FCStone (FCSX) 10-K/A 2006 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: August 31, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 000-51099

FCStone Group, Inc.

(Exact name of Registrant as specified in its charter)

Iowa	42-1091210
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2829 Westown Parkway, Suite 100, West Des Moines, Iowa	50266
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code: (515) 223-3756

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to 12(g) of the Act: Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Exchange Act Rule 12b-2).

Large accelerated filer  ¨ Accelerated filer  ¨ Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

There is currently no public market for the Registrant’s securities. As of November 28, 2006, the Registrant had 4,845,736 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

EXPLANATORY NOTE

This Annual Report on Form 10-K/A (“Form 10-K/A”) is being filed as Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year ended August 31, 2006, which was filed with the Securities and Exchange Commission on November 29, 2006 (the “Original Filing”). This Form 10-K/A is a technical amendment to add the conformed signature of our independent registered public accounting firm to their audit reports which appear in Items 8 and 15. The conformed signatures were previously inadvertently omitted from the electronically filed document. The additions of these conformed signatures are the only changes to these Items 8 and 15, which are filed herein in their entirety in accordance with the SEC’s rules and regulations.

The following sections in this report have been amended as a result of the restatement:

Part II—Item 8. Financial Statements and Supplementary Data; and

Part IV—Item 15. Exhibits and Financial Statement Schedules.

This Form 10-K/A only amends the Items described above, and we have not modified or updated other disclosures presented in our Original Filing. Accordingly, this Amendment No. 1 does not reflect events occurring after the filing of our Original Filing and does not modify or update those disclosures affected by subsequent events, except as specifically referenced herein. Information not affected by this amendment is unchanged and reflects the disclosures made at the time of the Original Filing on November 29, 2006.

1

PART II

Item 8. Financial Statements and Supplementary Data

Our audited consolidated financial statements are filed under this Item, beginning on page F-1 of this Report. Our financial statement schedules are filed under Item 15 “Exhibits and Financial Statement Schedules.”

2

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)	Financial Statements and Schedules
	(1)	The following financial statements are filed as a part of this report:
		Report of Independent Registered Public Accounting Firm
		Consolidated Statements of Financial Condition as of August 31, 2005 and August 31, 2006
		Consolidated Statements of Operations for the years ended August 31, 2004, August 31, 2005 and August 31, 2006
		Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended August 31, 2004, August 31, 2005 and August 31, 2006
		Consolidated Statements of Cash Flows for the years ended August 31, 2004, August 31, 2005 and August 31, 2006
		Notes to Consolidated Financial Statements
	(2)	The following financial statement schedules are filed as a part of this report:
		Schedule I—Parent company condensed financial statements
		Schedule II—Valuation and qualifying accounts
(b)	Exhibits
	The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this amended Annual Report on Form 10-K/A or incorporated herein by reference as indicated below.

3

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FCSTONE GROUP, INC.
February 5, 2007	/S/    PAUL G. ANDERSON
Date	Paul G. Anderson, Chief Executive Officer (Principal Executive Officer)

4

INDEX TO COMPANY FINANCIAL STATEMENTS

FCStone Group, Inc. and Subsidiaries
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Financial Condition as of August 31, 2005 and 2006	F-2
Consolidated Statements of Operations for the Years Ended August 31, 2004, 2005 and 2006	F-3
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Years Ended August 31, 2004, 2005 and 2006	F-4
Consolidated Statements of Cash Flows for the Years Ended August 31, 2004, 2005 and 2006	F-5
Notes to Consolidated Financial Statements	F-6

Report of Independent Registered Public Accounting Firm

The Board of Directors

FCStone Group, Inc.:

We have audited the accompanying consolidated statements of financial condition of FCStone Group, Inc. and subsidiaries (the Company) as of August 31, 2006 and 2005 and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended August 31, 2006. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedules I and II. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FCStone Group, Inc. and subsidiaries as of August 31, 2006 and 2005 and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

November 28, 2006

Des Moines, Iowa

F-1

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share and per share amounts)

	August 31,
	2005			2006
ASSETS
Cash and cash equivalents:
Unrestricted	$	25,045		$	59,726
Restricted		1,410			4,010
Segregated		10,509			14,221
Commodity deposits and accounts receivable:
Commodity exchanges and clearing organizations—customer segregated, including United States treasury bills and notes of $338,837 in 2005, $600,609 in 2006		395,908			604,536
Proprietary commodity accounts		18,028			20,133
Customer regulated accounts in deficit secured by U.S. Treasury bills and notes of $2,786 in 2005 and $26,979 in 2006 included above		6,351			29,166
Total commodity deposits and accounts receivable		420,287			653,835
Marketable securities, at fair value—Customer segregated and other (including other of $376 in 2005 and $378 in 2006)		192,328			149,612
Accounts receivable and advances on grain		114,946			103,434
Notes receivable		9,632			14,971
Inventories—grain, fertilizer, and fuel		14,605			26,628
Exchange memberships and stock, at cost (fair value of $5,871 in 2005, $14,391 in 2006)(note 2)		1,797			6,587
Furniture, equipment, and improvements, net of accumulated depreciation of $4,676 in 2005 and $4,700 in 2006		8,206			7,386
Deferred income taxes(note 4)		4,013			4,697
Investments in affiliates		1,726			3,540
Investments in other organizations		1,847			1,994
Other assets		3,233			6,566
	$	809,584		$	1,057,207
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Checks written in excess of bank balance	$	4,880		$	6,436
Commodity and customer regulated accounts payable		548,562			726,920
Trade accounts payable and advances		134,415			169,650
Accrued expenses		20,764			26,876
Notes payable(note 11)		36,911			48,169
Subordinated debt(note 13)		5,500			7,000
Obligations under capital leases		4,125			3,575
Total liabilities		755,157			988,626
Minority interest(note 1)		4,755			3,607
Redeemable common stock held by Employee Stock Ownership Plan (note 10)		4,487			6,079
Stockholders’ equity(notes 5 and 10):
Common stock, no par value, authorized 20,000,000 at August 31, 2005 and 2006, respectively; issued and outstanding 4,828,279 and 4,845,736 shares at August 31, 2005 and 2006		21,524			21,747
Additional paid-in capital		—			120
Accumulated other comprehensive loss		(4,555	)		(1,955	)
Retained earnings		32,703			45,062
		49,672			64,974
Less maximum cash obligation related to ESOP shares (note 10)		(4,487	)		(6,079	)
Total stockholders’ equity		45,185			58,895
Commitments and contingencies(notes 9, 12, and 14)
Total liabilities and stockholders’ equity	$	809,584		$	1,057,207

See accompanying notes to consolidated financial statements.

F-2

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Year Ended August 31,
	2004		2005			2006
Revenues:
Commissions and clearing fees	$	67,594	$	76,674		$	105,622
Service, consulting and brokerage fees		12,008		18,913			33,388
Interest		3,982		8,177			23,174
Other		4,521		7,463			2,638
Sales of commodities		1,536,209		1,290,620			1,129,983
Total revenues		1,624,314		1,401,847			1,294,805
Costs and expenses:
Cost of commodities sold		1,519,221		1,275,094			1,112,949
Employee compensation and broker commissions		30,160		32,578			44,229
Pit brokerage and clearing fees		26,713		33,141			47,613
Introducing broker commissions		10,704		14,459			22,826
Employee benefits and payroll taxes(note 6)		7,136		8,044			9,801
Interest		4,418		3,946			5,705
Depreciation and amortization		861		1,551			1,674
Bad debt expense		716		4,077			1,909
Other expenses (note 9)		15,365		18,926			23,568
Total costs and expenses		1,615,294		1,391,816			1,270,274
Income before income tax expense and minority interest		9,020		10,031			24,531
Minority interest(note 1)		576		(499	)		(226	)
Income after minority interest and before income tax expense		8,444		10,530			24,757
Income tax expense(note 4)		2,030		3,950			9,500
Net income	$	6,414	$	6,580		$	15,257
Basic and diluted shares outstanding				4,357			4,833
Basic and diluted earnings per share			$	1.51		$	3.16

See accompanying notes to consolidated financial statements.

F-3

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(in thousands, except per share amount)

	Common Stock			Preferred Stock			Common Stock						Additional Paid In Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Maximum Cash Obligation Related to ESOP Shares			Total Stockholders’ Equity
							Class A			Class B
Balance at August 31, 2003	$	—		$	14,006		$	2,753		$	500		$	—	$	(3,932	)	$	22,500		$	—		$	35,827
Net income		—			—			—			—			—		—			6,414			—			6,414
Pension adjustment		—			—			—			—			—		893			—			—			893
Total comprehensive income		—			—			—			—			—		—			—			—			7,307
Transfer of Class A to preferred stock due to member reorganizations		—			49			(49	)		—			—		—			—			—			—
Patronage refunds:
Payable in cash:
Class A		—			—			—			—			—		—			(1,420	)		—			(1,420	)
Class B		—			—			—			—			—		—			(449	)		—			(449	)
Application of current year patronage to common and preferred stock		—			851			65			—			—		—			(916	)		—			—
Cash received on shares issued and subscribed		—			—			1			—			—		—			—			—			1
Cash disbursed on shares retired		—			(1,036	)		(401	)		—			—		—			—			—			(1,437	)
Balance at August 31, 2004		—			13,870			2,369			500			—		(3,039	)		26,129			—			39,829
Net income		—			—			—			—			—		—			6,580			—			6,580
Pension adjustment		—			—			—			—			—		(1,516	)		—			—			(1,516	)
Total comprehensive income		—			—			—			—			—		—			—			—			5,064
Application of prior year’s patronage		—			6			—			—			—		—			(6	)		—			—
Conversion, as a result of restructuring		16,737			(13,872	)		(2,365	)		(500	)		—		—			—			—			—
Repurchase of stock		(605	)		—			—			—			—		—			—			—			(605	)
Cash received on shares issued		6,231			—			—			—			—		—			—			(4,487	)		1,744
Cash disbursed on shares retired		—			(4	)		(4	)		—			—		—			—			—			(8	)
Registration costs		(839	)		—			—			—			—		—			—			—			(839	)
Balance at August 31, 2005		21,524			—			—			—			—		(4,555	)		32,703			(4,487	)		45,185
Net income		—			—			—			—			—		—			15,257			—			15,257
Pension adjustment		—			—			—			—			—		2,600			—			—			2,600
Total comprehensive income		—			—			—			—			—		—			—			—			17,857
Dividends paid ($0.60 per share)		—			—			—			—			—		—			(2,898	)		—			(2,898	)
Stock compensation		—			—			—			—			120		—			—			—			120
Change in value of shares held by ESOP		—			—			—			—			—		—			—			(1,369	)		(1,369	)
Cash received on shares issued		223			—			—			—			—		—			—			(223	)		—
Balance at August 31, 2006	$	21,747		$	—		$	—		$	—		$	120	$	(1,955	)	$	45,062		$	(6,079	)	$	58,895

See accompanying notes to consolidated financial statements.

F-4

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended August 31,
	2004			2005			2006
Cash flows from operating activities:
Net income	$	6,414		$	6,580		$	15,257
Depreciation		861			1,551			1,674
Amortization of discount on note receivable		—			—			(46	)
Gain on sale of exchange memberships and stock		(833	)		(1,750	)		—
Equity in earnings of affiliates, net of distributions		(66	)		(25	)		591
Minority interest, net of distributions		1,380			(733	)		(237	)
Change in commodity accounts receivable/payable, marketable securities and customer segregated funds, net		(12,535	)		(33,097	)		(16,186	)
(Increase) decrease in accounts receivable and advances on grain		(19,622	)		(3,379	)		815
Decrease (increase) in inventories—grain, fertilizer and fuel		10,831			(2,407	)		(12,023	)
Increase in other assets		(1,627	)		(356	)		(3,998	)
Increase in accounts payable		30,152			60,908			45,932
Increase in accrued expenses		2,147			3,052			9,233
Net cash provided by operating activities		17,102			30,344			41,011
Cash flows from investing activities:
Purchase of furniture, equipment, and improvements		(918	)		(1,105	)		(1,255	)
Acquisition of equity investment		—			—			(2,405	)
Acquisition of minority interest		—			—			(911	)
Collection (issuance) of notes receivable		9,732			(7,553	)		(5,458	)
Purchase of exchange memberships and stock		(68	)		(925	)		(5,403	)
Proceeds from sale of exchange memberships and stock		1,912			2,100			613
Net cash provided by (used in) investing activities		10,658			(7,483	)		(14,819	)
Cash flows from financing activities:
Increase (decrease) in checks written in excess of bank balance		8,022			(3,142	)		1,556
(Payments on) proceeds from note payable, net		(34,517	)		(4,620	)		11,258
Proceeds from issuance of common stock		1			1,744			—
Proceeds from issuance of redeemable common stock held by ESOP		—			4,487			223
Payment for redemption of stock		(1,437	)		(613	)		—
Payment of prior year patronage		(1,429	)		(1,869	)		—
Dividends paid		—			—			(2,898	)
Payments under capital lease		(688	)		(550	)		(550	)
Proceeds from subordinated debt		5,750			9,000			4,500
Payment of subordinated debt		(500	)		(9,250	)		(3,000	)
Monies deposited in escrow		—			(7	)		(2,600	)
Debt issuance costs		(125	)		—			—
Registration costs		—			(839	)		—
Net cash (used in) provided by financing activities		(24,923	)		(5,659	)		8,489
Net increase in cash and cash equivalents—unrestricted		2,837			17,202			34,681
Cash and cash equivalents—unrestricted—at beginning of year		5,006			7,843			25,045
Cash and cash equivalents—unrestricted—at end of year	$	7,843		$	25,045		$	59,726
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	4,785		$	3,821		$	5,587
Income taxes		2,057			4,215			10,335
Supplemental disclosure of noncash investing and financing activities:
Application of current year patronage to common and preferred stock	$	916		$	—		$	—
Transfer of Class A common stock to preferred stock, due to member reorganizations		49			—			—
Transfer of retained earnings to patronage payable, due to patronage refunds		1,869			—			—

See accompanying notes to consolidated financial statements.

F-5

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

ORGANIZATION

The accompanying consolidated financial statements include the financial statements of FCStone Group, Inc. and its wholly-owned subsidiaries, FCStone, L.L.C. (FCStone); FCC Investments, Inc. (FCC Investments); FCStone Trading L.L.C. (FCStone Trading); FCC Futures, Inc.; FCStone Financial, Inc. (FCStone Financial); FCStone Forex LLC; FCStone International, LLC; FCStone Merchant Services, LLC (FCStone Merchant Services); and 70% owned FGDI, L.L.C. (FGDI) (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.

FCStone is a commodity futures commission merchant servicing customers primarily in grain and energy related businesses. FCC Investments is registered as a securities broker-dealer. FCStone Trading provides risk management consulting services, acts as a dealer in over-the-counter (OTC) derivative contracts on physical commodities. FCC Futures, Inc. acts as a guaranteed introducing broker of FCStone and is registered with the National Futures Association. FCStone Financial provides railcar services to grain companies through leasing and subleasing of railcars and also enters into sale/repurchase agreements with grain companies for the purchase and sale of certain commodities. FCStone Forex LLC provides OTC interbank currency dealing services to self-directed and professionally managed client accounts. FGDI’s primary operations relate to grain merchandising. FCStone Merchant Services provides specialized financing through inventory repurchase arrangements, transactional commodity finance arrangements, and processing and tolling arrangements. FCStone International, LLC owns subsidiaries formed in Canada and Brazil.

The Company’s investment in Farmers Commodities Transportation Company, LLC (FCTC) represents 10% of the outstanding member units and is reported under the equity method at August 31, 2005 and 2006. FCTC provides railcar service through the leasing and subleasing of railcars and brokering the usage of these cars. FCStone provides management services, including accounting, administrative, personnel, and office space, to FCTC and has two members on FCTC’s board of directors. The Company also has minority holdings in three other entities, Green Diesel LLC, Lehi Mills L.L.C. and Hurley & Associates, all of which are carried under the equity method.

On March 1, 2005, the voting members of the Company approved the restructuring of the Company by terminating the Company’s cooperative status and ending the patronage-based rights accruing to the Company’s members (see note 10).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

COMMODITY DEPOSITS AND ACCOUNTS RECEIVABLE/PAYABLE

Commodity accounts include equities and deficits in open futures and option contracts and funds received to margin or guarantee commodity transactions. The Company is obligated to fund margin calls on open contracts and, in turn, receives reimbursement from customers for maintenance of their respective margins. In accordance with the Commodity Futures Trading Commission’s regulations, customer funds received to margin, guarantee,

F-6

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and/or secure commodity futures transactions are segregated and accounted for separately from the general assets of the Company. Commodity deposits and receivables with clearing organizations and commodity customer payables are reported gross except where a right of offset exists. The future collectability of these amounts can be impacted by the Company’s collection efforts, the financial stability of its customers and the general economic climate in which it operates. The Company evaluates accounts that it believes may become uncollectible through reviewing margin deficit reports and by monitoring the financial strength of its customers.

MARKETABLE SECURITIES

Marketable securities consist of short-term overnight investments in U.S. Treasury and U.S. Government Agency repurchase agreements and money market funds allowed by the Commodities Futures Trading Commission’s regulations for segregated customer funds. These securities are reported at market value, which approximates cost given their short-term nature.

TRADE ACCOUNTS RECEIVABLE

The Company records trade receivables due from its customers at the time sales are recorded in accordance with its revenue recognition policy. The future collectibility of these amounts can be impacted by the Company’s collection efforts, the financial stability of its customers, and the general economic climate in which it operates. The Company applies a consistent practice of establishing an allowance for accounts that it believes may become uncollectible through reviewing the historical aging of its receivables and by monitoring the financial strength of its customers. If the Company becomes aware of a customer’s inability to meet its financial obligations (e.g., where it has filed for bankruptcy), the Company establishes a specific allowance for the potential bad debt to reduce the net recognized receivable to the amount it reasonably believes it is probable will be collected.

NOTES RECEIVABLE

FCStone Financial and FCStone Merchant Services accept notes receivable under sale/repurchase agreements with customers whereby the customers sell certain commodity inventory to them and agree to repurchase the commodity inventory from them at a future date. The customers bear the risk of changes in market price while under contract and are required to maintain a security account with FCStone to hedge this risk. FCStone Financial and FCStone Merchant Services apply SFAS 49,Accounting for Product Financing Arrangements, and accordingly, these transactions are treated as secured borrowings rather than commodity inventory in the Company’s financial statements. Interest is accrued on the outstanding notes balance on a daily basis using an applicable interest rate, which ranged from 7.25% to 10.75% during 2006, from 7.50% to 8.25% during 2005 and from 3.75% to 5.50% during 2004. The notes are carried at their principal balance which approximates fair value.

During 2006, FCStone Merchant Services loaned $1.5 million to Green Diesel LLC as part of its financing to build a biodiesel production facility to be located in Houston, Texas. The note receivable bears interest on the principal balance outstanding at an annual rate of 10% and matures on October 31, 2008. The terms of the loan agreement included the issuance of warrants exercisable for up to 48% of the equity of Green Diesel. FCStone Merchants Services has discounted the note receivable relative to the value assigned to the warrants, which has been reported in other assets on the consolidated statement of financial condition. The discount is being amortized over the term of the loan agreement as an adjustment of the loan yield through interest income on the consolidated statement of operations.

F-7

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

INVENTORIES

Grain inventories are carried at market value, which is net realizable value (NRV). NRV is determined by estimating selling prices in the applicable market location and related costs of disposal in the ordinary course of business. Realized and unrealized gains and losses on futures contracts are credited or charged to current cost of sales.

Fertilizer inventory is recorded at the lower of cost or market using the first-in, first-out method.

Fuel inventory is recorded at the lower of cost or market using the weighted average method. FCStone Trading had a minimum line fill requirement at two pipeline companies which expired during fiscal 2006.

A summary of inventories as of August 31, 2005 and 2006 are as follows:

	2005		2006
Grain	$	13,507,493	$	25,539,782
Fertilizer		633,293		1,087,799
Fuel		464,315		—
	$	14,605,101	$	26,627,581

DERIVATIVE FINANCIAL INSTRUMENTS—GRAIN

FGDI’s use of derivative instruments includes commodity futures and option contracts offered through regulated commodity exchanges to reduce price risk. FGDI does not use derivative instruments for trading purposes and have procedures in place to monitor and control their use.

Accounting for these derivative instruments is done in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” Derivative instruments are required to be reported on the consolidated statements of financial condition at fair values. Fair values are determined based on published prices from regulated commodity exchanges.

COMMODITY PRICE RISK

FGDI has open cash contracts for the purchase and sale of grain, which are reported at market value and the resulting gains or losses are recognized currently in cost of products sold. FGDI is exposed to risks that it may not have sufficient grain quantity to deliver against its contacts and thus would be obligated to purchase grain at prevailing market prices in order to meet such commitments. FGDI is exposed to risk of loss in the market value of net open commodity positions, which are calculated by aggregating grain inventories and cash grain purchases and sales contracts. In order to reduce these risks, FGDI generally takes opposite and offsetting positions using futures contracts or options.

Realized and unrealized gains and losses on futures contracts and option contracts used as economic hedges of grain inventories and purchase and sale contracts are recognized in cost of products sold for financial reporting, using market prices. Inventories and cash purchase and sale contracts are marked to fair value using market-based prices so that gains and losses on the derivative contracts are offset by gains or losses on inventories and purchase and sale contracts.

F-8

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

HEDGE POLICY—FUEL

The Company follows the policy of hedging its fuel purchases made on behalf of its customers to minimize the risk due to market fluctuations. The gains and losses relating to closed hedge positions are either billed to or returned to the customer and are allocated based upon their respective volume of business. The Company is exposed to credit risk of customers, to the extent they fail to settle their obligations.

Balances receivable from or due to customers under these hedging contracts are reported at market value based on publicly available third-party pricing services and reflected as other receivables or accounts payable—customers in the financial statements and the related unrealized gain or loss is recorded in cost of fuel sold.

FURNITURE, EQUIPMENT, SOFTWARE, AND IMPROVEMENTS

Furniture, equipment, software, and improvements are recorded at cost. Expenditures for maintenance, repairs, and minor replacements are charged to operations, while expenditures for major replacements and betterments are capitalized.

FGDI had leased property, primarily comprised of grain bins, under capital lease having a net carrying value of $4,950,000 and $4,331,250 at August 31, 2005 and 2006, respectively (see note 9).

Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets. Furniture, equipment, and leasehold improvements are depreciated over five to forty years. Software is depreciated over a useful life of three years. Capital leases for grain bins are depreciated over the remaining life of the lease from the date placed in service.

CASH AND CASH EQUIVALENTS—UNRESTRICTED

Cash equivalents consist of investments with original maturities of three months or less and include money market funds totaling $17,329,530 and $48,591,534 at August 31, 2005 and 2006, respectively.

CASH AND CASH EQUIVALENTS—RESTRICTED

FCStone and FGDI have deposited monies into an escrow account held at a financial institution, in connection with FGDI’s capital lease obligation (see note 8). The deposited funds, and all earnings, are required to be held in escrow until repayment of the bond sinking fund. Additionally, FCStone Trading has deposited monies in a money market fund and can only be used as collateral for a letter of credit agreement (see Note 12).

CASH AND CASH EQUIVALENTS—SEGREGATED

Pursuant to requirements of the Commodity Exchange Act, funds deposited by customers relating to futures contracts in regulated commodities must be carried in separate accounts which are designated as segregated customers’ accounts. At August 31, 2005 and 2006, cash and cash equivalents—segregated included an interest bearing cash account of $5,043,322 and $6,080,886, respectively, for deposit of customer funds.

MINORITY INTERESTS

Minority interest in net assets and income reflected in the accompanying consolidated financial statements consists of:

a) A 30% minority interest, held since 2001, by an unaffiliated third party in FGDI, a domestic limited liability company, for 2005 and 2006.

F-9

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

b) A 30% minority interest, from October 2004 through March 2006, held by an unaffiliated third party in FCStone Merchant Services, a domestic limited liability company for 2005 and 2006. Effective March 31, 2006, the Company redeemed the minority ownership interest in accordance with the Limited Liability Company Agreement. On April 1, 2006, FCStone Merchant Services became a wholly owned subsidiary of the Company.

The following tables set forth the components of minority interest in the consolidated statements of financial condition:

	August 31
	2005		2006
FGDI, LLC	$	3,736,249	$	3,607,344
FCStone Merchant Services, LLC		1,018,776		—
Total	$	4,755,025	$	3,607,344

COMMON STOCK HELD BY ESOP

In 2005, the Company formed an employee stock ownership plan (ESOP) and the ESOP purchased shares of the Company’s common stock. The Company’s maximum cash obligation related to these shares is classified outside stockholders’ equity because the shares are not readily traded and could be put to the Company for cash upon termination by an employee.

OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) refers to expense, gains, and losses that are included in comprehensive income (loss) but are excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity, net of tax. The Company’s other comprehensive income (loss) is comprised of minimum pension liability adjustments, net of tax.

COMMISSION REVENUE AND EXPENSE AND CLEARING AND TRANSACTION FEES

Commissions on futures contracts are recognized when the related open commodity futures transaction is made (opened and closed). Commissions on option contracts are recognized upon the purchase or sale of the option. Clearing and transaction fees are charged when each trade is made (opened and closed).

SERVICE AND CONSULTING FEES

Risk management service and consulting fees are billed and recognized as revenue on a monthly basis when such services are provided. Such agreements are generally for one-year periods but are cancelable by either party with a 30-day notice.

REVENUE RECOGNITION ON PURCHASE AND SALE OF COMMODITIES

The Company recognizes revenue on sales when the agricultural products or fuel are shipped and/or the customer takes ownership and assumes risk of loss. In addition, in accordance with accounting principles generally accepted in the United States of America, revenues from certain activities should be reported gross with a separate display of cost of sales. Revenues from our grain merchandising and fuel sales have been presented gross. These grain merchandising and fuel sales include activities in which we are the primary obligor responsible for fulfillment, act as principal, change the product or perform part of the service, take title to the inventory and assume the risk and rewards of ownership, such as the risk of loss for collection and delivery.

F-10

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

REVENUE RECOGNITION ON COMMODITY FINANCING TRANSACTIONS

The Company recognizes revenue on sales in instances where the Company is not the primary obligor in the arrangement, based on the amount retained. These commodity financing transactions include activities in which the Company does not take title to the commodities and does not have the risks and rewards of ownership. The Company’s compensation, a stated percentage of the transaction’s profit, is calculated and recorded upon settlement of the transaction, as funds become available for distribution.

OTHER REVENUES

The Company reports its equity in the earnings of unconsolidated affiliates as other revenue. This amounted to $65,569, $25,263 and a loss of $584,029, in 2004, 2005 and 2006, respectively. The 2006 amount included a write-off of $737,727 related to an unaffiliated equity investment.

The Company recorded a gain on the sale of a Chicago Board of Trade exchange seat in the amount of $1,749,850 in 2005, which is included in other income.

The Company recorded a gain on the sale of its investment in The Clearing Corporation stock of $832,880 in 2004, which is included in other income.

STOCK-BASED COMPENSATION

On June 13, 2006, the Company issued stock options and adopted the fair value method of accounting for stock-based in accordance with SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), as described in Note 7. The options were fully vested and exercisable upon issuance. The Company obtained a third party valuation of the fair value of the shares to establish the fair value of the shares for purposes of determining the stock option strike price. The value of the stock options issued was based upon an option-pricing model using the minimum value method as allowed under SFAS 123 and was recognized as an expense in the period granted.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued FAS No. 123 (Revised 2004), “Share-Based Payment” (“FAS 123(R)”). This statement requires that the compensation cost relating to share based payment transactions be recognized in the financial statements. Compensation cost is to be measured based on the estimated fair value of the equity-based compensation awards issued as of the grant date. The related compensation expense will be based on the estimated number of awards expected to vest and will be recognized over the requisite service period (often the vesting period) for each grant. The statement requires the use of assumptions and judgments about future events and some of the inputs to the valuation models will require considerable judgment by management. FAS 123(R) replaces FAS 123 and supersedes APB 25. The Company will adopt FAS 123(R) as of September 1, 2006 using the modified prospective transition method, which will not impact the options granted in fiscal 2006, unless they are subsequently modified.

PATRONAGE REFUNDS

Prior to September 1, 2004, the Company operated on a cooperative basis; accordingly, substantially all savings arising from business transacted with or for members were allocated to them in the form of cash or stockholders’ equity.

INCOME TAXES

Prior to September 1, 2004, the Company operated as a nonexempt cooperative under Sections 1381 through 1388 of the Internal Revenue Code. Accordingly, federal income taxes were based on nonmember savings and the portion of member savings not allocated as patronage refunds, if any. The companies file a consolidated income tax return, and income taxes are allocated to the companies on the basis of their taxable income.

F-11

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances will be recorded to reduce deferred tax assets when is more likely than not that a tax benefit will not be realized.

RECLASSIFICATIONS

Certain amounts in the fiscal year 2004 and 2005 consolidated financial statements have been reclassified. Revenues generated from ocean vessel dockage and related income in our grain merchandising segment have been reclassified to other income from sales of commodities. Expenses related to the dock facility in our grain merchandising segment have been reclassified from cost of commodities sold to the applicable expense. These reclassifications are not significant and are intended to result in revenues and costs associated with grain merchandising that better reflect the purchases and delivery of grain, excluding revenues and expenses that are ancillary to those operations.

2. EXCHANGE MEMBERSHIPS AND STOCK

The Company has exchange memberships seats on the Chicago Board of Trade, the Board of Trade of Kansas City, Missouri, Inc., the Minnesota Grain Exchange, and the New York Mercantile Exchange. Additionally, the Company holds stock of the Chicago Mercantile Exchange and the New York Mercantile Exchange. These exchange memberships and stock provide FCStone the right to process trades directly with the various exchanges. The exchange memberships and stock are recorded at cost, in accordance with U.S. GAAP and Commodity Futures Trading Commission (CFTC) regulations.

3. SEGREGATED REQUIREMENTS

Pursuant to the requirements of the Commodity Exchange Act, funds deposited by customers of FCStone relating to futures contracts in regulated commodities must be carried in separate accounts which are designated as segregated customers’ accounts. Certain amounts in the accompanying table reflect reclassifications and eliminations required for regulatory filing and as a result, may differ from those presented in the accompanying consolidated statements of financial position. Funds deposited by customers and other assets, which have been aggregated as belonging to the commodity customers at August 31, 2005 and 2006, are as follows:

	2005		2006
Cash-segregated	$	9,818,297	$	12,388,880
Marketable securities, at fair value—customer segregated		191,951,270		149,234,280
Marketable securities held at a bank classified in commodity deposits and accounts receivable from commodity exchanges and clearing organizations		27,056,721		19,428,569
Commodity deposits and accounts receivable from commodity exchanges and clearing organizations, including marketable securities, net of omnibus eliminations		365,906,721		576,799,335
Securities held for customers in lieu of cash		—		6,995,610
Total customer segregated funds		594,733,009		764,846,674
Amount required to be segregated		571,451,661		727,680,363
Excess funds in segregation	$	23,281,348	$	37,166,311

F-12

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Funds deposited by customers and other assets, which are held in separate accounts for foreign futures, and foreign options customers at August 31, 2005 and 2006 are as follows:

	2005		2006
Cash-segregated	$	100,000	$	136,735
Equities with registered futures commissions merchants		72,625		222,024
Amounts held by members of foreign boards of trade		787,224		2,661,020
		959,849		3,019,779
Amount required to be segregated		130,584		1,583,764
Excess funds in segregation	$	829,265	$	1,436,015

4. INCOME TAXES

Income tax expense consists of current and deferred taxes as follows:

	2004			2005			2006
Current:
Federal	$	2,425,700		$	4,027,000		$	10,549,000
State and local		256,300			373,000			925,000
Total current		2,682,000			4,400,000			11,474,000
Deferred:
Federal		(615,700	)		(402,000	)		(1,962,000	)
State and local		(36,300	)		(48,000	)		(12,000	)
Total deferred		(652,000	)		(450,000	)		(1,974,000	)
Total income tax expense	$	2,030,000		$	3,950,0000		$	9,500,000

Total income tax expense differs from the “expected” tax expense computed by applying the federal income tax rate of 34% in fiscal years 2004 and 2005 and 35% in fiscal year 2006 to earnings before income tax expense as follows:

	2004			2005		2006
“Expected” tax expense	$	2,870,937		$	3,580,247	$	8,664,950
Patronage refund deduction		(1,002,609	)		—		—
State income tax		145,300			214,500		593,450
Non-deductible items and other		16,372			155,253		241,600
Income tax expense	$	2,030,000		$	3,950,000	$	9,500,000

The tax effects of temporary differences that give rise to deferred income tax assets are:

	2005		2006
Pension liability	$	2,182,500	$	1,590,029
Deferred compensation		1,440,100		2,148,600
Bad debt reserve		243,000		532,800
All other assets		147,100		425,096
Net deferred tax assets	$	4,012,700	$	4,696,525

F-13

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. As such, no valuation allowances have been provided.

5. EARNINGS PER SHARE

Earnings per share has been presented in the accompanying Consolidated Statement of Operations. Basic earnings per shares excludes dilution and is computed by dividing the applicable net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated based on the weighted average shares of common stock as adjusted for the potential dilutive effect of stock options. Stock-based compensation arrangements, including options, are considered to be outstanding as of the grant date for purposes of computing diluted earnings per share. Options to purchase 400,000 shares of common stock at $24.76 per share (see Note 7) were outstanding during the fourth quarter of 2006 but were not included in the computation of diluted EPS. As the Company’s common stock is not traded on a public exchange, there has been no change between the fair value of the options at the grant date that would give rise to a dilutive effect. The calculation of the basic and diluted shares outstanding for the year ended August 31, 2005, assumes the shares issued as a result of the restructuring (see Note 10) had been issued and outstanding for the full year. Prior to the conversion from a cooperative to a corporation, per share data had been omitted because, under the cooperative structure, earnings of the Company were distributed as patronage dividends to members based on the level of business conducted with the Company as opposed to a common shareholder’s proportionate share of underlying equity in the Company. Under the corporate structure, earnings of the Company may be distributed to shareholders based on their proportionate share of underlying equity.

6. RETIREMENT PLANS

The Company has a noncontributory retirement plan, which is a defined benefit plan that covers substantially all employees. Effective April 1, 2006, such plan was closed to new employees hired subsequent to the April 1, 2006 date. Additionally, the Company has a nonqualified noncontributory retirement plan covering certain executive employees. The Company’s policy is to fund amounts that are intended to provide for benefits attributed to service to date.

F-14

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents changes in, and components of, the Company’s net liability for retirement costs:

Changes in Benefit Obligation	2004			2005			2006
Benefit obligation at beginning of year	$	17,536,068		$	19,363,500		$	25,197,577
Service cost with interest		1,624,129			1,708,926			2,043,529
Interest cost		988,797			1,143,801			1,315,018
Assumption changes		(769,016	)		3,403,226			(4,064,592	)
Actuarial (gain)/loss		245,927			(132,427	)		1,664,380
Benefits paid		(262,405	)		(289,449	)		(299,257	)
Benefit obligation at end of year		19,363,500			25,197,577			25,856,655
Changes in Plan Assets
Fair value at beginning of year		7,564,857			10,881,775			13,632,532
Actual return		1,391,001			454,266			1,174,254
Employer contribution		2,188,322			2,585,940			2,518,704
Benefits paid		(262,405	)		(289,449	)		(299,257	)
Fair value at end of year		10,881,775			13,632,532			17,026,233
Funded status		(8,481,725	)		(11,565,045	)		(8,830,422	)
Unrecognized net obligation		584,620			584,620			417,203
Unrecognized actuarial (gain)/loss		7,189,412			10,855,102			7,466,293
Contributions from measurement date to fiscal year end		867,120			419,784			619,784
Minimum liability		(3,755,667	)		(6,702,314	)		(2,811,548	)
Accrued pension cost	$	(3,596,240	)	$	(6,407,853	)	$	(3,138,690	)

A change in the minimum pension liability resulted in a $1,515,912 after-tax reduction of comprehensive income in 2005 and a $2,599,640 after-tax increase in other comprehensive income in 2006.

The following table displays FCStone Group, Inc.’s plans that have accumulated benefit obligations and projected benefit obligations in excess of plan assets:

	August 31,
	2005		2006
Accumulated benefit obligations	$	20,460,169	$	20,784,707
Projected benefit obligations		25,197,577		25,856,655
Plan assets		13,632,532		17,026,233

The retirement benefit obligation was based upon an annual measurement date of June 30. The following weighted-average assumptions were used to determine benefit obligations in the accompanying statements of financial condition as of August 31, 2005 and 2006:

	2005		2006
Weighted-average assumptions:
Discount rate	5.25	%	6.25	%
Rate of compensation increase—based on age graded scale	2.50% to 7.20	%	2.75% to 7.25	%

F-15

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following weighted-average assumptions were used to determine net periodic pension cost for the years ended August 31, 2004, 2005 and 2006:

	2004		2005		2006
Weighted-average assumptions:
Discount rate	6.00	%	6.25	%	5.25	%
Expected return on assets	8.50	%	8.50	%	8.50	%
Rate of compensation increase—based on age graded scale	3.50% to 7.20	%	3.50% to 7.20	%	2.50% to 7.20	%

To account for our defined benefits pension plan in accordance with SFAS No. 87, we must make three main determinations at the end of each year: First, we must determine the actuarial assumptions for the discount rate used to reflect the time value of money in the calculation of the projected benefit obligations for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent fiscal year. For guidance in determining the rate, we look at rates of return on high-quality fixed-income investments and periodic published rate ranges.

Second, we must determine the actuarial assumption for rates of increase in compensation levels used in the calculation of the accumulated and projected benefit obligation for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent fiscal year. The salary growth assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation. Retirement and mortality rates are based primarily on actual plan experience and standard industry actuarial tables, respectively.

Third, we must determine the expected long-term rate of return on assets assumption that is used to determine the expected return on plan assets component of the net periodic pension cost for the subsequent year. The expected returned on plan assets reflects asset allocation, investment strategy and the view of investment managers and other large pension plan sponsors.

The expected long-term rate of return on asset assumption was determined, with the assistance of the Company’s investment consultants, based on a variety of factors. These factors include, but are not limited to, the plan’s asset allocations, a review of historical capital market performance, historical plan performance, current market factors such as inflation and interest rates, and a forecast of expected future asset returns. The Company reviews this long-term assumption on a periodic basis.

The components of retirement benefit costs recognized in the consolidated statements of operations were as follows:

	2004		2005			2006
Service cost	$	1,624,129	$	1,708,926		$	2,043,529
Interest cost		988,797		1,143,801			1,315,018
Less: Actual return on assets		1,391,001		454,266			1,174,254
Net amortization and deferral		1,293,586		(79,103	)		862,786
	$	2,515,511	$	2,319,358		$	3,047,079

F-16

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the actual asset allocation for the years ended August 31, 2005 and 2006, and the target asset allocation for the Company’s plan assets:

	August 31,				Target Asset Allocation (1)
	2005		2006
Equity securities	73	%	72	%	65% to 75	%
Debt securities	27	%	28	%	25% to 35	%
Total	100	%	100	%

(1) The long-term goal for equity exposure and for fixed income exposure is within the limits presented. The exact allocation at any point in time is at the discretion of the investment manager, but should recognize the need to satisfy both the volatility and the rate of return objectives for equity exposure, and satisfy the objective of preserving capital for the fixed income exposure.

The Company expects to contribute approximately $2.5 million to the pension plan during 2007.

The following benefit payments, which reflect expected future service, are expected to be paid:

Fiscal Year	Pension Benefits
2007	$	405,673
2008		485,429
2009		581,829
2010		702,291
2011		851,468
2012 – 2016		6,733,810

The Company participates in a 401(k) plan in the Thrift/Savings Plan for Cooperatives and the FCStone Group Employee Stock Ownership Plan, both defined contribution plans. The Company contributed approximately $813,000, $913,000 and $1,039,000 to these plans during 2004, 2005, and 2006, respectively.

F-17

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7. STOCK AWARD PLAN

On May 2, 2006, FCStone Group, Inc.’s Board of Directors approved the FCStone Group, Inc. 2006 Equity Incentive Plan (the “Plan”). The Plan permits the issuance of shares of the Company’s common stock to key employees and non-employee directors, pursuant to awards granted under the Plan, such as stock options, restricted stock awards, restricted stock units and performance share awards, as well as other stock-based awards. At August 31, 2006, 350,000 shares were available for issuance under the Plan.

Non-qualified Stock Options—Options granted to date under the plan were granted at a strike price of $24.76 as determined contemporaneously by an independent valuation firm. In reliance upon such valuation and pursuant to the Plan, on June 13, 2006 the Compensation Committee of the Board of Directors of the Company granted nonqualified stock options to purchase a total of 320,000 shares of Common Stock to executive officers and management employees of the Company and 80,000 shares of Common Stock to the non-employee directors of the Company. The options were 100% vested on the grant date and expire on June 13, 2016. A summary of the stock option activity is as follows:

	Options Outstanding	Weighted- Average Exercise Price		Options Exercisable	Weighted- Average Exercise Price
Balance at August 31, 2005	—		—	—		—
Options granted	400,000	$	24.76
Options exercised	—		—
Options forfeited	—		—
Balance at August 31, 2006	400,000	$	24.76	400,000	$	24.76

Information regarding options outstanding at August 31, 2006 was as follows:

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Options	Weighted Average Exercise price	Weighted Average         Remaining         Contractual Life (in years)	Options	Weighted Average Exercise price
$24.76	400,000	$24.76	9.79	400,000	$24.76

No options were granted during fiscal years 2004 and 2005. The value of the options granted during 2006 was determined under the minimum value method using a Black-Scholes pricing model and the significant assumptions used in this model were as follows:

	2006
Value of options	$	0.30
Volatility		0.00	%
Risk free interest rate		4.95	%
Expected life		5 years
Expected dividend yield on date of grant		4.6	%

Total stock-based compensation expense related to options issued to executive officers and management employees of the Company and non-employee directors of the Company under the minimum value method was $120,000 in the year ended August 31, 2006.

F-18

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. ADJUSTED NET CAPITAL REQUIREMENTS

Pursuant to the rules, regulations, and requirements of the Commodity Futures Trading Commission and other regulatory agencies, FCStone is required to maintain certain minimum net capital as defined in such rules, regulations, and requirements. Net capital and the related net capital requirement may fluctuate on a daily basis. FCStone’s adjusted net capital and minimum net capital requirement at August 31, 2005 and 2006 were as follows:

	2005		2006
Adjusted net capital	$	24,935,736	$	31,311,896
Minimum net capital requirement	$	17,480,009	$	21,869,555

The rules, regulations, and requirements of the Commodity Futures Trading Commission prohibit the withdrawal of equity if, after giving effect to such withdrawal and capital reductions which are scheduled to occur within six months, adjusted net capital is less than the greater of 120% of the minimum financial requirements of the CFTC or any self-regulatory organization of which FCStone is a member.

FCC Investments, Inc. is required to maintain certain net capital as defined by the Securities and Exchange Commission. At August 31, 2005 and 2006, FCC Investments net capital was $385,603 and $434,561, respectively. The minimum net capital requirement was $250,000 at August 31, 2005 and 2006, respectively.

9. COMMITMENTS

FCStone leases office space, equipment, automobiles, and an airplane under noncancelable operating leases which expire on various dates through 2012. Most of the leases provide that FCStone pay taxes, maintenance, insurance, and other expenses. At August 31, 2006, minimum rental payments due under operating leases were approximately as follows: 2007, $1,973,000; 2008, $1,697,000; 2009, $1,111,000; 2010, $650,000; and 2011 and beyond, $2,352,000.

The rental expense under the above operating leases was approximately $1,862,000, $2,290,000 and $2,361,000, in 2004, 2005 and 2006, respectively.

FCStone Financial leases covered hopper cars and, in turn, subleases these cars to a railroad company. The lease renewed for a three-year period effective October 1, 2005, and has been classified as an operating lease. Rental expense, excluding mileage credits and maintenance costs, under this lease totaled approximately $642,000, $656,000, and $1,066,000 in 2004, 2005 and 2006, respectively. Future minimum lease payments under this operating lease are approximately $1,106,000 in 2007; $1,106,000 in 2008; and $92,000 in 2009. The sublease also was renewed on a cancelable basis for a three year period effective October 1, 2005. Sublease rental income, excluding mileage credits and maintenance costs, totaled approximately $830,000, $831,000, and $1,188,000 in 2004, 2005 and 2006, respectively. Future minimum lease payments expected to be received under the sublease subsequent to August 31, 2006 are approximately $1,222,000 in 2007; $1,222,000 in 2008; and $102,000 in 2009.

FGDI is party to a capital lease agreement for grain bins in Mobile, Alabama. The capitalized asset was placed into service during September, 2005 and is being depreciated over the lease term. FGDI made payments on the lease equal to $687,500, $550,000, and $550,000 during 2004, 2005 and 2006, respectively. In addition, the Company pays interest on the Industrial Development Revenue Bonds which amounted to approximately $91,000, $82,000, and $92,000 in 2004, 2005, and 2006, respectively. The lease expires December 1, 2012 and annual minimum lease payments are equal to $550,000.

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FGDI also leases grain storage facilities under various operating leases with expiration dates ranging from August 31, 2005 through September 30, 2013. The terms of the operating lease for grain facilities in Mobile, Alabama, require an annual lease commitment of $800,000, which is included in the future minimum rental payments below. Payment of the annual lease amount, or a portion thereof, must be made in the instances where annual rail service and dockage income collected by the lessor, relating to the facilities’ volume of grain bushels handled, does not cover the annual lease amount. Additionally, the minority owner of FGDI has agreed to load a certain minimum number of bushels through the facility. Cash receipts by the lessor, associated with elevation of the member bushels, have been adequate to fund the minimum lease payment for the years ending August 31 2004, 2005 and 2006.

FGDI leases covered hopper cars for use in its Ohio operations under various operating leases from unrelated parties, with term ranging from twelve to sixty months. Rental expenses under these leases, which are included in cost of commodities sold, totaled approximately $2,000,000, $2,800,000, and $3,200,000 in 2004, 2005 and 2006, respectively.

FGDI’s approximate future minimum rental payments for the above facilities and railcars for subsequent fiscal years are approximately as follows: 2007, $4,639,000; 2008, $3,903,000; 2009, $2,600,000; 2010, $2,110,000; and 2011, $1,647,000.

FGDI leases various office space and grain storage facilities under year-to-year operating leases. Rental expense for these offices and facilities was approximately $415,000, $542,000, and $609,000 in 2004, 2005 and 2006, respectively. FGDI also rents equipment periodically throughout the year under day-to-day agreements. Rent expense for equipment and machinery was approximately $48,000, $51,000, and $64,000 in 2004, 2005 and 2006, respectively.

In the event the counterparty is unable to meet its contractual obligations, FCStone Trading may be exposed to the risk of purchasing energy related products at prevailing market prices. To mitigate this risk, FCStone Trading has purchased credit default swaps and credit insurance that provides some coverage against counterparty risk. FCStone Trading records the insurance or premium paid for swaps as a prepaid asset, which is amortized over the life of the policy or contract. At August 31, 2005 and 2006, FCStone Trading held 13 and 14 credit default swaps with a reported value of $196,752 and $125,893, respectively. The fair value of these swaps at August 31, 2005 and 2006 was consistent with the amounts reported. FCStone Trading has not experienced any significant recoveries under these arrangements in 2004, 2005, or 2006. Customer credit risk is mitigated through the collection of margin deposits.

During 2006, FCStone Trading entered into offsetting contracts with two parties to acquire and deliver fuel under a fixed price arrangement. FCStone Trading does not take possession of the fuel and recognizes a margin on the purchase and sale at each delivery date.

FCStone Merchant Services has a noncancelable operating lease for office space in New Jersey. The lease is for an initial three year term expiring on June 30, 2007. The lease contains a renewal option for an additional five year term and requires payment of all executory costs, such as maintenance and liability insurance. Rent expense associated with this lease totaled approximately $66,000 and in 2005 and 2006, respectively. Future minimum lease payments under the lease for the years subsequent to August 31, 2006 are $55,000.

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. STOCKHOLDERS’ EQUITY

On March 1, 2005, the voting stockholder/members of the Company approved the restructuring of the Company by terminating the Company’s cooperative status and ending the patronage-based rights accruing to the Company’s members. Pursuant to the restructuring, stockholders and subscribers received on April 15, 2005, 500 shares of new common stock for each fully-paid share of Class A common stock, $5,000 par value, 10,000 shares of new common stock for each fully-paid share of Class B common stock, $100,000 par value, one share of new common stock for each $10.00 of paid subscription and one share of new common stock for each $10.00 par value of preferred stock held. Membership interests in the Company represented by patronage-based rights as of August 31, 2004, were converted on April 15, 2005 into (i) shares of new common stock based on an appraised value and relative patronage; and (ii) subscription rights exercisable at a purchase price of $10.00 per share within 60 days after the distribution of new common stock and subscription rights. The Company distributed 4,310,237 shares of new common stock on April 15, 2005 pursuant to the restructuring. The Company commenced the subscription rights offering on April 15, 2005 and the offering continued until June 29, 2005 with 174,372 shares sold and $1,743,720 of equity raised.

In June 2005, the Company formed an employee stock ownership plan (ESOP) and filed a Form S-8 Registration Statement in order to provide employee incentives and an additional capital infusion to the Company. Generally, employees of the Company or any participating affiliates who meet the criteria defined in the ESOP are eligible. Eligible participants were able to elect to make a one-time irrevocable transfer of a portion of their 401(k) Plan to the ESOP. The amount of the transfer was limited to no more than one-third (1/3) of the eligible participant’s 401(k) Plan account balance. The ESOP intends to operate on a plan year which corresponds to the calendar year. For plan years beginning after December 31, 2005, the Company will make matching contributions to the ESOP in an amount equal to 50% of each participant’s eligible elective deferral contribution to the 401(k) Plan. Dividends received with respect to shares of Company Stock allocated to participants’ accounts in the ESOP will be credited to such participants’ accounts annually on the basis of the number of shares of Company Stock allocated to each such participant’s account. The initial ESOP stock sale was consummated as of August 26, 2005, with the ESOP purchasing from the Company 448,692 shares of common stock at a purchase price of $10.00 per share, for an aggregate of $4,486,920. All shares held by the ESOP are treated as outstanding in computing earnings per share. In the event a terminated plan participant, whether by death, disability, retirement or other termination, desires to sell his or her shares of Company stock, the Company may be required to purchase the shares from the participant at their appraised value at that time. To the extent that shares of common stock held by the ESOP are not readily tradeable, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholders’ equity as temporary equity.

As of August 31, 2005 and 2006, the shares held by the ESOP, fair value and maximum cash obligation were as follows:

	2005		2006
Shares held by the ESOP		448,692		466,149
Fair value per share	$	10.00	$	13.04
Maximum cash obligation	$	4,486,920	$	6,078,583

On August 15, 2005, we purchased 103,922 shares of the common stock of the Company held by Farmland Industries pursuant to an auction held by Farmland’s liquidating trustee and the approval of the bankruptcy court. The aggregate purchase price for the purchase of these shares was $605,000, or $5.82 per share. We do not have a plan or program for the purchase of shares of the Company’s common stock.

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. NOTES PAYABLE

Notes payable outstanding at August 31, 2005 and 2006 consisted of the following:

	Renewal / Expiration Date	Amount Available		Amount Outstanding at August 31,
				2005		2006
		(in millions)
Margin Call Facilities:
Deere Credit, Inc.	March 1, 2007	$	36.75	$	—	$	—
Harris, N.A.	January 31, 2007		35.0		—		—
CoBank, ACB	December 31, 2007		20.0		—		—
Commodity Merchandising Facilities:
CoBank, ACB	December 31, 2007		68.0		6,004,545		20,992,636
AFG Trust Finance Limited	May 25, 2007		8.0		3,586,792		4,057,937
Commodity Financing Facilities:
Deere Credit, Inc.	March 1, 2007		96.0		17,778,000		7,100,000
CoBank, ACB	May 1, 2007		75.0		4,833,000		3,405,000
Fortis Capital Corp.	Demand		20.0		—		1,116,000
RZB Finance, LLC	Demand		8.0		—		1,068,000
Bank of Tokyo-Mitsubishi UFJ, Ltd	Demand		10.0		—		—
Standard Chartered Bank, New York	Demand		20.0		—		—
Other borrowings:
Deere Credit, Inc.	October 1, 2009		10.25		4,250,000		10,250,000
Long-term Note	December 31, 2012		0.5		458,550		179,452
Total				$	36,910,887	$	48,169,025

Margin Call Facilities

FCStone has an unsecured line of credit with Deere Credit, Inc. (Deere Credit) to be used for margin calls, if necessary. The margin call line of credit is subject to annual review, and continued availability of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Deere Credit. Borrowings under this line are on a demand basis and bear interest at 0.35% under the Prime rate or base rate of interest established by Citibank, N.A. Unused portions of the credit facility require a commitment fee of .15% on the unused commitment.

FCStone has unsecured lines of credit with Harris, N.A. (Harris) to be used for margin calls and commodity deliveries, if necessary. These lines of credit are subject to annual review and continued availability of these lines are subject to FCStone’s financial condition and operating results continuing to be satisfactory to Harris. Borrowings under this line are on a demand basis and bear interest at the prime rate as announced by Harris. Unused portions of the credit facility require a commitment fee of ¹/4% on the unused commitment. Effective June 30, 2006, the amount available to borrow from Harris has been increased from $20,000,000 to $35,000,000 through December 31, 2006.

On January 25, 2006, FCStone Trading entered into a new master loan agreement with CoBank, ACB (CoBank). The agreement includes a revolving credit facility in the amount up to $10,000,000, which expires on December 30, 2006. Additionally, the agreement includes a revolving term loan in the amount up to $10,000,000, which expires on December 30, 2007. The purpose of these facilities is to provide funding for commodities risk management consulting services that FCStone Trading provides to its customers, primarily the payment of option

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

premiums and margin calls on hedge and swap transactions entered into by the FCStone Trading on behalf of customers. Additionally, the revolving term loan provides funding for the issuance of letters of credit required by and for the benefit of certain swap transaction counterparties. Amounts outstanding under these credit facilities will bear interest at a rate of 1/4 of 1% below the National Variable Rate established by CoBank from time to time. Unused portions of the credit facility require a commitment fee of ¹/4% on the unused commitment. The agreement contains financial covenants related to current assets in excess of current liabilities and total assets in excess of total liabilities, as defined. The loan agreement requires Trading to acquire and maintain nonvoting participation certificates in CoBank in amounts determined in accordance with CoBank’s bylaws and capital plan. These certificates are reported as investments in other organizations.

Commodity Merchandising Facilities

On March 28, 2006, the FGDI entered into a new master loan agreement with CoBank. The agreement includes a revolving credit facility for an amount of up to $68,000,000, to be used to finance inventory and receivables. The commitment expires March 28, 2007 and carries an interest rate on a variable basis indexed to LIBOR, as defined in the agreement, which was 7.56% at August 31, 2006. The agreement also includes a revolving term loan for an amount of up to $8,000,000, to be used to reimburse CoBank for any drafts that it may honor under issued letters of credit. The commitment expires March 28, 2008 and carries an interest rate on a variable basis indexed to LIBOR, as defined in the agreement. The credit facility and the term loan are secured by inventories, accounts receivable, and intangible properties. The agreement’s financial covenants include a minimum current ratio, a minimum net worth, and a maximum debt to adjusted working capital ratio. Additionally, FGDI is required to have at the end of each fiscal year, a minimum “Fixed Charge Coverage Ratio”. The FGDI was not in compliance with the annual fixed charge coverage ratio at August 31, 2006, but received a written waiver from CoBank for the fiscal year ended August 31, 2006. Unused portions of the credit facility require a commitment fee of .50% on the unused commitment. The loan agreement requires FGDI to acquire and maintain nonvoting participation certificates in CoBank in amounts determined in accordance with CoBank’s bylaws and capital plan. These certificates are reported as investments in other organizations.

On September 18, 2006, FGDI renewed its agreements with AFG Trust Finance Limited and AFG Trust Assets Limited for a United States dollar (USD) credit facility and a Chinese RenMinBi (RMB) credit facility, as well as an USD investment facility and a RMB investment facility. The USD credit facility carries an interest rate of the aggregate of the prime rate, as published by The Asian Wall Street Journal and .75% per annum, which was 9.0% at August 31, 2006. The credit facility is secured by all of the interest and rights in respect of the USD and RMB investment facilities with AFG Trust Assets Limited. The aggregate principal amounts of all the borrowings outstanding shall not exceed the lesser of the facility amount and the available limit, to be calculated as defined

in the agreement. There are no commitment fees associated with this line of credit and there have been no borrowings outstanding under the RMB credit facility.

Commodity Financing Facilities

On February 23, 2006, FCStone Financial amended its uncommitted line of credit agreement with Deere Credit, increasing the available amount to $96.0 million. The commitment expires on March 1, 2007, at which time it is FCStone Financial’s intent to renew this agreement. The line of credit carries an interest rate on a variable basis calculated based on the collateral quality of advances requested by FCStone Financial as defined in the agreement, which ranged from 7.50% to 8.25% at August 31, 2006. The line of credit is secured by inventories and accounts receivable. The agreement contains financial covenants related to current assets in excess of current liabilities and total assets in excess of total liabilities. FCStone Financial was in compliance with these requirements at August 31, 2006. In addition, FCStone Financial must obtain a Guaranty from FCStone Group, Inc. to meet minimum net worth levels at the end of each month and fiscal year. The Company

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

maintains a limited corporate guarantee with Deere Credit to meet this obligation. There are no commitment fees associated with this line of credit.

On February 28, 2003, FCStone Financial entered into an uncommitted line of credit agreement with CoBank, ACB. The commitment expires on April 30, 2007, at which time it is FCStone Financial’s intent to renew this agreement. Interest under the agreement will be determined separately at the time advances are requested by FCStone Financial. At August 31, 2006, the line of credit was bearing interest at 7.46%. Under a subordination agreement dated February 28, 2003, borrowings under the line of credit with Deere Credit, discussed above, are subordinate to those under the line of credit with CoBank. The agreement contains financial covenants related to equity. FCStone Financial was in compliance with this requirement in 2006. In addition, the Company maintains a guarantee of payment agreement with CoBank with a maximum obligation of $1.5 million. The loan agreement requires FCStone Financial to acquire and maintain nonvoting participation certificates in CoBank in amounts determined in accordance with CoBank’s bylaws and capital plan. These certificates are reported as investments in other organizations. There are no commitment fees associated with this line of credit.

FCStone Merchant Services has an uncommitted line of credit agreement with RZB Finance (RZB) in the amount of $8.0 million, to be used for short term advances (Loans) and issuance of commercial letters of credit (L/C’s). The Loans and L/C’s shall be used to finance the purchase of inventory, by FCStone Merchant Services or by their customers, from suppliers and accounts receivable arising from the sale of inventory. FCStone Merchant Services has executed and delivered to RZB a general security agreement and related UCC 1 financing statements granting RZB a first priority perfected lien on all personal property of FCStone Merchant Services. Each Loan is payable on demand, and in no event shall be outstanding for more than 180 days. Loans under the facility bear interest at a variable rate determined in accordance with the terms of the agreement. At August 31, 2006, the line of credit was bearing interest at an annual rate of 8.0%. The fees for issuing L/C’s under the facility are determined in accordance with the terms of the agreement, with a minimum fee of $500. The agreement contains financial covenants related to FCStone Merchant Services’s tangible net worth, as defined. FCStone Merchant Services was in compliance with the requirement at August 31, 2006. No commitment fees were paid in 2006 under this facility.

FCStone Merchant Services has an uncommitted line of credit agreement with Fortis Capital Corp. (Fortis) in the amount of $20.0 million, to be used for loans and documentary and standby letters of credit (L/C’s). Each loan or L/C shall be used to finance self liquidating transactions involving the purchase, storage, hedging, and sale of grains, crude oil, natural gas, and petroleum products that are traded on commodities exchanges, as well as, repurchase agreements with counterparties acceptable to Fortis. FCStone Merchant Services’s obligation to Fortis is secured by a perfected security interest in all personal property and fixtures of FCStone Merchant

Services. All loans are payable on demand, and in no event shall be outstanding for more than 74 days, unless agreed by Fortis. Loans under the facility bear interest at a variable rate determined in accordance with the terms of the agreement. At August 31, 2006, the line of credit was bearing interest at an annual rate of 7.71%. The fees for issuing documentary L/C’s under the facility are determined in accordance with the terms of the agreement, with a minimum fee of $500. The fees for issuing trade and financial standby L/C’s shall be not less than a fee at a rate of 2.0% and 2.50%, respectively, of the daily average maximum undrawn face amount outstanding. The agreement contains financial covenants related to FCStone Merchant Services’s working capital and ratio of total outstanding loans and extensions of credit from all banks and institutions to tangible net worth, as defined. FCStone Merchant Services was in compliance with the requirements at August 31, 2006. No commitment fees were paid in 2006 under this facility.

FCStone Merchant Services has an uncommitted line of credit agreement with Bank of Toyko-Mitsubishi UFJ, Limited (BTMU) in the amount of $10.0 million, to be used for loans and commercial and standby letters of credit (L/C’s). Each loan or L/C shall be used to finance self liquidating transactions involving the purchase,

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

storage, hedging, and sale of grains, crude oil, natural gas, and petroleum products that are traded on commodities exchanges, as well as, repurchase agreements with counterparties acceptable to BTMU. The facility is secured by a first priority lien on the inventory, accounts receivable, hedge contracts, and the proceeds from the specific commodity transaction financed. All loans are payable on demand, and in no event shall be outstanding for more than 364 days. Loans under the facility bear interest at a variable rate determined in accordance with the terms of the agreement. The fees for issuing commercial L/C’s under the facility are determined in accordance with the terms of the agreement, with a minimum fee of $500. The fees for issuing standby L/C’s under the facility are determined in accordance with the terms of the agreement, with a minimum fee of $250 for each ninety day period outstanding. No commitment fees were paid in 2006 under this facility.

FCStone Merchant Services has an uncommitted revolving credit facility agreement with Standard Chartered Bank, New York in the amount of $20.0 million, to be used for short term loans, the issuance of documentary and standby letters of credit, and letters of indemnity. Each loan or letter of credit shall be used to finance physical commodity transactions, including grains and energy products. The facility is secured by a first priority lien on the inventory, accounts receivable, hedge contracts, and the proceeds from the specific commodity transaction financed. All loans are payable on demand, and in no event shall be outstanding for more than ninety days, with provisions for rollovers if necessary. Loans under the facility bear interest at a variable rate determined in accordance with the terms of the agreement. The fees for issuing documentary and standby letters of credit under the facility are determined in accordance with the terms of the agreement, with a minimum of $500. The agreement contains financial covenants related to FCStone Merchant Services’s tangible net worth, minimum working capital and maximum total leverage, as defined. FCStone Merchant Services was in compliance with the requirements at August 31, 2006. No commitment fees were paid in 2006 under this facility.

Other Borrowings

The Company has a general corporate unsecured line of credit agreement with Deere Credit. The availability of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Deere Credit. Borrowings under this line are on a demand basis and bear interest at a rate equal to 2.90% in excess of the LIBOR rate, as defined in the agreement. At August 31, 2006, the line of credit was bearing interest at 8.29%. Unused portions of the credit facility require a commitment fee of .50% on the unused commitment.

FCStone has an installment note payable to an individual, due $5,750 per month, including interest at a rate equal to 1.75% in excess of the Fed Funds rate as reported by the Wall Street Journal, with final payment due in December 2012. At August 31, 2006, the note was bearing interest at 7.01%. Payments required to be made on the installment note during the fiscal years ending 2007 through 2009 are $69,000, $69,000, and $41,452, respectively.

12. LETTERS OF CREDIT

FCStone Trading is required to provide letters of credit to certain customers and counterparties that can be drawn upon if there is a loss on the over-the-counter contracts. FCStone Trading has provided several letters of credit, under agreements with CoBank, in the aggregate amount of $7,375,000, with maturity dates that ranged from September 30, 2004 to September 30, 2006. To date, no counterparties have drawn down on these facilities. The agreements require commitment fees paid in advance, which are recorded as prepaid expenses and recognized over the life of the respective letter of credit. At August 31, 2006, FCStone Trading had $2,526,110 of cash restricted to collateralize a standby letter of credit with Harris in favor of a counterparty.

During 2003, the City of Mobile, Alabama, issued $5,500,000 of Industrial Development Revenue Bonds (Bonds) related to the construction of grain bins (see note 9), of which $3,575,000 remains outstanding. FGDI is

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

required to maintain a bank letter of credit in the amount of approximately $4,000,000, which expires on August 31, 2006, subject to required renewal, to secure the Bonds. FGDI agrees to pay a standby letter of credit fee, payable annually and charged to interest expense ratably.

FCStone Merchant Services provides credit support on behalf of certain customers using arrangements such as documentary and standby letters of credit (see note 11). These arrangements enable customers to execute transactions or obtain desired financial arrangements with third parties. Should the customer fail to perform under the terms of the transaction or financing arrangement, FCStone Merchant Services would be required to perform on their behalf. The length of these credit support arrangements parallels the length of the related financing arrangements or transactions. FCStone Merchant Services has issued letters of credit in the amount of $7,417,000 and $10,394,180 at August 31, 2005 and 2006, respectively.

13. SUBORDINATED DEBT

FCStone has an unsecured subordinated debt line of credit with Deere Credit in the amount of $7,000,000 million. The subordinated revolving line of credit bears interest at the rate of 4.8% in excess of LIBOR, which was 10.19% at August 31, 2006. Unused portions of the credit facility require a commitment fee of ¹/2 percent on the unused commitment. Borrowings outstanding under this line of credit were $4,000,000 and $6,000,000 at August 31, 2005 and 2006, respectively.

FCStone has several subordinated notes with various individuals, amounting to $1,500,000 and $1,000,000 at August 31, 2005 and 2006, respectively (see note 15). The notes are variable rate notes, and bear interest at a rate equal to the prime rate as published inThe Wall Street Journal, which was 8.25% at August 31, 2006. The notes mature on dates ranging from December 31, 2006 through June 30 2007, and are subordinated as defined by Commodity Futures Trading Commission Regulations.

14. CONTINGENCIES

The Company, from time to time, is involved in various legal matters considered normal in the course of its business. It is the Company’s policy to accrue for amounts related to these matters if it is probable that a liability has been incurred and an amount can be reasonably estimated. Although the outcome of such matters cannot be predicted with certainty and no assurances can be given with respect to such matters, the Company believes that the outcome of these matters in which it is currently involved will not have a materially adverse effect on its results of operations, liquidity, or financial position except as discussed below.

During 2004, FCStone LLC received approximately $600,000 in subrogation payments which were reimbursements for legal expenses incurred in previous years. Such amounts are reflected as a reduction of other expenses in the accompanying statement of operations.

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London Maritime Arbitrators Association of London, England, alleging a breach by FGDI of charter party agreements regarding five vessels and seeking to recover damages of $242,655, $230,863, $769,302, $649,031 and $403,167, respectively. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI claims that, under the sales contracts with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which are being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims and believes

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

that it has meritorious defenses. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong alleging a breach of a sales contract by FGDI and seeking to recover damages of $1,125,000, of which $55,475 was not disputed as due under the contract. Liaoyang Edible Oils alleged that these damages arose out of disputes related to the final pricing of the contract. On December 15, 2005 the arbitration panel rendered a decision, dismissing the claim for pricing damages, but also doing its own accounting under the contract, and making an award to claimant, including interest and arbitration costs, of approximately $275,000. A partial award of attorneys’ fees and costs was also rendered in the decision, although this amount is yet to be quantified. FGDI has made an accrual related to this claim, based on current estimates. On January 25, 2006, the claimant filed an appeal, which under the arbitration rules governing this dispute, is deemed to be a request for a new hearing. FGDI intends to defend the appeal and seek an order that the award be upheld in its entirety, except for the accounting amount and except that each party should be ordered to bear its own legal costs. In addition, FGDI has cross appealed as to the amount determined by the arbitration panel.

On December 9, 2004, Xiamen Zhonge Industry Co., Ltd. (Xiamen) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong. Xiamen’s claim alleges that FGDI breached its duty to accept pricing instructions provided by Xiamen to FGDI. FGDI submitted a statement of defense and counterclaim to which Xiamen replied with a modified claim. The matter is now fully submitted and is awaiting decision.

On May 23, 2006, a former customer, Watseka Farmers Grain Cooperative Company, filed an action in the United States District Court, Central District of Illinois seeking actual damages, interest, punitive damages and general relief relating to losses on allegedly improper speculative trades ordered by the former general manager of the customer in a commodity futures account at FCStone, LLC. The customer was placed under supervision by Illinois state authorities in May 2004, after examination revealed deficiencies in its financial reporting and condition, and its assets were subsequently sold. We intend to vigorously defend this claim.

Management is currently unable to predict the outcome of these claims and, except as noted above, believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5,Accounting for Contingencies, since the amount of any liability is neither probable nor reasonably estimable. As such, except as noted above, no amounts have been accrued in the financial statements. Management intends to vigorously defend these claims and will continue to monitor the result of arbitration and assess the need for future accruals.

15. ACCOUNTS RECEIVABLE

During 2006, an FGDI customer located in Alabama declared bankruptcy. Assets were sold through a court administered auction. FGDI is uncertain as to the amount of its receivable that it can collect from this customer and has reserved the entire balance receivable through a $1.1 million charge to bad debt expense in 2006.

An FGDI customer located in Mexico failed to make timely payment on accounts owed to the Company in the amount of $2.9 million. Although this customer has subsequently provided a mortgage on real estate located in Mexico, based on available information, it appears probable that the Company will be unable to collect the amount due. As a result, the Company’s loss from this default is approximately $2.9 million, which has been recognized as a charge to bad debt expense during fiscal 2005. During November 2004, an FGDI customer located in Mexico failed to make timely payment on its receivables. As a result, the Company’s loss from this

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

non payment default was $1.0 million. The Company recognized the loss through a $0.7 million charge to bad debt expense during fiscal 2005, in addition to $0.3 million previously recorded for this matter.

16. TRANSACTIONS WITH AFFILIATED COMPANIES

FCStone has entered into an agreement with FCTC to provide management services, including accounting, administrative, personnel, and office space. The Company receives a monthly fee plus 15% of net earnings of FCTC, which totaled approximately $207,000, $231,000, and $359,704 in 2004, 2005 and 2006, respectively.

The Company loaned monies to individuals who subsequently loaned the monies in the form of subordinated debt to FCStone, creating a financial interest which is required to enable FCStone to execute transactions through exchange membership seats held by these individuals on the Chicago Mercantile Exchange. At August 31, 2005 and 2006, $1,000,000 was outstanding under this arrangement, respectively.

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, commodity and accounts and note receivables, marketable securities and payables contained in the Consolidated Statements of Financial Condition approximates their fair values due to the short-term nature of these instruments. Short-term borrowings and obligations under capital lease have variable rates which approximate fair value.

The fair value estimates presented herein are based on pertinent information available to management as of August 31, 2005 and 2006. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may be different significantly from the amounts presented herein.

18. OPERATING SEGMENT INFORMATION

The Company reports its operating segments based on services provided to customers, which includes Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising, and Financial Services. The Commodity and Risk Management Services segment offers commodity services to its customers, with an emphasis on risk management using futures, options, and other derivative instruments. The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firms, fund operators, commodities traders and others. The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer in the United States and international markets. The Financial Services segment offers financing and facilitation for customers to carry grain and other commodities.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates individual segment performance based on segment income or loss defined as the respective segment’s portion of the total Company’s income before taxes and minority interest.

Reconciling Amounts represent the elimination of interest income and expense, and commission income and expense between segments. Such transactions are conducted at market prices to more accurately evaluate the profitability of the individual business segments. Additionally, certain assets consisting primarily of commodity deposits and accounts receivable, notes receivable, and amounts due from affiliates between segments have been eliminated.

F-28

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table represents the significant items by operating segment for the results of operations for the years ended August 31, 2004, 2005, and 2006, respectively:

	Commodity & Risk Management Services		Clearing & Execution Services		Grain Merchandising			Financial Services			Corporate & Other			Reconciling Amounts			Total
	(in thousands)
2004
Total revenues	$	156,122	$	40,484	$	1,426,846		$	2,517		$	80		$	(1,735	)	$	1,624,314
Interest revenues		1,345		1,412		68			1,519			10			(372	)		3,982
Interest expense		114		193		3,168			1,262			53			(372	)		4,418
Income (loss) before minority interest and income tax expense		7,907		3,359		2,230			(447	)		(4,029	)		—			9,020
Total assets		212,430		289,651		98,306			5,244			10,836			(12,640	)		603,827
2005
Total revenues	$	83,713	$	53,377	$	1,240,547		$	25,775		$	157		$	(1,722	)	$	1,401,847
Interest revenues		3,131		4,124		153			1,128			125			(484	)		8,177
Interest expense		73		337		2,849			937			234			(484	)		3,946
Income (loss) before minority interest and income tax expense		11,160		5,152		(2,037	)		556			(4,800	)		—			10,031
Total assets		356,341		380,422		80,569			28,554			8,887			(45,189	)		809,584
2006
Total revenues	$	91,970	$	79,948	$	1,079,828		$	45,905		$	(300	)	$	(2,546	)	$	1,294,805
Interest revenues		9,610		10,702		693			3,320			279			(1,430	)		23,174
Interest expense		155		426		3,344			2,716			494			(1,430	)		5,705
Income (loss) before minority interest and income tax expense		21,937		10,981		(430	)		(19	)		(7,938	)		—			24,531
Total assets		395,001		581,709		87,461			27,960			16,140			(51,064	)		1,057,207

A summary of the Company’s consolidated revenues by geographic area is presented below:

	Consolidated Revenues (1)(000’s)
	2004		2005		2006
United States	$	883,159	$	692,556	$	718,247
China		433,849		553,393		311,489
Japan (2)		90,009		—		35
Canada		79,874		59,868		74,419
Mexico		96,661		63,491		45,530
Other countries		40,762		32,539		145,085
Total	$	1,624,314	$	1,401,847	$	1,294,805

(1) Revenues are attributed to countries based on location of customer.

(2) In 2005 and 2006, no revenues from our grain merchandising segment were attributed to a customer located in Japan. As a result of a change in the location of the customer’s headquarters, the 2005 and 2006 revenues were attributed to the customer’s U.S. based affiliated entity.

F-29

Mitsubishi is a significant customer for grain sold by FGDI, accounting for 6%, 6%, and 8% of consolidated total revenues for the years ended August 31, 2004, 2005, and 2006, respectively.

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly data is set forth in the following table (in thousands):

	Quarter
	First		Second		Third		Fourth		Total
2005
Total revenues	$	445,489	$	346,090	$	315,370	$	294,898	$	1,401,847
Income (loss) before minority interest and income tax expense		1,572		3,222		3,552		1,685		10,031
Net income		930		1,746		2,226		1,678		6,580
2006
Total revenues	$	350,009	$	268,861	$	358,798	$	317,137	$	1,294,805
Income (loss) before minority interest and income tax expense		5,371		6,556		6,023		6,581		24,531
Net income		3,383		3,936		4,051		3,887		15,257

As a result of the deterioration of the financial statements of an unaffiliated equity investment, which included a going concern opinion, the Company recorded a loss of $0.6 million in the fourth quarter of fiscal 2006 related to this unaffiliated equity investment.

20. SUBSEQUENT EVENTS

On October 6, 2006, a commodity pool limited partnership, which maintained its commodity account with the Company and for which a subsidiary of the Company acted as general partner and commodity pool operator, was unable to meet a margin call from assets of the pool. The resulting liquidation of pool positions under continuing adverse market conditions resulted in a deficit account balance of approximately $1.5 million. The company is seeking recourse from the commodity trading advisor, which was a former introducing broker of the Company, but the amount of possible recovery, if any, is unknown at this time. The Company expects to take a charge against income in the first quarter of the fiscal year ending August 31, 2007.

On November 2, 2006, the Company loaned an additional $600,000 to Green Diesel to finance the expanded facility.

On November 9, 2006, the Company’s board of directors declared a dividend of $1.25 per share on the 4,845,736 shares outstanding. The stock record date for such dividend payment was November 9, 2006, and the payment date is December 20, 2006.

On November 9, 2006, the Company issued a notice of redemption of 27,463 shares of common stock held by Watseka Grain Cooperative Company pursuant to Article IV, Section 3 of the Amended and Restated Articles of Incorporation of the Company at a redemption price of $13.35 per share. The Company claims a lien in the approximate amount of $254,000 against such proceeds relating to deficit amounts due to the Company.

On November 20, 2006, the Company’s agreement with Deere Credit, related to the general corporate unsecured line of credit, was amended, increasing the available amount by $3,000,000 making a total loan commitment of $13,250,000, with all other terms of the agreement remaining the same. Additionally, FCStone’s agreement with Deere Credit, related to the unsecured subordinated debt line of credit, was amended, increasing the available amount by $5,000,000 making a total loan commitment of $12,000,000, with all other terms of the agreement remaining the same.

F-30

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENT OF FINANCIAL CONDITION

Parent Company Only

August 31, 2005 and 2006

(in thousands)

	2005			2006
ASSETS
Cash and cash equivalents	$	420		$	669
Accounts receivable		38			219
Notes receivable		1,250			1,325
Notes receivable—subsidiaries		1,000			3,500
Deferred income taxes		4,013			4,697
Investments in affiliates and others		54,865			69,332
	$	61,586		$	79,742
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable	$	25		$	75
Accrued expenses:
Accrued pension liability		5,965			2,074
Income taxes payable		480			1,555
Other		439			207
Notes payable		4,250			10,250
Total liabilities		11,159			14,161
Minority interest		755			607
Redeemable common stock held by Employee Stock Ownership Plan		4,487			6,079
Stockholders’ equity:
Common stock, no par value		21,524			21,747
Additional paid in capital		—			120
Accumulated other comprehensive loss		(4,555	)		(1,955	)
Retained earnings		32,703			45,062
		49,672			64,974
Less maximum cash obligation related to ESOP shares		(4,487	)		(6,079	)
Total stockholders’ equity		45,185			58,895
	$	61,586		$	79,742

S-1

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENT OF OPERATIONS

Parent Company Only

Years Ended August 31, 2004, 2005 and 2006

(in thousands)

	2004		2005			2006
Revenues:
Interest	$	10	$	129		$	283
Equity in earnings of affiliates		9,063		10,142			24,839
Total revenues		9,073		10,271			25,122
Costs and expenses:
Interest		53		234			494
Bank charges and miscellaneous		—		6			97
Total costs and expenses		53		240			591
Income before minority interest and income tax expense		9,020		10,031			24,531
Minority interest		576		(499	)		(226	)
Income before income tax expense		8,444		10,530			24,757
Income tax expense		2,030		3,950			9,500
Net income	$	6,414	$	6,580		$	15,257

S-2

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENTS OF CASH FLOWS

Parent Company Only

Years Ended August 31, 2004, 2005 and 2006

(in thousands)

	2004			2005			2006
Cash flows from operating activities:
Net income	$	6,414		$	6,580		$	15,257
Equity in earnings of affiliates		(9,108	)		(10,142	)		(24,839	)
Minority interest, net of distributions		380			(733	)		(226	)
Increase in deferred income taxes		(236	)		(450	)		(1,975	)
Increase in accounts receivable		(17	)		(21	)		(181	)
Increase in accrued expenses		—			—			120
Increase in accounts payables		15			10			50
(Decrease) increase in income taxes payable		(27	)		101			1,075
Net cash used in operating activities		(2,579	)		(4,655	)		(10,719	)
Cash flows from investing activities:
Distributions from affiliates		5,373			2,514			17,395
Capital contribution in affiliate		(2,100	)		(225	)		(5,190	)
Purchase of exchange membership and stock		—			—			(2,600	)
Proceeds from sale of exchange membership		—			—			613
Net cash provided by investing activities		3,273			2,289			10,218
Cash flows from financing activities:
Increase (reduction) in checks written in excess of bank balance		124			(124	)		—
Proceeds from issuance of common stock		1			1,744			—
Proceeds from issuance of redeemable common stock held by ESOP		—			4,487			223
Payment for redemption of stock		(1,437	)		(613	)		—
Payment of prior year patronage		(1,429	)		(1,869	)		—
Dividends paid		—			—			(2,898	)
(Issuance of) proceeds from repayment of notes receivable, net		(6,250	)		4,000			(2,575	)
Proceeds from (issuance of) notes payable, net		8,250			(4,000	)		6,000
Registration costs		—			(839	)		—
Net cash (used in) provided by financing activities		(741	)		2,786			750
Net (decrease) increase in cash and cash equivalents		(47	)		420			249
Cash and cash equivalents at beginning of year		47			—			420
Cash and cash equivalents at end of year	$	—		$	420		$	669
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	53		$	224		$	443
Income taxes		2,057			4,215			10,310

S-3

SCHEDULE II

FCSTONE GROUP, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

			Additions
Those reserves which are deducted in the Consolidated               Financial Statements from Receivables	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions			Balance at End of Period
Fiscal year ended August 31, 2004
Reserve for doubtful accounts	$	445	$	716	$	—	$	(191	)	$	970
Fiscal year ended August 31, 2005
Reserve for doubtful accounts	$	970	$	4,077	$	—	$	(4,122	)	$	925
Fiscal year ended August 31, 2006
Reserve for doubtful accounts	$	925	$	1,909	$	—	$	—		$	2,834

S-4

EXHIBIT INDEX

Exhibit No.	Description of Document
3.1	Certificate of Incorporation of FCStone Group, Inc. (as currently in effect) (2)
3.2	Bylaws of FCStone Group, Inc. (as currently in effect) (2)
4.3	FCStone Group, Inc. 2006 Equity Incentive Plan (3)
10.1	Employment Agreement, dated as of September 1, 2005, between FCStone, LLC, and Paul G. Anderson (4)
10.2	Employment Agreement, dated as of January 5, 2004, between FCStone Group, Inc., and Jeff Soman (2)
10.3	Employment Agreement, dated as of April 18, 1988, between Farmers Commodities Corporation and Robert V. Johnson (2)
10.4	Employment Agreement, dated as of May 9, 2003, between FCStone, LLC, and Steve Gutierrez (2)
10.5	Employment Agreement, dated as of July 8, 1996, among Farmers Commodities Corporation, Farmers Grain Dealers, Incorporated, and Steve Speck (2)
10.6	CEO Deferred Compensation Plan for Paul G. Anderson dated February 22, 2002 (2)
10.7	Farmers Commodities Corporation Supplemental Nonqualified Pension Plan (5)
10.8	Short-term Incentive Plan (5)
10.9	Long-term Incentive Plan (5)
10.10	FGDI Incentive Plan (6)
10.11	FCStone Group, Inc. Amended and Restated Mutual Commitment Compensation Plan (5)
10.12	Form of Director Indemnification Agreement (6)
10.13	Master Loan Agreement, dated November 3, 2003, between FCStone Group, Inc., and Deere Credit, Inc. (2)
10.14	Amended and Restated Unsecured Revolving Operating Note, dated May 19, 2006, between FCStone, LLC, and Deere Credit, Inc., due on March 1, 2007 (11)
10.15	Master Loan Agreement, dated April 15, 2002, between FCStone Financial, Inc., and Deere Credit, Inc. (2)
10.16	Limited Corporate Guaranty, dated April 16, 2002, between FCStone Financial, Inc., and Deere Credit, Inc. (2)
10.17	Amended and Restated Revolving Statused Operating Note, dated February 23, 2006, between FCStone Financial, Inc., and Deere Credit, Inc. (7)
10.18	Revolving Subordinated Loan Agreement, dated November 21, 2002, between FCStone, LLC, and Deere Credit, Inc. (2)
10.19	First Amendment to the Revolving Subordinated Loan Agreement, dated November 3, 2003, between FCStone, LLC, and Deere Credit, Inc. (2)
10.20	Second Amendment to the Revolving Subordinated Loan Agreement, dated February 28, 2005, between FCStone, LLC, and Deere Credit, Inc. (11)

Exhibit No.	Description of Document
10.21	Unsecured Revolving Subordinated Note, dated November 21, 2002, between FCStone, LLC, and Deere Credit, Inc., due on December 1, 2005 (2)
10.22	First Amendment to the Unsecured Revolving Subordinated Note, dated November 3, 2003, between FCStone, LLC, and Deere Credit, Inc. (2)
10.23	Change in Terms Agreement, dated February 28, 2005, between FCStone, LLC, and Deere Credit, Inc. (8)
10.24	Master Loan Agreement, dated February 15, 2001, between FCStone, LLC, and Deere Credit, Inc. (2)
10.25	Unsecured Demand Note, dated September 15, 2000, between FCStone, LLC, and Harris Trust Savings Bank (2)
10.26	Letter Agreement for $15 Million Credit Facility, dated March 5, 2003, between FCStone, LLC, and Harris Trust Savings Bank (2)
10.27	Master Loan Agreement dated February 28, 2003 between FCStone Financial, Inc., and CoBank ACB (9)
10.28	Guaranty of Payment, dated February 28, 2003, between FCStone Group, Inc., and CoBank ACB (9)
10.29	Revolving Credit, Term Loan and Security Agreement, dated March 28, 2006, by and between FGDI, LLC, and CoBank ACB, as lender and agent (7)
10.30	First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of May 31, 2006 between FGDI, LLC, and CoBank ACB, as lender and agent (10)
10.31	Cash Subordinated Loan Agreement, dated June 30, 2004, between FCStone, LLC, and Gerald Hirsch (5)
10.32	Amendment to Cash Subordinated Loan Agreement and Promissory Note, dated June 30, 2006, between FCStone, LLC, and Gerald Hirsch (12)
10.33	Cash Subordinated Loan Agreement, dated December 12, 2003 between FCStone, LLC, and William Shepard (5)
10.34	Amendment to Cash Subordinated Loan Agreement and Promissory Note, dated December 14, 2005 between FCStone, LLC, and William Shepard (12)
10.35	Trust Indenture for Industrial Revenue Bonds, dated December 1, 2003 (5)
10.36	Lease Agreement, dated December 1, 2002, between the Industrial Development Board of the City of Mobile, Alabama and FGDI, LLC (5)
10.37	Letter Agreement, dated March 31, 2004, between FCStone Merchant Services, LLC, and Fortis Capital Corp. for $20,000,000 credit facility (6)
10.38	Promissory Note ($20,000,000), dated May 10, 2004, between FCStone Merchant Services, LLC, and Fortis Capital Corp. (6)
10.39	Continuing Security Agreement between FCStone Merchant Services, LLC, and Fortis Capital Corp. (6)
10.40	Letter Agreement, dated February 17, 2004, between FCStone Merchant Services, LLC, and RZB Finance, LLC, for $5,000,000 credit facility (6)
10.41	General Security Agreement and Supplement, dated February 17, 2004, between FCStone Merchant Services, LLC, and RZB Finance, LLC (6)
10.42	Amended and Restated Promissory Note ($8,000,000), dated January 30, 2006, between FCStone Merchant Services, LLC, and RZB Finance, LLC (11)

Exhibit No.	Description of Document
10.43	Demand Note, dated November 23, 2004, between FCStone Merchant Services, LLC, and UFJ Bank, Limited (12)
10.44	Letter Agreement, dated December 1, 2004, between FCStone Merchant Services, LLC, and Standard Chartered Bank (12)
10.45	Promissory Note, dated December 1, 2004, between FCStone Merchant Services, LLC, and Standard Chartered Bank (12)
21.1	Subsidiaries of the Registrant (2)
23.1	Consent of KPMG LLP (1)
31.1	Certification of Paul G. Anderson, Chief Executive Officer, pursuant to Rule 13a-15(e) /15d-15(e). (1)
31.2	Certification of Robert V. Johnson, Chief Financial Officer, pursuant to Rule 13a-15(e) /15d-15(e). (1)
32.1	Certification of Paul G. Anderson, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
32.2	Certification of Robert V. Johnson, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

(1) Filed herewith.

(2) Previously filed as an exhibit to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on August 18, 2004.

(3) Previously filed as an exhibit to the Registration Statement on Form S-8, filed by FCStone Group, Inc., on June 12, 2006.

(4) Previously filed as an exhibit to the Current Report on Form 8-K filed by FCStone Group, Inc., on December 14, 2005.

(5) Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on December 9, 2004.

(6) Previously filed as an exhibit to Amendment No. 3 to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on December 30, 2004.

(7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ended February 28, 2006, filed by FCStone Group, Inc., on April 19, 2006.

(8) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ended February 28, 2005 filed by FCStone Group, Inc., on April 14, 2005.

(9) Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on October 6, 2004.

(10) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ended May 31, 2006, filed by FCStone Group, Inc., on July 17, 2006.

(11) Previously filed as an exhibit to the Registration Statement on Form S-1, filed by FCStone Group, Inc., on October 12, 2006.

(12) Previously filed as an exhibit to the Annual Report on 10-K, filed by FCStone Group, Inc., on November 29, 2006.