Management's Discussion and Analysis : 1 of 15 Management's Discussion and Analysis : 2 of 15 Management's Discussion and Analysis : 3 of 15 Management's Discussion and Analysis : 4 of 15 Management's Discussion and Analysis : 5 of 15 Management's Discussion and Analysis : 6 of 15 Management's Discussion and Analysis : 7 of 15 Management's Discussion and Analysis : 8 of 15 Management's Discussion and Analysis : 9 of 15 Management's Discussion and Analysis : 10 of 15 Management's Discussion and Analysis : 11 of 15 Management's Discussion and Analysis : 12 of 15 Management's Discussion and Analysis : 13 of 15 Management's Discussion and Analysis : 14 of 15 Management's Discussion and Analysis : 15 of 15 YEARS ENDED DECEMBER 31, 2002 AND 2001 The net loss for 2002 was $43.2 million, resulting in a loss per share on a fully diluted basis of $0.36. This compares to net income of $38.5 million and earnings per share of $0.31 on a fully diluted basis in 2001. In 2002, total revenues decreased 23.0% to $527.4 million, from $684.7 million in 2001, primarily related to decreased average revenue capture per share and contract offset, in part, by volume increases. Expenses decreased 4.6% to $601.2 million, down from $630.4 million in 2001. Our expenses for 2002 and 2001 included $52.1 million and $20.5 million, respectively, in international charges, writedowns of assets and lease loss accruals. Excluding these charges, expenses decreased 10.0% to $549.1 million in 2002, from $609.8 million in 2001. This decrease was primarily related to lower employee compensation due to reduced headcount and lower profitability, decreased communications and data processing expenses and lower payment for order flow expenses due to reductions in our payment for order flow rates. In 2002, our Equity Markets segment had revenues of $490.3 million, and a loss before income taxes and minority interest of $96.7 million (loss includes $35.9 million in international charges and $16.2 million in writedown of assets and lease loss accruals). In 2001, our Equity Markets segment had revenues of $648.0 million, and income before income taxes and minority interest of $27.9 million (income is net of $20.5 million of writedown of assets and lease loss accruals). In 2002, our Asset Management segment had revenues of $47.4 million and income before income taxes and minority interest of $22.9 million. In 2001, our Asset Management segment had revenues of $42.7 million and income before income taxes and minority interest of $26.5 million. Revenues Net trading revenue from equity securities market-making decreased 28.8% to $310.2 million in 2002, from $435.7 million in 2001. Equity trading revenues are almost entirely comprised of revenues from U.S. equity market-making.This decrease in equity trading revenue was primarily due to a 53.1% decrease in average revenue capture per share. Average revenue capture per share has continued to be adversely impacted by a reduction in spreads due to decimalization and the resulting one-penny minimum price spread, and the reduction in the average market price of shares traded. This decrease in net trading revenues due to the reduction of average revenue capture was offset, in part, by a 49.6% increase in U.S. equity share volume. However, the majority of the increase in U.S. equity share volume was due to higher share volume in low-priced Bulletin Board and Pink Sheet stocks, which have a lower average revenue capture per share. Net trading revenue from options market-making decreased 6.9% to $120.1 million in 2002, from $128.9 million in 2001.The decrease was primarily due to a 33.4% decrease in average revenue capture per contract, partially offset by a 33.2% increase in U.S. option contract volume. Our U.S. option contract volume was positively impacted by Knight Financial Products LLC’s (“KFP”) purchases of additional exchange posts during 2001 and 2002, which increased our overall options market-making coverage but was offset, in part, by the delisting of a number of option classes with limited volumes.