INTL FCStone 2005 Annual Report Download - page 35

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In the Company’s securities market-making and trading activities, the Company maintains inventories of
equity and debt securities. In the Company’s commodities market-making and trading activities, the Company’s
positions include physical inventories, forwards, futures and options. The Company’s commodity trading
activities are managed as one consolidated book for each commodity encompassing both cash positions and
derivative instruments. The Company monitors the aggregate position for each commodity in equivalent physical
ounces. The table below illustrates, for fiscal 2005, the Company’s average, greatest long, greatest short and
minimum day-end positions by business segment. Due to integration issues related to the acquisition of INTL
Global Currencies, this information is not available for the Company’s foreign exchange activities for the entire
year of fiscal 2005.
Fiscal Year 2005
(amounts in $000’s) Average
Greatest
Long
Greatest
Short
Minimum
Exposure
Equityaggregateoflongandshort ........................ $4,921 $7,000 n/a $2,219
Equitynetoflongandshort.............................. $ 166 $3,270 $(2,332) $ 3
Debtaggregateoflongandshort .......................... $5,122 $8,527 n/a $2,586
Debtnetoflongandshort ............................... $2,503 $6,374 $(1,059) $ 5
Gold ................................................ $ (23) $ 754 $(2,440) $ 0
Silver ............................................... $ (2) $ 223 $ (511) $ 0
ITEM 7. FINANCIAL STATEMENTS
The Company’s consolidated financial statements are set forth on pages F-1 through F-49.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8A CONTROLS AND PROCEDURES
In May 2005, the Company’s management and the Audit Committee of the Company’s Board of Directors
concluded that the Company needed to restate certain of the Company’s financial statements to correct errors in
the application of accounting principles with respect to the accounting for: (i) the beneficial conversion feature
embedded in the $12,000,000 convertible notes issued by the Company in March 2004; (ii) the recognition of
rental expense for certain office leases; and (iii) the treatment of interest paid on the convertible notes for tax
purposes. As a result, the Company has restated its historical financial statements for the fiscal years ended
September 30, 2002, 2003 and 2004, and the fiscal quarters ended December 31, 2003 and 2004.
The above restatements are described in more detail in Note 2 to the Company’s Consolidated Financial
Statements included in this Form 10-KSB.
Controls over the application of accounting policies are within the scope of internal controls. As a result of
these restatements, management concluded in May 2005 there were material weaknesses in the Company’s
internal controls, as defined by the Public Company Accounting Oversight Board. The material weaknesses
related to the issues described above have been remediated as a result of processes that have been implemented
by the Company. In this connection, the Company has increased the size of its finance staff, expanded the scope
of training for its finance staff, acquired additional resources regarding financial reporting and adopted policies
regarding the review of complex financial transactions.
In connection with the filing of this Form 10-KSB, the Company’s management, including the Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls
and procedures as of September 30, 2005. The Company’s Chief Executive Officer and Chief Financial Officer
have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2005.
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