S E C O N D Q UA RT E R R E P O RT J U N E 3 0, Meeting Challenges. Creating Opportunities.

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1 S E C O N D Q UA RT E R R E P O RT J U N E 3 0, Meeting Challenges. Creating Opportunities. 2

2 Letter to the Shareholders Meeting Challenges. Creating Opportunities. Ken Hitzig Chairman of the Board Tom Henderson President and Chief Executive Officer Enclosed are the second quarter and semi-annual results for the periods ended June 30, 2009, together with comparative figures for the same periods last year. This report has not been reviewed by the Company s auditors, but has been reviewed and approved by the Company s Audit Committee and Board of Directors. Factoring volume rose to a second quarter record of $380 million from $365 million in the same quarter last year. Revenue did not keep pace with volume as all of the volume increase was low-rate, low risk, international business. In addition, interest rates and outstandings declined and there were more non-performing loans this year compared with Accordingly, total revenue for the second quarter declined to $5,677,000 compared with $7,094,000 recorded in the same period last year. Lower borrowings and interest rates resulted in a drop in interest expense of more than two-thirds quarter over the quarter to $245,000. General and administrative expenses, including depreciation, rose to $3,594,000 this year compared with $3,390,000 last year. This quarter s expenses include redundancy costs of $330,000 incurred to reduce personnel. The weak North American economy caused our portfolio quality to drop a few notches when compared to last year. The provision for credit and loan losses climbed steeply to $1,082,000 in the second quarter of 2009 versus $248,000 in the same quarter of 2008, largely as a result of a significant write-off. Net earnings for the second quarter were $494,000 compared with the $1,759,000 earned in the second quarter of Earnings per diluted share were 5 cents versus 18 cents last year. Factoring volume for the first six months of 2009 rose to a record $782 million compared with $748 million in The increase was all low-rate international business. Total revenue was $11,748,000 this year, down from $14,521,000 last year. Interest expense was down $1,124,000 to $546,000 in General and administrative expenses, including depreciation, were $7,121,000 in 2009 compared with $6,857,000 in Provision for credit and loan losses in the first six months of 2009 was $1,414,000 compared with $1,083,000 in the same period of Net earnings for the first half of 2009 were $1,774,000 compared with $3,247,000 earned in the comparable period last year. Earnings per diluted share were 19 cents this year versus 34 cents last year. At the Board of Directors meeting held today, the regular quarterly dividend of 6.5 cents per common share was declared payable September 1, 2009 to shareholders of record August 14, The Board also agreed to apply for a renewal of its normal course issuer bid ("Bid"). Under the current Bid, which commenced August 8, 2008, 183,500 shares had been purchased for cancellation on the Toronto Stock Exchange to July 28, We are pleased to announce that our Canadian subsidiaries have changed their names. Accord Business Credit Inc. has become Accord Financial Ltd. and Montcap Financial Corp. has become Accord Financial Inc. Combining all the strengths of our business units under one name with a common theme will broaden the opportunities available to us in North America. We will share a common web-site and logo. The message we present in the marketing of our products and services will be uniform and highlight the international scope of our activities and multiple product offerings. The result will be to enhance our image among our referral sources and prospective clients and lead to more business for each operating unit. The economic recession sweeping North America, and indeed, the world, didn t spare Accord. The overall quality of our portfolio weakened, our credit and loan loss provisions rose steeply, and the flow of incoming new business slowed. As we move into the second half of the year there are some encouraging signs. Deal flow is on the rise, yields are beginning to improve, and we see the potential for a much-improved second half. This is not a prediction, but there are certainly breaks in the clouds on the horizon for the final six months that we didn t see at the beginning of the year. Mr. Gerald S. Levinson, a vice-president of the Company, retired on June 30, He joined Accord in September, 1978 and was head of the Montreal operation for many years. Including service with another financial company prior to Accord, he completed 51 years in the industry, quite possibly a Canadian record. We wish him many enjoyable games of bridge and golf in his retirement years. You will note that this letter is signed by Ken Hitzig as Chairman of the Board, as well as Tom Henderson, President and Chief Executive Officer of the Company. These appointments were made on May 6, 2009 as part of a planned succession within the Company. For the second quarter, Canadian operations generated net earnings of $485,000 compared with $987,000 last year. U.S. operations generated earnings of $9,000 versus $772,000 last year. For the six months ended June 30, 2009, Canadian earnings were $1,180,000 versus $1,855,000 for the same period of U.S. earnings were $594,000 compared with $1,392,000 last year. Ken Hitzig Chairman of the Board Toronto, Ontario July 28, 2009 Tom Henderson President and Chief Executive Officer Table of Contents Inside front cover / Letter to the Shareholders 1 Management s Discussion and Analysis 8 Consolidated Balance Sheets 9 Consolidated Statements of Earnings 9 Consolidated Statements of Comprehensive (Loss) Income 9 Consolidated Statements of Retained Earnings 10 Consolidated Statements of Cash Flows 11 Notes to Consolidated Financial Statements

3 Management s Discussion and Analysis of Results of Operations and Financial Condition ( MD&A ) Stuart Adair Chief Financial Officer Overview The following discussion and analysis explains trends in Accord Financial Corp. s ("Accord" or the "Company") results of operations and financial condition for the quarter and six months ended June 30, 2009 compared with the quarter and six months ended June 30, It is intended to help shareholders and other readers understand the dynamics of the Company s business and the factors underlying its financial results. Where possible, issues have been identified that may impact future results. This MD&A should be read in conjunction with the Company s interim unaudited consolidated financial statements (the "Statements") and notes for the above noted periods, which are included as part of this 2009 Second Quarter Report and as an update in conjunction with the discussion and analysis and audited consolidated financial statements and notes thereto included in the Company s 2008 Annual Report. Additional information pertaining to the Company, including its Annual Information Form, is filed under the Company s profile with SEDAR at All amounts discussed in this MD&A are expressed in Canadian dollars unless otherwise stated and have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). Please refer to note 3(b) to the Statements regarding the Company s use of accounting estimates in the preparation of its financial statements in accordance with GAAP. The following discussion contains certain forward-looking statements that are subject to significant risks and uncertainties that could cause actual results to differ materially from historical results and percentages. Factors that may impact future results are discussed in the Risks and Uncertainties section below. Accord s Business Accord is a leading North American provider of factoring and other asset-based financial services to businesses, including financing, collection services, credit investigation and guarantees. The Company s financial services are discussed in more detail in its 2008 Annual Report. Its clients operate in many industries, including apparel, financial and professional services, engineering, chemicals, electronics, oilfield services, temporary staffing, telecommunications, textiles, food products, furniture, sporting goods, leisure products, footwear, plastics and industrial products. The Company, founded in 1978, operates three factoring companies in North America, namely, Accord Business Credit Inc. ("ABC") and Montcap Financial Corporation ("MFC") in Canada and Accord Financial, Inc. ("AFI") in the United States. The Company s business principally involves: (i) recourse factoring by MFC and AFI, which entails financing or purchasing receivables on a recourse basis, as well as asset-based lending, namely, financing other tangible assets, such as inventory, equipment and real estate; and (ii) non-recourse factoring by ABC, which principally involves providing credit guarantees and collection services on a non-recourse basis, generally without financing. Results of Operations Quarter ended June 30, 2009 compared with quarter ended June 30, 2008 Net earnings declined by $1,265,000 or 72% to $494,000 in the second quarter of 2009 compared to $1,759,000 in last year s second quarter. The decrease in net earnings resulted from lower revenue and a significantly higher provision for credit and loan losses, although increased general and administrative expenses ("G&A") also contributed to the decline. Diluted earnings per common share for the quarter were 5 cents, 72% lower than the 18 cents last year. Factoring volume increased by 4% to a second quarter record $380 million compared to $365 million in the second quarter of Non-recourse volume rose by 18%, while recourse volume declined by 7%. Volume rose as a result of low-rate, and low risk, international business and, consequently, did not result in a similar percentage increase in factoring commissions. Revenue decreased by $1,417,000 or 20% to $5,677,000 in the current quarter compared with $7,094,000 last year. Revenue principally declined as a result of a combination of lower factored receivables and loans (FR&L) and reduced factoring and loan yields compared to the second quarter of Average yields declined largely as a result of decreased interest rates, an increase in non-performing loans and lower recourse volume when compared to last year s second quarter. Total expenses for the second quarter increased by $495,000 or 11% to $4,922,000 compared to $4,427,000 last year. The provision for credit and loan losses rose by $834,000 to $1,082,000 compared to $248,000 last year, while G&A increased by 6% or $204,000 to $3,544,000 from $3,340,000 last year. Interest expense decreased by 69% or $544,000 to $245,000. Depreciation expense was unchanged at $50,000. The provision for credit and loan losses is a combination of net write-offs and charges or recoveries related to changes in the Company s allowance for losses. The net write-off provision increased by $624,000 to $1,064,000 in the current quarter from $440,000 last year, while there was an expense of $18,000 compared to a recovery of $192,000 related to Second Quarter Report

4 Quarterly Financial Information (unaudited, in thousands of dollars except earnings per share) Diluted Quarter ended Revenue Net Earnings Earnings Per Share 2009 June 30 $ 5,677 $ 494 $ 0.05 March 31 6,071 1, December 31 $ 6,753 $ 462 $ 0.05 September 30 6,785 1, June 30 7,094 1, March 31 7,427 1, Total $ 28,060* $ 5,041 $ December 31 $ 7,771 $ 2,059 $ 0.22 September 30 7,174 1, June 30 6,785 1, March 31 6,616 1, Total $ 28,346 $ 6,287 $ 0.66 *due to rounding the total of the four quarters does not agree with the total for the fiscal year. changes in the Company s allowances for losses. The increase in net write-offs in the current quarter pertained to one significant account. The Company is prudent in its approach to providing for write-offs and believes that all problem accounts have been identified and adequately provided for, which is particularly important in the current adverse economic environment. Please see the discussion on the Company s allowance for losses below. G&A comprise personnel costs, representing the major portion of G&A, as well as occupancy costs, marketing expenses, commissions to third parties, professional fees, data processing, travel, telephone and general overheads. The increase in G&A resulted from severance costs of $330,000 incurred in the quarter, as well as the 16% rise in the average value of the U.S. dollar against the Canadian dollar compared to the second quarter of 2008, which served to increase the Canadian dollar equivalent of AFI s G&A. The Company continues to manage its controllable expenses closely. Interest expense declined on a 39% decrease in average borrowings (bank indebtedness and notes payable) and significantly lower interest rates. Borrowings decreased largely as a result of lower FR&L compared to last year s second quarter. Income tax expense declined by 71% to $261,000 in the second quarter compared to $908,000 last year on a similar percentage decrease in pre-tax earnings. The effective income tax rate was 34.6%, slightly higher than last year s 34.0%. Canadian operations reported a 51% decrease in net earnings in the second quarter of 2009 compared to 2008 (see note 11 to the Statements). Net earnings fell by $502,000 to $485,000 compared to $987,000 last year principally as a result of lower revenue. Revenue declined by $1,139,000 or 24% to $3,703,000. Expenses decreased by $388,000 or 12% to $2,988,000 on a $473,000 decline in interest expense. G&A increased by $69,000 to $2,575,000, while the provision for credit and loan losses increased by $19,000 to $142,000. Depreciation was relatively unchanged. Income tax expense declined by 52% to $230,000 on a similar decline in pre-tax earnings. U.S. operations reported a substantial decline in net earnings in the second quarter compared to last year. Net earnings fell by $763,000 to $9,000 in the current quarter compared to $772,000 last year, principally as a result of higher provision for credit and loan losses, although lower revenue and higher G&A also contributed to the decrease. Revenue declined by $277,000 or 12% to $1,975,000. Expenses increased by $884,000 or 84% to $1,935,000 as the provision for credit and loan losses increased by $816,000 to $941,000, while G&A rose by $135,000 to $969,000. Interest expense decreased by $70,000 to $16,000. Income tax expense declined by 93% to $31,000 on a 97% decrease in pre-tax earnings. In U.S. dollars, AFI incurred a net loss of US$9,000. Six months ended June 30, 2009 compared with six months ended June 30, 2008 Net earnings declined by $1,473,000 or 45% to $1,774,000 in the first half of 2009 compared to $3,247,000 in last year s first half. The decrease in net earnings principally resulted from lower revenue, although a higher provision for credit and loan losses and G&A contributed to the decline. Diluted earnings per common share for the first six months of 2009 were 19 cents, 44% lower than the 34 cents last year. Factoring volume increased by $34 million or 5% to $782 million compared to $748 million last year. Non-recourse volume rose by 17%, while recourse volume declined by 6%. As noted above, volume rose on low-rate, and low risk, international business, which did not result in a similar percentage rise in factoring commissions. Revenue declined by $2,773,000 or 19% to $11,748,000 in the current six months compared with $14,521,000 last year. Revenue declined as a result of a combination of lower FR&L and reduced factoring and loan yields. Yields declined compared to the first six months of 2008 for reasons noted above. Total expenses for the first six months of 2009 decreased by $530,000 or 6% to $9,080,000 compared to $9,610,000 last year as the Company s interest expense declined by $1,124,000 or 67% to $546,000. The provision for credit and loan losses rose by $331,000 or 30% to $1,414,000, while G&A increased by $258,000 or 4% to $7,019,000. Depreciation expense rose slightly to $101,000. Interest expense decreased on a 32% decrease in average borrowings and significantly lower interest rates. Borrowings decreased largely as a result of lower FR&L in the first half of 2009 compared to The provision for credit and loan losses comprised net write-offs of $1,485,000, an increase of $462,000, while there was a recovery of $71,000 related to changes in the Company s allowances for losses. As noted above, net write-offs included one significant loss in the current six month period. G&A rose on the above noted severance costs and was also impacted by the 20% rise in the average value of the U.S. dollar against the Canadian dollar this year, which served to increase the Canadian dollar equivalent of AFI s G&A. Income tax expense declined by 46% to $894,000 compared to $1,664,000 last year on a similar percentage decrease in 2 Accord Financial Corp.

5 pre-tax earnings. The effective income tax rate was 33.5%, slightly lower than last year s 33.9%. Canadian operations reported a 36% decrease in net earnings in the first six months of 2009 compared to 2008 (see note 11 to the Statements). Net earnings fell by $675,000 to $1,180,000 compared to $1,855,000 last year as a result of lower revenue. Revenue declined by $2,469,000 or 24% to $7,761,000. Expenses declined by 20% or $1,477,000 to $6,028,000 as a result of a $997,000 reduction in interest expense, a $399,000 decline in the provision for credit and loan losses and an $81,000 decrease in G&A. Income tax expense declined by $317,000 or 36% to $553,000 on a similar percentage decrease in pre-tax earnings. U.S. operations reported significantly lower results compared to last year s first half. Net earnings declined by 57% to $594,000 compared to $1,392,000 last year. Revenue decreased by 7% to $3,988,000 largely as a result of lower interest earned on asset-based loans. Expenses increased by $948,000 or 45% to $3,053,000 on a $729,000 increase in the provision for credit and loan losses and a $340,000 rise in G&A. Interest expense decreased by $125,000 on lower borrowings. Income tax expense declined by $453,000 or 57% to $341,000 on a similar decrease in pre-tax earnings. In U.S. dollars, AFI s net earnings decreased by 67% to US$460,000. Review of Balance Sheet Shareholders equity at June 30, 2009 totalled $46,946,000, a $4,575,000 increase compared to $42,371,000 at June 30, 2008 and a decrease of $1,233,000 from $48,179,000 at December 31, Book value per common share rose to $4.97 at June 30, 2009 compared to $4.44 a year earlier but was lower than the $5.10 at December 31, The increase in shareholders equity since June 30, 2008 principally resulted from a $4,178,000 improvement in the accumulated other comprehensive loss account. This is discussed below. Total assets were $87 million at June 30, 2009 compared to $107 million at June 30, 2008 and $103 million at December 31, Total assets largely comprised FR&L. Excluding inter-company balances, identifiable assets located in the United States were 46% of total assets at June 30, 2009 compared with 37% at June 30, Gross FR&L before the allowance for losses thereon, totalled $77 million at June 30, 2009, lower than the $102 million at June 30, 2008 and the $103 million at December 31, 2008 (see note 4 to the Statements). The decrease resulted from lower business activity and recourse volume, and a number of account liquidations, among other things. As part of the account liquidations the Company obtained title to certain assets securing a loan in the quarter (see assets available for sale below). FR&L, net of the allowance for losses thereon, totalled $74 million at June 30, 2009 compared to $100 million at June 30, 2008 and at December 31, FR&L principally represent advances made by our recourse factoring and asset-based lending subsidiaries, MFC and AFI, to clients in a wide variety of industries. These businesses had approximately 150 clients at June 30, Four clients each comprised over 5% of gross FR&L at June 30, 2009, of which the largest client comprised 9%. In its non-recourse factoring business, the Company contracts with clients to assume the credit risk associated with respect to their receivables usually without financing them. Since the Company does not take title to these receivables, they do not appear on its balance sheet. These non-recourse, or managed, receivables totalled $140 million at June 30, 2009, compared to $92 million at June 30, 2008 and $134 million at December 31, Managed receivables comprise the receivables of approximately 175 clients principally in the apparel, home furnishings, industrial products and footwear industries. The 25 largest clients generated 75% of non-recourse volume in the first six months of Most of the clients' customers are retailers in Canada and the United States. At June 30, 2009, the 25 largest customers accounted for 60% of total managed receivables. One substantial customer, in the engineering business, was responsible for the rise in factoring volume this year and comprised 19% of managed receivables as at June 30, This customer is considered to be of the highest credit quality. Although the retail environment is suffering as a result of the current economic downturn, the Company's credit risk related thereto is closely monitored and its managed receivables continue to be well rated. Credit risk relating to both the Company s recourse and nonrecourse receivables and asset-based loans is managed in a variety of ways. This is discussed in detail in note 15(a) to the Statements. After a detailed review of the Company's $217 million portfolio at June 30, 2009, all problem accounts were identified and provided for. The Company maintains separate allowances for credit and loan losses on both its FR&L and its guarantee of managed receivables, at amounts, which, in management's judgment, are sufficient to cover the fair value of estimated losses thereon. The allowance for losses on FR&L was prudently increased by $679,000 or 32% to $2,809,000 at June 30, 2009 compared to $2,130,000 at June 30, 2008 despite a 25% decline in the Company s gross FR&L. The increase in allowance was largely established in the fourth quarter of 2008 in light of the higher than usual write-offs incurred in the latter part of fiscal 2008, and current adverse economic conditions. The allowance for losses on the guarantee of managed receivables increased to $876,000 at June 30, 2009 compared to $836,000 as of June 30, The allowance tends to fluctuate with managed receivables and the credit risk inherent therein. This allowance represents the fair value of estimated payments to clients under the Company's guarantees to them. As these managed receivables are off-balance sheet, this allowance is included in the total of accounts payable and other liabilities. The estimates of both allowance for losses are judgmental. Management considers them to be adequate. Assets available for sale totalled $6,342,000 at June 30, 2009 and comprised certain assets securing a loan to which the Company had obtained title in the current quarter. As set out in note 5 to the Statements, the assets were written down to their net realizable value at June 30, There were no assets available for sale at June 30, 2008 or December 31, Cash totalled $3,279,000 at June 30, 2009 compared with $4,432,000 at June 30, 2008 and $994,000 at December 31, The Company endeavors to minimize cash balances as far as possible when it has bank indebtedness outstanding. However, due to the large volume of cash being processed daily, Second Quarter Report

6 it is necessary that a certain amount of cash be held to fund daily requirements. Fluctuations in cash balances are normal. Changes in income taxes receivable/payable, other assets, future income taxes, capital assets and goodwill were not significant. Total liabilities at June 30, 2009 were $39,689,000 compared to $64,756,000 at June 30, 2008 and $55,318,000 at December 31, Total liabilities have declined since last June 30 largely as a result of lower bank indebtedness. Bank indebtedness totalled $22,158,000 at June 30, 2009, a 51% decrease compared to $45,387,000 at June 30, 2008, and 38% lower than the $35,877,000 at December 31, The $23,229,000 decrease since last June 30 principally resulted from the $25,408,000 reduction in gross FR&L. The Company has approved credit lines totalling approximately $98 million at June 30, 2009 and was in compliance with all loan covenants thereunder. The Company has no term debt outstanding. Amounts due to clients totalled $4,168,000 at June 30, 2009 compared to $5,424,000 at June 30, 2008 and $4,588,000 at December 31, Amounts due to clients principally consist of collections of receivables not yet remitted to the Company s clients. Contractually, the Company remits collections within a week of receipt. Fluctuations in amounts due to clients are not unusual. Accounts payable and other liabilities totalled $2,592,000 at June 30, 2009 compared to $3,047,000 at June 30, 2008 and $3,080,000 at December 31, As noted above, accounts payable and other liabilities include the allowance for losses on the guarantee of managed receivables. Changes in deferred income and notes payable were not significant. Capital stock totalled $6,935,000 at June 30, 2009 compared to $6,722,000 at June 30, 2008 and $6,732,000 at December 31, There were 9,445,371 common shares outstanding at June 30, 2009 compared with 9,536,871 a year earlier. Note 8(b) provides details of the Company s latest Normal Course Issuer Bid (the Bid ). The latest Bid commenced August 8, 2008 and will terminate on the earlier of August 7, 2009 or the date on which a total of 477,843 common shares have been repurchased. To June 30, 2009 the Company had repurchased and cancelled 160,500 common shares acquired under this Bid, of which 41,800 shares were purchased in Details of the Company s stock option plans are set out in note 9(e) to the Company s 2008 audited financial statements included in its 2008 Annual Report. The Company has not issued any options to employees or directors since There remain 42,000 options outstanding at June 30, 2009 with an exercise price of $7.25. Contributed surplus totalled $43,000 at June 30, 2009 compared to $99,000 at June 30, 2008 and $82,000 at December 31, Contributed surplus has declined as a result of transfers to capital stock arising on the exercise of stock options. Retained earnings totalled $43,876,000 at June 30, 2009 compared to $43,636,000 at June 30, 2008 and $43,543,000 at December 31, In the first half of 2009, retained earnings increased by $333,000, which comprised net earnings of $1,774,000 less dividends paid of $1,225,000 (13 cents per common share) and the $216,000 premium paid on the 41,800 shares repurchased and cancelled under the Bid. In the first half of 2008, retained earnings increased by $1,956,000, which comprised net earnings of $3,247,000 less dividends paid of $1,045,000 (11 cents per common share) and the $246,000 premium paid on the 35,300 shares repurchased and cancelled under the prior Bid. Please refer to the Consolidated Statements of Retained Earnings on page 9 of this report. Accumulated other comprehensive loss comprises the unrealized foreign exchange loss arising on the translation of assets and liabilities of the Company s self-sustaining U.S. subsidiary. This was negative $3,908,000 at June 30, 2009 compared to negative $8,086,000 at June 30, 2008 and negative $2,178,000 at December 31, The $1,730,000 decrease in 2009 was caused by the impact of the decline in value of the U.S. dollar against the Canadian dollar in 2009 on the Company s net investment in its U.S. subsidiary of approximately US$31 million. The value of the U.S. dollar decreased against the Canadian dollar from at December 31, 2008 to at June 30, 2009 thereby decreasing the Canadian dollar equivalent of the Company s investment by $1,730,000. Liquidity and Capital Resources The Company considers its capital resources to include shareholders' equity and debt, namely, its bank indebtedness and notes payable. The Company has no term debt outstanding. The Company's objectives when managing its capital are to: (i) maintain financial flexibility in order to meet financial obligations and continue as a going concern; (ii) maintain a capital structure that allows the Company to finance its growth using internally-generated cash flow and debt capacity; and (iii) optimize the use of its capital to provide an appropriate investment return to its shareholders commensurate with risk. The Company's financial strategy is formulated and adapted according to market conditions in order to maintain a flexible capital structure that is consistent with its objectives and the risk characteristics of its underlying assets. The Company manages its capital resources and makes adjustments to them in light of changes in economic conditions and the risk characteristics of its underlying assets. To maintain or adjust its capital resources, the Company may, from time to time, change the amount of dividends paid to shareholders, return capital to shareholders by way of normal course issuer bid, issue new shares, or reduce liquid assets to repay debt. Amongst other things, the Company monitors the ratio of its equity to total assets, principally FR&L, and its debt to shareholders' equity. These ratios are set out in the table below. (as a percentage) June 30, 2009 June 30, 2008 Dec. 31, 2008 Equity / Assets 54% 40% 47% Debt* / Equity 69% 131% 97% *bank indebtedness & notes payable These ratios have improved during the past year and are currently considerably better than those of most financial companies 4 Accord Financial Corp.

7 indicating the Company's continued financial strength and overall low degree of leverage. The Company s debt and capital requirements generally increase with the total FR&L outstanding. The collection period and resulting turnover of outstanding receivables also impact financing needs. In addition to cash flow generated from operations, the Company maintains bank lines of credit in Canada and the United States. The Company can also raise funds through its notes payable program. The Company had credit lines totalling approximately $98 million at June 30, 2009 and had borrowed $22 million against these facilities. Management believes that current cash balances and existing credit lines together with cash flow from operations will be sufficient to meet the cash requirements of working capital, capital expenditures, operating expenditures, dividend payments and share repurchases and provide sufficient liquidity and capital resources for future growth over the next twelve months. Quarter ended June 30, 2009 compared with quarter ended June 30, 2008 Cash outflow from operating activities before changes in operating assets and liabilities totalled $264,000 in the second quarter of 2009 compared with an inflow of $1,711,000 last year. After changes in operating assets and liabilities are taken into account, there was a net cash inflow from operating activities of $14,683,000 in the current quarter compared to $12,636,000 last year. The net cash inflow in the current quarter largely resulted from FR&L collections of $15,107,000. In the second quarter of 2008, the net cash inflow largely resulted from collections of FR&L of $9,701,000. Changes in other operating assets and liabilities are set out in the Company s Consolidated Statements of Cash Flows on page 10 of this report. Net cash outflow from financing activities totalled $12,389,000 in the current quarter compared to $10,587,000 last year. In the current quarter, bank indebtedness of $12,372,000 was repaid, while dividends of $612,000 (6.5 cents per common share) were paid and 12,500 common shares repurchased under the latest Bid at a cost of $75,000. Partly offsetting these outflows, was cash of $476,000 received from the issue of notes payable, net, and $194,000 received from the issuance of 49,000 common shares pursuant to the exercise of stock options. In the second quarter of 2008, bank indebtedness of $10,594,000 was repaid, while dividends of $524,000 (5.5 cents per common share) were paid and 12,000 common shares repurchased under the prior Bid at a cost of $87,000. Partly offsetting these cash outflows, was cash of $380,000 received from the issuance of 104,000 common shares pursuant to the exercise of stock options and $238,000 received from the issue of notes payable, net. Cash outflows from investing activities and the effect of exchange rates changes on cash were not significant in the quarters ended June 30, 2009 and Overall, there was a $2,187,000 increase in cash balances in the current quarter compared to an increase of $1,978,000 in the second quarter of Six months ended June 30, 2009 compared with six months ended June 30, 2008 Cash inflow from operating activities before changes in operating assets and liabilities totalled $1,412,000 in the first half of 2009 compared with $3,504,000 last year. After changes in operating assets and liabilities are taken into account, there was a net cash inflow from operating activities of $17,896,000 in the first six months of 2009 compared to $6,758,000 last year. The net cash inflow in the current six months largely resulted from $17,601,000 of FR&L collections and net earnings of $1,744,000. The net cash inflow in the first half of 2008 principally arose from collections of FR&L of $4,508,000 and net earnings of $3,247,000. Changes in other operating assets and liabilities are set out in the Company s Consolidated Statements of Cash Flows on page 10 of this report. Net cash outflow from financing activities totalled $15,511,000 in the first six months of 2009 compared to $3,371,000 last year. The net cash outflow in the current six month period resulted from a repayment of bank indebtedness of $13,418,000, payment of dividends totalling $1,225,000, redemption of $816,000 of notes payable, net, and the repurchase of 41,800 common shares under the latest Bid at a cost of $246,000. Partly offsetting these outflows was the issuance of 49,000 common shares for proceeds of $194,000. The net cash outflow in the first half of 2008 resulted from a repayment of bank indebtedness of $2,985,000, payment of dividends totalling $1,045,000 and the repurchase of 35,300 common shares under the prior Bid at a cost of $269,000. Partly offsetting these outflows were the issuance of notes payable, net, and 118,000 common shares for proceeds of $495,000 and $433,000, respectively. Cash outflows from investing activities and the effect of exchange rates changes on cash were not significant in the six months ended June 30, 2009 and Overall, there was a $2,285,000 increase in cash balances in the first six months of 2009 compared to $3,284,000 in the first half of Contractual Obligations and Commitments at June 30, 2009 Payments due in Less than 1 to 3 4 to 5 After 5 (in thousands) 1 year years years years Total Operating lease obligations $ 338 $ 670 $ 252 $ 316 $ 1,576 Purchase obligations Total $ 455 $ 677 $ 252 $ 316 $ 1,700 Related Party Transactions The Company has borrowed funds (notes payable) on an unsecured basis from shareholders, management, employees, other related individuals and third parties. These notes are repayable on demand and bear interest at bank prime rate less one half of one percent per annum, which is below the rate of interest the Company borrows from its banks. Notes payable at June 30, 2009 increased slightly to $10,105,000 compared with $10,074,000 at June 30, Of these notes payable, $8,440,000 ( $8,939,000) was owing to related parties and $1,665,000 ( $1,135,000) to third parties. Interest expense on these notes in the current quarter and first half of Second Quarter Report

8 2009 totalled $44,000 ( $107,000) and $104,000 ( $232,000), respectively. Financial Instruments All financial assets, including derivatives, are measured at fair value on the consolidated balance sheet with the exception of FR&L, which are recorded at cost; as these are short term in nature their carrying values approximate fair values. Financial liabilities that are held for trading or are derivatives or guarantees are measured at fair value on the consolidated balance sheet. Non-trading financial liabilities, such as bank indebtedness and notes payable, are measured at amortized cost. As at June 30, 2009, the Company had outstanding forward foreign exchange contracts with a financial institution that oblige the Company to buy US$285,000 between July 2, 2009 and September 30, Please refer to note 12 to the Statements for further details. Critical Accounting Estimates Critical accounting estimates represent those estimates that are highly uncertain and for which changes in those estimates could materially impact the Company s financial results. The following are accounting estimates that the Company considers critical to the financial results of its business segments: i) the allowance for credit and loan losses on both its FR&L and its guarantee of managed receivables. The Company maintains a separate allowance for losses on each of the above items at amounts, which, in management's judgment, are sufficient to cover the fair value of estimated losses thereon. The allowances are based upon several considerations including current economic environment, condition of the loan and receivable portfolios and typical industry loss experience. These estimates are particularly judgmental and operating results may be adversely affected by significant unanticipated credit or loan losses, such as occur in a bankruptcy or insolvency. Management believes that its allowances for losses are sufficient and appropriate and does not consider it reasonably likely that the Company s material assumptions will change. The Company s allowances are discussed above and are set out in note 4 to the Statements. ii) the extent of any provisions required for outstanding claims. In the normal course of business there is outstanding litigation, the results of which are not normally expected to have a material effect upon the Company. However, the adverse resolution of a particular claim could have a material impact on the Company s financial results. Management is not aware of any significant claims currently outstanding. Future Changes in Accounting Policies Transition to International Financial Reporting Standards Canadian public companies will be required to prepare their financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"), for financial years beginning on or after January 1, Effective January 1, 2011, the Company will adopt IFRS as the basis for preparing its consolidated financial statements and will issue its financial results for the quarter ended March 31, 2011 prepared on an IFRS basis. The Company will also provide comparative financial information on an IFRS basis, including an opening balance sheet as at January 1, The Company commenced its IFRS transition project in This project comprises four key phases: Project awareness and engagement - this includes identifying the members for the Company's IFRS transition team, and other representatives as required. Communication, training and education are essential to the success of this conversion project. In addition, this phase includes communicating the key project requirements with timelines and objectives to the Company's senior management, Board of Directors and Audit Committee. Diagnostic - this phase includes an assessment of the differences between current GAAP and IFRS, focusing on the areas which will have the most significant impact on the Company. Design, planning and solution development - this phase focuses on determining the specific impacts to the Company based on the application of the IFRS requirements. This includes the development of detailed solutions and work plans to address implementation requirements. Accounting policies will be finalized, first-time adoption exemptions will be considered, draft financial statements and disclosures will be prepared and a detailed implementation plan with timeline will be developed. Implementation - this phase includes implementing the required changes necessary for IFRS compliance. The focus is on the finalization of the IFRS conversion plan, approval and implementation of accounting and tax policies, implementation and testing of new processes, systems and controls, and calculation of opening IFRS balances. A transition team is in place and is responsible for making recommendations to the Company's Audit Committee and Board of Directors and implementing IFRS. The Company has completed the diagnostic assessment phase by identifying the differences between GAAP and IFRS. Given the present IFRS framework applicable at this time, the Company has identified the accounting policies changes which need to be adopted, first time adoption exemptions applicable to the Company and the financial statement and note disclosures that are required. The Company continues to work on the design, planning and solution development phase. In addition, the Company is monitoring the IASB's active projects and all changes to IFRS prior to January 1, 2011 will be incorporated as required. At this time, the impact on the Company's financial position and results of operations has not been fully determined or estimated for any of the IFRS conversion impacts identified, although they are not expected to be material. Risks and Uncertainties That Could Affect Future Results Past performance is not a guarantee of future performance, 6 Accord Financial Corp.

9 which is subject to substantial risks and uncertainties. Management remains optimistic about the Company s long-term prospects. Factors that may impact the Company s results include, but are not limited to, the factors discussed below. Please also refer to note 15 to the Statements, which discusses the Company s financial risk management practices. Competition The Company operates in an intensely competitive environment and its results could be significantly affected by the activities of other industry participants. The Company expects competition to persist in the future as the markets for its services continue to develop and as additional companies enter its markets. There can be no assurance that the Company will be able to compete effectively with current and future competitors. If these or other competitors were to engage in aggressive pricing policies with respect to competing services, the Company would likely lose some clients or be forced to lower its rates, both of which could have a material adverse effect on the Company s business, operating results and financial condition. The Company will not, however, compromise its credit standards. Economic slowdown The Company operates in Canada and the United States. Economic weakness in either of the Company s markets can affect its ability to do new business as quality prospects become limited. Further, the Company s clients and their customers are often adversely affected by economic slowdowns and this can lead to increases in credit and loan losses. Credit risk The Company is in the business of factoring its clients receivables and making other asset-based loans. The Company s factoring volume rose to $782 million in the first six months of 2009, while its portfolio totalled approximately $217 million at June 30, Operating results may be adversely affected by large bankruptcies and/or insolvencies. Please refer to note 15(a) to the Statements, which describes the Company s credit risk management practices. Interest rate risk The Company's agreements with its clients (interest revenue) and lenders (interest expense) usually provide for rate adjustments in the event of interest rate changes so that the Company's spreads are protected to some degree. However, as the Company s floating rate FR&L substantially exceed its floating rate borrowings, the Company is exposed to some degree to interest rate fluctuations. Please refer to note 15(c)(ii) to the Statements. Foreign currency risk The Company operates internationally. Accordingly, a portion of its financial resources are held in currencies other than the Canadian dollar. The Company s policy is to manage foreign exchange exposure and attempt to neutralize the impact of foreign exchange movements on its operating results where possible. In recent years, the Company has seen the weakening of the U.S. dollar against the Canadian dollar adversely impact its operating results upon the translation of its U.S. subsidiary s results into Canadian dollars. It has also caused a substantial decrease in the value of the Company s net Canadian dollar investment in its U.S. subsidiary, which has reduced the accumulated other comprehensive income or loss component of shareholders equity to a loss position, although the accumulated other comprehensive loss balance has improved significantly since June 30, 2008 as the U.S. dollar strengthened. Please refer to notes 13 and 15(c)(i) to the Statements. Potential acquisitions and investments The Company seeks to acquire or invest in businesses that expand or complement its current business. Such acquisitions or investments may involve significant commitments of financial and other resources of the Company. There can be no assurance that any such acquisitions or investments will generate additional earnings or other returns for the Company, or that financial or other resources committed to such activities will be productive. Such activities could also place additional strains on the Company s administrative and operational resources and its ability to manage growth. Personnel significance Employees are a significant asset of the Company. Market forces and competitive pressures may adversely affect the ability of the Company to recruit and retain key qualified personnel. The Company mitigates this risk by providing a competitive compensation package, which includes profit sharing, share appreciation rights, and medical benefits, as it continuously seeks to align the interests of employees and shareholders. Outlook The Company s principal objective is managed growth putting quality new business on the books while maintaining high standards of credit. Marketing initiatives and alliances are continuing. Among initiatives, MFC has a long-standing referral program with Bank of Nova Scotia, and Liquid Capital Corp., a franchisor of small factoring companies in Canada and the U.S. Our U.S. operation, which is active within the turnaround management industry, is seeing increased deal flow as the credit and capital markets in the U.S. remain depressed and its profile is increasing. Lower interest rates are starting to adversely impact revenues, while weak economic conditions have increased the Company's credit risk. This resulted in significantly higher credit and loan losses in the second half of fiscal 2008 and first half of Many large industry players are currently having trouble securing funding and smaller finance companies are exiting the industry as a result of adverse economic and credit conditions. Accord, with its substantial capital and borrowing capacity, is well positioned to capitalize on market opportunities. Through experienced management and staff, coupled with its strong financial resources, the Company is well positioned to meet increased competition and develop new opportunities. It continues to look to introduce new financial and credit services to fuel growth in a very competitive and challenging environment. Stuart Adair Chief Financial Officer July 28, 2009 Second Quarter Report

10 Consolidated Balance Sheets (unaudited) June 30 June 30 December Assets (Audited) Factored receivables and loans, net (note 4) $ 74,148,831 $ 100,235,537 $ 99,990,000 Assets available for sale (note 5) 6,342,364 Cash 3,278,832 4,431, ,723 Income taxes receivable 353, ,693 Other assets 215, , ,554 Future income taxes, net 567, , ,273 Capital assets 609, , ,010 Goodwill 1,118, ,642 1,171,346 $ 86,634,632 $ 107,126,968 $ 103,497,599 Liabilities Bank indebtedness $ 22,158,089 $ 45,387,122 $ 35,876,905 Due to clients 4,167,667 5,424,418 4,588,209 Accounts payable and other liabilities 2,591,881 3,046,561 3,080,485 Income taxes payable 87,379 Deferred income 665, , ,624 Notes payable 10,105,337 10,074,309 10,944,148 39,688,534 64,756,114 55,318,371 Shareholders' equity Capital stock (note 8) 6,934,703 6,721,925 6,731,581 Contributed surplus 42,840 99,042 82,225 Retained earnings 43,876,626 43,636,260 43,543,490 Accumulated other comprehensive loss (note 13) (3,908,071) (8,086,373) (2,178,068) 46,946,098 42,370,854 48,179,228 $ 86,634,632 $ 107,126,968 $ 103,497,599 Common shares outstanding 9,445,371 9,536,871 9,438,171 Notice to Reader Management has prepared these interim unaudited consolidated financial statements and notes and is responsible for the integrity and fairness of the financial information presented therein. They have been reviewed and approved by the Company's Audit Committee and Board of Directors. Pursuant to National Instrument , Part 4, Subsection 4.3(3)(a), the Company advises that its independent auditor has not performed a review or audit of these interim unaudited consolidated financial statements. 8 Accord Financial Corp.

11 Consolidated Statements of Earnings (unaudited) Three months Six months Three and six months ended June Revenue Factoring commissions, discounts, interest and other income $ 5,677,356 $ 7,094,273 $ 11,748,251 $ 14,521,482 Expenses Interest 245, , ,609 1,669,346 General and administrative 3,544,143 3,339,991 7,018,862 6,760,597 Provision for credit and loan losses 1,082, ,231 1,413,771 1,083,415 Depreciation 50,363 49, ,665 96,888 4,922,173 4,426,879 9,079,907 9,610,246 Earnings before income tax expense 755,183 2,667,394 2,668,344 4,911,236 Income tax expense 261, , ,000 1,664,000 Net earnings $ 494,183 $ 1,759,394 $ 1,774,344 $ 3,247,236 Earnings per common share (note 9) Basic $ 0.05 $ 0.19 $ 0.19 $ 0.34 Diluted $ 0.05 $ 0.18 $ 0.19 $ 0.34 Weighted average number of common shares (note 9) Basic 9,408,027 9,497,922 9,418,288 9,481,431 Diluted 9,408,027 9,529,659 9,426,276 9,543,033 Consolidated Statements of Comprehensive (Loss) Income (unaudited) Three months Six months Three and six months ended June Net earnings $ 494,183 $ 1,759,394 $ 1,774,344 $ 3,247,236 Other comprehensive (loss) income: unrealized foreign exchange (loss) gain on translation of self-sustaining foreign operation (3,052,027) (186,700) (1,730,003) 808,514 Comprehensive (loss) income $ (2,557,844) $ 1,572,694 $ 44,341 $ 4,055,750 Consolidated Statements of Retained Earnings (unaudited) Six months ended June Retained earnings at January 1 $ 43,543,490 $ 41,680,286 Net earnings 1,774,344 3,247,236 Dividends paid (1,225,078) (1,045,222) Premium on shares repurchased for cancellation (note 8(b)) (216,130) (246,040) Retained earnings at June 30 $ 43,876,626 $ 43,636,260 Second Quarter Report

12 Consolidated Statements of Cash Flows (unaudited) Three months Six months Three and six months ended June Cash provided by (used in) Operating activities Net earnings $ 494,183 $ 1,759,394 $ 1,774,344 $ 3,247,236 Items not affecting cash: Allowance for losses, net of charge-offs and recoveries (269,196) (73,679) 55, ,168 Deferred income (195,189) (11,677) (156,640) (72,383) Depreciation 50,363 49, ,665 96,888 Future income tax (recovery) (344,281) (12,562) (362,360) (48,322) (264,120) 1,711,063 1,412,162 3,503,587 Changes in operating assets and liabilities Factored receivables and loans, gross 15,106,559 9,701,094 17,600,509 4,508,052 Due to clients (313,361) 1,780,523 (390,197) 497,380 Income taxes receivable/payable (200,070) (431,903) (59,181) (933,849) Other assets 52,154 (139,127) 4,031 (296,271) Accounts payable and other liabilities 301,612 14,447 (671,418) (520,761) 14,682,774 12,636,097 17,895,906 6,758,138 Investing activities Additions to capital assets, net (65,323) (61,011) (78,405) (128,409) Financing activities Bank indebtedness (12,372,644) (10,594,143) (13,418,306) (2,984,389) Notes issued (repaid), net 476, ,978 (815,617) 494,680 Issuance of shares 193, , , ,700 Repurchase and cancellation of shares (74,711) (86,841) (245,943) (269,249) Dividends paid (611,902) (524,528) (1,225,078) (1,045,222) (12,389,400) (10,587,334) (15,511,394) (3,371,480) Effect of exchange rate changes on cash (41,449) (10,090) (20,998) 25,605 Increase in cash 2,186,602 1,977,662 2,285,109 3,283,854 Cash at beginning of period 1,092,230 2,453, ,723 1,147,684 Cash at end of period $ 3,278,832 $ 4,431,538 $ 3,278,832 4,431,538 Supplemental cash flow information Interest paid $ 210,865 $ 722,392 $ 455,053 $ 1,481,562 Income taxes paid $ 797,460 $ 1,352,916 $ 1,333,114 $ 2,672, Accord Financial Corp.

13 Notes to Consolidated Financial Statements (unaudited) Three and six months ended June 30, 2009 and Description of the business Accord Financial Corp. (the "Company") is incorporated by way of Articles of Continuance under the Ontario Business Corporations Act and, through its subsidiaries, is engaged in providing asset-based financial services, including factoring, financing, credit investigation, guarantees and receivables collection to industrial and commercial enterprises, principally in Canada and the United States. 2. Basis of presentation These interim unaudited consolidated financial statements (the "Statements") are expressed in Canadian dollars and have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") with respect to interim financial statements, applied on a consistent basis. Accordingly, they do not include all of the information and footnotes required for compliance with GAAP in Canada for annual audited financial statements. These Statements and notes should be read in conjunction with the audited consolidated financial statements and notes included in the Company s Annual Report for the fiscal year ended December 31, The accounting policies adopted for the preparation of these Statements are the same as those applied for the Company s audited financial statements for the fiscal year ended December 31, 2008 except for the policy set out in note 3(g) which the Company is applying for the first time. The preparation of these Statements and the accompanying unaudited notes requires management to make estimates and assumptions that affect the amounts reported (see note 3(b)). In the opinion of management, these Statements reflect all adjustments necessary to state fairly the results for the periods presented. Actual amounts could vary from these estimates and the operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. 3. Significant accounting policies a) Basis of consolidation These financial statements consolidate the accounts of the Company and its wholly owned subsidiaries, namely Accord Business Credit Inc. ("ABC") and Montcap Financial Corporation ("MFC") in Canada and Accord Financial, Inc. ("AFI") in the United States. Inter-company balances and transactions are eliminated upon consolidation. b) Accounting estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Estimates that are particularly judgmental relate to the determination of the allowance for losses relating to factored receivables and loans and to the guarantee of managed receivables (see notes 3(d) and 4). Management believes that both allowances for losses are adequate. c) Revenue recognition Revenue principally comprises factoring commissions from the Company s recourse and non-recourse factoring businesses. Factoring commissions are calculated as a discount percentage of the gross amount of the factored invoice. These commissions are recognized as revenue at the time of factoring. A portion of the revenue is deferred and recognized over the period when costs are being incurred in collecting the receivables. Additional factoring commissions are charged on a per diem basis if the invoice is not paid by the due date. Interest charges on loans are recognized as revenue on an accrual basis. Other revenue, such as due diligence fees, documentation fees and commitment fees, is recognized as revenue when earned. d) Allowances for losses The Company maintains a separate allowance for losses on both its factored receivables and loans and its guarantee of managed receivables. The Company maintains these allowances for losses at amounts which, in management's judgment, are sufficient to cover the fair value of estimated losses thereon. The allowances are based upon several considerations including current economic environment, condition of the loan and receivable portfolios and typical industry loss experience. Credit losses on factored receivables are charged to the respective allowance for losses account when debtors are known to be bankrupt or insolvent. Losses on loans are charged to the allowance for losses when collectibility becomes questionable and the underlying collateral is considered insufficient to secure the loan balance. Recoveries on previously written-off accounts are credited to the respective allowance for losses account. e) Foreign subsidiary The assets and liabilities of the Company's self-sustaining Second Quarter Report

14 foreign subsidiary are translated into Canadian dollars at the exchange rate prevailing at the balance sheet date. Revenue and expenses are translated into Canadian dollars at the average monthly exchange rate then prevailing. Resulting translation gains and losses are credited or charged to other comprehensive income. f) Derivative financial instruments The Company records derivative financial instruments on its balance sheet at their respective fair values. Changes in the fair value of these instruments are reported in earnings unless all of the criteria for hedge accounting are met, in which case changes in fair value would be recorded in other comprehensive income. g) Assets available for sale Assets available for sale are stated at the lower of cost or net realizable value. 4. Factored receivables and loans June 30, June 30, Dec. 31, (in thousands) Factored receivables $ 56,862 $ 64,239 $ 70,887 Loans to clients 20,096 38,127 32,090 Gross factored receivables and loans 76, , ,977 Allowance for losses 2,809 2,130 2,987 Net factored receivables and loans $ 74,149 $ 100,236 $ 99,990 The Company has also entered into agreements with clients whereby it has assumed the credit risk with respect to the majority of the clients receivables ("managed receivables"). At June 30, 2009, the gross amount of managed receivables was $140,244,133 ( $92,154,585). Management has provided an amount of $876,000 ( $836,000) as an allowance for losses on the guarantee of these managed receivables which represents the estimated fair value of these guarantees. As these managed receivables are off-balance sheet, this liability has been included in the total of accounts payable and other liabilities. 5. Assets available for sale During the three months ended June 30, 2009, the Company obtained title to certain assets securing a loan. The loan was written down by $1,127,000 to the net realizable value of the assets at June 30, 2009 and the amount of the write-down is included in the provision for credit and loan losses for the three and six months ended June 30, Income taxes The Company provides for income taxes in its interim unaudited consolidated financial statements based on the estimated effective tax rate for the full fiscal year in those jurisdictions in which it operates. 7. Stock-based compensation The Company accounts for stock-based compensation, including stock option grants and share appreciation rights ("SARs"), using fair value based methods. Stock options are granted to employees and non-executive directors at prices not less than the market price of such shares on the grant date. These options vest over a period of three years provided certain earnings criteria are met. The Company utilizes the Black-Scholes option-pricing model to calculate the fair value of the stock options on the grant date. This fair value is expensed over the award's vesting period. The Company has not granted any options since May The Company has established a SARs plan whereby SARs are granted to directors and key managerial employees of the Company. During 2008, 95,000 SARs were granted to directors and employees of the Company and its subsidiaries at a strike price of $7.25. These are the only SARs granted to date. Changes in the fair value of outstanding SARs are calculated at the balance sheet date. The change is recorded in general and administrative expenses ("G&A"), with a corresponding entry to accounts payable and other liabilities. As at June 30, 2009, the outstanding SARs had no intrinsic value. There was no stock-based compensation expense to record in G&A for the three and six months ended June 30, 2009 and Capital stock a) Issued and outstanding The common shares issued and outstanding are as follows: 2009 Number Amount Balance at January 1 9,438,171 $ 6,731,581 Issued on exercise of stock options 49, ,550 Shares repurchased for cancellation (41,800) (29,813) Transfer from contributed surplus 39,385 Balance at June 30 9,445,371 $ 6,934, Number Amount Balance at January 1 9,454,171 $ 6,215,914 Issued on exercise of stock options 118, ,700 Shares repurchased for cancellation (35,300) (23,209) Transfer from contributed surplus 96,520 Balance at June 30 9,536,871 $ 6,721, Accord Financial Corp.

15 (b) Share repurchase program On August 5, 2008, the Company received approval from the TSX to commence a new Normal Course Issuer Bid (the "Bid") for up to 477,843 of its common shares at prevailing market prices on the TSX. The Bid commenced August 8, 2008 and will terminate on the earlier of August 7, 2009 or the date on which a total of 477,843 common shares have been repurchased pursuant to its terms. All shares repurchased pursuant to the Bid will be cancelled. To June 30, 2009, the Company had repurchased and cancelled 160,500 common shares acquired at an average price of $6.12 per common share for a total consideration of $981,711. This amount was applied to reduce share capital by $114,473 and retained earnings by $867,238. During the six months ended June 30, 2009, the Company repurchased and cancelled 41,800 common shares acquired under the Bid at an average price of $5.88 per common share for a total consideration of $245,943, which was applied to reduce share capital by $29,813 and retained earnings by $216,130. During the six months ended June 30, 2008, the Company repurchased and cancelled 35,300 common shares acquired under the prior Bid at an average price of $7.63 per common share for a total consideration of $269,249, which was applied to reduce share capital by $23,209 and retained earnings by $246, Weighted average number of common shares outstanding Basic earnings per common share have been calculated based on the weighted average number of common shares outstanding in the period without the inclusion of dilutive effects. Diluted earnings per common share are calculated based on the weighted average number of common shares plus dilutive common share equivalents outstanding in the period, which, in the Company's case, consist entirely of stock options. The following is a reconciliation of common shares used in the calculations: Three months ended June Basic weighted average number of common shares outstanding 9,408,027 9,497,922 Effect of dilutive stock options 31,737 Diluted weighted average number of common shares outstanding 9,408,027 9,529,659 Six months ended June Basic weighted average number of common shares outstanding 9,418,288 9,481,431 Effect of dilutive stock options 7,988 61,602 Diluted weighted average number of common shares outstanding 9,426,276 9,543,033 Certain options were excluded from the calculation of diluted shares outstanding in the three and six months ended June 30, 2009 because they were considered to be anti-dilutive for earnings per common share purposes. No options were excluded in the three and six months ended June 30, Contingent Liabilities (a) In the normal course of business there is outstanding litigation, the results of which are not expected to have a material effect upon the Company. (b) At June 30, 2009, the Company was contingently liable with respect to open letters of credit issued on behalf of clients in the amount of $1,416,103 ( $2,486,618). These amounts were considered in determining the allowance for losses on factored receivables and loans. 11. Segmented information The Company operates and manages its businesses in one dominant industry segment providing asset-based financial services to industrial and commercial enterprises, principally in Canada and the United States. There were no significant changes to capital assets and goodwill during the periods under review. Three months ended June 30, 2009 United Inter- (in thousands) Canada States company Total Identifiable assets $ 49,120 $ 39,609 $ (2,094) $ 86,635 Revenue $ 3,703 $ 1,975 $ (1) $ 5,677 Expenses Interest (1) 245 General and administrative 2, ,544 Provision for credit and loan losses ,083 Depreciation ,988 1,935 (1) 4,922 Earnings before income tax expense Income tax expense Net earnings $ 485 $ 9 $ $ 494 Second Quarter Report

16 Revenue $ 4,842 $ 2,252 $ $ 7,094 Expenses Interest General and administrative 2, ,340 Provision for credit and loan losses Depreciation ,376 1,051 4,427 Earnings before income tax expense 1,466 1,201 2,667 Income tax expense Net earnings $ 987 $ 772 $ $ 1,759 Revenue $ 7,761 $ 3,988 $ (1) $ 11,748 Expenses Interest (1) 546 General and administrative 5,018 2,001 7,019 Provision for credit and loan losses ,414 Depreciation ,028 3,053 (1) 9,080 Earnings before income tax expense 1, ,668 Income tax expense Net earnings $ 1,180 $ 594 $ $ 1,774 Three months ended June 30, 2008 United Inter- (in thousands) Canada States company Total Identifiable assets $ 67,948 $ 39,179 $ $ 107,127 Six months ended June 30, 2009 United Inter- (in thousands) Canada States company Total Identifiable assets $ 49,120 $ 39,609 $ (2,094) $ 86,635 Six months ended June 30, 2008 United Inter- (in thousands) Canada States company Total Identifiable assets $ 67,948 $ 39,179 $ $ 107,127 Revenue $ 10,230 $ 4,291 $ $ 14,521 Expenses Interest 1, ,669 General and administrative 5,099 1,661 6,760 Provision for credit and loan losses ,084 Depreciation ,505 2,105 9,610 Earnings before income tax expense 2,725 2,186 4,911 Income tax expense ,664 Net earnings $ 1,855 $ 1,392 $ $ 3, Derivative financial instruments The Company has entered into forward foreign exchange contracts with a financial institution that mature between July 2, 2009 and September 30, 2009 and oblige the Company to sell Canadian dollars and buy US$285,000 at exchange rates ranging from to The contracts were entered into by the Company on behalf of one of its clients and similar forward foreign exchange contracts were entered into between the Company and the client whereby the Company will buy Canadian dollars from and sell the US$285,000 to the client. The favorable and unfavorable fair values of these contracts have been recorded on the Company s balance sheet in other assets and accounts payable and other liabilities, respectively. There has been no foreign exchange gain or loss to the Company as a result of entering into these contracts. As at June 30, 2008, the Company had entered into forward exchange contracts with a financial institution that matured between July 1, 2008 and September 30, 2008 and obliged the Company to sell Canadian dollars and buy US$850,000 at exchange rates ranging from to The contracts were entered into by the Company on behalf of one of its clients and similar forward foreign exchange contracts were entered into between the Company and the client whereby the Company would buy Canadian dollars from and sell the US$850,000 to the client. The favorable and unfavorable fair values of those contracts were recorded on the Company s balance sheet in other assets and accounts payable and other liabilities, respectively. There was no foreign exchange gain or loss to the Company as a result of entering into these contracts. 13. Accumulated other comprehensive loss Accumulated other comprehensive loss comprises the unrealized foreign exchange loss arising on translation of the assets and liabilities of the Company's self-sustaining U.S. subsidiary, which are translated into Canadian dollars at the exchange rate prevailing at the balance sheet date. Movements in this balance during the first six months of 2009 and 2008 were as follows: Balance at January 1 $ (2,178,068) $ (8,894,887) Unrealized foreign exchange (loss) gain on translation of self-sustaining (1,730,003) 808,514 foreign operation Balance at June 30 $ (3,908,071) $ (8,086,373) 14. Fair values of financial assets and liabilities Any financial assets or liabilities recorded at cost are short term in nature and, therefore, their carrying values approximate fair values. 14 Accord Financial Corp.

17 15. Financial risk management The Company is exposed to credit, liquidity and market risk related to the use of financial instruments in its operations. The Company s Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework through its Audit Committee. The Company's risk management policies are established to identify, analyze, limit, control and monitor the risks faced by the Company. Risk management policies and systems are reviewed regularly to reflect changes in the risk environment faced by the Company. a) Credit risk Credit risk is the risk of financial loss to the Company if a client, client s customer, or counterparty to a financial instrument fails to meet its contractual obligations. In the Company's case, credit risk arises with respect to its factored receivables and loans, managed receivables and any other counterparty the Company deals with. The carrying amount of these assets represents the Company's maximum credit exposure and is the most significant measurable risk that it faces. The nature of the Company's factoring and asset-based lending business requires it to fund or assume credit risk on the receivables offered to it by its clients, as well as to finance other assets, such as inventory, equipment and real estate. Typically, the Company takes title to the factored receivables and collateral security over the other assets that it lends against and does not lend on an unsecured basis. It does not take title to the managed receivables as it does not lend against them, but it assumes the credit risk from the client in respect of these receivables. All credit is approved by a staff of credit officers, with larger amounts being authorized by supervisory personnel, management and, in the case of credit in excess of $1,000,000, by the Company's Board of Directors. The Company monitors and controls its risks and exposures through financial, credit and legal reporting systems and, accordingly, believes that it has in place procedures for evaluating and limiting the credit risks to which it is subject. All credit is subject to ongoing management review. Nevertheless, for a variety of reasons, there will inevitably be defaults by customers and clients. The Company's primary focus continues to be on the creditworthiness and collectability of its clients' receivables. Monitoring and communicating with its clients' customers is measured by, amongst other things, an analysis which indicates the amount of receivables current and past due. The clients' customers have varying payment terms depending on the industries in which they operate, although most customers have payments terms of 30 to 60 days from original shipping or invoice date. Of the total managed receivables for which the Company guarantees payment, 6% were past due more than 60 days at June 30, In the Company's recourse factoring business, receivables become "ineligible" for lending purposes when they reach a certain pre-determined age, usually 90 days from invoice date, and are usually charged back to clients, thereby eliminating the Company's credit risk on such older receivables. The Company employs a client rating system to assess credit risk in its recourse factoring business, which reviews, amongst other things, the financial strength of each client, its management and the Company's underlying security, principally its clients' receivables, inventory, equipment and real estate, while in its non-recourse factoring business it employs a customer credit scoring system to assess the credit risk associated with the managed receivables that it guarantees. Credit risk is primarily managed by ensuring that the receivables factored are of high quality and that any inventory, equipment or other assets securing loans are professionally appraised. The Company assesses the financial strength of its clients' customers and the industries in which they operate on a regular and ongoing basis. For a factoring company, the financial strength of its clients' customers is often more important than the financial strength of the clients themselves. The Company also minimizes credit risk by limiting to $10,000,000 the maximum amount it will lend to any one client, enforcing strict advance rates, disallowing certain types of receivables, charging back or making receivables ineligible for lending purposes as they become older, and employing concentration limits on a customer and industry specific basis. The Company also confirms the validity of the majority of the receivables that it purchases. The following table summarizes the Company's credit exposure relating to its factored receivables and loans by industrial sector at June 30, Gross factored % of Industrial Sector receivables and loans total (in thousands) Financial and professional services $ 17, Apparel 16, Manufacturing 14, Food processing 10, Chemicals 5,813 8 Wholesale 4,969 6 Other 7,205 9 $ 76, The following table summarizes the Company s credit Second Quarter Report

18 exposure relating to its managed receivables by industrial sector at June 30, Managed % of Industrial Sector receivables total (in thousands) Retail $ 104, Engineering 26, Other 9,729 7 $ 140, As set out in notes 3(d) and 4, the Company maintains an allowance for credit and loan losses on both its factored receivables and loans and its guarantee of managed receivables. The Company maintains a separate allowance for losses on each of the above items at amounts, which, in management's judgment, are sufficient to cover the fair value of estimated losses thereon. The allowances are based upon several considerations including current economic environment, condition of the loan and receivable portfolios and typical industry loss experience. b) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Company's principle obligations are its bank indebtedness, notes payable, due to clients and accounts payable and other liabilities. Revolving credit lines totalling approximately $98 million have been established at a number of banking institutions bearing interest varying with the bank prime rate or LIBOR. At June 30, 2009, the Company had borrowed approximately $22 million against these facilities. These lines of credit are collateralized primarily by factored receivables and loans to clients. The Company was in compliance with all loan covenants under these lines of credit as at June 30, 2009 and Notes payable are due on demand and consist of advances from shareholders, management, employees, other related individuals and third parties. As at June 30, 2009, 84% of these notes were due to related parties and 16% to third parties. Due to clients principally consist of collections of receivables not yet remitted to the Company's clients. Contractually, the Company remits collections within a week of receipt. Accounts payable and other liabilities comprise a number of different obligations the majority of which are payable within six months. The Company had gross factored receivables and loans totalling $77 million at June 30, 2009, which substantially exceeded its total liabilities of $40 million at that date. The Company's receivables normally have payment terms of 30 to 60 days from original shipping or invoice date. Together with its unused credit lines, management believes that current cash balances and liquid short-term assets are more than sufficient to meet its financial obligations as they fall due. c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Company's income or the value of its financial instruments. The objective of managing market risk is to control market risk exposures within acceptable parameters, while optimizing the return on risk. (i) Currency risk The Company is exposed to currency risk primarily in its self-sustaining U.S. subsidiary, which operates exclusively in U.S. dollars, to the full extent of the U.S. subsidiary's net assets of approximately US$31 million at June 30, The Company's investment in its U.S. subsidiary is not hedged as it is long-term in nature. Unrealized foreign exchange gains or losses arise on translation of the assets and liabilities of the Company's self-sustaining U.S. subsidiary into Canadian dollars at balance sheet date. Resulting foreign exchange gains or losses are credited or charged to other comprehensive income or loss with a corresponding entry to the accumulated other comprehensive income or loss component of shareholders' equity. See note 13. The Company is also subject to foreign currency risk on the earnings of its U.S. subsidiary, which are unhedged. Based on the U.S. subsidiary's results for the six months ended June 30, 2009, a one cent change in the U.S. dollar against the Canadian dollar would change the Company's annual net earnings by approximately $9,000. It would also change other comprehensive income or loss and the accumulated other comprehensive income or loss component of shareholders' equity by approximately $310,000. The Company's Canadian operations have some assets and liabilities denominated in foreign currencies, principally factored receivables and loans, cash, bank indebtedness and due to clients. These assets and liabilities are usually economically hedged, although the Company enters into foreign exchange contracts from time-to-time to hedge its currency risk when there is no economic hedge. At June 30, 2009, the Company had unhedged foreign currency positions of US$317,000, 5,000 and 2, Accord Financial Corp.

19 (ii) in its Canadian operations. The Company ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies on a spot or forward basis when necessary to address short-term imbalances. Interest rate risk Interest rate risk pertains to the risk of loss due to the volatility of interest rates. The Company's lending and borrowing rates are usually based on bank prime rates of interest or LIBOR and are typically variable. The Company actively manages its interest rate exposure. 16. Capital disclosures The Company considers its capital structure to include shareholders' equity and debt, namely, its bank indebtedness and notes payable. The Company's objectives when managing capital are to: (i) maintain financial flexibility in order to preserve its ability to meet financial obligations and continue as a going concern; (ii) maintain a capital structure that allows the Company to finance its growth using internally-generated cash flow and debt capacity; and (iii) optimize the use of its capital to provide an appropriate investment return to its shareholders commensurate with risk. The Company's agreements with its clients (interest revenue) and lenders (interest expense) usually provide for rate adjustments in the event of interest rate changes so that the Company's spreads are protected to a large degree. However, as the Company's factored receivables and loans substantially exceed its borrowings, the Company is exposed to interest rate risk as a result of the difference, or gap, that exists between interest sensitive assets and liabilities. This gap largely exists because of, and fluctuates with, the quantum of the Company's shareholders' equity. The following table summarizes the interest rate sensitivity gap at June 30, Floating 0 to 3 Non-rate (in thousands) rate months sensitive Total Assets Factored receivables and loans, net $ 68,095 $ 119 $ 5,935 $ 74,149 Assets available for sale 6,342 6,342 Cash 1,804 1,475 3,279 Other assets 2,865 2,865 69, ,617 86,635 Liabilities Bank indebtedness 18,479 3, ,158 Due to clients 4,168 4,168 Notes payable 10,105 10,105 Other liabilities 3,258 3,258 Shareholders equity 46,946 46,946 28,584 3,489 54,562 86,635 $ 41,315 $ (3,370) $(37,945) $ The Company's financial strategy is formulated and adapted according to market conditions in order to maintain a flexible capital structure that is consistent with its objectives and the risk characteristics of its underlying assets. The Company manages its capital resources and makes adjustments to them in light of changes in economic conditions and the risk characteristics of its underlying assets. To maintain or adjust its capital resources, the Company may, from time to time, change the amount of dividends paid to shareholders, return capital to shareholders by way of normal course issuer bid, issue new shares, or reduce liquid assets to repay debt. The Company monitors the ratio of its equity to total assets, principally factored receivables and loans, and its debt to shareholders' equity. As a percentage, the ratios totalled 54% and 69%, respectively, at June 30, The Company's debt, and leverage, will usually rise with an increase in factored receivables and loans and vice-versa. These ratios are currently considerably better than those of most financial companies indicating the Company's continued financial strength and overall low degree of leverage. The Company's share capital is not subject to external restrictions. However, the Company's credit facilities include debt to tangible net worth ("TNW") covenants. Specifically, MFC is required to maintain a debt to TNW ratio of less than 4.0, while AFI is required to maintain a minimum TNW of US$12 million and a ratio of total liabilities to TNW of less than 2.5. The Company was fully compliant with these covenants at June 30, 2009 and There were no changes in the Company's approach to capital management from the previous year. Based on the Company's interest rate positions as at June 30, 2009, a sustained 100 basis point rise in interest rates across all currencies and maturities would increase net earnings by approximately $375,000 over a one year period. A decrease of 100 basis points in interest rates would reduce net earnings to a somewhat lesser extent. Second Quarter Report

20 Keeping Business Liquid Accord Financial Corp. (800) Accord Business Credit Inc. (800) Montcap Financial Corp. (800) Accord Financial, Inc. (800)