What a difference a year can make. In 2002, Knight's trading operations were struggling to absorb the effects of equity and derivative market structure changes. Our costs were higher than our revenues could support, even with strong performance from our asset management business. Knight was losing money, and some even pronounced the Knight business model dead. We knew that something — in fact, many things — had to change. We saw a much different picture in 2003, highlighted by our year-end results. Revenues increased 28% from $523.7 million to $670.0 million year over year. While Knight reported a loss in 2002 of $37.3 million from continuing operations, or a net loss of $43.2 million, the company turned it around in 2003 and reported income from continuing operations of $40.6 million, or $38.5 million in net income. After a $0.36 loss per diluted share in 2002, Knight reported earnings of $0.33 per diluted share in 2003. What did it take for Knight to swing from loss to profit? Hard work, and an unwavering commitment to our clients.We turned our immediate attention to resolving four legacy issues.We also reduced our cost structure and transformed our Equity Markets business based on our inherent strengths and the new market reality. Resolving Legacy Issues The first "legacy" issue that required our attention was management turnover. The recruitment of new management that began with my appointment on May 30, 2002 is essentially complete. Leaders from around the industry, particularly in sales and trading, have joined me here since that time. They complement the significant expertise the company already established in equities, options and asset management, and in the functions that support those businesses. Next, we put an end to the drag on earnings from Knight's international businesses. These operations never achieved profitability due to unfavorable market structure and economic developments overseas, as well as the overbuilding of Knight's European operations. We closed Knight Securities Japan during the second quarter of 2003. And we converted our London office from a market-making venture of about 200 employees to a much-smaller sales and trading office offering European clients our U.S. equity and ordinary share execution services. This shift was completed by the middle of the year, allowing for nearly breakeven results through the second half. The third issue was excess real estate capacity. Knight took additional reserves in accordance with GAAP in the first quarter for unoccupied space in Knight's future headquarters at 545 Washington Boulevard in Jersey City, N.J. We have also continued to seek a sub-lease tenant to reduce our costs for the space we won't occupy. Within the next 18 months, Knight will begin its move to the new offices at an estimated cost of $40 million. The move will allow the company to improve our technology infrastructure, productivity and efficiency while securing sufficient and appropriate space for us before the lease for our current headquarters expires in 2006. We have made headway with our final unresolved issue, a private arbitration claim and regulatory inquiries that followed the filing of that claim. In early March 2004, the U.S. Securities and Exchange Commission and NASD notified us that they are considering actions against Knight Securities, now Knight Equity Markets, and its former CEO for specific trade activity, conduct, supervision and record-keeping that occurred in 1999 through 2001. These notifications are important next steps toward concluding the outstanding regulatory inquiries. As I write to you, the company is preparing its response to the regulators. In the meantime, Knight also continues to defend against the private arbitration claim. We look forward to closing this chapter from our past. Transforming Equity Markets With these legacy issues addressed to the best of our ability, we concentrated efforts on growing our institutional business and adjusting our broker-dealer business. As noted over the past year, new management has a new philosophy — an unwavering commitment to our clients. We have better organized our structure and operations around client needs. One of the most visible of these efforts was changing the name of our over-the-counter equities subsidiary to Knight Equity Markets, the first step in moving all of our equities trading under one umbrella. Knight also instituted more coordinated sales and trading functions. Much of the last year was spent making numerous enhancements to our product and service offering for institutions, which we believe represents our greatest opportunity for growth. For example, we opened or added to our regional sales trading offices, all while keeping our home base strong in Jersey City. We hired an international and ADR sales and trading team, added to our listed block trading staff, brought on an options and exchange traded funds sales and trading team, and strengthened our listed and agency program trading staffs. In addition, Knight acquired the highly respected soft dollar and commission recapture business of Donaldson & Co. At the end of 2003 Knight had 65 institutional sales traders, compared to less than 30 in the fall of 2002. Today we have institutional leaders who not only have established relationships but who also have the ability to build new ones. Knight did all of this in one year, and all to provide the widest range of, and highest-quality choices for, our institutional clients. We've made significant progress among institutions, but we will not become complacent. We will expand sales coverage as demand dictates and concentrate our efforts where Knight has a particular strength or opportunity. Institutions seek high-quality trade executions from firms that give them superior service and with whom they can build strong relationships. Knight can and will continue to meet all of these demands. In 2003 we also were successful in adjusting our trading operations, particularly those serving our broker-dealer clients, to a decimalized environment. After struggling with this challenge from 2001 through 2002, we reduced staffing levels; established a new, competitive rebate schedule which included a profit-sharing structure; initiated fees for execution; negotiated lower clearing rates; and adjusted our auto-execution protocols to manage order flow inventory with greater efficiency. These changes moved Knight into a favorable position in advance of the market's rebound. In fact, our internal efforts combined with market conditions made our broker-dealer business the greatest contributor to Knight's turn from loss to profit in 2003. On top of our success in introducing new efficiencies, Knight made numerous improvements to our technology infrastructure, including an increase in capacity that allows us to process more volume than ever before. In 2004 we will continue to look for ways to increase the efficiency of our equity trading operations. We believe there still is room for greater automation, broker-dealer client penetration, and improvements to client service and relationships.