NASDAQ OMX Group (NDAQ)

16. Subsequent Events

Transfer of Sponsorship of Exchange Traded Funds

On October 19, 2006, we announced an agreement with PowerShares Capital Management LLC, or PowerShares, that will transfer the sponsorship functions including, sales, marketing and administration of our QQQ, EQQQ and BLDRs exchange-traded funds, or ETFs. These transactions are expected to close by June 2007 pending approval by the SEC and the Irish Financial Services Regulatory Authority.

Internal Reorganization

On or about November 8, 2006, Nasdaq plans to complete an internal reorganization that was approved by Nasdaq’s stockholders at the 2005 Annual Meeting of Stockholders in connection with exchange registration. As part of the reorganization, Nasdaq will transfer the ownership of some of its subsidiaries, including its broker-dealer subsidiaries, to the Exchange. The Exchange will also assume Nasdaq’s obligations under the 3.75% convertible notes due October 22, 2012 and the related indenture. Nasdaq will guarantee the obligations of the Exchange under the indenture. The reorganization will not have a material effect on our consolidated financial position or results of operations.

LSE Interim Dividend

On November 8, 2006, the LSE declared an interim dividend of £0.06, or $0.11 per share. The interim dividend will be paid to those shareholders of record on December 8, 2006, for payment on January 5, 2007. Based on Nasdaq’s total percentage ownership at November 8, 2006, the interim dividend totals approximately GBP 3.3 million, or $6.2 million which will be recorded in dividend income in the Consolidated Statements of Income in the fourth quarter of 2006.

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16. Subsequent Events

Sale of Building and Related Assets

In April 2006, we classified our building and related assets located in Trumbull, Connecticut as held-for-sale. See Note 5, “2006 and 2005 Cost Reduction Program, INET Integration and Strategic Review,” for further discussion. On July 28, 2006, we completed the sale of this building and related assets for approximately $30.4 million which resulted in an additional $0.4 million loss recorded in the third quarter of 2006. As a result of this sale we were required to prepay a portion of the Credit Facilities as defined in the agreements. Accordingly, we prepaid approximately $9.7 million of the $750 million senior term loan facility and approximately $5.7 million of the $434.8 million term loan credit agreement. We plan to use the remaining proceeds for general corporate purposes.

NASD Equity Ownership in Nasdaq Common Stock

On July 11, 2006, NASD announced it had achieved full divestiture of ownership of Nasdaq common stock, with the sale of its remaining shares of Nasdaq common stock. NASD still has voting control based on its ownership of our Series D preferred stock. After we complete the second phase of exchange registration, which we expect to occur in the fourth quarter of 2006, the Series D preferred stock will automatically lose its voting rights and will be redeemed by us for $1.00.

Exchange Registration

On August 1, 2006, we completed a corporate restructuring in connection with becoming operational as a national securities exchange. Under the new structure, The Nasdaq Stock Market, Inc. was converted to a holding company and, its wholly-owned subsidiary, The NASDAQ Stock Market LLC, assumed the operations of the national securities exchange.

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20. Subsequent Events

Equity Offering

On February 15, 2006, Nasdaq completed a public offering of 13,895,229 shares of Nasdaq’s common stock. The offering consisted of 7,000,000 primary shares and 6,895,229 shares of Nasdaq’s common stock offered by NASD and certain other stockholders who received such shares through the exercise of warrants they purchased in Nasdaq’s 2000 and 2001 private placements. Nasdaq and NASD have granted the underwriters an option to purchase up to an additional 2,084,284 shares of Nasdaq’s common stock to cover over-allotments, if any, which the underwriters may exercise within 30 days of the date of the final prospectus. On March 2, 2006, Nasdaq announced that the underwriters purchased the additional 2,084,284 shares of common stock. Nasdaq and NASD contributed equally to the over-allotment option. The completion of the offering, including the exercise of the over-allotment option, resulted in the total sale of 15,979,513 shares of which 8,042,142 shares were sold by Nasdaq and 7,937,371 shares sold by NASD and certain other stockholders. As a result of the above transactions, NASD’s ownership decreased to 11.4%

Nasdaq used the proceeds from this offering to redeem our Series C Cumulative Preferred Stock, as discussed below, and plans to use the remainder for general corporate purposes, including potential acquisitions.

Preferred Stock Payoff

The Series C Cumulative Preferred Stock was paid in full on February 15, 2006. Nasdaq paid $104.7 million to redeem our Series C Cumulative Preferred Stock, which included accrued and unpaid dividends and a make-whole premium.

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Shareholder.com

On February 6, 2006, Nasdaq completed the acquisition of Shareholder.com, a privately held, Massachusetts-based firm specializing in shareholder communications and investor relations intelligence services, for $40.0 million in cash, subject to post-closing adjustments. Shareholder.com will operate as a wholly-owned subsidiary of Nasdaq. Shareholder.com currently serves over 1,000 clients, including companies listed on both domestic and foreign exchanges. Shareholder.com will continue to offer its comprehensive suite of services to all publicly traded companies who wish to optimize investor relations capabilities.

Exchange Registration

On January 16, 2006, the SEC unanimously approved Nasdaq’s application to operate as a national securities exchange. This action will allow Nasdaq to take the final steps needed to complete its separation from NASD. With exchange status, Nasdaq will be licensed to operate a newly formed subsidiary, The Nasdaq Stock Market LLC, as its own Self-Regulatory Organization.

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Note 22. Subsequent Events (Unaudited)

On April 22, 2005, the Company announced that it entered into a definitive agreement pursuant to which The NASDAQ Stock Market, Inc. (“NASDAQ”) will acquire all outstanding shares of the Company for an aggregate purchase price of approximately $1,769,000 in cash, or $5.10 per share on a fully diluted basis. On November 16, 2005, the Department of Justice closed its investigation under the Hart-Scott Rodino Antitrust Improvements Act of the pending acquisition of Instinet Group by NASDAQ, in effect approving the acquisition of Instinet Group by NASDAQ. The transaction was completed on December 8, 2005 at a price of $5.09 per share on a fully diluted basis. INET has been combined with NASDAQ’s current operations while Instinet, The Institutional Broker, along with certain Instinet Group corporate liabilities, has been acquired from NASDAQ by a group led by Silver Lake Partners and Instinet senior management.

The Company completed the acquisition of Bridge Trading on March 31, 2005 for 3,752 shares in Company stock.

The Company completed the sale of LJR on July 1, 2005 to the Bank of New York for $174,000 in cash.

On July 12, 2005, Instinet Group’s Board of Directors approved the payment of a special cash dividend of $0.32 per common share to Instinet Group stockholders, based upon the net after-tax proceeds of the sale of LJR. The record date for the dividend was July 29, 2005 and the payment was made on August 15, 2005. Instinet Group common stock traded ex-dividend for two days prior to the record date, starting on July 27, 2005.

In April and May 2005, four purported class action lawsuits were filed in the Court of Chancery in the State of Delaware against Instinet Group, each of our directors and Reuters alleging, among other things, that defendants breached their fiduciary duties as to our public stockholders in connection with the proposed merger by approving the transaction at an allegedly unfair and inadequate price. On June 22, 2005, plaintiffs filed a consolidated amended complaint consolidating three of the lawsuits while voluntarily dismissing the fourth lawsuit. The amended complaint seeks, among other things, class action status, an injunction against consummation of the transaction, invalidation of certain provisions of the Merger Agreement, damages in an unspecified amount, rescission in the event the transaction is consummated and attorney’s fees.

On September 9, 2005, the parties entered into a proposed settlement of the action pursuant to a Stipulation and Agreement of Compromise, Settlement and Release. Pursuant to the proposed settlement: (i) Instinet revised the definitive proxy statement to include certain disclosures that have been agreed upon and reviewed by plaintiffs; (ii) Nasdaq and Instinet agreed to reduce by 15%, from $66,500 to $56,525, the break-up fee that Instinet would pay to Nasdaq under certain conditions pursuant to Section 8.6(a) of the merger agreement; and (iii) Nasdaq agreed to waive, with respect to members of the purported plaintiff class only, the provisions of the merger agreement pursuant to which the aggregate merger consideration was to have been reduced by up to $2,500 based on the

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Notes to Consolidated Financial Statements

(In thousands, except per share amounts)

total amount of certain of our transaction liabilities, the net effect of which is an increase of approximately $0.007 per share (or approximately $1,000 in the aggregate) in the merger consideration that will be received by Instinet stockholders other than the defendants.

On September 16, 2005, Instinet mailed a notice of settlement to its stockholders. On October 25, 2005, the Delaware Court of Chancery certified the class of Instinet Group shareholders and approved the proposed settlement as fair and reasonable. Separately, on November 30, 2005, the Court awarded plaintiffs’ counsel $450 for attorneys’ fees and reimbursement of expenses. The settlement is still subject to the entry of a final and non-appealable judgment dismissing the consolidated action with prejudice and the delivery of appropriate releases.

13. Subsequent Events

Transfer of OTCBB Business to NASD

On July 8, 2005, Nasdaq announced that it plans to enter into an agreement to transfer the Over-the-Counter Bulletin Board

(“OTCBB”) business and the trade reporting of all other Over-the-Counter (“OTC”) securities to NASD. The transfer is subject to approval from the SEC, the signing of a definitive agreement, and other necessary approvals. This development is designated to facilitate corporate structure changes related to Nasdaq achieving exchange status. It is not expected to have a material impact on Nasdaq’s operating results.

Nasdaq and NASD have structured this transfer of the businesses to be seamless to the customers of the OTCBB and OTC trade reporting businesses. Nasdaq will continue to provide the technology and connectivity used to carry out the day-to-day functions of the OTCBB and OTC trade reporting, through a service agreement with NASD, while the OTCBB business will be owned, managed and continue to be regulated by NASD.

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12. Subsequent Events

Acquisition of Instinet Group

On April 22, 2005, Nasdaq announced that it entered into a definitive agreement (the “Agreement”) with Instinet Group, Incorporated (“Instinet”) to acquire Instinet (the “Acquisition”) and that it concurrently entered into a definitive agreement to sell Instinet’s Institutional Broker division to an affiliate of Silver Lake Partners II, L.P. (“SLP”). Instinet also entered into a definitive agreement to sell its Lynch, Jones & Ryan subsidiary to Bank of New York prior to consummation of the Nasdaq transaction. As a result of these transactions, Nasdaq will ultimately acquire Instinet’s Electronic Communication Network (“INET”).

Instinet stockholders will receive approximately $1.878 billion in cash, comprised of approximately $934.5 million from Nasdaq, approximately $207.5 million from SLP and the balance from Instinet’s available cash, including approximately $174.0 million from Bank of New York.

Completion of the Acquisition is subject to the completion of Instinet’s sale of Lynch, Jones & Ryan, and customary closing conditions, including the approval of the Acquisition by Instinet’s shareholders, as well as regulatory approvals, including approval of the SEC and approval under the Hart-Scott Rodino Antitrust Improvements Act of 1976. The proposed sale of Instinet’s Institutional brokerage business to an affiliate of SLP is subject to terms and conditions including, among other things, the closing of the Acquisition, and closing conditions and regulatory approvals that are similar to the closing conditions contained in the Agreement discussed above.

Nasdaq expects the Acquisition to be dilutive to Nasdaq’s stockholders for up to 12 months and anticipates this transaction will be accretive to stockholders thereafter.

To finance the transaction, Nasdaq has obtained the following:

In order to facilitate the transaction, Hellman & Friedman also restructured the terms of Nasdaq’s existing Subordinated Notes, extending the maturity date to October 2012, lowering the interest coupon rate to 3.75% from 4.0% and lowering the Subordinated Notes’ conversion price to $14.50 from $20.00. Hellman & Friedman also received an additional 2.75 million warrants to purchase Nasdaq common stock at a price of $14.50 per share. These warrants also cannot be exercised on or before April 22, 2006 and expire on the third anniversary of the Acquisition closing date.

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Notes to Condensed Consolidated Financial Statements—(Continued)

In the event the Acquisition does not occur, the convertible notes issued on April 22, 2005 will be redeemed at par and the warrants will expire worthless. In addition, the terms of the Subordinated Notes will revert back to the original terms, with limited exceptions.

A further discussion of these transactions is contained in Nasdaq’s Current Report on Form 8-K, dated April 28, 2005.

Stock Repurchase and Waiver Agreement

On April 21, 2005, Nasdaq and NASD entered into a Stock Repurchase and Waiver Agreement whereby NASD consented to the financing described under Acquisition of Instinet Group above. In exchange for the waiver, Nasdaq repurchased 384,932 shares of its Series C Cumulative Preferred Stock owned by NASD for approximately $40.0 million, which included all accrued and unpaid dividends and Additional Redemption Amounts (as defined in the Certificate of Designations, Preferences and Rights of the Series C Cumulative Preferred Stock) due on these repurchased shares.

Real Estate

As previously disclosed in our 2004 Annual Report on Form 10-K, Nasdaq’s management decided to sell the building it owns and occupies in Rockville, Maryland located at 9513 Key West Avenue. This building is classified as held-for-sale and is included in land, buildings and improvements in the Condensed Consolidated Balance Sheets with a carrying value of $17.6 million at March 31, 2005 and December 31, 2004. In April 2005, Nasdaq tentatively agreed to an offer from NASD to purchase the building for Nasdaq’s carrying value.

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12. Subsequent Events

Acquisition of Instinet Group

On April 22, 2005, Nasdaq announced that it entered into a definitive agreement (the “Agreement”) with Instinet Group, Incorporated (“Instinet”) to acquire Instinet (the “Acquisition”) and that it concurrently entered into a definitive agreement to sell Instinet’s Institutional Broker division to an affiliate of Silver Lake Partners II, L.P. (“SLP”). Instinet also entered into a definitive agreement to sell its Lynch, Jones & Ryan subsidiary to Bank of New York prior to consummation of the Nasdaq transaction. As a result of these transactions, Nasdaq will ultimately acquire Instinet’s Electronic Communication Network (“INET”).

Instinet stockholders will receive approximately $1.878 billion in cash, comprised of approximately $934.5 million from Nasdaq, approximately $207.5 million from SLP and the balance from Instinet’s available cash, including approximately $174.0 million from Bank of New York.

Completion of the Acquisition is subject to the completion of Instinet’s sale of Lynch, Jones & Ryan, and customary closing conditions, including the approval of the Acquisition by Instinet’s shareholders, as well as regulatory approvals, including approval of the SEC and approval under the Hart-Scott Rodino Antitrust Improvements Act of 1976. The proposed sale of Instinet’s Institutional brokerage business to an affiliate of SLP is subject to terms and conditions including, among other things, the closing of the Acquisition, and closing conditions and regulatory approvals that are similar to the closing conditions contained in the Agreement discussed above.

Nasdaq expects the Acquisition to be dilutive to Nasdaq’s stockholders for up to 12 months and anticipates this transaction will be accretive to stockholders thereafter.

To finance the transaction, Nasdaq has obtained the following:

In order to facilitate the transaction, Hellman & Friedman also restructured the terms of Nasdaq’s existing Subordinated Notes, extending the maturity date to October 2012, lowering the interest coupon rate to 3.75% from 4.0% and lowering the Subordinated Notes’ conversion price to $14.50 from $20.00. Hellman & Friedman also received an additional 2.75 million warrants to purchase Nasdaq common stock at a price of $14.50 per share. These warrants also cannot be exercised on or before April 22, 2006 and expire on the third anniversary of the Acquisition closing date.

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Notes to Condensed Consolidated Financial Statements—(Continued)

In the event the Acquisition does not occur, the convertible notes issued on April 22, 2005 will be redeemed at par and the warrants will expire worthless. In addition, the terms of the Subordinated Notes will revert back to the original terms, with limited exceptions.

A further discussion of these transactions is contained in Nasdaq’s Current Report on Form 8-K, dated April 28, 2005.

Stock Repurchase and Waiver Agreement

On April 21, 2005, Nasdaq and NASD entered into a Stock Repurchase and Waiver Agreement whereby NASD consented to the financing described under Acquisition of Instinet Group above. In exchange for the waiver, Nasdaq repurchased 384,932 shares of its Series C Cumulative Preferred Stock owned by NASD for approximately $40.0 million, which included all accrued and unpaid dividends and Additional Redemption Amounts (as defined in the Certificate of Designations, Preferences and Rights of the Series C Cumulative Preferred Stock) due on these repurchased shares.

Real Estate

As previously disclosed in our 2004 Annual Report on Form 10-K, Nasdaq’s management decided to sell the building it owns and occupies in Rockville, Maryland located at 9513 Key West Avenue. This building is classified as held-for-sale and is included in land, buildings and improvements in the Condensed Consolidated Balance Sheets with a carrying value of $17.6 million at March 31, 2005 and December 31, 2004. In April 2005, Nasdaq tentatively agreed to an offer from NASD to purchase the building for Nasdaq’s carrying value.

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23. Subsequent Events

Purchase of NIA

On January 1, 2005, Nasdaq purchased the remaining 50.0% interest in the Nasdaq Insurance Agency from AIG NJV, Inc. for nominal consideration. The purchase is not expected to have any impact on the operations of the agency. Beginning January 1, 2005, Nasdaq will consolidate the Insurance Agency in its consolidated results.

Common Stock Listing

Nasdaq applied for and was granted a common stock listing on The Nasdaq National Market, and commenced trading on The National Market under the symbol NDAQ on February 10, 2005.

Completion of Secondary Offering

On February 15, 2005, Nasdaq completed an underwritten secondary offering of 16,586,980 shares of common stock owned by NASD and an additional 3,246,536 shares of common stock owned by certain selling stockholders who purchased the shares in Nasdaq’s private placements in 2000 and 2001. Nasdaq, its officers or other employees did not sell any shares in the secondary offering and Nasdaq did not receive any proceeds from the offering.

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