The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company's control, including adverse changes in economic, political and market conditions, losses from the Company's market-making and trading activities arising from counter-party failures and changes in market conditions, the possible loss of key personnel, the impact of increasing competition, the impact of changes in government regulation, the possibility of liabilities arising from violations of federal and state securities laws and the impact of changes in technology in the securities and commodities trading industries. Although the Company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the Company's actual results will not differ materially from any results expressed or implied by the Company's forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.

Principal Activities

International Assets Holding Corporation and its subsidiaries (collectively "INTL" or "the Company") form a financial services group focused on select international markets. The Company commits its capital and expertise to market-making and dealing in financial instruments, currencies and commodities, and to asset management. The Company's activities are divided into five reportable business segments-international equities market-making, foreign exchange trading, commodities trading, international debt capital markets and asset management.

International Equities Market-Making. The Company is a leading U.S. market maker in select foreign securities, including unlisted American Depository Receipts and foreign common shares. The Company provides execution and liquidity primarily to U.S.-based wire houses, regional broker-dealers and institutional investors.

Foreign Exchange Trading. The Company trades select illiquid currencies of developing countries. The Company's target customers are financial institutions, multi-national corporations, and governmental and charitable organizations operating in these developing countries. In addition, the Company executes trades based on the foreign currency flows inherent in its existing international securities activities. The Company primarily acts as a principal in buying and selling foreign currencies on a spot basis.

Commodities Trading. The Company provides a full range of over-the-counter precious and base metals trading and hedging capabilities to producers, consumers, recyclers and investors with a particular focus on transactions that include physical delivery. Acting as a principal, the Company commits its capital to buy and sell the metals on a spot and forward basis.

International Debt Capital Markets. The Company originates international debt transactions for issuers located primarily in emerging markets. This includes bond issues, syndicated loans, asset securitizations as well as forms of other negotiable debt instruments. The Company also actively trades a wide variety of international debt instruments including both investment grade and higher yielding emerging market bonds with particular focus on smaller emerging market sovereign, corporate and bank bonds that trade worldwide on an over-the-counter basis.

Asset Management. The Company provides asset management services through INTL Consilium, LLC, an asset management joint venture in which it held a 50.1% interest at March 31, 2009, and through two wholly owned subsidiaries: INTL Capital Ltd. and Gainvest S.A. Sociedad Gerente de Fondos Communes de Inversion. INTL Consilium, LLC acts as the investment manager for private investment funds organized by INTL Consilium, LLC and others. INTL Capital Ltd. acts as the investment adviser to INTL Trade Finance Fund Ltd. Gainvest acts as an investment adviser to three investment funds organized and traded in Argentina. Subsequent to the end of the quarter, the Company agreed to discontinue its business relationship with and redeem its 50.1% interest in INTL Consilium, LLC. The results of INTL Consilium, LLC, previously consolidated and included within continuing operations, will be treated by the Company for accounting purposes as discontinued operations with effect from the fiscal quarter ending June 30, 2009.

Selected Summary Financial Information

As discussed in previous filings and elsewhere in this Form 10-Q, the requirements of accounting principles generally accepted in the U.S. ("GAAP") to carry derivatives at fair market value but physical commodities inventory at the lower of cost or market value have a significant temporary impact on our reported earnings. Under GAAP, gains and losses on commodities inventory and derivatives which the Company intends to be offsetting are often recognized in different periods. Additionally, GAAP does not require us to reflect changes in estimated values of forward commitments to purchase and sell commodities.

For these reasons, management assesses the Company's operating results on a marked-to-market basis. Management relies on these adjusted operating results to evaluate the performance of the Company's commodities business segment and its personnel.

Under "marked-to-market basis" in the tables below are the Company's adjusted operating revenues, pro forma income from continuing operations, pro forma net income, adjusted EBITDA and adjusted stockholders' equity, which have been adjusted to reflect the marked-to-market differences in the Company's commodities business during each period (in the case of operating revenues and net income) and the cumulative differences (in the case of stockholders' equity). The Company has also included the estimated tax liability which would have been incurred as a result of these adjustments, utilizing a blended tax rate of 37.5%.

                      Pro Forma Adjusted Financial Information (non-GAAP) (UNAUDITED)

                                                           Three Months Ended            Six Months Ended
                                                                March 31,                   March 31,
(In millions, except employee count and ratios)            2009           2008          2009          2008
As reported on a GAAP basis:
Operating revenues                                       $    27.1       $  32.7      $   56.7       $  74.7
Income from continuing operations                        $     4.3       $   6.5      $    7.8       $  20.2
Net income                                               $     4.0       $   6.0      $    7.3       $  18.9
Stockholders' equity                                     $    79.3       $  57.1

Marked-to-market basis (unaudited, pro forma,
non-GAAP):
Adjusted operating revenues                              $    27.5       $  30.2      $   58.5       $  58.9
Adjusted, pro forma income from continuing operations    $     4.6       $   4.9      $    9.0       $  10.4
Adjusted, pro forma net income                           $     4.3       $   4.4      $    8.5       $   9.1
Adjusted EBITDA                                          $     7.5       $  10.6      $   16.6       $  22.1
Adjusted stockholders' equity                            $    83.0       $  66.6

Cumulative after tax adjustment to stockholders'
equity                                                   $     3.7       $   9.5


Trailing twelve months on marked-to-market basis
(unaudited, pro forma, non-GAAP):
Adjusted operating revenues                              $     100       $   102
Adjusted, pro forma net income                           $      10       $    14
Adjusted EBITDA                                          $      22       $    37
Adjusted return on average equity                             13.9 %        24.5 %

The following marked-to-market adjustments were made
to the GAAP basis numbers shown above (unaudited, pro
forma, non-GAAP management data):
Gross marked-to-market adjustment                              0.4          (2.5 )         1.8         (15.8 )
Pro forma tax effect at 37.5%                                 (0.1 )         0.9          (0.6 )         6.0

After tax marked-to-market adjustment                    $     0.3       $  (1.6 )    $    1.2       $  (9.8 )


Reconciliation of net income to adjusted EBITDA
(non-GAAP)
Net income                                               $     4.0       $   6.0      $    7.3       $  18.9
Minority interests                                             0.3           0.5           0.5           1.3
Income tax                                                     0.8           4.3           3.3          12.5
Depreciation and amortization                                  0.3           0.2           0.5           0.5
Interest expense                                               2.3           2.8           4.6           5.8
Interest income                                               (0.6 )        (0.7 )        (1.4 )        (1.1 )
Gross marked-to-market adjustment                              0.4          (2.5 )         1.8         (15.8 )

Adjusted EBITDA (non-GAAP)                               $     7.5       $  10.6      $   16.6       $  22.1


Other data (unaudited, pro forma, non-GAAP):
Employees                                                      186           181
Compensation and benefits / adjusted operating
revenues                                                      37.8 %        36.4 %        41.0 %        36.7 %
Leverage ratio: Total assets to equity                         4.6           5.9

Adjusted operating revenues, adjusted net income, adjusted EBITDA and adjusted stockholders' equity are financial measures that are not recognized by GAAP, and should not be considered as alternatives to operating revenues, net income or stockholders' equity calculated under GAAP or as an alternative to any other measures of performance derived in accordance with GAAP. The Company has included these non-GAAP financial measures because it believes that they permit investors to make more meaningful comparisons of performance between the periods presented. In addition, these non-GAAP measures are used by management in evaluating the Company's performance.

Results of Operations

Set forth below is the Company's discussion of the results of its operations, as viewed by management, for the fiscal quarters and six-month periods ended March 31, 2009 and 2008, respectively. The quarters will be referred to in this discussion as "Q2 2009" and "Q2 2008", and the six-month periods as "YTD 2009" and "YTD 2008", respectively. This discussion refers to both GAAP results and adjusted marked-to-market information, in accordance with the information presented above under the heading 'Pro Forma Adjusted Financial Information'. For the international equities, foreign exchange trading, international debt capital markets and asset management segments, there are no differences between the GAAP results and the adjusted marked-to-market results. Only the commodities trading segment has differences between the GAAP results and the adjusted marked-to-market results. However, this means that there are differences between the GAAP basis and marked-to-market basis numbers for total operating revenues, total contribution and net income. Please note that any term below that contains the word 'adjusted' refers to non-GAAP, marked-to-market information.

Financial Overview

The following table shows an overview of our financial results.



                                                   Three Months Ended                Six Months Ended
                                                        March 31,                       March 31,
                                                          %                               %
(In millions)                                   2009    Change       2008       2009    Change       2008
FINANCIAL OVERVIEW
Adjusted total operating revenues (non-GAAP)   $ 27.5       (9 )%   $ 30.2     $ 58.5       (1 )%   $  58.9
Interest expense                                  2.3      (18 )%      2.8        4.6      (21 )%       5.8

Net revenues (non-GAAP)                          25.2       (8 )%     27.4       53.9        2 %       53.1
Non-interest expenses                            19.7        7 %      18.4       41.0       16 %       35.3

Income before income tax and minority
interest (non-GAAP)                               5.5      (39 )%      9.0       12.9      (28 )%      17.8
Pro forma income tax expense (non-GAAP)           0.9      (74 )%      3.4        3.9      (40 )%       6.5
Minority interest in income of consolidated
entities                                           -      (100 )%      0.7         -      (100 )%       0.9

Income from continuing operations (non-GAAP)      4.6       (6 )%      4.9        9.0      (13 )%      10.4
Less: Net income attributable to the
noncontrolling interests                          0.3      (40 )%      0.5        0.5      (62 )%       1.3

Pro forma net income (non-GAAP)                $  4.3       (2 )%   $  4.4     $  8.5       (7 )%   $   9.1


Reconciliation of operating revenues from
GAAP to adjusted, non-GAAP numbers:
Total operating revenues, (GAAP)               $ 27.1               $ 32.7     $ 56.7               $  74.7
Gross marked-to-market adjustment                 0.4                 (2.5 )      1.8                 (15.8 )

Operating revenues (non-GAAP)                  $ 27.5               $ 30.2     $ 58.5               $  58.9


Reconciliation of income tax expense from
GAAP to pro forma, non-GAAP numbers:
Income tax expense (GAAP)                      $  0.8               $  4.3     $  3.3               $  12.5
Pro forma taxes on gross marked-to- market
adjustment at 37.5%                               0.1                 (0.9 )      0.6                  (6.0 )

Pro forma income tax expense (non-GAAP)        $  0.9               $  3.4     $  3.9               $   6.5

Q2 2009 Operating Revenues vs. Q2 2008 Operating Revenues

The Company's operating revenues under GAAP for Q2 2009 and Q2 2008 were $27.1 million and $32.7 million, respectively. The Company's adjusted operating revenues were $27.5 million in Q2 2009, compared with $30.2 million in Q2 2008. Decreases in adjusted operating revenues of 18% in equities market-making, 5% in commodities trading, 50% in debt capital markets and 40% in asset management were partially offset by a 51% increase in foreign exchange trading adjusted operating revenues. The unusual levels of volatility in global equity markets experienced during the first quarter of fiscal 2009 were not sustained during Q2 2009. Reduced volumes during the quarter produced matching results. The commodities trading results in Q2 2009 were largely driven by precious metals activity, while those in Q2 2008 were driven by base metals trading activity. Foreign exchange trading produced its best quarter ever in Q2 2009. The lack of demand and risk intolerance caused by the global financial crisis continues to adversely affect our debt arrangement and placement business, accounted for in the debt capital markets segment. Reduced revenue in the asset management segment arose as a result of reduced investment advisory fees related to redemptions from funds under management and to declining values of assets as a result of the global financial crisis. See the segmental analysis below for additional information on activity in each of the segments.

YTD 2009 Operating Revenues vs. YTD 2008 Operating Revenues

The Company's operating revenues under GAAP for YTD 2009 and YTD 2008 were $56.7 million and $74.7 million, respectively. The Company's adjusted operating revenues were $58.5 million in YTD 2009, 1% lower than the operating revenues of $58.9 in YTD 2008. Adjusted operating revenues increased by 46% in equities market-making, 15% in foreign exchange trading and 13% in commodities trading, offset by decreases of 43% in debt capital markets and 80% in asset management. The equities market-making segment benefited from the unusual levels of volatility in global equity markets during 2009. Foreign exchange trading revenues have continued to climb during 2009 as a result of widening spreads in emerging market exchange rates and increased customer activity. The commodities trading results in YTD 2009 have been largely driven by precious metals activity, compared with base metals activity in YTD 2008. Operating revenues in the debt capital markets segment has been adversely affected in YTD 2009 by the global

financial crisis. Reduced investment advisory fees related to redemptions from funds under management and to declining values of assets as a result of the global financial crisis, as well as marked-to-market losses in the Company's proprietary investments in certain funds and accounts managed by the Company, led to reduced revenue and losses in the asset management segment.

Q2 2009 Interest expense vs. Q2 2008 Interest expense

Interest expense: Interest expense decreased by 18% from $2.8 million in Q2 2008 and $2.3 million in Q2 2009 as a result of decreased average borrowings and lower interest rates. In mid-2008 the Company entered into two three-year interest rate swaps for a total of $100 million. These were designated as cash flow hedges. See Note 10 to the condensed consolidated financial statements for further information. The Company pays a fixed 3.66% (on average), and receives a variable rate equal to one-month LIBOR. One-month LIBOR was lower than the fixed rate of 3.66% paid by the Company for most of Q2 2009, resulting in a net interest expense on the swaps. The effective portion of the interest expense on the swaps during Q2 2009 had the effect of increasing the Company's reported interest expense by $0.6 million.

YTD 2009 Interest expense vs. YTD 2008 Interest expense

Interest expense: Interest expense decreased by 21% from $5.8 million in YTD 2008 to $4.6 million in YTD 2009 as a result of decreased average borrowings and lower interest rates. The effective portion of the interest expense on the interest rate swaps (referred to in the paragraph above) during YTD 2009 had the effect of increasing the Company's reported interest expense by $0.8 million.

Non-interest expenses

The following table shows a summary of our non-interest expenses.

                                          Three Months Ended             Six Months Ended
                                               March 31,                     March 31,
                                                 %                             %
  (In millions)                        2009    Change       2008     2009    Change       2008
  NON-INTEREST EXPENSES
  Compensation and benefits           $ 10.4       (5 )%   $ 11.0   $ 24.0       11 %    $ 21.6
  Clearing and related expenses          5.0       28 %       3.9      9.9       29 %       7.7
  Other non-interest expenses
  - Occupancy and equipment rental       0.3        0 %       0.3      0.7        0 %       0.7
  - Professional fees                    0.3      (40 )%      0.5      1.1       10 %       1.0
  - Depreciation and amortization        0.3        0 %       0.3      0.5        0 %       0.5
  - Business development                 0.5      (17 )%      0.6      1.0      (23 )%      1.3
  - Insurance                            0.1        0 %       0.1      0.2        0 %       0.2
  - Other                                2.8       65 %       1.7      3.6       57 %       2.3

  Total other non-interest expenses      4.3       23 %       3.5      7.1       18 %       6.0

  Total non-interest expenses         $ 19.7        7 %    $ 18.4   $ 41.0       16 %    $ 35.3

Q2 2009 Non-Interest Expenses vs. Q2 2008 Non-Interest Expenses

Total Non-Interest Expenses: Non-interest expenses increased by 7% from $18.4 million in Q2 2008 to $19.7 million in Q2 2009.

Compensation and Benefits: Compensation and benefits expense decreased by 5% from $11.0 million to $10.4 million. These represented 53% of total non-interest expenses in Q2 2009, compared with 60% in Q2 2008. The variable portion of compensation and benefits decreased by 5% from $5.7 million in Q2 2008 to $5.4 million in Q2 2009, mainly as a result of decreased revenues. The fixed portion of compensation and benefits decreased 6% from $5.3 million to $5.0 million, resulting from reduced base salaries. The number of employees declined from 190 at the beginning of Q2 2009 to 186 at the end of Q2 2009, compared with 181 employees at the end of Q2 2008. Stock-based compensation expense was $0.5 million and $0.4 million for Q2 2009 and Q2 2008, respectively.

Clearing and Related Expenses: Clearing and related expenses increased by 28% from $3.9 million in Q2 2008 to $5.0 million in Q2 2009. The increase was mainly a result of increased equities volumes and third-party commissions paid in the foreign exchange trading business.

Other Non-Interest Expenses: Other non-interest expenses increased by 23% from $3.5 million in Q2 2008 to $4.3 million in Q2 2009. In Q2 2009 these included $1.8 million of bad debt write-offs, compared with $1.1 million in Q2 2008, and $0.5 million as an impairment charge relating to the Company's joint venture interest in INTL Consilium, LLC, which the Company agreed to redeem effective April 30, 2009. The 40% decrease in professional fees was as a result of adjustments made to accruals in the prior quarter. Business development costs decreased by 17%, from $0.6 million to $0.5 million.

Provision for Taxes: The effective income tax rate on a GAAP basis was 16% in Q2 2009, compared with 37% in Q2 2008. This change was primarily due to changes in the geographic mix of profits and losses.

Our effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings, the level of our pre-tax earnings and the level of our tax credits.

Minority Interest: The minority interest in income of consolidated entities decreased from $0.5 million in Q2 2008 to $0.3 million in Q2 2009. This represents the minority interests in our joint venture, INTL Consilium, LLC, and in INTL Gainvest Capital Uruguay S.A. During February 2009, the Company acquired the 50% interest held by our joint venture partner in INTL Commodities DMCC, making this company a wholly-owned subsidiary.

Loss from Discontinued Operations: On August 1, 2008, the Company notified the employees of its Hong Kong subsidiary, INTL Global Currencies (Asia) Ltd., of its intention to discontinue its foreign exchange margin trading operations. The subsidiary has been closed down without any material expenses incurred beyond those accrued at September 30, 2008. The loss from discontinued operations, net of taxes, was $0.7 million in Q2 2008.

YTD 2009 Non-Interest Expenses vs. YTD 2008 Non-Interest Expenses

Total Non-Interest Expenses: Non-interest expenses increased by 16% from $35.3 million in YTD 2008 to $41.0 million in YTD 2009.

Compensation and Benefits: Compensation and benefits expense increased by 11% from $21.6 million to $24.0 million. These represented 59% of total non-interest expenses in YTD 2009, compared with 61% in YTD 2008. The variable portion of compensation and benefits increased by 26% from $11.4 million in YTD 2008 to $14.4 million in YTD 2009. Although total revenues decreased by 1%, variable compensation numbers for the YTD 2009 period are unusual because of very high equities market-making revenues in the quarter ended December 31, 2008 and because losses, such as the asset management losses in the same period, do not result in a corresponding credit to the variable compensation expense. The fixed portion of compensation and benefits decreased 6% from $10.2 million to $9.6 million, as a result of having fewer employees. The number of employees declined from 195 at the beginning of YTD 2009 to 186 at the end of YTD 2009, compared with 181 employees at the end of YTD 2008. Stock-based compensation expense was $0.9 million and $0.7 million for YTD 2009 and YTD 2008, respectively.

Clearing and Related Expenses: Clearing and related expenses increased by 29% from $7.7 million in YTD 2008 to $9.9 million in YTD 2009. The increase was mainly a result of increased equities volumes and third-party commissions paid in the foreign exchange trading business.

Other Non-Interest Expenses: Other non-interest expenses increased by 18% from $6.0 million in YTD 2008 to $7.1 million in YTD 2009. In YTD 2009 these included $1.9 million of bad debt write-offs, compared with $1.1 million in YTD 2008, and a $0.5 million impairment charge relating to the Company's joint venture interest in INTL Consilium, LLC, which the Company agreed to redeem, effective April 30, 2009. Business development costs decreased by 23%, from $1.3 million to $1.0 million.

Provision for Taxes: The effective income tax rate on a GAAP basis was 30% in YTD 2009, compared with 37% in YTD 2008. This change was primarily due to changes in the geographic mix of profits and losses.

Our effective income tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings, the level of our pre-tax earnings and the level of our tax credits.

Minority Interest: The minority interest in income of consolidated entities decreased from $1.3 million in YTD 2008 to $0.5 million in YTD 2009. This represents the minority interests in our two joint ventures, INTL Consilium, LLC and INTL Commodities DMCC, and in INTL Gainvest Capital Uruguay S.A. During February 2009 the Company acquired the 50% interest held by our joint venture partner in INTL Commodities DMCC, making this company a wholly-owned subsidiary.

Loss from Discontinued Operations: On August 1, 2008, the Company notified the employees of its Hong Kong subsidiary, INTL Global Currencies (Asia) Ltd., of its intention to discontinue its foreign exchange margin trading operations. The subsidiary has been closed down without any material expenses incurred beyond those accrued at September 30, 2008. The loss from discontinued operations, net of taxes, was $0.9 million in YTD 2008.

Segment Information

The following table shows information concerning the Company's principal
business segments.



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