Note 1: Organization and Description of the Business Note 2: Significant Accounting Policies Note 3: Securities Owned and Securities Sold, Not Yet Purchased Note 4: Receivable From/Payable to Brokers and Dealers Note 5: Goodwill and Intangible Assets Note 6: Investment in Deephaven Sponsored Fund Note 7: Significant Customers Note 8: International Charges Note 9: Writedown of Assets and Lease Loss Accrual Note 10: Fixed Assets and Leasehold Improvements Note 11: Commitments and Contingent Liabilities Note 12: Earnings Per Share Note 13: Employee Benefit Plan Note 14: Income Taxes Note 15: Long-Term Incentive Plans Note 16: Financial Instruments With Off-Balance Sheet Risk and Concentrations of Credit Risk Note 17: Net Capital Requirements Note 18: Subsequent Events Note 19: Business Segments Note 20: Condensed Financial Statements of Knight Trading Group, Inc. (Parent Only) Note 1: ORGANIZATION AND DESCRIPTION OF THE BUSINESS Knight Trading Group, Inc. and its subsidiaries (the “Company”) operate in equity markets and asset management segments. The Company’s equity markets segment is comprised of the following operating subsidiaries: Domestic Subsidiaries   •  Knight Securities, L.P. (“KS”) operates as a market maker in over-the-counter equity securities (“OTC securities”), primarily those traded in the Nasdaq stock market and on the OTC Bulletin Board (“OTCBB”). KS is a broker-dealer registered with the Securities and Exchange Commission (“SEC”), is a member of the National Association of Securities Dealers (“NASD”) and the Cincinnati Stock Exchange. •  Knight Capital Markets LLC (“KCM”) operates as a market maker in the Nasdaq Intermarket™, the over-the-counter market for New York Stock Exchange (NYSE) and American Stock Exchange (AMEX)-listed securities. KCM is a broker-dealer registered with the SEC and is a member of the NASD. •  Knight Financial Products LLC (“KFP”) operates as a market maker and specialist in options on individual equities, equity indices and fixed income futures instruments in the U.S. KFP, through its affiliate Knight Execution Partners LLC (“KEP”), also manages a professional option and equity execution services business. KFP and KEP are broker-dealers registered with the SEC. Additionally, KFP and KEP are members of the Chicago Board Options Exchange, American Stock Exchange, Philadelphia Stock Exchange, Pacific Stock Exchange and the International Securities Exchange. KFP is also a member of the Chicago Board of Trade and the Chicago Mercantile Exchange.   International Subsidiaries   •  Knight Roundtable Europe Limited (“KREL”), which wholly owns Knight Securities International, Ltd. (“KSIL”), a U.K. registered broker-dealer, provides agency execution services for European investors in European and U.S. equities. KSIL also provided market-making services in European securities, however, these services were discontinued in 2002. The Company owns an approximate 85% interest in KREL. KSIL is regulated by the Financial Services Authority in the U.K. and is a member of the London Stock Exchange. •  Knight Securities Japan Ltd. (“KSJ”) operates as a market maker in Japanese equity securities.The Company owns 60% of KSJ through a joint venture with Nikko Cordial Group. KSJ is regulated by the Financial Supervisory Agency in Japan. The Company also maintains an asset management segment for institutional investors and high-net-worth individuals through its Deephaven Capital Management LLC (“Deephaven”) subsidiary.