Investment Technology Group (ITG)

(a)         Basis of Presentation

The consolidated financial statements include the accounts of The MacGregor Group, Inc. and its wholly owned subsidiaries Blackwatch Brokerage, Inc., MacGregor Solutions, S.L., and MacGregor UK Limited (collectively, the Company). All intercompany accounts and transactions have been eliminated in consolidation.

Blackwatch Brokerage, Inc. (Blackwatch) is a registered broker-dealer under the Securities and Exchange Act of 1934, and acts as an introducing broker whose accounts are cleared and carried by other broker-dealers on a fully disclosed basis. Blackwatch was incorporated in the State of Delaware on March 3, 1999, and commenced operations on December 23, 1999 subsequent to the grant of its application to the National Association of Securities Dealers, Inc. (NASD). Blackwatch is subject to minimum net capital requirements of the Securities and Exchange Commission’s Rule 15c3-l (the Rule). Under the Rule, Blackwatch is required to maintain “net capital” equal to the greater of $5,000 or 6-2/3% of “aggregate indebtedness” (a maximum ratio of 15 to 1) as those terms are defined by the Rule. At September 30, 2005, December 31, 2004, and December 31, 2003, Blackwatch’s regulatory net capital of $2,485,326, $1,295,917, and $1,705,205, respectively, exceeded its required net capital of $116,854, $62,140, and $80,499, respectively. “Aggregate indebtedness” was approximately $1,752,805, $932,110, and $1,207,486 at September 30, 2005, December 31, 2004, and December 31, 2003, respectively, resulting in a ratio of “aggregate indebtedness” to “net capital” of approximately 71%, 72%, and 71%, respectively. Blackwatch is exempt from the provisions of the Securities and Exchange Commission’s Rule 15c3-3 under paragraph (k)(2)(ii) thereof.

(b)          Unaudited Interim Financial Information

The consolidated financial statements for the interim nine-months ended September 30, 2005 and 2004 are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been included. Results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year or any other future period.

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THE MACGREGOR GROUP, INC.
Notes to Consolidated Financial Statements (Continued)

Information pertaining to the Nine Months Ended September 30, 2005 and 2004 is Unaudited.