Liquidity
Historically, we have financed our business primarily through cash generated by operations, as well as the proceeds from our initial public and follow-on offerings, the private placement of preferred and common units and borrowings under subordinated notes. As of December 31, 1999, we had $695.1 million in assets, 91% of which consisted of cash or assets readily convertible into cash, principally receivables from clearing brokers and securities owned. Receivables from clearing brokers include interest bearing cash balances held with clearing brokers, net of amounts related to securities transactions that have not yet reached their contracted settlement date, which is generally within three business days of the trade date. Securities owned principally consist of equity securities which trade in Nasdaq and on the NYSE and AMEX markets.

Net income (pro forma net income) plus depreciation and amortization was $177.0 million, $56.7 million and $32.8 million during 1999, 1998 and 1997, respectively. Depreciation and amortization expense, which related to fixed assets and goodwill, was $9.1 million, $5.9 million and $4.2 million during 1999, 1998 and 1997, respectively. Capital expenditures were $11.1 million in 1999, $8.9 million in 1998 and $4.4 million in 1997, or 1.4%, 2.5% and 2.0% of total revenues in each year, respectively. Capital expenditures in 1999 primarily related to the purchase of data processing and communications equipment, as well as leasehold improvements and additional office facilities to support our growth. Additionally, we made cash payments of $6.0 million, $4.1 million and $2.4 million in 1999, 1998 and 1997, respectively, in connection with our acquisitions of the listed securities market-making businesses of Trimark in 1995 and Tradetech in 1997. The aggregate minimum rental commitments for 2000 are $8.5 million. We anticipate that we will meet our 2000 capital expenditure needs out of operating cash flows.

As registered broker-dealers and market makers, Knight and Trimark are subject to regulatory requirements intended to ensure the general financial soundness and liquidity of broker-dealers and requiring the maintenance of minimum levels of net capital, as defined in SEC Rule 15c3-1 ($4.0 million and $1.2 million, respectively, as of December 31, 1999). These regulations also prohibit a broker-dealer from repaying subordinated borrowings, paying cash dividends, making loans to its parent, affiliates or employees, or otherwise entering into transactions which would result in a reduction of its total net capital to less than 120.0% of its required minimum capital. Moreover, broker-dealers, including Knight and Trimark, are required to notify the SEC prior to repaying subordinated borrowings, paying dividends and making loans to its parent, affiliates or employees, or otherwise entering into transactions, which, if executed, would result in a reduction of 30.0% or more of their excess net capital (net capital less minimum requirement). The SEC has the ability to prohibit or restrict such transactions if the result is detrimental to the financial integrity of the broker-dealer. At December 31, 1999, Knight had net capital of $246.8 million, which was $242.8 million in excess of its required net capital of $4.0 million and Trimark had net capital of $39.7 million, which was $38.5 million in excess of its required net capital of $1.2 million.

We used a portion of our capital resources before our initial public offering to pay interest on our issued and outstanding Mandatorily Redeemable Preferred A and B Units, and to make quarterly distributions to our members to meet their estimated income tax obligations on their share of our taxable income. The Preferred A and B Units bore interest at a rate approximating the Federal Funds rate. The Preferred A Units were redeemed and retired in their entirety in April 1998 for approximately $12.5 million in cash. In April 1998, we redeemed a portion of the Preferred B Units for approximately $1.2 million in cash. We used $13.8 million of the proceeds of our initial public offering to redeem all of the remaining outstanding Preferred B Units on July 17, 1998.

PaineWebber Capital Inc., an affiliate of PaineWebber Incorporated, loaned $30.0 million to Roundtable under a loan agreement dated as of June 19, 1998. Roundtable used the proceeds from this loan to make distributions of undistributed profits to the members of Roundtable before our reorganization from a limited liability company to a Delaware corporation immediately before our initial public offering. In connection with the dissolution of Roundtable, we assumed all of Roundtable's obligations under the loan. We subsequently repaid the entire loan from our operating cash flows, making principal pre-payments of $5.0 million, $9.0 million, $6.0 million and $10.0 million on September 15, 1998, October 20, 1998, December 15, 1998 and January 19, 1999, respectively.

We currently anticipate that available cash resources and credit facilities will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months.

In April 1999, our Board of Directors approved a two-for-one stock split of our Class A and Class B Common Stock. Shareholders of record as of the close of business on April 30, 1999 received, in the form of a stock dividend, one additional share for each share held by them. On May 14, 1999, the transfer agent distributed the additional shares. All share and per share amounts presented in this document have been adjusted to reflect the stock split.

On October 8, 1998, our Board of Directors approved a program to repurchase, over a period of up to eighteen months, up to 3 million shares of our outstanding Class A Common Stock up to a total aggregate amount not to exceed $20 million. On July 21, 1999, our Board of Directors cancelled the repurchase program. We did not repurchase any shares under this program.

In 1999, we made several investments in non-publicly traded companies. The largest investment is a 19.49% interest in EASDAQ which we purchased for approximately $9.1 million. EASDAQ is a Pan-European stock market for international growth and technology companies.