.

Financial service fees in the prior year included a one-time adjustment of approximately $10 million related to the change in accounting for IRA fees. Excluding this adjustment, financial service fees increased modestly over the prior year. Other revenue increased $9 million, or 12% over the prior year, as a result of increased mutual fund networking and educational and marketing support fees from mutual fund companies.

Commission expense within PCG was up 14%, relatively proportional to the increase in commission revenues and fees of 15%. Administrative compensation, occupancy and business development expenses increased proportionately to net revenues. These increases include expenses associated with new branches, sales support staff, home office visits and account transfer fees. Information processing expenses rose only 4% and reflect the benefit of operating leverage despite continued investment in systems upgrades. The decrease in other expense is the result of lower legal costs and settlements as the last of the outstanding large cases related to the 2000 – 2002 market decline were settled in the prior year.

Overall PCG margins increased by 16% over the prior year, reaching 12.6%.

Results of Operations – Capital Markets

The following table presents consolidated financial information for the Capital Markets segment for the years indicated:

	Year Ended
	September 30,	% Incr.	September 30,	% Incr.	September 30,
	2008	(Decr.)	2007	(Decr.)	2006
	($ in 000's)
Revenues:
Institutional Sales Commissions:
Equity	$ 237,920	13%	$ 210,343	(3%)	$ 217,840
Fixed Income	99,870	125%	44,454	6%	41,830
Underwriting Fees	80,400	(33%)	120,205	14%	105,429
Mergers & Acquisitions Fees	38,385	(36%)	59,929	34%	44,693
Private Placement Fees	2,536	12%	2,262	(3%)	2,334
Trading Profits	(3,503)	(138%)	9,262	(58%)	21,876
Interest	33,032	(32%)	48,275	27%	38,090
Other	17,367	48%	11,768	(23%)	15,327
Total Revenue	506,007	-	506,498	4%	487,419

Interest Expense	31,692	(44%)	56,841	23%	46,126
Net Revenues	474,315	5%	449,657	2%	441,293

Non-Interest Expenses
Sales Commissions	111,448	13%	98,903	2%	96,649
Admin & Incentive Comp and Benefit Costs	221,905	9%	204,512	2%	200,453
Communications and Information Processing	35,981	11%	32,366	20%	27,084
Occupancy and Equipment	18,271	38%	13,196	9%	12,073
Business Development	23,511	-	23,468	6%	22,177
Clearance and Other	26,605	15%	23,054	16%	19,907
Total Non-Interest Expense	437,721	11%	395,499	5%	378,343
Income Before Taxes and Minority Interest	36,594	(32%)	54,158	(14%)	62,950
Minority Interest	(13,575)		(14,808)		(15,271)
Pre-tax Earnings	$ 50,169	(27%)	$ 68,966	(12%)	$ 78,221

Year ended September 30, 2008 Compared with the Year ended September 30, 2007 – Capital Markets

Capital Markets net revenues increased 5% compared to the prior year due to record equity and fixed income institutional sales commissions, which increased 13% and 125%, respectively, compared to the prior year. Equity institutional sales commissions were higher both domestically and in Canada as volatile market conditions generated increased activity. The equally volatile fixed income markets produced an even greater increase in commission revenue as institutions sought expertise on various products, and many altered their weighting in fixed income products.

These increases were offset by reduced investment banking fee revenue compared to the prior year. Equity underwriting fees were $26 million and $3 million below the prior year in the U.S. and Canada, respectively. This was attributable to the lack of underwritings due to the uncertain market conditions. During the year Capital Markets managed or co-managed 82 transactions in the U.S. and Canada, compared to 108 transactions in the prior year. In addition, the prior year was a record year for mergers and acquisition fees. RJTCF saw a dramatic decrease of $15 million in deal related fee revenue (included in underwriting fees) as several of its major clients are no longer in the market.

Total Company trading profits declined $18 million (over 100%) with $12.8 million of that decline in the Capital Markets segment. While domestic equity facilitation losses remained consistent at $8 million, overall fixed income trading profits increased from $11 million in fiscal 2007 to $15 million in fiscal 2008. This included a particularly difficult fixed income trading environment due to a flight to quality, especially during the fourth quarter. RJ Ltd.’s trading profits reversed from a $2.8 million profit in fiscal 2007 to a $6 million loss in fiscal 2008. This was a combined result of an increase in facilitation losses of $6.6 million and a $2.6 million decline in proprietary trading gains.

Gross revenues were flat with the prior year and net revenues were up 5%. However, due to the $42 million increase in non-interest expense, pre-tax earnings were down 27% from the prior year. Commission expense increased in line with commission revenues. The other compensation expenses, occupancy and communications and information processing expenses increased due to growth as the Company has taken advantage of the opportunity to add quality Capital Markets teams. Equity Capital Markets has added a net seven professionals in Investment Banking over the past year, as well as additional Sales and Research personnel. This segment moved or substantially renovated several of its larger offices this year, including offices in New York, Atlanta and Chicago, and opened one new office in San Francisco. Fixed Income has taken advantage of market conditions in the taxable fixed income institutional sales area and in Public Finance to recruit a combined 49 additional professionals, representing a 20% increase in its producing professionals. These hires were accomplished at lower costs than possible in recent years.

Year ended September 30, 2007 Compared with the Year ended September 30, 2006 – Capital Markets

The Capital Markets segment pre-tax earnings declined 12% despite a 2% increase in net revenues. Commission revenue was down slightly, the net of a decline in equity commissions related to the decline in commissions generated by underwriting transactions, and an increase in fixed income commissions, a result of the increased volatility. Commissions generated by underwriting transactions reached a record $41 million in the prior year and were only $22 million in the current year.

The increase in underwriting fees included increases of $3 million at RJA, despite a decline in the number of deals from 97 to 78, and $3 million at RJ Ltd. on 30 deals versus 29 in the prior year. Merger and acquisition fees were up $15 million, reaching an all time record level of $60 million for the year. During fiscal 2007, RJA closed 15 individual merger and acquisition transactions with fees in excess of $1 million. Trading profits were down 58% from the prior year, reflecting a particularly difficult fixed income trading environment during the fourth quarter. As credit issues drove fixed income product values down there was a flight to quality and the firm’s economic hedges (short positions in US Treasuries) contributed additional losses. Meanwhile, there were also increased losses in equity customer facilitations and OTC market making. Raymond James Tax Credit Fund (“RJTCF”) revenues increased 11% as they invested $375 million for institutional investors versus $277 million in the prior year. Interest revenue increased related to higher average fixed income inventory levels.

Expenses were generally in line with revenue growth with two exceptions. Communications and information processing increased predominantly due to increased costs associated with market information systems and software development costs. Other expense reflects a shift to the use of electronic and other non-exchange clearing methods and includes transaction related underwriting expenses incurred by RJTCF.

Results of Operations - Asset Management

The following table presents consolidated financial information for the Asset Management segment for the years indicated:

	Year Ended
	September 30,	% Incr.	September 30,	% Incr.	September 30,
	2008	(Decr.)	2007	(Decr.)	2006
	($ in 000's)
Revenues
Investment Advisory Fees	$ 195,884	2%	$ 192,763	14%	$ 169,055
Other	41,044	(3%)	42,112	9%	38,766
Total Revenues	236,928	1%	234,875	13%	207,821

Expenses
Admin & Incentive Comp and Benefit Costs	74,392	2%	72,887	9%	66,689
Communications and Information Processing	18,902	3%	18,360	11%	16,523
Occupancy and Equipment	4,228	(2%)	4,296	3%	4,163
Business Development	8,898	-	8,876	6%	8,379
Investment Advisory Fees	46,788	1%	46,368	18%	39,281
Other	24,435	6%	22,945	(3%)	23,588
Total Expenses	177,643	2%	173,732	10%	158,623
Income Before Taxes And Minority Interest	59,285	(3%)	61,143	24%	49,198
Minority Interest	420		626		449
Pre-tax Earnings	$ 58,865	(3%)	$ 60,517	24%	$ 48,749

The following table presents assets under management and a portion of the Company’s non-managed fee based assets at the dates indicated:

	September 30,	% Incr.	September 30,	% Incr.	September 30,
	2008	(Decr.)	2007	(Decr.)	2006
Assets Under Management:	($ in 000's)

Eagle Asset Mgmt., Inc.
Retail	$ 5,852,904	(15%)	$ 6,925,930	24%	$ 5,600,806
Institutional	6,753,282	(11%)	7,601,374	11%	6,862,611
Total Eagle	12,606,186	(13%)	14,527,304	17%	12,463,417

Heritage Family of Mutual Funds
Money Market	6,108,327	11%	5,524,598	(12%)	6,306,508
Other	3,043,460	(23%)	3,956,677	32%	3,004,816
Total Heritage	9,151,787	(3%)	9,481,275	2%	9,311,324

Raymond James Consulting Services (“RJCS”)	7,989,510	(17%)	9,638,691	22%	7,915,168
Eagle Boston Investment Management, Inc.	633,646	2%	622,860	(37%)	996,353
Freedom Accounts	7,603,840	(7%)	8,144,920	59%	5,122,733

Total Assets Under Management	37,984,969	(10%)	42,415,050	18%	35,808,995

Less: Assets Managed for Affiliated Entities	(4,675,129)	(12%)	(5,305,506)	33%	(3,991,281)

Third Party Assets Under Management	$ 33,309,840	(10%)	$ 37,109,544	17%	$ 31,817,714

Non-Managed Fee Based Assets:

Passport	$ 17,681,201	(11%)	$ 19,945,507	21%	$ 16,514,313
IMPAC	8,436,116	(12%)	9,565,051	20%	7,966,313
Total	$ 26,117,317	(11%)	$ 29,510,558	21%	$24,480,626

Year ended September 30, 2008 Compared with the Year ended September 30, 2007 - Asset Management

Asset Management revenues increased modestly despite a 10% decline in assets under management as most of this decline occurred in the last few weeks of the fiscal year. Expenses were well controlled, thus pre-tax income declined only 3%. Assets under management declined by 10% or $3.8 billion during the year as positive net sales did not offset a significant decline in the market value of portfolios. Portfolios managed by Eagle experienced approximately $1.9 billion in market depreciation in 2008 compared to $2.1 billion in appreciation during the prior year. Market depreciation of RJCS/Freedom portfolios was approximately $4.0 billion compared to appreciation of $1.3 billion in fiscal 2007. Other fee based programs (non-managed) witnessed a decline in market values in the amount of $5.9 billion in 2008 as compared to a gain of $1.4 billion in the prior year. Despite adverse market conditions, net inflows for the segment amounted to approximately $7 billion in 2008. This included approximately $2.3 billion in managed accounts (including Eagle) and $4.7 billion in non-managed fee based accounts. Money market fund assets increased despite the transfer of $550 million to RJBank in March 2008. Performance results were very good, as 87% of the investment managers participating in the Raymond James Consulting Services program outperformed their indices for the five year period ended September 30, 2008. Of Eagle’s 11 principal investment programs, 10 outperformed their indices during the same period. At September 30, 2008, five of the eight funds managed by Heritage had earned a four-star overall rating from Morningstar.

Year ended September 30, 2007 Compared with the Year ended September 30, 2006 - Asset Management

The Asset Management segment has benefited significantly from the successful recruiting in PCG. New Financial Advisors bring additional client assets, a portion of which is often directed into an asset management alternative. In addition, both Eagle and Heritage have been successful in their efforts to increase their presence on outside broker-dealer platforms. Eagle’s retail sales to outside broker-dealers were 33% of their total 2007 sales, while Heritage’s were 78% of their total sales. Revenues in this segment increased 13% on a 17% increase in assets under management, as there continues to be some fee compression. Expenses increased only 10%, generating a 24% increase in pre-tax earnings and a 26% margin as a result of operating leverage. Money market fund balances declined as a result of the transfer of $1.3 billion to RJBank in March 2007.

Results of Operations - RJBank

The following table presents consolidated financial information for RJBank for the years indicated:

	Year Ended
	September 30,	% Incr.	September 30,	% Incr.	September 30,
	2008	(Decr.)	2007	(Decr.)	2006
	($ in 000's)
Interest Earnings
Interest Income	$ 407,123	46%	$ 278,248	144%	$ 114,065
Interest Expense	191,537	(1%)	193,747	163%	73,529
Net Interest Income	215,586	155%	84,501	108%	40,536

Other Income	(1,819)	(237%)	1,324	111%	627
Net Revenues	213,767	149%	85,825	109%	41,163

Non-Interest Expense
Employee Compensation and Benefits	10,091	30%	7,778	27%	6,135
Communications and Information Processing	1,130	7%	1,052	16%	907
Occupancy and Equipment	721	-	719	14%	629
Provision for Loan Losses and Unfunded
Commitments	57,127	78%	32,150	134%	13,760
Other	32,416	89%	17,121	359%	3,729
Total Non-Interest Expense	101,485	73%	58,820	134%	25,160
Pre-tax Earnings	$ 112,282	316%	$ 27,005	69%	$ 16,003

The tables below present certain credit quality trends for corporate loans and residential/consumer loans:

	Fiscal Year
	September 30,	September 30	September 30,
	2008	2007	2006
	(in 000’s)

Net Loan Charge-offs:
Corporate Loans	$ (10,169)	$ (629)	$ -
Residential/Consumer Loans	(3,447)	(453)	(52)

Total	$(13,616)	$ (1,082)	$ (52)

Allowance for Loan Loss:
Corporate Loans	$ 79,404	$ 42,358	$ 14,814
Residential/Consumer Loans	8,751	4,664	3,880

Total	$ 88,155	$ 47,022	$ 18,694

	September 30,	September 30	September 30,
	2008	2007	2006
	(in 000’s)

Nonperforming Assets:
Corporate	$ 39,390	$ 682	$ -
Residential/Consumer	22,918	5,036	2,091

Total	$ 62,308	$ 5,718	$ 2,091

Total Loans(1):
Corporate Loans(1)	$ 4,563,065	$ 2,769,517	$ 956,038
Residential/Consumer Loans(1)	2,620,317	1,941,714	1,325,488

Total	$ 7,183,382	$ 4,711,231	$ 2,281,526

(1) Net of unearned income and deferred expenses.

Year ended September 30, 2008 Compared with the Year ended September 30, 2007 - RJBank

Net interest income increased 155% and pre-tax profits at RJBank more than quadrupled during the fiscal year compared to the prior year. Interest revenue at RJBank increased 46% despite falling rates, with the loan balances increasing from $4.7 billion to $7.1 billion. The loan increase consisted primarily of 24% purchased residential mortgage pools and 73% corporate loans, with 97% of the latter purchased or originated participations in syndicated loans. As a result, total assets increased from $6.3 billion to $9.4 billion, adjusted to exclude the investment of the $1.9 billion FHLB advance repaid on October 1, 2008. Corporate loans increased from $2.8 billion to $4.6 billion, while retail and residential loans increased from $1.9 billion to $2.6 billion. The growth in loans was funded by the growth in customer deposits. The influx of client cash balances into the RJBank Deposit Program (reaching historically high levels), generated by a combination of new clients bringing cash to the firm, clients raising cash, and clients electing to hold their cash in FDIC insured accounts, plus the bulk transfer of $550 million in cash balances in March 2008, resulted in a $3.2 billion increase in deposit balances from $5.6 billion to $8.8 billion. As a result of the falling interest rate environment, interest expense fell 1% despite the higher balances. RJBank has benefited from the declining interest rate environment as the rates on the interest earning assets have declined at a slower pace than the rates paid on deposits. In addition, RJBank’s corporate loan portfolio is predominantly LIBOR based and LIBOR was unusually high in comparison to other rates for a period of time during the year, generating particularly good spreads. The growth in loan balances at RJBank gave rise to an attendant increase in loan loss provisions; the provisions for loan loss and unfunded lending commitments were $57.1 million compared to $32.1 million in the prior year. Net loan charge-offs for the year were $13.6 million compared to $1.1 million in the prior year. RJBank has no exposure to subprime loans.

In addition to the increase in the allowance for loan loss, charge-offs and nonperforming assets have increased as the loan portfolio has grown and aged. The Company does not believe that this is related to a significant decline in the loan credit quality other than for loans to borrowers in the Residential Acquisition and Development/Homebuilder industry. During the year ended September 30, 2008, RJBank experienced some credit quality deterioration in corporate credits in this industry segment. Four credits in this segment account for approximately $35.7 million in nonaccrual loans (91% of the nonperforming corporate assets above) and three of those credits contributed $8.5 million in net charge-offs (83% of the corporate loan charge-offs above) for the year ended September 30, 2008. Total loans outstanding and commitments in this industry segment are $98 million and $116 million, respectively. Committed exposures to this industry segment have been reduced by more than 40% over the past year. Credit trends in other segments of our corporate loan portfolio have remained relatively stable to date.

RJBank does not own any payment option ARM loans or subprime mortgage loans. Shared National Credits (“SNCs”), large syndicated corporate loans that are reviewed under a common program in which several bank regulatory agencies participate, comprise approximately 90% of RJBank’s corporate loan portfolio. RJBank’s residential loan portfolio consists of 76% in interest-only mortgages. 7% of the residential loan portfolio was originated under a streamlined documentation feature for high net worth clients or with reduced documentation, which may be considered Alt A. However, for streamlined documentation, very strict standards must be met including a minimum $1.0 million account relationship, maximum loan-to-value (“LTV”) of 70%, and minimum credit score of 720. In addition, the streamlined documentation feature is only available for purchases and is not available for cash out refinance transactions.

As of October 31, 2008, the unrealized loss on the Company’s available for sale securities portfolio was $114.4 million, compared to $89.0 million as of September 30, 2008, a decrease in value of $25.4 million. The decline in value was due to a significant widening of interest rate spreads across market sectors related to the continued illiquidity and uncertainty in the markets. No factors were identified that would indicate additional securities were considered to be other-than-temporarily impaired and therefore had no impact on earnings.

Year ended September 30, 2007 Compared with the Year ended September 30, 2006 - RJBank

The Company completed its second bulk transfer of cash balances into the RJBank Deposit Program in March 2007, moving another $1.3 billion. This, combined with organic growth from the influx of new client assets, resulted in a $2.6 billion increase in average deposit balances. This increase in average deposit balances provided the funding for the $1.6 billion increase in average loan balances. This increase was 38% purchased residential mortgage pools and 62% corporate loans, 98% of which are purchased interests in corporate loan syndications with the remainder originated by RJBank. As a result of this growth, RJBank net interest income increased 108% to $84.5 million. Due to robust loan growth, the associated allowance for loan losses that are established upon recording a new loan and making new unfunded commitments required a provision of over $32 million in 2007. Accordingly, RJBank’s pre-tax income increased only 69%. During periods of growth when new loans are originated or purchased, an allowance for loan losses is established for potential losses inherent in those new loans. Accordingly, a robust period of growth generally results in charges to earnings in that period, while the benefits of higher interest earnings are realized in later periods.

The following table presents average balance data and operating interest income and expense data for the Company's banking operations, as well as the related interest yields and rates and interest spread for the years indicated:

	Year Ended
	September 30, 2008					September 30, 2007			September 30, 2006
		Operating		Average			Operating	Average		Operating	Average
	Average	Interest		Yield/		Average	Interest	Yield/	Average	Interest	Yield/
	Balance	Inc./Exp.		Cost		Balance	Inc./Exp.	Cost	Balance	Inc./Exp.	Cost
	($ in 000’s)
	(continued on next page)
Interest-Earning Banking Assets:
Loans, Net of Unearned
Income (1)	$ 6,144,131	$346,560	5.64%		$ 3,180,331		$204,959	6.44%	$ 1,601,708	$ 95,366	5.95%
Reverse Repurchase
Agreements	786,598	22,839	2.90%		878,822		46,438	5.28%	122,301	6,497	5.31%
Agency Mortgage backed
Securities	225,935	8,226	3.64%		199,514		11,086	5.56%	157,454	7,833	4.97%
Non-agency Collateralized
Mortgage Obligations	379,979	23,474	6.18%		229,108		12,808	5.59%	21,204	1,151	5.43%
Other Government Agency
Obligations	-	-	-		-		-	-	8,314	404	4.86%
Corporate Debt and Asset
Backed Securities	-	-	-		-		-	-	8,839	499	5.65%
Money Market Funds, Cash
and Cash Equivalents	190,954	5,416	2.84%		49,979		2,533	5.07%	34,469	1,607	4.66%
FHLB Stock and Other	12,439	608	4.89%		7,121		424	5.95%	12,936	708	5.47%
Total Interest-Earning
Banking Assets	7,740,036	407,123	5.26%		4,544,875		278,248	6.12%	1,967,225	114,065	5.80%
Non-Interest-Earning
Banking Assets	24,835				16,410				13,329

Total Banking Assets	$ 7,764,871				$ 4,561,285				$ 1,980,554

Interest-Bearing
Banking Liabilities: