Annual Report 2010 Annual Report 2010 - NEX/media/Files/N/NEX/annual... · ICAP plc Annual Report...

for the year ended 31 March 2010

Annual Report 2010

ICAP plc2 Broadgate London EC2M 7UR United KingdomTelephone +44 20 7000 5000 Facsimile +44 20 7000 5975 Email [email protected] Website www.icap.comCompany number 3611426

ICAP plc Annual Report 2010

Inside this report 01 ICAP in ten 17 Business review 18 Group Chief Executive Officer’s review 24 Business review 30 Risk and control environment 43 Governance 44 Directors’ profiles 46 Chairman’s statement 47 Directors’ report 50 Corporate governance 55 Remuneration report 63 Independent auditors’ report 65 Financial statements 66 Financial statements 75 Notes to the financial statements 140 Index to the financial statements 141 Shareholder information 141 Information for shareholders 142 Definitions

01

Welcome to ICAP in

ICAP is the world’s premier voice and electronic interdealer broker and provider of post trade risk and information services.

In this section we provide a ten-point overview of ICAP, what we do and how we have performed.

ICAP in ten01 –

15Business review17 –

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02 ICAP in ten

Highlights

R Group revenue from continuing operations rose to £1,605 million with profit before tax1 of £333 million

R Electronic revenue of £252 million produced operating profit1 of £100 million

R Post trade risk and information revenue rose to £142 million and produced operating profit1 of £69 million

R Electronic broking and post trade risk and information contributed 48% of Group operating profit1

R Continued progress in new businesses during the period. However, expansion into full service agency cash equities in Europe and Asia Pacific failed to match up to our expectations and was closed; £18 million of post-tax losses have been recorded as discontinued operations

R Post-tax exceptional costs of £52 million, related to the costs of closing the European and Asia Pacific full service agency cash equities businesses and settling an SEC investigation

R On an underlying basis2 revenue fell by 6% and operating profit2 by 13%

R The Group’s operating profit1 margin was 22% (2009 – 23%), reflecting the early stage of some acquisitions and investments

R Free cash flow3 of £219 million (2009 – £296 million). Net debt4 of £148 million (31 March 2009 – net debt £126 million) after making acquisition related payments of £149 million and paying £92 million in dividends

R The directors recommend a final dividend per ICAP share of 12.44p, which will be paid on 20 August 2010. The full year dividend will be 17.55p compared with 17.05p per share in 2008/09

9 Read more on page 24

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03

FinancialSummary

2010 2009 Variance Continuing operations £m £m %

Revenue 1,605 1,585 1Operating expenses1 (1,270) (1,243) (2)Other income 19 23 (17)

Operating profit1 354 365 (3)Net finance costs (28) (24) (17)Associates (net of tax)1 7 9 (22)

Profit before tax1 333 350 (5)

Profit before tax – statutory3 247 285 (13)

Variance pence pence %

Dividend per share 17.55 17.05 3

Earnings per share total operations Basic 18.0 27.6 (35)Adjusted basic 32.3 34.1 (5)

Earnings per share continuing operationsAdjusted basic 35.1 34.7 1

Variance Total operations £m £m %

Net assets 1,215 1,140 7Free cash flow4 219 296 (26)Net debt5 (148) (126) (17)


Notes:1 From continuing operations excluding amortisation and

impairment of intangibles arising on consolidation and exceptional items.

2 From continuing operations excluding amortisation and impairment of intangibles arising on consolidation and exceptional items and adjusted to exclude the impact of FX.

3 From continuing operations. Total statutory profit after tax for the year of £116 million included a loss from discontinued operations and exceptional items after tax of £48 million.

4 Free cash flow is net cash flow from operating activities adjusted for capital expenditure and dividends received from associates and other investments.

5 Net debt is cash and cash equivalents less long-term and short-term borrowings and overdrafts.

Group revenue from continuing operations remained stable at £1,605 million and operating profit1 declined to £354 million, primarily as a result of investment in new businesses. However, ICAP has demonstrated that, as a result of investments made over a long period, its overall business is in good shape and is more broadly based than it has ever been. By following a clear growth and diversification strategy ICAP is well positioned to take advantage of any changes in the structure and regulation of the financial services industry.


04 ICAP in tenICAP in ten

What we do9 Read more

on page 24

ICAP is the world’s premier voice and electronic interdealer broker and provider of post trade risk and information services. The Group is active in the wholesale markets in interest rates, credit, commodities, FX, emerging markets and equity derivatives.

Customer ACustomer A is interested in

selling certain securities and contracts to dealer 1

Dealer 1Dealer 1 places a sell

order with ICAP

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05

Post trade riskICAP also provides a range of post trade risk services to help its customers reduce operational and systemic risk in their markets. This increases their capacity, reduces their costs and creates new trading opportunities, which in turn benefits ICAP. As regulatory and market demand for such products and services increases, ICAP expects this business to grow.

Electronic and voice brokingAn interdealer broker draws together willingness to buy and sell in wholesale markets. ICAP uses voice broking or electronic networks to bring these buyers and sellers together, facilitating price discovery and receiving a commission when a transaction is entered into. In many of the markets where ICAP operates, voice brokers help to create liquidity and facilitate the price discovery process. This is particularly important in non-standardised, bespoke markets where the number of parties willing to enter certain transactions may be limited. In more standardised markets with higher and more frequent participation, such as spot FX and government bonds, ICAP operates electronic broking platforms. ICAP’s combined solution offers access to markets across all asset classes and levels of liquidity.

Voice broking

Post trade risk

Electronic broking

Dealer 2The dealer who buys the securities will in turn sell them on to a customer

Customer BCustomer B buys the

securities from dealer 2


06 ICAP in ten

Our divisions Our business is managed across the following divisions:

R core voice broking (by geographic region)

R electronic broking

R post trade risk and information

R new businesses

Core voice broking Voice brokers help to create liquidity in wholesale markets by bringing together buyers and sellers, creating liquidity and easing the price discovery process. This is particularly important in non-standardised, bespoke markets as well as innovative new markets where there may be less liquidity. In challenging market conditions voice brokers offer a very valuable service to the dealer community.

Electronic broking When markets are more liquid and products more standardised, they are most efficiently traded on electronic broking platforms. ICAP offers a number of electronic broking platforms, the largest of which are the EBS platform for spot FX and the BrokerTec platform for fixed income products. ICAP also offers platforms for electronic broking of interest rate and credit default swaps. In addition to efficiency benefits for customers, electronic broking has many transparency and audit benefits, which are of particular interest to regulators. ICAP’s electronic broking networks are often integrated with our customers’ post trade networks.

Post trade risk and information Post trade risk and information services help customers reduce operational and systemic risk in their markets. This includes services such as portfolio reconciliation and compression, netting and aggregation services and information data services that offer regulators and market participants greater insight into the markets.

New businesses The breadth and diversity of ICAP’s business is one of the key drivers of its success. ICAP continues to expand and diversify through a series of investments, despite sometimes challenging conditions in many of these markets. This segment includes businesses that have been acquired or set up within the past two years. Examples of these businesses are shipping, equity derivatives, base metals and our investment in Brazil.

Diversity of our business

9 Read more about Voice broking on page 24

9 Read more about Electronic broking on page 25

9 Read more about Post trade risk and information on page 26

9 Read more about New businesses on page 27

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07Our key markets

ICAP is active in a broad range of markets, including interest rates, credit, commodities, FX, emerging markets and equity derivatives, and post trade risk and information services.

ICAP continues to have the potential for further growth and we have invested ahead of our competitors. Factors that support this growth include:

R instability in currencies, interest rate and credit markets leading to price volatility and forming the basis for further growth in interest rate and credit derivatives, FX, commodities and listed financial markets;

R demand for improved operational and capital efficiency for bank and hedge fund traders in these markets;

R use of derivatives to manage efficiently and hedge risk exposure to changes in interest rates and FX, commodity and other price fluctuations;

R continuing high levels of government and corporate bond issuance as structural change reducing bank lending to corporates;

R reallocation of capital to commoditised “flow” markets and the structural shift away from complex structured products;

R continuing regulatory pressure on financial market participants to overhaul OTC market infrastructure, reducing systemic and operational risk by improving back office procedures and reducing systemic and counterparty risk;

R clearing of OTC derivatives trades to reduce risk, improve market efficiency and reduce costs;

R increased political pressure for new regulations requiring more electronic trading, improved transparency and higher capital requirements for OTC trades that are not cleared; and

R continued liberalisation of emerging markets. Economic growth and increasing sophistication are driving growth in onshore and offshore interest rate, FX and credit markets in these countries.

Our geographic regions ICAP’s businesses are distributed across more than 70 locations in 32 countries worldwide with a strong presence in all major financial centres in EMEA, the Americas and Asia Pacific. Our largest offices are in the UK, the US and Brazil.

2009/10

Rates

100% = £1,605m

2005/06

100% = £919m

Revenue comparison from continuing operations by asset class

FX EquitiesEmerging markets Credit Commodities

9%

14%

11%

6%8%

52%

11%

13%

9%

10%

18%

39%


08 ICAP in ten

ICAP’s strategic goals are clear. We want to be:

R the leading global intermediary;

R the leading post trade risk provider; and

R the main infrastructure provider to the world’s wholesale financial markets.

We aim to have at least 35% of overall interdealer market revenues and to generate operating profit evenly distributed between voice broking, electronic broking and post trade risk and information.

There are three components to our strategy:

R the expansion of our leading voice broking business;

R the growth of our global electronic broking business both through increasing volumes of existing products and by developing new markets; and

R the development of our post trade risk and information businesses to provide innovative services that enable our customers to reduce their costs and risks and to increase their efficiency, return on capital and capacity to process trades.

Our strategic goals9 Read more

on page 19

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09

The charts below show a number of the key performance indicators which ICAP uses to measure the progress we are making towards our financial and strategic goals.

The breadth of ICAP’s business is a key driver of its success. We believe that the percentage of our revenue derived from businesses acquired or started during the previous two years is an important indicator of our commitment to new initiatives to diversify and grow the business. In our core voice broking division we consider revenue per voice broker a key performance indicator of our productivity. Technology spend as a percentage of revenue is a measure of our commitment to building and improving our competitiveness in electronic broking.How we

measure our progress9 Read more

on page 29

1 From continuing operations excluding amortisation and impairment of intangibles arising on consolidation and exceptional items.

2 Percentage of revenue generated from new business started or acquired during the preceding two years, previously three years and revised to more closely align the metric with the new business segment.

New business**2008

2009

2010

17%

14%

10%

2008

2009

2010

20%-22%

21%-23%

22%-24%

Operating profit*

Voice

2008

2009

2010

26%61%

17%24%59%

13%

19%29%52%

Share of the global financial market

Voice revenue per voice broker*2008

2009

2010

£498,000

£542,000

£544,000

Technology spend as percentage of revenue*2008

2009

2010

12%

11%

11%

Electronic Post trade risk and information

10


ICAP in ten

How we have performed9 Read more

on page 24

Core voice broking Revenue1 and operating profit1 from ICAP’s core voice broking businesses were slightly lower than in 2008/09 when the markets were exceptionally active. This was particularly the case in EMEA. Revenue1 and operating profit1 in the Americas increased slightly and profitability in Asia Pacific improved markedly.

After consecutive years of extremely strong growth and volatility, in 2009/10 the interest rate markets returned to more normal and stable trading conditions with lower levels of volatility in the markets. In EMEA and the Americas, revenue growth in the credit markets continued to be driven by corporate bond trading, offsetting slower activity levels in the credit default swap market.

The commodities division generated another year of good revenue growth in both EMEA and the Americas, driven primarily by oil, electricity, natural gas and coal. This division has generated positive revenue growth in each of the past four years.

Electronic broking Electronic broking had a resilient year in terms of revenue1 and its operating profit1 benefited from strong cost control. We have seen recovery in the electronic fixed income markets and, more recently, in the spot FX markets.

Customer activity has increased and traditional market players that were adversely affected by the dislocations in the markets are re-establishing themselves, joined by new market participants.

Post trade risk and information ICAP’s post trade risk and information division has developed well and in the first full financial year that the division has reported separately, it contributed 19% of ICAP’s operating profit1. As regulatory and market demand for systems and methodologies that reduce operational and systemic risk in the markets increases, ICAP expects the division to continue to increase its contribution.

Reset, the market leading expert for interest rate reset risk management, accounts for the largest proportion of our post trade risk and information revenue and operating profit. It has seen some slowdown in the second part of the year as short-term interest rates remain low and stable. ReMatch, the bulk risk mitigation service for credit derivative portfolios, launched in October 2009, is showing initial promise.

Key achievements 2009/10Restablished our domestic

Brazilian business;Rstrong performance from post

trade risk;Rcompleted the acquisition of

100% of TriOptima; andRextended the product coverage

on our electronic broking platforms to include broking credit derivatives in the US.

1 Continuing operations excluding amortisation and impairment of intangibles arising on consolidation and exceptional items.

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Traiana, the post trade netting and aggregation service, saw very strong growth. It has continued to build out its offering to both the buy and sell side, with increased volumes and a growing number of participants on the Harmony Network. An FX joint venture with settlement bank, CLS Group, is expected to reduce banks’ costs and processing burdens associated with high velocity trading by up to 90%.

In March 2010 we completed the acquisition of the 61.78% of the share capital of market infrastructure provider, TriOptima, we did not already own. TriOptima, whose services are aimed at reducing risk and helping financial institutions to manage their OTC derivative portfolios more efficiently, is performing well.

ICAP information collects data from ICAP’s global voice and electronic broking operations covering more than 32 countries from 50 locations in the three trading zones, EMEA, the Americas and Asia Pacific. This business has seen strong revenue and profit growth, driven by increased demand for independent trading data for regulatory purposes and the rise in algorithmic trading.

New businesses ICAP continues to expand and diversify its business through a series of investments. For 2009/10 the new business segment includes the Group’s investment in a number of new initiatives which have been started or acquired over the past two years. Despite recording an operating loss in 2009/10, many of these new businesses are expected to be profitable in the coming years. During the year the Group announced its decision to discontinue its European and Asia Pacific integrated full service agency cash equities business.

Market conditions in equity derivatives were more difficult than in recent years, but Link continued to hold its position as the leading global equity derivatives broker and the business continued to make a material profit contribution.

ICAP’s expansion into Brazil continues apace and has yielded good initial results in its first year of operation, despite showing an operating loss. Brazil is now ICAP’s third largest wholly-owned office by head count with more than 250 brokers and support staff.

In Shipping, the business made a small operating loss due to difficult market conditions. However, it is well positioned for an upturn in the shipping cycle. ICAP’s London Metal Exchange base metals broking business provided a strong performance.

Divisional performance

Voice broking

£1,036m

Electronic broking

£252m

Post trade risk and information

£142m

New businesses

£175m

Divisional performance revenue from continuing operations

12


ICAP in ten

A regulatory and reputational spotlight is being aimed at all financial services companies. The scale of ICAP means our profile is high and we must demonstrate leadership in setting and achieving the highest ethical and professional standards by our staff, management and directors. We are committed to strengthening our control environment, both geographically and across product lines and have continued to make substantial progress in the past year.

The directors believe that a sound control environment and robust risk management are fundamental to ICAP’s business. The significant risks of the Group are continually monitored, assessed and managed at the relevant level.

As a broker, intermediating flow between trading counterparties, the Group does not aim to take proprietary risk positions in any of its businesses and is not, by the nature of its activities, exposed to significant market or credit risk.

The principal risks that the Group faces have not changed during the year.

The Group continues to classify its exposures into eight risk categories: operational, regulatory and compliance, credit, liquidity, reputational, market, financial and strategic of which we consider the first two to be our principal risks.

ICAP’s risk management framework is built on four complementary pillars – risk governance, risk management, risk measurement and risk infrastructure. The Group is committed to building on its already strong control environment, both geographically and across product lines.

Managing risk9 Read more

on page 30

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The policy behind the executive directors’ remuneration is aligned with the interests of shareholders. Performance-related pay is the main component of overall remuneration.

The principles of the directors’ remuneration policy have been developed over a number of years to recognise and reward the substantial growth of the Group. The charts set out the performance-related and the share-based elements of the remuneration of the four executive directors.

How we are rewarded9 Read more

on page 56

Michael Spencer Group Chief Executive Officer

Performance-related pay

Matthew Lester Group Finance Director

John Nixon Chief Executive Officer ICAP Electronic Broking

Mark Yallop Group Chief Operating Officer

Fixed percentage Performance-related percentage

Michael Spencer Group Chief Executive Officer

Share-based remuneration

Matthew Lester Group Finance Director

John Nixon Chief Executive Officer ICAP Electronic Broking

Mark Yallop Group Chief Operating Officer

Cash percentage Share-based percentage


14 ICAP in ten

Board and management ICAP is managed by an experienced board of directors who are responsible for ICAP’s strategy and long-term business objectives, acquisitions and major investments.

The board also oversees ICAP’s risk management, control and compliance functions. There is a clear division between the roles and responsibilities of the Chairman and Group Chief Executive Officer. The Chairman is responsible for leadership of the board and ensuring effective communication with shareholders and the Group Chief Executive Officer is responsible for leading and managing the business.

A number of our non-executive directors are retiring in 2010/11. This creates an opportunity to refresh the board with relevant skills and experience for the current environment.

ICAP has built a very strong competitive position with a very capable management team, led by the Global Executive Management Group. This group consists of the four executive directors of ICAP and six members of senior management.

Our key resources

BoardNon-executive directors

Charles Gregson (Chairman) James McNulty William Nabarro John Sievwright

Global Executive Management GroupSenior management

David Casterton Gil Mandelzis Stephen McDermott Doug Rhoten Kim Rosenkilde David Rutter



Executive directors

Michael Spencer Matthew Lester John Nixon Mark Yallop

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Staff ICAP employs approximately 4,500 people worldwide. Of this number, more than 2,500 are brokers, sales and customer support staff and over 800 are employed in IT and the development of our electronic broking platforms.

As the Group has expanded and grown, ICAP has attracted people with a broader range of skills in both technology and in the original broking businesses.

Our brokers and their managers comprise the largest group of our staff. They are highly entrepreneurial, dynamic, team spirited individuals with extremely strong networking and interpersonal skills. Our technology professionals, sales, marketing and support staff also contribute greatly to our overall success.

Technology ICAP’s various businesses are leaders in the use of technology. During the year we spent 11% of our revenue from continuing operations on technology and our advances are key to the success, efficiency and responsiveness of our operating businesses.

We continue to achieve significant economies of scale by leveraging internally developed and externally acquired trading platforms in a global IT network of more than 800 IT professionals based in EMEA, the Americas and Asia Pacific.

ICAP’s strong technological capability ensures that not only can we meet the needs of our customers but also that we are able to anticipate their requirements in a rapidly changing business and regulatory environment.

Suppliers We rely on a number of key suppliers to help us carry out our business. We have put in place procedures to ensure that purchasing decisions balance cost against other factors including service quality, global reach and resilience.

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Business reviewIn this section we describe the main trends underlying the performance of the business and the principal risks and uncertainties facing the Group.18 Group Chief Executive Officer’s review 22Global Executive Management Group24Business review 24Results for 2010

24Divisional performance

28Technology

29Key performance indicators

30Risk and control environment

36Corporate and social responsibility

38Financial review


18 Group Chief Executive Officer’s review

As a result of investments made over a long period our overall business is in good shape. By following a clear growth and diversification strategy for several years ICAP is well positioned to take advantage of any changes in the structure and regulation of the financial services industry. We are concentrating this year on growing our business organically and working with our customers to expand the use of the market infrastructure our investment has developed. We have made a good start to the new financial year, with volatile conditions creating more active markets.

Michael SpencerICAP Group Chief Executive Officer

Governance

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Financial statements

65 – 140

Information for shareholders

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19Our goals are to be the leading global intermediary, the leading post trade risk services provider and the main infrastructure provider to the world’s wholesale financial markets. We aim to have at least 35% of overall interdealer market revenues and to generate operating profit* evenly distributed between voice broking, electronic broking and post trade risk and information. There are three components to our strategy:

Rthe expansion of our leading voice broking business;

Rthe growth of our global electronic broking business both through increasing volumes of existing products and by developing new markets; and

Rthe development of our post trade risk and information businesses to provide innovative services that enable our customers to reduce their costs and risks and to increase their efficiency, return on capital and capacity to process trades.

ICAP’s businesses are based fundamentally on networks that we develop and operate globally for the wholesale financial markets. We have successfully developed a business providing value added services to customers and then charging them when they complete their transactions using these networks. Building physical, global networks is technically challenging, time consuming and requires considerable customer co-operation. However, once a network is established there are significant economies of scale. In the broking businesses, as the number of buyers and sellers on a network increases, liquidity increases as prices tighten making the network more attractive to new users. In turn the network becomes more valuable as transaction volumes increase and new customers and products are added.

Delivering on our strategyWe have consolidated our position as a leading global intermediary in the wholesale financial markets by a clear margin. The Group has a good track record of building and growing our business over many years and we continue to believe that we can expand our businesses in emerging markets, credit, equity derivatives and commodities, including shipping markets. They present considerable structural and market share growth potential over the next three to five years.

In the core voice broking businesses the interest rate derivatives markets have been active on both sides of the Atlantic albeit at lower levels than the exceptionally busy markets during the previous year. The commodities markets have, in most instances, maintained the steady growth that we have seen for a number of years. In the credit markets, cash continued to be more active than derivatives. Most of the emerging markets in the Americas, Asia Pacific and Europe had an active end to the financial year.

Our investment in new voice broking businesses provided mixed performances this year. The expansion into full service agency cash equities in Europe and Asia Pacific failed to deliver the necessary returns. After a thorough review conducted in early 2010 we announced in March our decision to withdraw this full service offering. This was a very disappointing outcome and an important lesson.

Although our shipping business continues to make small losses we believe it is well positioned for the upturn in the shipping cycle. Our Brazilian businesses are continuing to increase revenue and market share and we expect them overall to reach break-even within the next financial year. We believe our equity derivatives businesses maintained market share in more difficult markets and our London Metal Exchange business continued to show steady

growth. ICAP’s intellectual property business, Ocean Tomo, will help us build a leading position in the global and intellectual property broking market.

Almost half of ICAP’s operating profit* is now derived from electronic broking and post trade risk and information.

Electronic volumes returned to more normal levels during 2009/10 but in the last quarter, driven primarily by greater customer risk tolerance, average daily volumes on our electronic broking networks, BrokerTec and EBS, increased by 24% compared with the previous year. Total average daily volumes in fixed income products on the BrokerTec platform (US Treasury products, US repo and EU repo) were $539 billion, an increase of 33% on the same period in 2009. Average daily volumes in spot FX on the EBS platform were $154 billion single count during the last quarter of 2009/10.

ICAP’s post trade risk and information businesses continue to perform strongly. The information business saw a healthy improvement in profit in 2009/10 driven by a continuing increase in demand for independent trading data to meet the enhanced risk management needs of our customers.

Traiana’s Harmony network FX processing service handled an average of 354,000 tickets per day in the last quarter of 2009/10, compared to 187,000 tickets per day in the corresponding quarter a year earlier. Traiana and State Street Bank have announced recently an agreement to combine State Street’s Global Trading Support Services (GTSS) with Traiana’s Harmony post trade services to create the comprehensive end-to-end post trade pre-settlement solution. The partnership increases Traiana’s Harmony network with the addition of over 200 asset managers, hedge funds and other institutional clients as well as custodian banks. We continue to invest most of the profit from this business into the development of additional applications for the Harmony network.

ReMatch, the bulk risk mitigation service for credit derivative portfolios, has made a good start. The basis risk management business, Reset saw slower markets due to the stability in short-term interest rates but the business and its prospects are sound.

Key achievements 2009/10Restablished our domestic Brazilian business;

Rstrong performance from post trade risk;

Rcompleted the acquisition of 100% of TriOptima; and

Rextended the product coverage on our electronic broking platforms to include broking credit derivatives in the US.

Strategic priorities for 2010/11Rcontinue investing in our target markets;

Rincrease returns in voice broking;

Rfurther expansion of post trade risk;

Rextend the new product coverage on our electronic broking platforms; and

Rgenerate superior EPS growth for our investors.

* From continuing operations excluding amortisation and impairment of intangibles arising on consolidation and exceptional items.

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Group Chief Executive Officer’s review continued

The acquisition of the remaining 61.78% of equity in TriOptima that ICAP did not already own, was completed at the end of the financial year. TriOptima operates a portfolio reconciliation service that currently handles 5.8 million trades representing over 75% of all non-cleared OTC derivative transactions globally. triReduce, the portfolio compression service, serves over 150 bank and non-bank subscribers worldwide and, in 2009, eliminated $40.3 trillion of outstanding derivatives contracts.

Opportunities in changing marketsThe very public political debate about strengthening financial regulation and the market infrastructure, particularly of OTC derivatives, is moving towards a conclusion in the major centres. Legislators, regulators and market participants all have their own demands.

Once legislation is in place, some of which may be this year, we expect new industry regulation and capital treatments to emerge. This includes proposals for international adoption of the new Basel III proposals for banks’ capital and liquidity requirements.

However, while the debate continues, 14 of the largest banks have made a number of commitments to global regulators that have and will continue to improve the market infrastructure even before legislation designed to reform OTC market structures has been finalised. These include increasing transparency through the use of global data repositories to address the needs of regulators for information about counterparty exposures and aggregated post trade data. TriOptima has been tasked with the development of the global trade repository for OTC interest rate derivatives and began publishing the first aggregated market data on 30 April 2010.

We also expect that the requirements for electronic trading systems in the OTC derivative markets will become clearer. We successfully launched electronic trading of credit derivatives in the US in 2010 and expect to launch electronic trading of interest rate derivatives by the end of 2010. Now that there is broad agreement on the benefits of introducing counterparty (CCP) clearing for standardised eligible transactions, regulators and risk and operations professionals have started to consider risks that cannot be removed or mitigated by CCP models, such as further order risks and complex and structured trades. In 2011 we anticipate the increased use of both more efficient bilateral collateralisation and CCPs and that these risk mitigation techniques will be applied to larger segments of the OTC markets.

We expect to expand our range of post trade processing and risk management services in this evolving regulatory environment. This is an attractive area in which to invest; we know the market well and are working alongside our key customers. The new services we are introducing employ intellectual rather than financial capital and our competition is fragmented.

RegulationAnother aspect is that a regulatory and reputational spotlight is being aimed at all financial services companies. During the past year the Group announced that it had reached a settlement with the SEC in respect of a multi-year, industry-wide investigation into the markets in certain fixed income securities, without admitting or denying allegations of any wrongdoing. The investigation concerned certain activities on ICAP Securities USA LLC’s

Business driversICAP continues to have the potential for further growth and we have invested ahead of our competitors. Factors that support this growth include:

Rinstability in currencies, interest rate and credit markets leading to price volatility and forming the basis for further growth in interest rate and credit derivatives, FX, commodities and listed financial markets;

Rdemand for improved operational and capital efficiency for bank and hedge fund traders in these markets;

Ruse of derivatives to manage efficiently and hedge risk exposure to changes in interest rates and FX, commodity and other price fluctuations;

Rcontinuing high levels of government and corporate bond issuance as structural change reduces bank lending to corporates;

Rreallocation of capital to commoditised “flow” markets and the structural shift away from complex structured products;

Rcontinuing regulatory pressure on financial market participants to overhaul OTC market infrastructure, reducing systemic and operational risk by improving back office procedures and reducing systemic and counterparty risk;

Rclearing of OTC derivatives trades to reduce risk, improve market efficiency and reduce costs;

Rincreased political pressure for new regulations requiring more electronic trading, improved transparency and higher capital requirements for OTC trades that are not cleared; and

Rcontinued liberalisation of emerging markets. Economic growth and increasing sophistication are driving growth in onshore and offshore interest rate, FX and credit markets in these countries.

Governance

43 – 63


65 – 140


141 – 143

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ICAP in ten01 –


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interdealer voice broking mortgage backed securities desk between 2005 and 2008. Since then ICAP Securities USA LLC has made substantial enhancements to the quality of its control environment.

The scale of the Group means our profile is high and we must demonstrate leadership in setting and achieving the highest ethical and professional standards by our staff, management and directors. We are committed to strengthening our strong control environment, both geographically and across product lines, and have continued to make substantial progress in the past year.

Competitive environmentWe continue to benefit from greater scale and broader diversity than our competitors. When assessing our available market size we include interdealer broking markets in interest rates, credit, commodities (including shipping), FX, equity derivatives and emerging markets – together with markets such as post trade risk. Markets such as global cash equities and financial futures remain separate from this broader definition, although ICAP does act as an executing broker in listed futures markets. By our estimates, overall industry revenue declined in 2009/10 by 12% to $11 billion. On this basis ICAP currently estimates its share of this market has grown to 22%–24%. Our strategy remains to increase this share to 35%.

In voice broking markets, competitive strength is a function of longstanding customer relationships, coherent asset class coverage, excellent communications and, increasingly, the speed and efficiency of straight-through-processing that is normally provided or facilitated by ICAP as a free ancillary service in conjunction with voice broking.

In electronic broking markets, our key competitive advantages are: depth of available liquidity, breadth of our electronic network and established customer connectivity. Our networks are also highly scalable, offering scope for functional enhancement and delivery of new innovative products.

Our competitors in post trade risk are widely dispersed and there are no other businesses with the combination of scale, technology or network connectivity covering the segments in which we operate. The Group’s post trade risk operations have significant growth capacity and can be leveraged across different asset classes to reduce further risk and improve operational efficiency in the wholesale financial markets.

Our people ICAP has a strong and successful culture which has a big impact on our ability to recruit and retain the highest quality staff. We have successfully expanded the business and once again we have seen a substantial growth in the number of ICAP staff. In fact during the past 10 years we have more than doubled our headcount to more than 4,500 while at the same time tripling our revenue. I would like to thank each of them for their contribution to ICAP’s continuing development during the past year. The combined efforts of our staff, our executive management team and my fellow directors have been truly inspiring.

Charity DayICAP’s Charity Day is a long established part of our culture. Over the past 17 years we have donated more than $119 million to charities proposed by our staff in each of our offices around the world. So far over 800 charities have benefited; they range from training centres for vulnerable children in Ghana to the search for an effective treatment for Alzheimer’s disease sufferers in London. In December 2009 we successfully raised $18.7 million (£11.5 million) in one day. It was only made possible by the amazing efforts of our customers, staff, suppliers and supporters who made Charity Day 2009 such a fantastic success.

DividendOur business continues to be highly cash generative and, although we have had one-off issues this year, our free cash flow was £219 million and we have a stable net debt position. As a result the business is well placed to continue to grow and develop. On this occasion the directors have based their dividend recommendation on the continuing adjusted EPS of 35.1p so that the total dividend for the year will be 17.55p compared with 17.05p per share in 2008/09: subject to shareholder approval a final dividend of 12.44p per share will be paid on 20 August 2010 to shareholders on the register on 23 July 2010.

Under the terms of the scrip dividend scheme that was introduced in 2009, shareholders will be offered the opportunity to elect to receive their cash dividend in shares. Further details will be announced on 28 July 2010.

Looking aheadICAP continues to benefit significantly from the investments made in previous years. We have learned some valuable lessons this past year but are very focused on building and developing the business, employing an even more disciplined approach to our new initiatives, a sound control environment and robust risk management.

Our overall business is in good shape and is more broadly based than it has ever been. By following a clear growth and diversification strategy our business is well positioned to take advantage of any changes in the structure and regulation of the financial services industry. We will concentrate this year on growing our business organically and will work with our customers to expand the use of the market infrastructure our investment has developed. We have made a good start to the new financial year, with volatile conditions creating more active markets.

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Global Executive Management Group (GEMG)

Michael SpencerGroup Chief Executive OfficerAged 54Michael was the founder of Intercapital in 1986 and became Chairman and Chief Executive of Intercapital in October 1998, following the Exco/Intercapital merger. He is deemed, with IPGL and its subsidiary INFBV, to have an interest of 17.39% in ICAP plc. IPGL’s other interests include City Index Limited and investments in a variety of other financial services companies. Michael was non-executive Chairman of Numis Corporation plc from April 2003 until May 2009. In February 2007, he was appointed Treasurer of the Conservative Party.

Mark YallopGroup Chief Operating OfficerAged 50As Group Chief Operating Officer, Mark is chairman of the group risk committee and is responsible for the post trade risk businesses. He had previously been Group Chief Operating Officer of Deutsche Bank Group, following many years’ involvement in trading in the derivatives, foreign exchange and cash markets. Mark was also a director of ISDA from 1996 to 1998.

Matthew LesterGroup Finance DirectorAged 46As Group Finance Director, Matthew is chairman of the finance committee and is responsible for a number of global support functions including finance, treasury, tax and company secretariat. Previously he worked for Diageo plc in a number of senior finance roles, including Group Financial Controller. Matthew, having qualified as a chartered accountant in 1987 with Arthur Andersen, moved to Kleinwort Benson, corporate finance, in 1988. He is a member of the main committee of The 100 Group of Finance Directors.

John NixonGroup Executive Director ICAP Americas Chief Executive Officer ICAP Electronic BrokingAged 55John is the executive director responsible for ICAP Americas and continues to be responsible for electronic broking. He has 30 years’ experience in the interdealer broking industry. Prior to his full-time involvement with ICAP, he was a non-executive director of ICAP plc from 1998 to 2002. John was previously Chief Executive Officer of Tullett and Tokyo Forex, now part of Tullett Prebon, where he worked from 1978 to 1997 in Toronto, London and New York.

The GEMG consists of the four executive directors of ICAP and six members of senior management.

The GEMG is the main strategic development forum for ICAP and meets six times a year to review business operations and performance. New business initiatives are approved by the GEMG which then reviews them on a regular basis.

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David CastertonChief Executive OfficerICAP London and EMEAAged 51David is responsible for all voice broking, technology and support functions in London and EMEA including ICAP Shipping. Between 1997 and 2008, he was responsible for ICAP’s interest rate business in London. Before joining ICAP in 1995 David was with MW Marshall and Guy Butler International.

Douglas Rhoten Chief Executive Officer ICAP AmericasAged 55Doug has over 29 years’ experience in the broking industry. He joined ICAP in 1977 and was appointed Chief Executive Officer for ICAP Americas in 2001 and is responsible for all voice broking technology and support functions in the US, the operations in Latin America, including Brazil, and ICAP’s intellectual property business. He is a founding member of The Green Exchange and former member of the US Federal Reserve Bank Foreign Exchange Committee.

Kim Rosenkilde Chief Executive Officer ICAP Asia PacificAged 44Kim is responsible for all voice broking, technology and support functions in Asia Pacific. Prior to joining ICAP, he held a number of positions at ABN Amro, most recently as Chief Executive Officer and country executive, Japan and head of global markets, North America. Kim has 23 years’ experience in fixed income and currency trading and risk management.

David Rutter Deputy Chief Executive Officer ICAP Electronic BrokingAged 47David was appointed to his current role in 2006 and is responsible for the day-to-day management of ICAP’s Electronic Broking’s global business. Prior to joining ICAP in 2003, David was a significant shareholder in Prebon. His tenure at Prebon began in 1988 and he served in various capacities including Global Chief Executive Officer of Prebon Energy and Managing Director of the Americas. David has served on several corporate boards of entities in the e-commerce field.

Gil Mandelzis Chief Executive Officer TraianaAged 42Gil co-founded Traiana in April 2000. Prior to Traiana, he worked in the M & A group at Deutsche Bank Alex Brown (formerly BT Wolfensohn) in New York, where Gil advised companies in the financial and technology sectors. Gil holds an MBA from INSEAD.

Stephen McDermott Chief Operating Officer ICAP AmericasAged 53Stephen was, until March 2008, an executive director of ICAP plc. In 2006 he oversaw the integration with EBS. He was appointed a director of the US operations in December 1995 having joined the foreign exchange business of Garban in 1986. Stephen is also a board member of Columbia University’s Executive Masters of Science and Technology Management.

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24


Business review

Results for 2010

The Group reports a profit from continuing operations of £333 million before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items; this represents a decrease of 5% over the prior year. On a statutory basis, profit from continuing operations before tax was £247 million, a decrease of 13% over the prior year; £18 million of post-tax losses have been recorded as discontinued operations.

ICAP reports on segments of its business in the same way externally as we manage and report the business internally. The major segments are the three regions of core voice broking, electronic broking, post trade risk and information and new businesses. New businesses, currently comprising new voice broking businesses, have been separated out to allow the appropriate focus given the very substantial investment that has been undertaken.

The majority of ICAP’s revenue is non-pound sterling denominated and has been affected positively by the strengthening of the dollar against pound sterling.

ICAP is active in a broad range of markets and the diversity of its market coverage is a key strength of the Group. The revenue and growth rates per market from our continuing operations are given below.Continuing operations Markets

2010 Revenue

£m

2009 Revenue

£m

Growth

%

Interest rates** 630 678 (7)FX 292 245 19Equities 163 184 (11)Emerging markets 141 127 11Credit 204 192 6Commodities 175 159 10Total 1,605 1,585 1

Divisional performanceCore voice broking

Revenue*

£m

Headline growth

%

Underlyinggrowth*

%

Operatingprofit*

%

Headline growth

%

Underlyinggrowth*

%

EMEA 506 (3) (7) 115 (15) (12)The Americas 434 3 (6) 80 5 (4)Asia Pacific 96 – (9) 1 n/m n/mTotal 1,036 – (6) 196 (6) (7)

Revenue* and operating profit* from ICAP’s core voice broking businesses were slightly lower than in 2008/09, when the markets were exceptionally active. Headline growth benefited from the impact of the weakening of pound sterling against the dollar and euro. This was particularly the case in EMEA. Revenue* and operating profit* in the Americas increased slightly, with an improvement in performance in the second half of 2009/10 and profitability in Asia Pacific improved. We saw some improvement in our core voice broking markets in the last quarter of the financial year as risk tolerance began to return to the market.

Interest ratesAfter consecutive years of extremely strong growth and volatility, in 2009/10 the interest rate markets returned to more normal and stable trading conditions with lower levels of volatility in the markets. Interest rate derivatives volumes increased steadily over the course of 2009/10 despite increasing uncertainty about future regulatory proposals from the US and European governments.

Traditional “flow” interest rate products, both cash and derivatives, remained active on both sides of the Atlantic, as high levels of corporate bond issuance around the world partially offset the lower volatility. Although interest rate swap volumes increased, revenues declined compared with the very strong revenues of 2008/09. This was due to a shift in the traded product mix towards lower revenue short date durations, particularly in the Americas.

In general risk appetite returned to the markets in the last quarter of 2009/10, with spreads narrowing correspondingly. There was a marked increase in trading activity towards the end of the financial year, particularly in the interest rate options market. However, this increased risk tolerance remains vulnerable to negative news flow, as highlighted by the recent European sovereign debt crisis.

* From continuing operations excluding amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying additionally excludes the impact of FX.

** Includes interest rates revenue from our electronic fixed income platform.

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ICAP in ten01 –


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Credit In EMEA and the Americas, revenue growth continued to be driven by corporate bond trading, offsetting slower activity levels in the credit default swap (CDS) market. Persistent uncertainty about the implementation and potential impact of proposed regulatory changes, including the introduction of central clearing, continued to weigh on the CDS market. However this accounts for a relatively small part of ICAP’s business.

After two very active years, however, the corporate bond market is also returning to more normal, stable trading conditions. This market benefited from the high levels of corporate bond issuance of the past year although reduced volatility and narrower spreads have slowed growth from the exceptionally high levels of 2008/09. In both the CDS and corporate bond market the focus has shifted from high yield to high grade credit as volatility decreased. Volumes in emerging market credit products have increased considerably as these markets recover from the financial crisis.

CommoditiesThe commodities division generated another year of good revenue growth in both EMEA and the Americas, driven primarily by oil, electricity, natural gas and coal. This division has generated positive revenue growth in each of the past four years. Increased confidence in economic recovery led to record trading volumes in natural gas and coal on both sides of the Atlantic. Electricity volumes were resilient in both North America and continental Europe. The emissions market had a stable year, although the lack of regulatory consensus at the 2009 United Nations Climate Change Conference and uncertainty about the market post 2012 weighed on volumes in the second half of the year.

ICAP continues to develop within the nascent iron ore sector. Although this business is at a very early stage, iron ore broking fits in well with ICAP’s existing coal and freight businesses, and leverages the extensive research strengths of ICAP Shipping. The expected changes to the annual benchmark pricing system for iron ore producers, and the move to a spot market, is likely to drive growth in this new marketplace. Soft commodities also performed well.

In February 2010, ICAP Energy announced the introduction, subject to regulatory approvals, of a combined voice-electronic broking service for OTC crude and fuel oil and middle distillate swaps. ICAP TrueQuote will offer OTC oil swap clients an innovative screen-supported voice hybrid service with execution and straight-through-processing to clearing.

Emerging marketsAfter two years of difficult conditions, emerging markets are benefiting from the increased risk appetite in the global markets and are showing signs of a recovery. Trading volumes in emerging market interest rate and FX products have increased considerably over the past year in both Europe and Latin America, particularly at the short end of the yield curve. Emerging market CDS are also showing signs of nascent recovery.

In Asia Pacific, after a subdued year, volumes traded through our joint venture in China with CFETS (China Foreign Exchange Trading System) have started to increase, particularly in the fixed income and forward FX businesses.

In Latin America, SIF ICAP Chile, our new joint venture, is developing well. ICAP continues to seek out opportunities for investment in Argentina, Chile, Colombia and Ecuador.

FXIn 2009/10 volatility began to return to the FX market, particularly in emerging market currencies. Turkish lira experienced notably high turnover and there were also increased volumes traded in the Russian rouble, Hungarian forint, Polish zloty, Gulf Co-operation Council currencies and the South African rand. Other African currencies are also developing well, with an upturn in business in Kenya and Ghana.

Electronic broking

£m

Headlinegrowth

%

Underlyinggrowth*

%

Revenue* 252 – (11)Operating profit* 100 14 (13)

Electronic broking had a resilient year in terms of revenue* and its operating profit* benefited from strong cost control.

After extraordinary growth followed by a very cautious trading environment post the recent financial crisis, our electronic broking volumes are returning to more normal levels. We have seen recovery in the electronic fixed income markets and, more recently, in the spot FX markets. Customer activity has increased and traditional market players that were adversely affected by the dislocations in the markets are re-establishing themselves, joined by new market participants.

Average daily electronic broking volumes for the EBS spot FX platform and the BrokerTec fixed income platform for the 12 months ended 31 March 2010 were $629.5 billion, down 12% from the previous 12 months. However, volumes reached $715.3 billion in March 2010, the highest levels since October 2008, with volumes showing a reasonably consistent rise over the past 12 months.

Fixed incomeFixed income trading on the BrokerTec platform has rebounded strongly and total average daily volumes in US Treasury products, US repo and EU repo, in the last quarter of 2009/10 were $539 billion, up 33% on the comparative period in 2009. US Treasury products continued to benefit from the high levels of issuance and US repo trading was stable. In November 2009, ICAP entered into a strategic partnership with Gre Tai Securities to provide onshore access to US government bond trading in Taiwan for the first time.

* From continuing operations excluding amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying additionally excludes the impact of FX.

26


TreasuryMyTreasury, the ICAP money market fund platform, recorded an increase of 600% in the number of users in the past year. 190 investor organisations are now able to trade 133 funds from 24 fund providers on MyTreasury.

Post trade risk and information

£m

Headlinegrowth

%

Underlyinggrowth*

%

Revenue* 142 15 5Operating profit* 69 13 2

ICAP’s post trade risk and information division developed well, in terms of both revenue and profit contribution and its range of products.

In the first full financial year that the division has reported separately it contributed 19% of ICAP’s operating profit*. As regulatory and market demand for systems and methodologies that reduce operational and systemic risk in the markets increases, ICAP expects the division to continue to increase its contribution.

Post trade riskICAP introduced a new management structure for post trade risk in February 2010. This new management structure comprises Traiana, TriOptima, ReMatch and Reset, and is headed by ICAP’s Group Chief Operating Officer. Reporting to him is an executive team that includes the management of each of the ICAP post trade risk businesses.

Reset, the market leading expert for interest rate reset risk management, accounts for the largest proportion of ICAP’s post trade risk revenue and operating profit*. Reset has seen some slowdown in the second part of the year as short-term interest rates remain low and stable.

ReMatch, the bulk risk mitigation service for credit derivative portfolios, launched in October 2009, is showing initial promise. ReMatch and Reset are both services designed to help customers mitigate non-strategic risk from OTC derivatives.

Traiana, the post trade netting and aggregation service, saw very strong growth. It has continued to build out its offering to both the buy and sell side, with increased volumes and a growing number of participants on the Harmony Network. The average daily volume processed by Harmony in the past financial year was 263,000 unique trades, up from 120,000 the year before. Traiana’s FX joint venture with settlement bank CLS Group began operations in January 2010 with eight banks participating. The service aims to alleviate the back office operational risk and costs created by automated trading in high velocity markets and reduce systemic risks. This joint venture, powered by technology provided by Traiana, reduces costs and processing burdens associated with high velocity trading by up to 90%.

Business reviewcontinued

In Europe, EU repo also rebounded very strongly. We have seen increased interest in BrokerTec from new market participants that are applying to be primary dealers or members of a central counterparty. During 2009/10 electronic European government bond trading saw an upward trend with spreads tightening and issuance remaining high. In October Finland became the sixth EU government to open its trading to competing platforms and, in March, the Belgian debt agency renewed BrokerTec’s term as an eligible platform for the Belgian market. Conditions remain positive and continue to support growing interest in electronic trading of government bonds. In addition, new counterparties are applying to become primary dealers in many European government bond markets, which will expand the client base on the BrokerTec platform and increase trading.

FXThe FX market overall is beginning to experience more volatility and the spot FX market volumes rose in the second half of the financial year. Average daily electronic broking volumes on the EBS platform in the last quarter of 2009/10 were $154 billion, an increase of 3% year-on-year. In this period, daily volumes on the EBS platform surpassed $200 billion six times.

The currency volumes traded on the EBS platform continued to become more diverse in the past year, with trading volumes increasing in Commonwealth currencies, particularly the Australian dollar, and the Mexican peso. Russia continues to develop, with a significant increase in trading in the Russian rouble and in the number of active local and international banks.

EBS Prime has expanded in the past year, with the addition of BNP Paribas and Morgan Stanley, bringing the total of prime banks to 20. EBS Prime now accounts for approximately 39% of total EBS volumes.

Non-deliverable forwards (NDFs) in Asia Pacific have performed strongly, particularly the Korean, Malaysian and Indian currencies, as emerging Asian currencies became more buoyant. Electronic broking of NDFs also gained momentum in Latin American currencies.

In December, ICAP launched Kenyan shilling currency pairs on the EBS platform and there has been active trading from both local and international banks.

CreditThe CDS market continues to wait for the outcome of regulatory proposals on CDS clearing and electronic trading and, as such, trading conditions have been quieter. As the provider of two electronic trading solutions for the CDS market in Europe and the US, ICAP Credit and BrokerTec Credit, ICAP expects to benefit in the long term from the regulatory proposals currently being debated in Europe and the US.

* From continuing operation excluding amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying additionally excludes the impact of FX.

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ICAP in ten01 –


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In March 2010 ICAP completed the acquisition of the 61.78% of the share capital it did not already own in market infrastructure provider TriOptima for an initial cash consideration of Swedish krona (SEK) 1,288 million (£119 million), inclusive of a deferred consideration payment of SEK 72 million (£7 million), financed from ICAP’s existing debt facilities. The acquisition of TriOptima at the end of the financial year will significantly increase the scale of these businesses in 2010/11.

TriOptima’s services, aimed at reducing risk and helping financial institutions to manage their OTC derivative portfolios more efficiently, are performing well. In 2009, TriOptima’s portfolio reconciliation service triResolve included 5.8 million trades across all asset classes and product structures, representing over 75% of all non-cleared OTC derivative transactions globally. triReduce, TriOptima’s portfolio compression service, eliminated $14.5 trillion of outstanding credit default swap and $25.8 trillion of interest rate swap notional value.

In October 2009, TriOptima was selected by the International Swaps and Derivatives Association (ISDA) to operate the first central trade repository for interest rate swaps, collecting data initially from the G-14** financial institutions for all their interest rate swap trades. This service went live on 15 January 2010 providing relevant banking supervisors with the information submitted by the G-14** financial institutions.

In February 2010, ICAP also acquired a minority interest in the automated collateral management service provider AcadiaSoft.

InformationICAP information collects data from ICAP’s global voice and electronic broking operations covering more than 32 countries from 50 locations in the three key trading zones. This part of the post trade risk and information division has seen strong revenue and profit growth, driven by increased demand for independent trading data for regulatory purposes and the rise in algorithmic trading. The business packages and distributes real-time, end-of-day and historical data and has distribution relationships globally with risk management, analytics and global data vendors. ICAP has been a significant driving force behind reference data for key OTC markets. In 2009, ICAP launched ICAP FIX, a comprehensive data service providing accurate and verifiable marks across an extensive range of ICAP market data. ICAP FIX can be used as reference and validation data for product and credit control, risk management and mark-to-market of positions.

New businesses

2010£m

2009£m

Revenue 175 170Operating profit* (11) 7

ICAP continues to expand and diversify its business through a series of investments despite a challenging year in some of these markets. For 2009/10 the new business segment included the Group’s investment in a number of new initiatives which have been started or acquired over the past two years. These include Link (equity derivatives), Arkhe (emerging markets), ICAP Shipping, LME (base metals) and Ocean Tomo (intellectual property).

This segment is reviewed at the start of each year and comparatives restated to reflect any reclassifications. It is anticipated that Link and ICAP Shipping, both of which have been owned by the Group for two years, will be reported in the core voice segment from 2010/11. TriOptima, a business in which the Group has owned a 38.22% shareholding for a number of years, will be reported in post trade risk and information in 2010/11.

Equity derivativesIn equity derivatives, the combination of low market volatility, falling commission rates and increased competition created difficult market conditions. In spite of these factors, ICAP, through its subsidiary Link, continued to hold its position as the leading equity derivatives broker and the business continued to make a material profit contribution. We saw some confidence returning to single stock and emerging market equity derivatives towards the end of the financial year.

Emerging marketsICAP’s expansion into Brazil was driven by the structural shift in the Brazilian financial markets and increased onshore trading of domestic products. We anticipate that the combination of further bank consolidation and the increasing internationalisation of Brazilian banking will lead to more mature markets. This expansion continues apace and has yielded good initial results in its first year of operation, despite showing an operating loss.

ICAP’s broking activity on BM&F Bovespa has grown in market share and rank, with increasing participation from local and international market participants expected to drive further growth in this market. BMF Spot FX and swap volumes in particular have been strong and local bond trading in the region has also exceeded expectations. ICAP’s Bovespa broking continues to increase revenue and market share. In the Brazilian equity market, we experienced sharp and robust growth, despite very competitive market conditions, resulting in a top 20 market position out of a total competitive field of 90 broking organisations in less than one year. ICAP’s retail offering for Brazilian equities, MYCAP, continues to gain traction, with almost 6,000 new accounts.

Following the acquisition of Arkhe, the leading independent broker in Brazil, in July 2009, Brazil is now ICAP’s third largest wholly-owned office with more than 250 brokers and support staff.


** The G-14 financial institutions include Bank of America-Merrill Lynch, Barclays Capital, BNP Paribas, Citi, Credit Suisse, Deutsche Bank AG, Goldman Sachs, HSBC Group, JP Morgan, Morgan Stanley, The Royal Bank of Scotland Group, Societe Generale, UBS AG, Wachovia Bank, N.A.

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TechnologyICAP’s various businesses are leaders in the use of technology. During 2009/10 we spent 11% of our revenue on technology and our advances are key to the success, efficiency and responsiveness of our operating businesses.

For our electronic broking business, our technology group not only provides fixed income and FX matching engines but maintains extensive networks connecting us to our customer firms and to individual traders worldwide.

In voice broking, we also make significant investment in technology to support efficient interaction with our customers. We use technology for the distribution of prices both internally and to our customers; for hybrid trading systems; for straight-through-processing; for risk management; and for clearing and settlement.

Similarly, technology is the basis of our post trade risk and information business. Each business has its own independent development teams that are at the heart of the diverse range of services provided to their customers.

We continue to achieve significant economies of scale by leveraging internally developed and externally acquired trading platforms in a global IT network of more than 800 IT professionals based in EMEA, the Americas and Asia Pacific.

ICAP’s strong technological capability ensures that not only can we meet the needs of our customers but also that we are able to anticipate their requirements in a rapidly changing business and regulatory environment.


ShippingThe year was marked by a 40% fall in the Baltic Dry Index, a 50% drop in rates for crude oil tankers and a 61% reduction in investment in new vessels and, as a result, the business made a small operating loss. However, ICAP Shipping is well positioned for the upturn in the shipping cycle. We believe that China and India will continue to drive demand for shipping services. This belief was reinforced in the latter part of the financial year, resulting in improved brokerage rates.

Base metalsICAP’s London Metal Exchange base metals broking business continued to show steady growth and has expanded during the past year.

Intellectual propertyIn June 2009 we acquired the transactions division of Ocean Tomo LLC, the leading Intellectual Capital Merchant Banc® company for an initial consideration of $10 million at closing, comprising $5 million in cash and $5 million of restricted ICAP plc shares. The combination of ICAP’s existing successful patent brokerage business and the Ocean Tomo brand will help us build a leading position in the global patent and intellectual property broking market.

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Key performance indicatorsThis section describes the key performance indicators we use to measure the progress we are making towards our financial and strategic goals. We aim to be the leading global intermediary and the leading post trade risk provider in our markets, with operating profit* that is evenly distributed between voice broking, electronic broking and post trade risk and information. In prior years, ICAP aimed to generate 50% of its profit from electronic broking. This change of strategic goal reflects the increasing importance of post trade risk and information to our business, driven by increased regulatory demand for such services.

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In the past financial year, ICAP estimates its share of its overall available market, excluding global cash and equities and listed futures and including shipping, post trade risk and information, increased to 22%-24% from 21%-23% in the previous year. By our estimates, the size of ICAP’s total available market was $11 billion.

ICAP aims to have a split of operating profit* that is evenly distributed between its voice broking, electronic broking and post trade risk and information businesses. In 2009/10, 52% was derived from voice broking, 29% from electronic broking and 19% from post trade risk and information.

Innovation is a key driver of ICAP’s success. In order to measure our performance in this area, we previously measured the percentage of our revenue derived from businesses acquired or started during the previous three years. However, for 2009/10 we measured performance over the past two years to more closely align the metric with our new business segment. As anticipated, in 2009/10 this key performance indicator showed a marked decline from 14% to 10%, as EBS no longer fell into this category. We expect this key performance indicator to decline further in 2010/11 despite growth in new business initiatives, as it is anticipated that Link and ICAP Shipping, both of which have been owned by the Group for two years, will be reported in the core voice broking segment from 2010/11.

For 2009/10 the key performance indicator for voice revenue per voice broker was flat compared to the previous year as a result of the investment in new businesses, in particular Brazil. As the new businesses develop we expect to see a material improvement in this performance indicator.

Overall staff compensation as a proportion of revenue remained flat at 59%. The increase in the proportion of non-voice broking business reduces this percentage. However, in 2009/10, this has been offset by the impact of investment in new voice business where, initially, staff compensation is a higher percentage of revenue.

ICAP is a network business and, as a provider of some of the world’s leading electronic broking platforms, our investment in technology is crucial to our ability to anticipate and meet our customers’ needs. To monitor our progress in this area ICAP measures the percentage of revenue spent on technology which at 11% remained unchanged from the previous year.

New business**2008

2009

2010

17%

14%

10%

2008

2009

2010

20%-22%

21%-23%

22%-24%

Operating profit*

Voice

2008

2009

2010

26%61%

17%24%59%

13%

19%29%52%

Share of the global financial market

Voice revenue per voice broker*2008

2009

2010

£498,000

£542,000

544,000

Staff compensation as percentage of revenue*2008

2009

2010

56%

59%

59%

Technology spend as a percentage of revenue*2008

2009

2010

12%

11%

11%

Electronic Post trade risk and information


** Percentage of revenue generated from new businesses started or acquired during the preceding two years.

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Risk frameworkThe Group-wide risk management framework of ICAP is built on four complementary pillars: risk governance, risk management, risk measurement and risk infrastructure. The Group aims to apply industry best practices across all aspects of its risk framework.

The Group is committed to building on its already strong control environment, both geographically and across product lines. To better align its risk capabilities with its strategic objectives, the Group has made substantial progress in the past year by:

R expanding the reach and influence of the risk management function and increasingly embedding its risk management approach in all business decision-making processes;

R reinforcing the discipline applied to new business approvals;

R tightening the relationships and improving the communication flow between the Group’s infrastructure functions;

R improving risk monitoring systems and reporting infrastructure in particular those relating to liquidity risk; and

R articulating its risk appetite in direct relation to the significant risks of the Group at a more granular level.

Risk governance and the boardThe board is responsible for setting the overall risk strategy and risk appetite of the Group. During the year the scope of the audit committee was broadened to include a more systematic and regular review of the risks facing the Group and it was in consequence renamed the audit and risk committee.

The audit and risk committee is also responsible for approving the appointment, dismissal and compensation of the global head of risk, thereby reinforcing the independence of the risk function.

The audit and risk committee has delegated the day-to-day risk management of the Group to an executive group risk committee which meets at least six times a year. Details of the committee’s responsibilities are shown on page 53.

The co-ordination of the Group’s risk activities is undertaken by the group risk committee. All of the divisional chief executive officers are members as are the Group Chief Operating Officer, the Group Finance Director and the global head of risk. This committee reviews the environment and risk indicators to monitor their status and assess the appropriateness and effectiveness of the Group’s risk management. As required, new or revised group policies are developed and approved by this committee.


Risk and control environment: managing risk and enforcing complianceThe directors believe that a sound control environment and robust risk management are fundamental to ICAP’s business. The significant risks of the Group are continually monitored, assessed and managed at the relevant level.Risk environmentThe principal risks that the Group faces have not changed during the year.

The Group continues to classify its exposures into eight risk categories: operational, regulatory and compliance, credit, liquidity, reputational, market, financial and strategic. Of these, it considers operational and regulatory and compliance to be the principal risks. The Group constantly seeks to improve the maturity, robustness and sustainability of its risk management framework and to promote enhanced risk management discipline across all its businesses and supporting functions.

The Group does not aim to take proprietary risk positions in any of its businesses and is not, by the nature of its activities, exposed to significant market or credit risk.

It is exposed to the credit of its customers for the payment of invoiced commissions and other fees, and to the performance of its customers where the Group acts as matched broker between buyers and sellers or as exchange broker.

The Group is involved in the execution, processing and, in limited cases, clearing of large numbers of transactions and is therefore exposed to operational risk. The Group is also dependent on its credibility and reputation with its customers as a provider of financial services and is therefore exposed to regulatory and reputational risks.

The Group anticipates a tougher prudential, supervisory and regulatory framework and increased activity by regulators globally in the future and is adjusting its compliance and risk efforts accordingly. Although much of the recent scrutiny has been aimed purely at banks, a more active approach by regulators to other parts of the wholesale financial services industry is likely in future.

Longer term, the remaining uncertainties in the proposed legislative and regulatory changes, and their impact on the industry’s macro-structure could present a threat to the Group’s business, making it more difficult to expand into new markets and services, and could limit its flexibility regarding capital structure.

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Operational riskOperational risk comprises a diverse range of risk events including both direct and indirect losses from inadequate or failed internal processes, actions or omissions by people, systems failure and losses caused by external events. It represents a significant source of potential unexpected losses for the Group. Examples of such losses include:

R significant and extended failure of IT systems and applications;

R breakdown of information security, including network intrusion, breach of network gateways or security systems failure;

R project risk in relation to critical IT development;

R the loss of key members of staff;

R broker errors;

R failure of external settlement/clearing systems;

R failure or disruption of operational or businesses process flow;

R natural or man-made business disruptions; and

R the introduction of new products and markets and their related tax, legal, accounting, regulatory, settlement and technology issues.

Significant operational risks and their controls are continually reviewed and assessed using a variety of tools including risk control self assessments, key risk indicators and operational process maps. Through these measures, corrective steps are taken to reduce the probability of operational risks occurring and to mitigate their impact in the event they do occur.

Many of the Group’s activities are dependent on the integrity and robustness of its information technology and operational systems and significant resources are devoted to protecting the resilience of these systems. This includes formal business continuity plans and appropriate remote data back-up and disaster recovery facilities for each of our key locations. Business continuity for our core activities is tested periodically to maintain effectiveness.

Regulatory and compliance riskThis category of risk covers changes in the regulatory environment that impact the Group’s strategic objectives or business methodology and the risk of failure by the Group to comply with all applicable regulations.

The risk function reports to the Group Chief Operating Officer and is accountable for managing the risk framework of the Group across all ICAP’s entities and geographies.

During the year regional risk committees have been established in EMEA, the Americas and Asia Pacific. These committees are responsible for supervising overall risk levels in their respective regions and act as the interface between front office management and the group risk function.

Risk appetiteRisk appetite is the overall broad-based amount of risk that the Group is willing to accept in pursuit of its strategic and financial objectives.

The over-arching risk appetite of the Group is set in terms of four objectives: to maintain at all times an investment grade debt credit rating at the corporate level; to maintain at all times a liquidity cushion of at least $250 million; to maintain at all times capital in excess of the minimum regulatory requirements at the subsidiary level; and to operate the business within pre-agreed loss constraints.

At an operational level, each business head is required to operate within credit and liquidity limits and is held accountable for managing overall risk within his business area at levels which in aggregate reflect the Group’s overall risk appetite.

The Group regularly examines events that could seriously reduce earnings, impair its liquidity position or create legal, regulatory or reputational damage and takes appropriate actions to mitigate risk where the scenario is likely to result in an outcome which is incompatible with the Group’s appetite for risk.

Risk managementFront line management and assuranceAcross the Group, front office management is responsible for all control-related business issues and have full accountability for the management of the risks in their businesses, within limits and the control environment set by the Group. Staff and managers at all levels are required to take a prudent approach to risk taking and to continuously review their control environment.

The Group’s independent control functions (risk, compliance, legal and internal audit) are responsible for ensuring that the control environment is able to identify and escalate independently to senior management the Group’s key risks and that risk mitigating steps are taken where appropriate.

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Credit riskThe Group is exposed to credit risk in the event of non-performance by counterparties to its agency and matched principal broking, post trade, risk mitigation and information businesses and in its treasury operations.

Processes and controls are in place to limit and monitor the Group’s exposures to any of its trading partners or to concentrations of clients. In particular group risk management continuously evaluates the financial soundness, liquidity and solvency of ICAP’s counterparties and sets global limits (and where appropriate regional and other sub-limits) for each counterparty based on internal ratings in order to limit the potential loss which the Group could suffer as a result of a counterparty default. Where appropriate, country limits are also applied to limit the exposure of the Group to that country.

In name give-up transactions, ICAP’s role as broker is to bring together buyers and sellers and, where appropriate, to assist in the negotiation of the price and other material terms of the transaction in return for a commission. At the point at which the parties agree to terms, ICAP leaves the buyer and the seller to clear and settle the transaction directly with each other through the appropriate market mechanism. ICAP’s credit risk in the name give-up broking business and the post trade risk and information businesses is limited to the (potential) non-recovery of commission/fee income earned for arranging a transaction or providing information or a post trade or risk mitigation service. This risk is monitored by regional accounts’ receivable teams.

In certain markets, ICAP facilitates its clients by acting as the executing broker of exchange products. In these transactions, ICAP executes the client order on the exchange as principal and then novates the trade to the underlying clients’ respective clearing broker for settlement. In the vast majority of cases such trades are given up intra day, usually within a few minutes. In circumstances where novation is delayed, ICAP is left with a position facing the relevant exchange clearing house and, until subsequent give-up is achieved, may be required, in line with clearing house rules, to post margin. ICAP maintains liquidity to manage these short-term requirements.

In contrast to name give-up transactions, matched principal transactions involve ICAP acting as settlement counterparty for identified buyers and sellers in matching, in whole or in part, reciprocal back-to-back trades. In such cases the Group is also exposed to the risk of mismatches and errors and outstanding unmatched positions are monitored and liquidated. To mitigate the potential credit risk implicit in matched principal transactions, ICAP applies a disciplined approach to new client approval, undertakes transactions on a delivery-versus-payment basis and, through the group risk function, monitors limits and their utilisation on a global basis. Any exceptions to this are approved prior to the transaction taking place and are reported to the group risk committee. In US Treasuries ICAP is a FICC netting member, in order to facilitate its customers access to clearing, and as such is subject to margin requirements even across matched buy and sell positions.


Regulatory riskRegulatory risk is the risk of either financial loss or opportunity cost arising from failure to meet the requirements of the Group’s regulators or to anticipate the impact that legislation has on the markets in which the Group carries out its business.

Regulators worldwide are under substantially greater pressure to increase both active day-to-day level scrutiny of market participants and macro-prudential oversight of banks and structure of markets. Further, the effect of the huge market dislocations during the recent financial crisis has been to reveal the conduct, or misconduct, of businesses, such as the allegations levelled at certain financial firms and their executives.

Compliance riskCompliance risk is the risk that the Group fails to adhere to the relevant rules and regulations that apply to its business.

The ICAP Group is lead-supervised by the FSA and is required to meet the systems and controls requirements of the CRD. It continually reviews these and, where necessary, takes action to ensure compliance. In its 2010/11 business plan, the FSA has announced plans to adopt a more outcomes-focused approach to supervision and will achieve this in various ways including more intensive reviews of prudential returns and control systems as well as more frequent visits and meetings with senior management.

In the US, the Group’s activities are primarily regulated by FINRA and the SEC. In December 2009 the Group announced that one of its US subsidiaries, ICAP Securities USA LLC, had reached a settlement with the SEC in respect of a multi-year, industry-wide investigation into the markets in certain fixed income securities, without admitting or denying allegations of any wrongdoing.

ICAP Securities USA LLC has made substantial enhancements to the quality of its control environment over the period. These include greater formalisation of its broking practices, enhanced operational, risk and compliance controls, improved training and monitoring programmes, revised policies and procedures, and the recruitment of additional experienced managers in various control roles.

The Group’s operations in other countries are subject to relevant local regulatory requirements. Adherence to these regulations is monitored via the group general counsel who reports regularly to the board.

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Reputational riskICAP relies on a reputation for the highest integrity in all its activities both in order to maintain its existing business and to pursue its strategies for growth and new business development. A number of initiatives are dedicated to the avoidance of reputational damage by ensuring ethical and transparent corporate behaviour, fair and consistent conduct of business and corporate and social responsibility. These initiatives include policies and procedures for the management of conflicts of interest, anti-money laundering and data security. These processes are embedded in the day-to-day management of the Group through education, training and Group policies and delegated authorities.

Inevitably, despite these specific steps taken by the Group, ICAP remains exposed to the general perception of the financial industry. In times of market and regulatory uncertainty, a single large negative event in the wholesale financial markets may be widely advertised and commented on and, as a result, create through “reputational contagion” the impression of wider operational or organisational deficiencies in the industry. ICAP is well aware of this situation, routinely monitors events at other companies and regularly upgrades its preparedness.

Market riskICAP aims not to be exposed to any transaction-related market risk. As a result, however, of providing its clients with matched principal brokerage, it can become exposed to a variety of market risks including price, interest rates and FX.

The Group’s matched principal brokerage business involves ICAP acting as counterparty for identified buyers and sellers by matching, in whole or in part, reciprocal back-to-back trades. In order to facilitate customer transactions and provide liquidity, the Group may, however, participate in certain marketplaces by posting quotations. The act of posting quotations in pursuit of customer orders can result in ICAP becoming principal to an unmatched trade. In such situations, or where one or both counterparties in an OTC matched principal transaction fail to fulfil their obligations (for example an unsettled transaction) or through trade mismatches or errors, ICAP is exposed to market risk. In these circumstances, ICAP’s policies and procedures require the liquidation or hedging and liquidation of these principal positions as soon as reasonably practicable.

A similar risk exists for exchange traded transactions in which ICAP facilitates client orders. While trades are normally taken up by the underlying clients’ clearing brokers within a few minutes, if take-up is delayed or ultimately does not happen, ICAP is left with a position facing the exchange and is exposed to short-term price movements in the underlying asset temporarily held by the Group. Policies and procedures are in place to reduce the likelihood of such trade mismatches or failed give-ups and, in the event that they arise, the Group’s policy is to liquidate these principal positions as soon as reasonably practicable.

In certain parts of its businesses, the Group, acting in its interdealer broker capacity, occasionally engages in complex (and sometimes very substantial) structured matched principal transactions in order to execute orders placed by its highly-rated counterparties. The Group undertakes significant tax, legal and regulatory due diligence before entering these transactions.

Credit risk related to the Group’s treasury activities (cash investments and derivative financial instruments) is limited by the Group’s policy of requiring its treasury transactions to be undertaken with financial institutions which have been approved by the group risk committee and which are investment grade rated.

Liquidity riskLiquidity risk is the risk that the Group is unable to make payments on the dates that they fall due.

As a result of providing settlement services to its customers for matched principal transactions and execution (and some limited instances of clearing) in exchange traded products, the Group is required to hold a core level of liquidity in order to provide collateral and margin to the clearing houses of which it is a direct member and to those third party clearing providers who act on the Group’s behalf. On top of this “core” liquidity requirement, the Group is also exposed to temporary movements in margin requirements as a result of changes in the volume and mix of the transactions undertaken by its customers. It is difficult accurately to predict the timing and amount of these temporary movements, which are often only required intra-day. As a result the Group requires access to significant short-term liquidity, which is addressed through a combination of holding significant short-term cash balances and having access to same day borrowings under a swing-line credit facility. In May 2010, the Group refinanced its existing revolving credit facility and increased the amount of swing-line from $94 million to $200 million. These changes will increase the Group’s operational flexibility in terms of meeting margin calls.

To assist with managing liquidity, the Group seeks to diversify its funding sources and maintains an investment grade rating from Moody’s and Fitch. The improvement in market conditions enabled ICAP to launch its debut €300 million bond in July 2009, commence issuance of euro commercial paper and to refinance its core revolving credit facility in May 2010 with the result that, at 12 May 2010, its debt facilities had an average maturity of 44 months and provided access to £273 million of un-drawn committed headroom. While the Group has no facilities falling due within the next 24 months, its liquidity position could be impaired due to circumstances beyond its control, such as a worsening of credit markets or a perception that ICAP or similar market participants are subject to greater uncertainties. Details of ICAP’s borrowing arrangements are set out in note 22 to the financial statements.

With the exception of small, local cash management balances, surplus cash is invested with financial institutions which have an equivalent credit rating of A or better. The Group invests cash balances in a range of instruments including money market deposits, AAA liquidity funds, government bonds and other more structured, capital protected instruments. When investing its cash balances, the Group considers the protection of principal, liquidity characteristics and bank counterparty risk, as well as the optimisation of return.

Counterparty limits for cash investment are set and monitored by the group risk committee and, through the recent financial market turmoil, a number of changes have been made to reduce further the Group’s exposure to institutions perceived as higher risk.

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Strategic riskA number of strategic risks, as set out below, are an inevitable consequence of the Group’s position in the wholesale financial markets. These risks are mitigated through the management and governance processes of the Group including, in particular, the new business initiative process:

R increasing competition/disintermediation: existing or potential competitors might be able to exploit their size, expertise, access to better funding, superior technology or other types of leverage to change the economics or the mechanics of our business to their advantage and hence reduce ICAP’s market share or profitability;

R significant change in the structure of markets as a result of operational changes imposed by regulation and/or legislation;

R variability in economic and financial markets: the volume of business flow transacted by the Group is affected directly by conditions in the global financial markets. Factors influencing ICAP’s daily volumes include the levels and volatility of and correlations between asset prices, credit quality of counterparties, changes in economic activity, political and market events, product innovation and indicators of market confidence; and

R diversification into new markets, with novel risk characteristics.

Risk measurement and infrastructureDay-to-day risk management and mitigation is the responsibility of business heads. Risk management provides support to the businesses with a range of tools adapted to the size and complexity of the Group and an independent assessment and reporting of risk to senior management. These tools include:

R credit risk and liquidity risk limits based on an internal scoring system;

R monitoring tools and reports such as dashboards and key risk indicators;

R group and risk policies;

R controls and procedures;

R risk and control self assessments and process maps; and

R significant risk assessment and quantification programmes.


In practice, only an extremely small proportion of ICAP’s transactions actually result in any exposure to market risk and compliance with ICAP’s policies is monitored by the risk and compliance functions and by senior management.

Financial riskInterest rate riskThe Group finances itself through a combination of fixed and floating rate debt obligations and maintains cash on its balance sheet to meet a combination of local regulatory capital rules, clearing house deposits and other commercial requirements, including margin calls which arise through the provision of certain markets of clearing services to brokerage clients. The existence of these cash and debt positions exposes the Group to interest rate risk which, from time to time, it manages with derivative instruments with the objective of minimising interest cost and the impact of interest volatility on the Group’s income statement. Details of the Group’s sensitivity to changes in interest rates are set out in note 24(e) to the financial statements.

Currency riskThe Group publishes its consolidated financial statements in pound sterling and conducts business in a number of other currencies, principally the dollar and the euro. As a result the Group is exposed to FX risk due to exchange rate movements which affect the Group’s transactional revenue, and the translation of the earnings and net assets of its overseas operations.

The table below shows the anticipated impact for the year ending March 2011 on operating profit* of a 10 cent strengthening in the dollar and euro on ICAP in terms of transactional and translational exposure. Operating profit*

Dollar £m

Euro £m

Total £m

Transactional 9 13 22Translational 13 4 17

Further details of the Group’s hedging strategy and the level of cover in place at 31 March 2010 are contained in note 24(d) to the financial statements.


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In parallel to developing its staff, the Group has continued to invest in its systems and is in the process of rolling out a new consolidation tool to improve further the robustness of the management and statutory reporting processes. This work will continue in 2010/11 as TriOptima is integrated and will also further standardise, automate and streamline processes.

External reporting, which includes the half and full year reports together with the interim management statements, uses data produced by the regional teams and relies on systems and processes functioning correctly. To minimise the risk of error the Group Finance Director requires the business chief executive officers and chief financial officers to provide their assessment of the financial control environment as part of a filing assurance review process before the half year and full year report is recommended by the audit and risk committee to the board for external release.

The risk team monitors an array of qualitative and quantitative measures to ensure that the business risks remain within acceptable parameters. More emphasis is given to the relevance of these measures than to their mathematical sophistication. Metrics that are robust, easy to explain to the businesses and directly related to their risk profiles are preferred. Examples include key risk indicators, scenario analysis and credit exposure metrics. Using these measures, the Group produces a number of market, credit and operational risk and intelligence reports which are disseminated widely among the Group’s managers and up to executive management level and the board.

Internal control system and internal auditThe day-to-day business of the Group is subject to a system of internal controls which incorporates financial, operational and compliance controls and risk management systems.

The effectiveness of the internal control system is reviewed regularly by the independent internal audit function. Internal audit reports to the audit and risk committee of the board (and functionally to the Group Finance Director) and provides assurance to executive management and the board that the system of internal control achieves its objectives and highlights gaps and areas for improvement. The internal audit function is outsourced to Ernst & Young. Internal audit establishes an annual plan of desks and functions to be examined based on discussions with management and the perception of the level of risk in the Group’s activities.

Following audits, internal audit provides management and the audit and risk committee with conclusions of their analysis.

The Group has investments in a number of joint ventures and associates. Where the Group is not directly involved in the management of the investment it can influence, through board representation, but not control the internal control systems present in those entities. The board’s review of the effectiveness of the system of internal controls in those entities is consequently less comprehensive than in its directly-owned subsidiaries.

Financial reportingThe Group’s finance function is organised on a regional basis under the leadership of the Group Finance Director whose direct reports include the regional chief financial officer of each of EMEA, the Americas and Asia Pacific, the chief financial officer electronic broking, the group treasurer, the group financial controller and the group tax director.

This group meets on a monthly basis and is responsible for both the day-to-day management and strategic development of the Group’s finance infrastructure together with ensuring that Group policies have been adopted and appropriate controls put in place to enable accurate and timely reporting of consolidated financial information for management, regulatory and statutory purposes.

Over the course of the past 12 months, the Group has continued to upgrade the quality of its finance team through selective recruitment, focused training and investment in the finance graduate programme.

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ICAP’s role as an interdealer broker is to facilitate trading in the wholesale financial markets, thereby helping to ensure the smooth functioning of the global financial markets. These markets are critical to the global financial system. The vast majority of financial asset classes exist only in the OTC environment and, consequently, the efficient functioning of these markets is essential for the free flow and availability of capital, the mitigation of risk and issuer and investor choice. These markets play a major role in global economic development and are the hub of developments that benefit savers, investors, businesses and governments.

We facilitate trading by using our voice brokers and electronic broking platforms to match buyers and sellers and create liquidity in the OTC markets, enabling our customers to achieve their business objectives and to hedge their risk exposures to numerous markets, including interest rates, FX and energy. We have spent many years facilitating the flow of trades to clearing houses on behalf of our customers and aim to improve the overall resilience of the financial system. In addition we offer a wide range of post trade services, which help our customers reduce the overall level of risk.

The past twelve months have seen increased focus by regulators and politicians on these markets and proposals continue to be debated by governments across the world. There is no doubt that an overhaul of some areas of the regulatory framework supporting the OTC markets is necessary and ICAP continues to consult extensively with both politicians and regulators as part of this process.

We believe that our role as a key participant in the OTC markets best positions us to contribute to society, while maximising shareholder returns over the long term.

StaffAs the Group has expanded and grown, ICAP has attracted people with a broader range of skills in both technology and in the original broking businesses. The brokers and their managers comprise the largest group of the overall staff and they are required to have very specific skills. They are highly entrepreneurial, dynamic, team-spirited individuals with extremely strong networking and interpersonal skills and the ability to excel in a pressurised environment. ICAP’s ability to attract and retain the highest quality staff and leverage their intellectual capital is one of the key factors driving the success of our business.

Management is committed to the advancement and training of talented individuals and to providing an environment that is intellectually challenging, motivating and supportive. This year there has been a greater investment in staff through training, in particular on management and supervisory skills and on providing market knowledge and product training to the business support functions. The latter is designed to enhance the ability of the business support functions to support the broking functions more effectively. The use of e-learning has been a particular feature, especially in areas of risk management and compliance policy awareness and training. This is an excellent way of monitoring effective delivery of training and employees’ acknowledgement of their awareness of relevant policies and their agreement to be bound by them.

ICAP employs approximately 4,500 people worldwide. Of this number, more than 2,500 are brokers, sales and customer support staff and over 800 are employed in IT and product development of our electronic broking platforms.


Corporate and social responsibilityICAP aims to conduct its business in a socially responsible manner, to contribute to the communities in which it operates and to respect the needs of its customers, employees, investors, regulators, suppliers and other stakeholders.

ICAP Charity Day – 17 years of making a difference

£11.5m £11.0m £9.2m £7.1m £5.2m £4.2m £4.0m £3.3m £2.6m £2.0m £2.2m £1.3m £540k £500k £460k £320k £288k 1993

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life assurance, pension provision and access to an employee assistance programme. Incentive and share ownership schemes are also run for the benefit of employees. Further information on these schemes can be found in note 27 to the financial statements.

Employee wellbeingAs well as providing medical insurance ICAP promotes a number of initiatives to support employee health and wellbeing which, in addition to encouraging more healthy lifestyles, also helps to control medical insurance costs. These initiatives include in-house health screening sessions, free or subsidised health assessments, subsidised or discounted gym memberships and sponsorship of ICAP staff sports teams.

Equal opportunity and diversity policyICAP is committed to employment policies that provide and promote equal employment and advancement opportunities and to providing an environment that ensures tolerance and respect for all employees. ICAP’s policy is that no employee, contract or temporary worker will be treated less favourably, victimised or harassed on the grounds of their disability, gender, marital or civil partnership status, race, nationality, colour, ethnicity, religion or similar philosophical belief, sexual orientation, age, or any other class protected by applicable law.

In a number of locations, for example the UK and the US, there has been increasingly active promotion of diversity initiatives. These include an active Diversity Council in the US, which has arranged presentations by prominent people from minority groups, and the launch of ICAP Mutual Interest Networks which is the umbrella framework in the UK for a range of affinity networks such as Women’s ICAP Network and Family and Dependants Network. These groups also arrange presentations and information sessions on subjects of interest to the network membership with the overall aim of encouraging a more diverse and inclusive environment in ICAP.

Health and safetyICAP has a health and safety policy which is approved by the board and owned by the Group Chief Operating Officer. Regional health and safety committees oversee structures for policy compliance. All managers have a responsibility for ensuring a healthy and safe working environment. The great majority of ICAP employees work in an office environment and, as such, there are no significant areas of risk to report.

Charity DayCorporate philanthropy and charitable giving have always been an important part of ICAP’s corporate culture and ICAP’s annual Charity Day has played a special role in employee motivation since its inception in 1993. Charity Day is an annual event held each December when the Group donates a whole day’s revenue to a selection of charities worldwide. There is significant staff, customer and supplier involvement in Charity Day and the charities are selected by ICAP’s staff in each region in which it operates.

This revenue would otherwise contribute directly to the broker commission pool and, as such, our staff contribute directly to these worthy causes.

Over 800 charities globally have benefited from ICAP’s Charity Day. These charities cover the whole spectrum of causes including medical research, crime prevention, developing countries and children. In 2009 ICAP’s Charity Day raised $18.7 million (£11.5 million) for more than 125 charitable organisations, bringing the total sum raised since the creation of Charity Day to $119 million. This very significant sum has contributed greatly to alleviating suffering and improving the lives of thousands of people.

ICAP is a global business reflecting the global nature of the markets in which we operate. Geographic mobility of the workforce has always been a feature of ICAP’s business model.

In order to ensure a continuing flow of intellectual capital into our business, ICAP is committed to maintaining and developing further an active graduate recruitment programme, even in these more difficult market conditions. First launched in 2006, ICAP’s global graduate recruitment programme aims to provide a steady flow of young, developing talent into the business. Since its launch, a total of 120 graduates have joined ICAP, with 39 graduates joining in the past year. The programme has always had an internship element focused on 2nd year undergraduates, the best of whom are encouraged to apply for a graduate trainee role. This has been expanded to include a short internship element aimed at 1st year undergraduates and long placement roles lasting between six and 12 months.

The graduate recruitment programme has also expanded in terms of the business areas it recruits for and in geographic scope. Traditionally focused on voice and electronic broking graduate trainees, with a small intake of trainee accountants recruited for ICAP’s finance function, graduate trainees are also recruited for shipbroking, shipping research, risk management, operations and IT. The programme has also expanded significantly in Asia Pacific and, in addition, now operates an internship programme for Traiana in Israel.

While the recent financial market crisis has provided opportunities to recruit highly skilled individuals, ICAP continues to monitor staff efficiency and productivity closely. Broker compensation is directly linked to commission which varies from desk to desk. Profit per broker will depend on the mix of business undertaken. Commission arrangements are structured to ensure no risk remains outstanding at the time of payment. As a result, there is no requirement for deferral conditions to be attached to commission payments.

While the Group, in common with other similar organisations, is exposed to the risk of brokers moving to other companies, ICAP seeks to minimise this risk by offering competitive remuneration structures linked to both individual and desk performance. In addition, as far as possible, ICAP uses minimum term contracts which are normally staggered across a desk to avoid the risk of key staff failing to renew, non-compete clauses, gardening leave provisions and restrictions on hiring colleagues.

In many emerging markets it is not possible to restrict staff’s freedom to leave to join a competitor. In these markets ICAP provides staff with the ability to buy themselves out of their contract which forms an economic disincentive to leave or, in the worst case, financial protection while ICAP rebuilds its platform.

Employee involvement and employment practicesICAP is committed to achieving and maintaining the highest standards in the workplace. This commitment is underpinned by policies on equal opportunities, harassment and discrimination, to which all employees are required to adhere and which are regularly monitored and enforced. The Group undertakes diversity training designed to prevent harassment and discrimination and retaliation against individuals who report problems in the Group’s workplace.

The Group recognises the importance of effective internal communication in promoting employee engagement and uses a variety of methods, including ICAP’s global intranet, to keep staff informed about developments in the business, policies and procedures and training and advancement opportunities in a timely manner.

Employee benefitsICAP provides a range of employee benefits to its staff. These vary by location according to local market practice but typically include benefits such as medical insurance, income protection insurance,

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Staff costs represent the single largest expense of the Group and are variable, in part, with performance in core voice broking and, to a lesser extent, electronic broking and post trade risk and information. For 2009/10, staff costs remained flat at 59% of revenue which reflects a change of revenue mix within our core businesses and the impact of new business initiatives, where it takes time for margins to reach target levels.

The Group estimates that approximately 50% of its cost base varies with revenue, which is in line with the prior year.

Operating profit* marginThe Group’s operating profit* margin generated from its continuing operations for the year ended 31 March 2010 was 22%, down 1% on the prior year as a result of a shift to lower margin businesses within core voice broking and investment in new businesses being partially offset by the £23 million of annualised cost savings noted in last year’s Annual Report.

During the year ended 31 March 2010, the operating profit* margin generated by the core voice broking business fell by 1% to 19%, primarily as a result of a change in the business mix within the EMEA region where an increased percentage of revenue was generated from business with higher commission rates. The EMEA voice broking margin fell by 3% to 23% during the period. As a result of cost control management, the Americas region maintained its margin at 18% and Asia Pacific, despite challenging market conditions, improved its operating profit* margin from (2)% to 1%.

Through a continued focus on costs and our new businesses reaching operational maturity we would expect to see the operating profit* margin for the voice business to show a modest improvement. However, the combination of competitive pressure and an ongoing need to invest in our people, systems and processes will limit our ability to improve voice margins significantly in the near term.

Revenue from our electronic broking business of £252 million was flat compared to the prior year. However, as a result of the actions taken in the prior year to manage costs, the operating profit* margin improved from 35% to 40%.

The post trade risk and information business continued to perform strongly with the 2009/10 year performance delivering an operating profit* margin of 49% in line with the prior year.

Exceptional items and discontinued operationsThe Group’s policy is to separately disclose items in its income statement as exceptional which are non-recurring and, in terms of both size and nature, material.

On 18 December 2009, the Group announced that one of its US subsidiaries, ICAP Securities USA LLC, had reached a settlement with the SEC in regard to a multi-year, industry-wide investigation into the markets in certain fixed income securities, without admitting or denying allegations of any wrongdoing.


EnvironmentICAP’s environment policy is approved by the board and owned by the Group Finance Director.

As a financial institution, the nature of ICAP’s operations means that its environmental impact is relatively low and is limited to the emission of greenhouse gases through running offices and corporate travel. ICAP seeks to reduce emissions by purchasing electricity from renewable sources where possible, minimising air travel and recycling waste. ICAP has worked with Carbon Neutral Limited, an environmental consultancy, to estimate the residual emissions of the Group in terms of carbon dioxide equivalents. Worldwide, the Group is estimated to emit the equivalent of 15.3 thousand tonnes** of carbon dioxide or 3.5 tonnes (2009 – 3.8 tonnes) per employee per annum. ICAP continues to monitor electricity output and overall emissions output. ICAP will endeavour to reduce further this footprint, although the expansion of our global office network is likely to impact our footprint in the medium term. Where it is not possible to reduce this footprint, ICAP purchases Certificates of Emission Reduction (CER) under the United Nations’ sponsored Clean Development Mechanism.

Furthermore, one of ICAP’s business divisions is involved in helping to reduce emissions output by offering broking services in emissions credits as part of the EU Emissions Trading Scheme and United Nations Certified Emission Reduction Credits. ICAP has a leading market share of OTC brokered European Union Allowances and has a prominent position in the rapidly developing carbon options market. ICAP is also active in the nascent emissions trading markets in the US.

Financial reviewCost managementThe Group considers the efficient and effective management of its operating expenses as a key component of its operational strategy and continually evaluates opportunities to reduce these.

During the year, net operating expenses related to the continuing business increased by 3% to £1,251 million due to the impact of FX (£68 million) and the investment in new businesses principally in Brazil (£44 million). This was largely offset by a reduction in performance related commissions and annualised cost savings of £23 million.


** Based on World Business Council for Sustainable Development and the World Resources Institute Protocols, relevant Scope 3 activities (mainly business travel and commuting) have been included as recommended by these organisations. Using only Scope 1 and 2 emissions (minimum recommended reporting level) would reduce ICAP’s reported emissions by approximately 80%. The total figure is after excluding 8.1 tonnes ( 2009 – 7.0 tonnes) of electricity produced from renewable sources.

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Earnings and earnings per share (EPS)We believe that the most appropriate EPS measurement ratio for the Group is adjusted basic EPS as this measure better reflects the Group’s underlying cash earnings. For the year ended 31 March 2010 we have also presented adjusted EPS from continuing operations so that the impact of the losses arising from the discontinuance of the full service agency cash equities business in Europe and Asia Pacific can be identified.

Adjusted basic EPS from continuing operations excludes the impact of the performance of discontinued operations, amortisation and impairment of intangibles arising on consolidation and exceptional items. The calculation of EPS is set out in note 13 to the financial statements.

Adjusted basic EPS from continuing operations increased by 1% to 35.1p. The Group’s basic EPS from continuing operations decreased from 28.2p to 25.5p and total basic EPS, including discontinued operations, decreased from 27.6p to 18.0p.

As detailed in note 2 to the financial statements, the Group is adopting IFRS3 (revised) with effect from 1 April 2010. This will result in a number of future acquisition related costs, including transaction fees and changes to the estimated amount of contingent deferred consideration, impacting the income statement. For acquisitions which closed prior to 31 March 2010, these costs are accounted for on the balance sheet as a movement in goodwill and, as they do not impact on the Group’s ability to generate cash flow, it is planned to amend the definition of adjusted EPS used in future reporting periods to remove the impact of these adjustments from earnings.

DividendFor the past three years, the Group has paid a dividend equal to 50% of adjusted basic EPS which reflects the board’s desire to balance distributions to shareholders against the wider capital demands of the Group.

For the current year we propose, subject to shareholder approval, to continue to apply the same multiple but to exclude the impact of the discontinued business from the definition of adjusted EPS which results in a final dividend of 12.44p being proposed. This compares to 12.35p in the prior year and, when taken in conjunction with the interim dividend of 5.11p per share, results in a full-year dividend of 17.55p which is an increase of 3% on the prior year.

At the annual general meeting in July 2009, the introduction of a scrip dividend scheme was approved in order to give shareholders greater flexibility and the opportunity to elect to receive new ordinary shares in ICAP as an alternative to any cash dividend declared by the Company. 4,567,807 shares were issued in order to satisfy elections in respect of last year’s final dividend with no shares issued in respect of the interim dividend distribution in February 2010. It is proposed to continue to offer a scrip dividend alternative for 2010/11. Further details will be announced on 28 July 2010.

Interim dividends are calculated as 30% of the previous year’s full-year dividend. This approach will continue for the 2010/11 financial year.

The investigation concerned alleged activities on certain of ICAP Securities USA LLC’s interdealer voice broking securities desks between 2005 and 2008. ICAP suspended two individuals on the mortgage backed securities desk in June 2008 and subsequently terminated their employment for violation of ICAP’s policies.

ICAP Securities USA LLC has made substantial enhancements to the quality of its control environment over the period. These include greater formalisation of its broking practices, enhanced operational, risk and compliance controls, improved training and monitoring programmes, revised policies and procedures, and the recruitment of additional experienced managers in various control roles.

The Group has recognised an exceptional charge of £21 million in respect of this settlement representing penalties and costs related to the settlement of this matter.

The second exceptional item of £46 million (pre-tax) relates to our cash equities business. The expansion into full service agency cash equities in Europe and Asia Pacific failed to deliver the necessary returns. After a thorough review conducted in early 2010 we announced in March our decision to withdraw this full service offering. This exceptional item includes restructuring and closure costs related to redundancy, the write-off of fixed assets and the termination of third-party contracts.

The closure of the European and Asia Pacific cash equities businesses in March represents a change of strategy for the Group, as these businesses were previously positioned alongside post trade risk and emerging markets as an engine for growth and, as such, received significant prominence over the past 18 months in management presentations, press and analyst coverage. In order to enable relevant comparison of future performance, we believe it is important to identify the impact that these businesses have had on the Group’s results and, as such, have separately disclosed them as a discontinued operation in the financial statements.

The Group is continuing to negotiate with the impacted staff and suppliers to mitigate the closure costs and to find alternative uses for the fixed assets.

No exceptional charges were recognised in the comparative financial statements for the 12 months to 31 March 2009. Further details on the discontinued business and exceptional items are set out in notes 4 and 6 to the financial statements.

TaxThe overall objective continues to be to plan and manage the tax affairs of the Group efficiently within the various local tax jurisdictions of the world to achieve the lowest tax cash cost and effective tax rate while complying with local tax regulations. As a result of this management the Group’s effective tax rate, excluding amortisation, impairment of intangibles arising on consolidation, exceptional items and discontinued operations, has reduced to 32% (2009 – 33%).

A tax credit of £20 million (2009 – £22 million) has been recognised in the income statement column entitled “amortisation and impairment of intangibles arising on consolidation” to reflect the impact on deferred tax of amortising intangible assets.

The Group’s tax charge is affected by the varying tax rates in different jurisdictions applied to taxable profits; the mix of those profits; and the rules impacting deductibility of certain costs. The Group continues to take a prudent approach to the management of its tax affairs and provisions are set to cover tax exposures.

Losses on discontinued operations of £18 million are shown net of a tax credit of £7 million and related reorganisation costs of £41 million net of a tax credit of £11 million.

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as a result of writing down the carrying value of a number of customer relationships which have been impacted by the credit crisis, a further £4 million (2009 – £7 million) impairment to First Brokers and £1 million of other impairments.

Matched principal gross-upCertain Group companies are involved as a matched principal in the process of broking securities between third parties. Such trades are complete only when both sides of the deal are settled and so the Group is exposed to risk in the event that one side of the transaction remains unsettled. Substantially all the transactions settle within a short period of time and, as such, the settlement risk is considered to be minimal.

All amounts due to and payable by counterparties in respect of matched principal business are shown gross, except where a legally enforceable netting agreement exists and the asset and liability are either settled net or simultaneously. At 31 March 2010 matched principal business resulted in the balance sheet being grossed up by £60 billion.

Contingent deferred consideration and deferred considerationA number of the Group’s recent acquisitions have been structured to include an element of deferred consideration that is contingent on the business performance. These arrangements take a variety of forms and may involve part of the purchase consideration being deferred and linked to future performance or the vendors retaining a minority interest which they may have the right to put and ICAP call after a pre-agreed period.

Overall, the objective of these arrangements is to reduce the risk inherent in acquiring smaller owner-managed businesses and to align the vendors, many of whom remain with ICAP, to both integrate and develop the business further. At 31 March 2010, the present value of these obligations was £19 million which represents a decrease of £29 million when compared to the prior year, as a result of the payment of £14 million of deferred consideration in respect of Link, the removal of the obligation in respect of full service agency cash equities and a rebasing of the expected amount due for ICAP Shipping.

An amount of £7 million deferred consideration was recognised as a liability at 31 March 2010 which was paid in May 2010 to TriOptima.

Further details of these arrangements are set out in note 14 of the financial statements.

Net debt and cashThe Group aims to ensure that it has constant access, even in periods of corporate or market turmoil, to an appropriate level of cash, other forms of marketable securities and committed funding lines to enable it to finance its ongoing operations, proposed acquisitions and other reasonable unanticipated events on cost-effective and attractive terms. During the past 12 months ICAP’s risk function has reviewed the liquidity risks facing the Group and confirmed that $250 million remains as an appropriate level of liquidity headroom to mitigate the operational risks including margin and collateral requirements inherent in our business.


Operating profit*/cash conversionThe Group’s consolidated cash flow statement is set out on page 71 of the financial statements.

The Group continues to generate substantial free cash flow and in 2009/10 once again saw its post-tax profits, excluding the impact of exceptional items and the amortisation and impairment of intangibles arising on consolidation, convert into cash.

Free cash flow

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Cash generated by operations 345 455Interest and tax (69) (101)Cash flow from operating activities 276 354Capital expenditure (66) (63)Dividends from associates and investments 9 5Free cash flow 219 296

Cash generated from operations decreased by £110 million in 2009/10, reflecting the impact of lower trading revenues (£15 million), the settlement of the SEC claim and related costs (£21 million), the impact of initially unsettled trades (£13 million), and the maintenance of the one-off benefit seen in the prior year from enhancing our working capital practices.

Net payments in respect of interest and tax have decreased by £32 million to £69 million, reflecting the combined impact of lower profits in the year together with timing differences.

The Group distributed £92 million of its free cash flow to shareholders through its dividend. In total, £149 million was invested in a number of acquisitions during the year, including £122 million to acquire the remaining shares in Reset and TriOptima and £14 million as deferred consideration for Link.

Balance sheet – net assetsNet assets have increased from £1,140 million to £1,215 million which include the recognition of intangible assets in respect of our previous shareholding of 38.22% in TriOptima.

Intangible assets arising on consolidationThe Group accounts for those assets and liabilities which arise on acquisition at fair value and recognises goodwill and other intangible assets on consolidation. At 31 March 2010, intangible assets arising on consolidation stood at £1,489 million, up £85 million on the prior year as a result of the amortisation charge related to those assets with a finite useful life, such as customer relationships, revaluation of dollar denominated assets, principally EBS, Traiana and Reset being more than offset by the assets arising on the acquisition of Arkhe and TriOptima.

The Group is required to consider the carrying value of these assets on an annual basis against their value in use and, if appropriate, to impair the carrying value. Details of the approach adopted to review the assets are set out in note 15 to the financial statements and resulted in a £5 million (2009 – £nil) charge


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In general, higher levels of market volatility result in increased demand for the Group’s brokerage and post trade risk and information services. From a regulatory capital perspective, however, the impact is significantly dampened by the fact that much of this incremental business occurs in markets which operate on a name give-up basis or are cleared through a central counterparty. We would, therefore, expect any increase in activity to have a limited impact on the Group’s capital resource requirement and, as such, absent a material acquisition, loss of the waiver or a change in the basis of computation, existing capital resources are viewed as sufficient to both operate and grow the business.

Contractual arrangementsDuring 2009/10 the Group’s total cost base from continuing operations was £1,270 million (2009 – £1,243 million) of which approximately 75% (2009 – 75%) was represented by staff costs 11% by technology costs (2009 – 10%) and 14% by other costs (2009 – 15%) including premises, travel, entertainment and clearing.

The Group places reliance on a number of key suppliers to carry out its business effectively and has put in place procedures to ensure that purchasing decisions balance cost against other factors including service quality, global reach and resilience.

The success of ICAP’s core voice broking business is reliant on its ability to attract and retain highly qualified staff. A number of legal arrangements, including rolling contracts and non-compete arrangements, are employed to mitigate the risk of key producers being lost to competitors.

Information systems and communications are key to the delivery of both voice and electronic products and, in this area, the Group seeks to ensure that its systems have full redundancy and are capable of operating from business continuity sites.

The settlement of matched principal and exchange traded businesses requires access to clearing houses either directly or through third party providers of clearing and settlement services. In North America the Group is a member of the FICC and NSCC through which it clears US Treasury products, agency, mortgage and equity trades for its client base. In Europe and Asia Pacific, with the exception of base metal clearing on LCH. Clearnet Group Ltd, the majority of the Group’s clearing activities are outsourced to third parties where ICAP seeks to partner with one of the leading clearing providers in each market.

As more fully described in note 22, the Group relies on a small number of international banks to provide it with access to liquidity. No single bank provides the Group with more than 14% of its total committed credit facilities.

Events after the balance sheet dateOn 7 May 2010, the Group refinanced its existing £473 million three-year unsecured revolving credit facility and $94 million swingline with a new $880 million revolving credit facility incorporating an up to $200 million swingline facility, which matures on 31 May 2013. This facility carries a floating interest rate at LIBOR plus 2% with an additional 0.50% payable dependent on the debt to earnings ratio.

Our business is in good shape and well positioned to take advantage of improving market conditions and regulatory change. We have learnt valuable lessons from our expansion into the full service agency cash equities business and adopted new processes, used the financial crisis to strengthen our voice franchise, continued to invest in our electronic broking platforms and, through Reset, Traiana, TriOptima and ReMatch, to operate some of the key post trade risk solutions used by our clients. The business continues to exhibit low levels of market risk, remains highly cash generative and has a strong balance sheet and, as such, we believe is well positioned to respond to future market challenges.

The Group has traditionally financed itself through a combination of retained profits, short-term committed and uncommitted bank facilities, equity, and US private placement loan notes and, as set out in last year’s Annual Report, has taken steps through obtaining investment grade credit ratings and putting in place a Global Medium Term Note programme (GMTN), to ensure that it is able to take advantage of improving market conditions to diversify these sources further.

During July 2009, the Group took advantage of stronger market conditions to significantly strengthen its balance sheet through the issuance of the GMTN programme of its debut bond, raising €300 million of five-year term debt to repay the £135 million bridge facility, which had been taken out in April 2008 to finance the purchase of Link, and to create additional headroom under its core revolving credit facility.

The Group’s core £473 million revolving credit facility was due to mature in March 2011 and, in line with its objective of maintaining appropriate levels of committed headroom for the 12 months ahead, ICAP announced on 7 May 2010 that it had successfully refinanced this facility into a new $880 million committed revolving credit facility which matures in May 2013, following which the average maturity of the Group’s debt facilities has been extended to 44 months.

The Group’s credit ratings remained unchanged throughout the period. At 12 May 2010, the Group was rated BBB+ by Fitch and Baa2 by Moody’s. Net debt was £148 million, an increase of £22 million on the prior year as a result of the borrowings to finance the acquisition of TriOptima being partially offset by strong cash generation in the year. Further details of the Group’s net debt, cash and cash equivalent and borrowings are set out in notes 33(c), 33(b) and 22 respectively of the financial statements.

Capital structure and regulatory capitalICAP is an international business which provides brokerage, post trade risk and information services in a wide range of products to professional counterparties. The business is subject to consolidated supervision by the FSA under the terms of the CRD.

In March 2007, ICAP obtained a waiver from the consolidated capital adequacy tests which have the effect of excluding goodwill from the capital computation and, in so doing, allows the Group to undertake acquisitions using debt rather than equity finance. The terms of the waiver, which runs until the end of March 2012, limits our ability to incur market risk and, in effect, prohibits the Group from undertaking proprietary trading activities.

The Group’s Pillar 1 regulatory capital surplus represents the difference between the capital resources of the Company, on a stand alone basis, and the regulatory capital requirements of the Group calculated, in accordance with the requirements of the waiver, on an aggregate basis.

The Group’s Pillar 1 regulatory capital requirement calculated under the CRD waiver is relatively stable. However, as a result of timing differences in the receipt of dividends from subsidiaries and the payment to ICAP’s shareholders, the Group’s regulatory capital, and consequently the Pillar 1 headroom, may fluctuate. At the year end the Group had in excess of £500 million of Pillar 1 headroom.

CRD requires ICAP, under Pillar 2, to evaluate the risks facing the business and to determine whether the Pillar 1 capital is sufficient to cover any expected losses. The Group has developed a scenario-based model which utilises data provided by the business to assess the economic capital required to cover the expected risks and, at 31 March 2010, viewed the Pillar 1 capital as sufficient to cover the identified risks. The analysis of economic capital is documented in the Group’s Internal Capital Adequacy Assessment Process (ICAAP) which is required by the FSA, regularly updated and formally approved by the board annually.

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46Chairman’s statement

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63 Independent auditors’ report

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Directors’ profiles

Charles Gregson NNon-executive ChairmanAged 62Charles was appointed non-executive Chairman in 2001 having been the executive Chairman from 1998 to 2001. Between 1978 and 1998, he was responsible for the Garban businesses that demerged from United Business Media plc in 1998 and then merged with Intercapital in 1999 to form ICAP. He was chief executive of PR Newswire Association Inc and has served on the board of United Business Media plc. In addition, he is a non-executive director of International Personal Finance plc, Caledonia Investments plc, St. James’s Place plc and The Starting Price Regulatory Commission Ltd. He is also the non-executive chairman of CPP Group plc.

Charles was last re-elected by shareholders at the annual general meeting in 2008 and is standing for re-election at the annual general meeting in July 2010.

Matthew LesterGroup Finance DirectorAged 46Matthew was appointed Group Finance Director in 2006 and is chairman of the finance committee and is responsible for a number of global support functions including finance, treasury, tax and company secretariat. Previously he worked for Diageo plc in a number of senior finance roles, including Group Financial Controller. Matthew, having qualified as a chartered accountant in 1987 with Arthur Andersen, moved to Kleinwort Benson, corporate finance, in 1988. He is a member of the main committee of The 100 Group of Finance Directors.

Matthew was last re-elected by shareholders at the annual general meeting in 2007 and is standing for re-election at the annual general meeting in July 2010.

Michael Spencer NGroup Chief Executive Officer Aged 54Michael was the founder of Intercapital in 1986 and became Chairman and Chief Executive of Intercapital in October 1998, following the Exco/Intercapital merger. He is deemed, with IPGL and its subsidiary INFBV, to have an interest of 17.39% in ICAP plc. IPGL’s other interests include City Index Limited and investments in a variety of other financial services companies. Michael was non-executive Chairman of Numis Corporation plc from April 2003 until May 2009. In February 2007, he was appointed Treasurer of the Conservative Party.

Michael was last re-elected by shareholders at the annual general meeting in 2009.

John NixonGroup Executive Director ICAP AmericasChief Executive Officer ICAP Electronic BrokingAged 55John was appointed an executive director in 2008. He is the executive director responsible for ICAP Americas and continues to be responsible for electronic broking. He has 30 years’ experience in the interdealer broking industry. Prior to his full-time involvement with ICAP, he was a non-executive director of ICAP plc from 1998 to 2002. He was previously the Chief Executive Officer of Tullett and Tokyo Forex, now part of Tullett Prebon, where he worked from 1978 to 1997 in Toronto, London and New York.

John was last re-elected by shareholders at the annual general meeting in 2008.

The Group is led by an experienced board of directors consisting of a non-executive Chairman, a Group Chief Executive Officer, three further executive directors and, as from 1 April 2010, three independent non-executive directors.

Key to membership of committeesAR Audit and risk committee

N Nomination committee

R Remuneration committee


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Mark YallopGroup Chief Operating Officer Aged 50Mark was appointed Group Chief Operating Officer in 2005 and is chairman of the group risk committee and is responsible for the post trade risk division. He had previously been Group Chief Operating Officer of Deutsche Bank Group, following many years’ involvement in trading in the derivatives, foreign exchange and cash markets. Mark was also a director of ISDA from 1996 to 1998.

Mark was last re-elected by shareholders at the annual general meeting in 2009.

John Sievwright AR, RIndependent non-executive director Aged 55John was appointed as a non-executive director in July 2009 and is chairman of the audit and risk committee. Prior to joining ICAP he was Chief Operating Officer, International, for Merrill Lynch, based in New York, Tokyo and London. He has also held a number of senior positions at Merrill Lynch, including Chief Operating Officer, Global Markets and Investment Banking; Head of Global Futures and Options and Chief Administrative Officer for the Debt Markets and Global Equity Derivatives Divisions. He is also a non-executive director of FirstGroup plc and chairman of their audit committee.

John will be offering himself for election at the annual general meeting in July 2010.

James McNulty AR, N, RSenior independent non-executive directorAged 59James was appointed a non-executive director in 2004 and is chairman of the remuneration committee. He has 30 years’ experience in the global financial markets, including futures, securities, derivatives and foreign exchange. He is a director of NYSE Euronext. He was President and Chief Executive Officer of Chicago Mercantile Exchange Holdings Inc from its formation in August 2001 and Chicago Mercantile Exchange Inc from February 2000 until 1 January 2004. Before this he was managing director and co-head of the Corporate Analysis and Structuring Team in the Corporate Finance division of the investment banking firm now known as UBS.

James was last re-elected by shareholders at the annual general meeting in 2007 and is standing for re-election at the annual general meeting in July 2010.

William Nabarro AR, N, RIndependent non-executive director Aged 54William was appointed as a non-executive director in 1998 and is chairman of the nomination committee. He was appointed Executive Chairman of JLT Employee Benefits in January 2006 and joined the board of Jardine Lloyd Thompson Group plc as Commercial Director in April 2006. He was Vice Chairman of KPMG Corporate Finance between July 1999 and July 2003. Before joining KPMG he was a managing director of SG Hambros Corporate Finance. He joined Hambros Bank in 1978 and was head of its Corporate Finance Division from 1997 to 1999.

William was last re-elected by shareholders at the annual general meeting in 2008.

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Chairman’s statement

income securities, without admitting or denying any allegations of any wrongdoing. The investigation concerned activities on certain of ICAP Securities USA LLC’s interdealer voice broking securities desks between 2004 and 2008. ICAP suspended two individuals on the mortgage backed securities desk in June 2008 and subsequently terminated their employment for violation of ICAP policies.

ICAP Securities USA LLC has made substantial enhancements to the quality of its control environment over the period. These include greater formalisation of its broking practices, enhanced operational, risk and compliance controls, improved training and monitoring programmes, revised policies and procedures, and the recruitment of additional experienced managers in various support roles. We are working to further strengthen our compliance and risk functions on a worldwide basis.

During the year we made important revisions to the remit and structure of the audit committee. It was renamed the audit and risk committee and its agenda, role and responsibilities were broadened to more actively deal with matters of business control and oversight and regulation. The frequency of meetings has increased to six a year. I regularly attend both the audit and risk and the remuneration committee meetings.

During the period under review, a thorough board evaluation was undertaken to review the effectiveness of the board and the committees. The results of the evaluation were supportive of the decision making and board processes and endorsed the changes being undertaken in the remit of the audit and risk committee. James McNulty, as the senior independent director, undertook, in consultation with other directors, an evaluation of my performance as Chairman.

The responsibilities and time commitment of the non-executive directors has increased very substantially and, after consultation with an external adviser, their fees have been adjusted, with effect from 1 May 2010, to reflect this additional time commitment.

In view of my length of service, I will be standing for re-election at the forthcoming annual general meeting. Matthew Lester and James McNulty will also be standing for re-election and John Sievwright will be standing for re-appointment as he was appointed a director since the last annual general meeting.

Nick Cosh, who retired at the end of the financial year, was previously chairman of our audit committee and gave ten years of dedicated and very valuable service during a period when the Group grew dramatically and the issues it faced became increasingly complex. Another long standing and much valued director, William Nabarro, who has been a member of the board since the inception of ICAP, has also decided to retire from the City and will not be seeking re-election at the forthcoming annual general meeting. I would like to thank them both for their wise counsel over many years and through many changes.

Charles GregsonChairman

19 May 2010

In preparing the Annual Report we have taken into account recent changes and recommendations on corporate governance that were contained in the final Walker report and others such as the Turnbull Guidance on Internal Control and the best practice guidance set out in the Higgs report. The corporate governance section, together with the remuneration report, details how the Company has applied the principles set out in Section 1 of the Combined Code and includes additional and explanatory disclosures as to how the Company has complied.

I am satisfied with ICAP’s overall corporate governance structure and would like to comment on some changes we have made this year.

In addition to the scheduled board meetings, we have increased the frequency of interim meetings. The board has met on a number of occasions to consider current issues such as trading performance, the SEC investigation and settlement and acquisitions. The additional board meetings were sometimes called at short notice and any director who was unable to attend a meeting was briefed separately on the matters for discussion at the meeting and their views were sought and considered. These interim meetings have undoubtedly improved communication between board members and enabled full and detailed consideration of high priority issues.

The nomination committee, together with the rest of the board, has been considering the succession of a number of long-serving non-executive directors who are coincidentally retiring this year. In addition to the appointment of John Sievwright during the year, the board is now seeking to appoint three new independent non-executive directors. This creates an opportunity to refresh the board with relevant skills and experience for the current environment.

The board discussed and agreed the skills, knowledge and experience that each appointee would ideally have. Experience of the markets in which ICAP operates is a requirement but such experience could be derived from a number of other related financial services sectors. The board has appointed a prominent leadership advisory firm to undertake a thorough search on an international basis and the process is well underway. Candidates are now being evaluated and we expect to appoint new non-executive directors in the second quarter of the financial year 2010/11. This will keep the period when we are non-compliant with the Combined Code as short as possible.

The Group is lead-supervised by the FSA and is required to meet the systems and control requirements of the CRD. It regularly reviews these and, where necessary, takes action to ensure compliance. In its 2010/11 business plan, the FSA has announced plans to adopt a more outcomes-focused approach to supervision of all financial services firms and will achieve this in various ways, including more intensive reviews of prudential returns and control systems as well as more frequent visits and meetings with senior management. The board recognises that we have to continuously review and enhance the Group procedures to ensure compliance with all the FSA’s and other regulators’ requirements.

In the US, the Group’s activities are primarily regulated by FINRA and the SEC. In December 2009 the Group announced that it had reached agreement with the SEC to settle in respect of a multi-year, industry-wide investigation into the markets in certain fixed


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The directors present their report and the audited financial statements of the Group for the year ended 31 March 2010.

Activities, business review, future developments and risk management A review of business activities, future developments and a description of the principal risks and uncertainties facing the Company, including risk management and financial risk management, is given in the following sections of the Annual Report:

–ICAP in ten on pages 1 to 15,

–key performance indicators on page 29,

–the business review on pages 18 to 41, and

–note 24 to the financial statements which contains information on risk management and financial risk management.

All these sections are incorporated into the directors’ report by reference.

Results and dividendsThe results of the Group for the year are set out in the consolidated income statement on page 66. The directors recommend a final dividend of 12.44p per share which, together with the interim dividend of 5.11p per share already declared and paid, makes a total for the year ended 31 March 2010 of 17.55p per share (2009 – 17.05p). Details of the interim dividend payment are set out in note 12 to the financial statements. Subject to approval at the annual general meeting, the final dividend will be paid on 20 August 2010 to shareholders on the register on 23 July 2010 (ex-dividend date being 21 July 2010).

Under the terms of the scrip dividend scheme approved at last year’s annual general meeting, shareholders will be offered the opportunity to elect to receive their cash dividend in shares. Further details will be announced on 28 July 2010 and will be available on the ICAP website.

Related party transactionsDetails of related party transactions are set out in note 32 to the financial statements.

Events after the balance sheet dateDetails of events after the balance sheet date are set out in the business review on page 41 and in note 35 to the financial statements.

Directors and directors’ interestsProfiles of the directors who held office at the end of the year are given on pages 44 and 45. Details of the service contracts for those directors holding office during the year are shown in the remuneration report on page 59.

David Puth resigned as a director of the Company on 15 September 2009 and Nicholas Cosh retired at the end of the financial year.

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Directors’ report

John Sievwright was appointed a director on 15 July 2009 and will stand for election at the annual general meeting on 14 July 2010.

Charles Gregson has agreed to stand for annual re-election having been in office for over nine years. The Company’s articles of association and the Combined Code require a director to stand for re-election once every three years. Accordingly, Matthew Lester and James McNulty will stand for re-election at the forthcoming annual general meeting.

The interests of the directors in the Company’s ordinary shares of 10p each are shown below as at 31 March 2010 and at 31 March 2009 (or as at date of appointment). The interests of directors in options over the Company’s shares are shown on pages 61 and 62 within the remuneration report.

As at31 March

2010

As at 31 March

2009

Charles Gregson – Chairman 217,283 213,424Michael Spencer 113,902,090 138,076,836Matthew Lester 202,587 150,742John Nixon – –Mark Yallop 1,217,361 1,027,702Nicholas Cosh 30,000 30,000James McNulty 20,000 20,000William Nabarro 48,580 48,580John Sievwright – –

Notes1 Details of Michael Spencer’s shareholding are set out in a note to the substantial

shareholdings section of the directors’ report.2 Directors’ interests shown in the table above represent shares beneficially held by

each director together with shares held by their connected persons. They include ordinary shares held on behalf of Michael Spencer by the trustees of the ICAP Trust in respect of his basic awards and any vested, unexercised matching awards under the BSMP.

3 Between 31 March 2010 and 12 May 2010 there were no changes to the above interests.

Share capitalAll changes in share capital are detailed in note 26 to the financial statements. The Company has one class of share in issue, ordinary shares of 10p each, all of which are fully paid. Each ordinary share in issue carries equal rights including one vote per share on a poll at general meetings of the Company, subject to the Company’s articles of association and law. The shares issued to Ocean Tomo LLC under the asset and purchase agreement dated 15 June 2009 are subject to a restriction on transfer. This restriction will lapse on 15 June 2010. There are no other restrictions on the transfer of ordinary shares. Shares held in treasury carry no voting rights for as long as they are held as Treasury Shares. Votes may be exercised by shareholders attending or otherwise duly represented at general meetings. The ICAP and Garban Trusts hold ordinary shares which may be used to satisfy options and awards granted under the Company’s share plans. The voting rights of ordinary shares held in the ICAP and Garban Trusts are exercisable by the trustees in accordance with their fiduciary duties. The right to receive dividends has been waived in respect of the shares held in the ICAP and Garban Trusts and no dividend is payable on Treasury Shares.

48


Substantial shareholdingsAs at 12 May 2010, the Company had been notified of the following interests of 3% or more in its issued ordinary share capital:

Totalinterest in

ordinary shares

Percentage of voting rights

Indirect%

Direct%

Total%

Mr and Mrs M Spencer, together with INFBV* 113,902,090 16.96 0.43 17.39Newton Investment Management Limited 51,483,526 7.86 – 7.86BlackRock, Inc 32,388,112 0.08 4.86 4.94Schroders plc 32,243,080 4.92 – 4.92AXA SA 29,749,171 3.75 0.79 4.54Legal & General Group plc 19,850,242 – 3.03 3.03

* Mr and Mrs M Spencer own approximately 55.10% of IPGL which in turn owns 100% of INFBV. Accordingly, Mr and Mrs M Spencer are deemed to be interested in all the shares in ICAP plc held by INFBV (111,069,560) respectively. A trust fund of which their children are beneficiaries holds a further 50,000 shares and 1,781,501 shares are held by EES Trustees International Limited as trustee of the ICAP Trust. The shares held in the ICAP Trust include basic awards to Michael Spencer under the BSMP and matching awards under the BSMP in respect of which there are no unsatisfied performance or continuity of employment conditions. Michael Spencer holds 1,001,029 shares in his own name.

The Company has been notified by IPGL that, as part of normal corporate borrowing facilities, a total of 111,069,560 ICAP ordinary shares registered in the name of INFBV are included in a package of assets charged pursuant to a loan facility agreement dated 6 October 2008 between IPGL, INFBV, certain other subsidiaries of IPGL and HSBC Bank Plc.

Mr M Spencer has notified the Company that security has been granted in favour of HSBC Private Bank (UK) Limited over 996,800 ICAP ordinary shares held by him personally.

Annual general meetingThe twelfth annual general meeting of the Company will be held on Wednesday 14 July 2010. Details of the resolutions to be proposed at the annual general meeting are set out in a separate letter sent to all shareholders.

Creditor payment policyThe Group’s policy with regard to the payment of its suppliers is to agree the terms of payment at the start of business with each supplier and to ensure that each supplier is made aware of the terms of payment and paid in accordance with its contractual and legal obligations. The Company does not have any trade creditors.

Political donationsNo political donations were made during the year (2009 – nil).

Charitable donationsDuring the year the Group donated £11.5 million (2009 – £11 million) to charitable organisations globally, of which £5 million (2009 – £5 million) was donated to charitable organisations based in the UK. Further information can be found on page 37 of the business review and on the Group’s website, www.icap.com.

Employee involvementDetails are given in the business review on page 37.

Disability policyDetails are given in the business review on page 37 as part of the equal opportunity and diversity policy section.

Directors’ reportcontinued

As at 31 March 2010, options existed over 14,294,040 of the Company’s ordinary shares of 10p each in relation to employee share option schemes. Of this figure, 7,302,825 are options and awards over existing shares which are held in employee share trusts. The remainder are expected to be satisfied by either new issues of shares or by Treasury Shares. Changes in options and awards under the various schemes are detailed in note 27 to the financial statements.

The Company holds 2,034,739 Treasury Shares at 31 March 2010 (2009 – 2,034,739) which represents 0.31% of the issued share capital. The Company has not acquired or disposed of any interests in its own shares during the period under review. As at the date of this report, the Company had an unexpired authority to repurchase shares up to a maximum of 64,773,593 ordinary shares of 10p each.

The rules of the Company’s share plans contain provisions which may cause options and awards granted to employees under the schemes to vest on a change of control.


65 – 140


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49


Governance

43 – 63

ICAP in ten01 –


41

The directors are also required by the Disclosure and Transparency Rules of the FSA to include a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Company and the Group.

Directors’ statement pursuant to the Disclosure and Transparency RulesEach of the directors, whose name and function is listed in the directors’ profiles, confirms that, to the best of his knowledge and belief:

–the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

–the management report contained in the business review includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Going concernThe Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the business review. The financial position of the Group, its cash flow, liquidity position, facilities and borrowing position are described in the business review and notes 22 and 24 to the financial statements provide further detail on the Group’s borrowings and management of financial risks. The business review includes an analysis of the key risks facing the Group and the Group’s approach to risk management.

After reviewing the Group’s annual budget, liquidity requirements, plans and financing arrangements, the directors are satisfied that the Company and the Group have adequate resources to continue to operate for the foreseeable future and confirm that the Company and the Group are going concerns. For this reason they continue to adopt the going concern basis in preparing these financial statements.

By order of the board

Deborah AbrehartGroup Company Secretary ICAP plc 2 Broadgate London EC2M 7UR Company number 3611426

19 May 2010

Auditors and the disclosure of information to auditorsSo far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditors in connection with preparing their report, of which the auditors are unaware. Each director has taken all the steps that he is obliged to take as a director in order to make him aware of any relevant audit information and to establish that the auditors are aware of that information.

PricewaterhouseCoopers LLP were re-appointed auditors to the Company on 15 July 2009. Resolutions to re-appoint PricewaterhouseCoopers LLP and to authorise the directors to set their remuneration will be proposed at the forthcoming annual general meeting. Note 9 to the financial statements sets out details of the auditors’ remuneration.

Statement of directors’ responsibilities for the Annual ReportThe directors are responsible for preparing the Annual Report, the remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Company and Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.

In preparing these financial statements, the directors are required to:

–select suitable accounting policies and then apply them consistently;

–make judgements and accounting estimates that are reasonable and prudent;

–state whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements;

–prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

50


Corporate governance

The corporate governance section, together with the remuneration report, details how the Company has applied the principles set out in Section 1 of the Combined Code and includes additional disclosures as to how the Company has complied with the detailed provisions of the Code.

The directors believe that during the year they have complied in full with the provisions of the Combined Code. The Combined Code is publicly available at www.frc.co.uk.

DirectorsComposition of the boardDuring the year ended 31 March 2010 the Group was headed by an experienced board of directors consisting of a non-executive Chairman, four executive directors, including the Group Chief Executive Officer, and four independent non-executive directors. As from 1 April 2010, following the retirement of Nicholas Cosh at the end of the financial year, the board has three independent non-executive directors.

The current members of the board, together with their biographical details, are shown on pages 44 and 45.

The nomination committee and the board have been considering succession planning for some time, particularly as a number of long-serving non-executive directors would be retiring at similar times. In addition to the appointment of John Sievwright during the year, the board is seeking to appoint three new independent non-executive directors during the year ending 31 March 2011.

The board discussed and agreed the skills, knowledge and experience that each appointee would ideally have. Experience of the markets in which ICAP operates is a requirement but such experience could be derived from a number of other related financial services sectors. The board recognises that the recruitment of three non-executive directors creates an opportunity to provide input to the board from a greater variety of relevant perspectives than would normally be possible.

Following a selection process, the board appointed leadership advisory firm Heidrick & Struggles to undertake this search on an international basis and the process is well underway with a short list of possible candidates for the first appointment at the selection stage.

Board meetingsThe board has six board meetings scheduled each year with one meeting focussing on the strategic review. In addition to the scheduled meetings, the board has met on a number of additional occasions to consider other issues including trading performance, the SEC investigation and settlement, acquisitions, approval of share allotments in respect of the scrip dividend scheme and the Company’s various option schemes. The additional board meetings were sometimes called at short notice and any director who was unable to attend a meeting was briefed separately on the discussions at the meeting and their views were sought and considered.

The following table sets out the number of meetings of the board and its committees during the year ended 31 March 2010 and attendance by directors at those meetings:

Board scheduled meetings

Board additional meetings

Audit and risk committee

Remuneration committee

Nomination committee

Total number of meetings 6 11 6 7 1Charles Gregson 6/6 11/11 – – 0/1Michael Spencer 6/6 10/11 – – 0/1Matthew Lester 6/6 11/11 – – –John Nixon 5/6 9/11 – – –Mark Yallop 5/6 10/11 – – –Nicholas Cosh 6/6 7/11 6/6 6/7 1/1James McNulty 6/6 10/11 6/6 7/7 1/1William Nabarro 6/6 9/11 6/6 7/7 1/1John Sievwright (appointed 15 July 2009) 5/5 8/9 4/4 6/6 –Former directorDavid Puth (resigned 15 September 2009) 2/2 2/3 2/2 1/1 –


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Governance

43 – 63

Independence of directorsAll the non-executive directors are independent of management and considered by the board to be free from any business or other relationships which could interfere with the exercise of their independence.

In accordance with the Combined Code and the Company’s articles of association, all directors are subject to re-appointment by shareholders at the first opportunity following their appointment and, subsequently, must seek re-election at least once every three years.

Conflicts of interestIn line with the Companies Act 2006, the articles of association were amended at the 2008 annual general meeting to allow the board to authorise potential conflicts of interest that may arise and to impose such limits or conditions as it thinks fit. The decision to authorise a conflict of interest can be made only by independent directors (those who have no interest in the matter being considered). In making such a decision the directors must act in a way they consider in good faith will be most likely to promote the Company’s success. A process has been established whereby actual and potential conflicts are regularly reviewed and for the appropriate authorisation to be sought prior to the appointment of any new director or if a new conflict arises. During 2009/10 this procedure operated effectively.

Induction and continuing professional developmentNew directors to the board are provided with appropriate training and briefings which take into account their individual qualifications and experience. All directors receive, during their term of office, regular briefings on changes and developments in the Group’s business and on any legislative and regulatory changes which are relevant to the Group.

Board evaluationDuring the year the board evaluated its performance and that of its committees and individual directors. This was done by way of a questionnaire which was completed by each director to evaluate effectiveness and accountability and by individual meetings with the Chairman. The collective results were then discussed by the board with actions agreed.

The Chairman’s evaluation was undertaken by James McNulty as the senior independent director in consultation with other directors.

The board has considered and agreed that each of Charles Gregson, Matthew Lester and James McNulty, who are standing for re-election at the annual general meeting, continue to perform effectively and to demonstrate commitment to their roles.

Audit and risk committeeThe following directors served on the committee during the year:

John Sievwright (chairman) (appointed as chairman on 1 December 2009) Nicholas Cosh (retired 31 March 2010) James McNulty William Nabarro David Puth (resigned 15 September 2009)

John Sievwright, a chartered accountant and member of the audit and risk committee from 15 July 2009, took over the chair of the audit and risk committee on 1 December 2009 from Nicholas Cosh who had announced his decision to retire as a director of ICAP plc with effect from the end of the financial year. David Puth was a member of the committee during the year until his resignation on 15 September 2009.

Role of the boardThe board has a schedule of matters specifically reserved to it for decision and approval which include:

–the Group’s long-term objectives and commercial strategy;

–significant acquisitions, disposals and investments;

–the Group’s annual and half-year reports;

–any significant change in accounting policies or practices;

–any interim dividend and recommendation of the final dividend;

–the annual operating and capital expenditure budgets;

–any changes to the Company’s capital structure or its status as a listed company;

–risk management strategy; and

–treasury policy.

Information is provided in a timely and regular manner to directors for all meetings to enable them to exercise their judgement in the discharge of their duties. In addition other senior executives attend certain board meetings to make presentations on potential acquisitions and to discuss the results and strategies of their businesses.

All directors have access to the advice and services of the Group Company Secretary who is responsible for ensuring that board procedures and applicable rules are observed. There is a procedure to enable the directors to obtain independent professional advice in respect of their duties at the Company’s expense. This facility extends to the members of the audit and risk, remuneration and nomination committees. The Company maintains liability insurance for its directors and officers.

There is a clear division between the roles and responsibilities of the Chairman and the Group Chief Executive Officer. The Chairman is responsible for leadership of the board and ensuring effective communication with shareholders. The Group Chief Executive Officer is responsible for leading and managing the business.

To support the principles of good corporate governance, the board manages the Group through board meetings and a number of committees, each of which has terms of reference and meets regularly. The terms of reference of the audit and risk, remuneration and nomination committees are available on the Group’s website, www.icap.com. The minutes of each of the committees are made available to all directors and the board receives an update from each of the committee’s chairman following each committee meeting.

Senior independent directorJames McNulty is the senior independent director and provides an additional contact point for shareholders if the normal contact channels are inappropriate.

ICAP in ten01 –


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52


–to monitor the mechanisms of internal control of those areas of risk identified throughout the Group;

–to review and approve the risk appetite methodology;

–to review and recommend to the board approval of the Group’s ICAAP document;

–to ensure that the global head of risk and the risk function are independent of the business and free to conduct their activities without management constraint;

–to approve the appointment, dismissal and compensation of the global head of risk; and

–to establish the high-level objectives of the global risk team and review performance against these objectives twice a year.

Activities During the year the committee considered:

–the annual and half-year financial statements with particular focus on the most appropriate treatment and disclosure of any new or judgemental matters;

–developments in accounting standards and financial reporting and their likely impact on the Group’s financial statements with particular regard to the market conditions experienced during this period;

–its terms of reference particularly with reference to the Walker report’s recommendations on board risk committees;

–audit fees and terms of engagement;

–the policy on usage of the external auditor for non-audit engagements and agreed strategic criteria for when the use of the external auditor was appropriate;

–all proposed non-audit assignments undertaken by the external auditors with fees in excess of £50,000;

–reports on the activities of the internal audit function, including the results of internal audits;

–the annual internal audit plan;

–the annual external audit plan;

–presentations from the global head of risk;

–distributable reserve and regulatory capital planning;

–post acquisition reviews; and

–the whistleblowing arrangements.

Corporate governancecontinued

All the audit and risk committee members are independent non-executive directors. The board has satisfied itself that the chairman of the audit and risk committee, and the committee collectively, have recent and relevant financial experience due to the senior positions they hold or held in other public companies, to enable the committee to function effectively and to discharge its responsibilities.

Following recent developments in corporate governance and regulation, the committee’s remit and structure has been changed and the terms of reference have been expanded in order to ensure that the committee, now known as the audit and risk committee, can fulfil its revised responsibilities.

During the year ended 31 March 2010, the committee met six times and this schedule will continue for 2010/11 and reflects the larger remit now covered by the committee.

In addition to the committee members, the meeting, by invitation only, is attended by the Chairman, Group Chief Operating Officer, Group Finance Director, the global head of risk, the group financial controller, the group general counsel, Ernst & Young as internal auditor and representatives from the external auditors. The chairman of the audit and risk committee also maintains contact with those attendees throughout the year. At the end of at least two of the committee meetings each year representatives from Ernst & Young, as internal auditor, and the external auditors are given the opportunity to raise any issues, in private, without management being present.

Role of the audit and risk committeeUnder its terms of reference, the audit and risk committee’s main responsibilities are:

–to monitor the integrity of the Group’s financial statements and any announcements relating to the Group’s financial performance;

–to review the Group’s internal financial controls and risk management systems;

–to assess the independence, objectivity and effectiveness of the external auditors;

–to develop and implement policies on the engagement of the external auditors for the supply of non-audit services;

–to make recommendations for the appointment, re-appointment and removal of the external auditors and approve their remuneration and terms of engagement;

–to monitor and review the effectiveness of the Group’s internal audit function;

–to approve the appointment or dismissal of the head of internal audit;

–to review arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters;

–to review the quality and effectiveness of the Group’s risk management framework, in particular to ensure that the key risks of the Group (including emerging threats) are properly assessed and mitigated;


65 – 140


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53


Governance

43 – 63

Nomination committeeThe following directors served on the committee during the year:

William Nabarro (chairman) Nicholas Cosh (retired 31 March 2010) Charles Gregson James McNulty Michael Spencer

The committee recommends to the board appointments for the roles of Chairman, Group Chief Executive Officer, executive and non-executive directors.

Much of this committee’s activities concerning the appointment of new non-executive directors has been undertaken by the full board.

During the year the committee considered the succession planning for the board with a particular focus during the first half of the year on the appointment of a non-executive director to chair the audit and risk committee following Nicholas Cosh’s decision to retire at the end of the financial year. As a result of an extensive search, undertaken by the global executive search firm Spencer Stuart, John Sievwright was appointed as a non-executive director.

Executive committeesIn addition to the board committees, the corporate governance framework includes three executive committees – the global executive management group, group risk and finance.

Global Executive Management Group (GEMG)The GEMG consists of the four executive directors of ICAP and six members of senior management. It is the main strategic development forum for ICAP and meets six times a year to review business operations and performance. New business initiatives are approved by the GEMG which then reviews them on a regular basis.

Group risk committeeThe committee is an executive committee chaired by the Group Chief Operating Officer and comprises non-revenue earning senior managers of the Group.

The committee meets at least six times a year. The minutes of the meetings are circulated together with the committee papers to members of the board.

The committee is responsible for ensuring that the Group’s risk management framework, risk appetite, risk strategy and policies are appropriate to the activities of the Group. The committee reviews the Group’s risk exposures and ensures adherence to Group risk policy (particularly in relation to credit, market and operational risk).

It is the board’s responsibility to determine the Group’s risk appetite and identify, monitor and assess the significant risks the Group may be exposed to. The committee is responsible for developing procedures for managing risk in line with board approved polices and limits.

This includes establishing and maintaining an adequate, sound and appropriate internal control structure, evaluating its effectiveness and promptly identifying material weaknesses and taking corrective steps.

ICAP in ten01 –


41

Evaluation of external auditorsDuring the financial year, the committee reviewed and approved the proposed audit fee and terms of engagement for the 2009/10 audit and recommended to the board that it proposes to shareholders that PricewaterhouseCoopers LLP be re-appointed as the Group’s external auditors for 2010/11.

The committee also monitored the balance of audit and non-audit fees to ensure that the independence and objectivity of the external auditors is maintained. During the year, PricewaterhouseCoopers LLP was one of the main providers of external advice but their work was limited to specific areas and the services of other firms were used on an ongoing basis. Any proposed non-audit assignments, with fees in excess of £50,000, are subject to the committee chairman’s prior approval and the subsequent approval of the committee.

As part of its consideration of the annual financial statements, the committee has reviewed and is satisfied that the auditors have remained independent of the Group during the financial year and continued to do so to the date of this report. The committee also received details from PricewaterhouseCoopers LLP of its own independence procedures and confirmation that, in its opinion, it remained independent throughout the year.

The assessment of the effectiveness of the external audit process for 2008/09 was undertaken following the completion of the 2008/09 audit. The results of this assessment were reviewed by the audit and risk committee in November 2009. The assessment of the effectiveness of the external audit process for 2009/10 will be conducted in June 2010.

PricewaterhouseCoopers LLP, and its predecessor organisations, has been the Company’s auditor since it was formed from the merger of Garban and Intercapital in 1999. The committee considers that the relationship with the external auditors is working well and remains satisfied with their effectiveness. Accordingly, it has not considered it necessary to require the firm to tender for the audit work although this is always kept under review. The external auditors are required to rotate the lead audit partner responsible for the Group and subsidiary audits every five years. There are no contractual obligations restricting the Company’s choice of external auditor.

Internal controlManagement is responsible for maintaining an effective system of internal control with the board being responsible for reviewing its effectiveness. Details of the steps taken by the committee to review the effectiveness of the Group’s system of internal control, including its control over financial reporting, are set out in the business review on page 35.

Remuneration committeeThe remuneration report is set out on pages 55 to 62.

54


Corporate governancecontinued

Finance committeeThe committee is an executive committee chaired by the Group Finance Director and includes the Group Chief Operating Officer.

The terms of reference are approved by the board and the committee meets at least six times a year. The minutes of the meetings are circulated to all members of the board.

The committee is responsible for reviewing and making recommendations to the board in relation to matters affecting the structure, financing, tax and treasury aspects of the Group and to ensure compliance with board approved financing, treasury and tax policies.

Relations and dialogue with shareholdersThe board is accountable to the Company’s shareholders for the performance and activities of the Group and is very much aware of the importance of maintaining good relations and communications with all its shareholders. The annual and half-year financial statements, together with the interim management statements and Stock Exchange announcements, are published on the investor relations section of the Group’s website, www.icap.com, as soon as they are released. Major shareholder and analysts’ presentations are also made available. The board recognises that the annual general meeting provides shareholders with an opportunity to receive information on the Group’s business performance and to question senior management on any business matter. All the directors attended the 2009 annual general meeting.

The Group has established a programme of communication with its institutional investors and analysts. At the time of the announcement of the full and half-year results, presentations are made to analysts, the press and institutional investors. In addition, there are regular meetings during the year (subject to relevant regulatory constraints) with analysts and investors to update them on developments in the Group’s strategy and performance.

Annual general meetingThe notice of the annual general meeting is sent to shareholders at least 20 working days before the meeting and details of proxy votes for and against each resolution, together with votes withheld, are made available after the vote has been dealt with on a show of hands.

Accountability and auditThe directors’ statement regarding their responsibility for preparing the Annual Report is set out in the directors’ report on page 49 and the independent auditors’ report regarding their reporting responsibility is detailed on page 63.


Deborah Abrehart Group Company Secretary


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ICAP in ten01 –


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Remuneration report

ActivitiesDuring the year the committee considered:

–the approval of the 2009/10 performance bonus payments;

–the executive directors‘ objectives for the year ended 31 March 2010;

–awards under the Company’s share and share option plans;

–the acceleration of the vesting of BSMP basic awards for UK tax resident participants and the consideration of the performance condition for the 2007 matching award;

– broker compensation packages above a certain size and/or term; and

–the regulatory and market developments and guidelines published in respect of remuneration practices.

Remuneration policyPrinciplesThe principles of the remuneration policy have been developed over a number of years to recognise and reward the rapid and substantial growth of the Group. The principles are designed to ensure that the structure and level of the executive directors’ remuneration are:

–appropriate in light of remuneration arrangements among senior executives and managers employed by competitors and other participants in the markets in which ICAP is active;

–compatible with the remuneration of senior brokers and managers employed within the Group who are not directors of ICAP plc;

–structured directly to take account of the absence of committed future revenue in the Group’s businesses, which means that the major part of revenue has to be secured in the year in which it is earned;

–structured to reflect Group profit, with low fixed-base salaries and negligible pension and other benefits;

–simple, with the amounts to which executive directors are entitled capable of being calculated by reference to the published financial statements of the Group;

–integrated, so that executive directors, other than John Nixon for 2009/10, participate in a single comprehensive bonus and incentive structure rather than participating in several different schemes;

–structured rather than discretionary: remuneration is primarily determined arithmetically by reference to the published financial performance of the Group, with the non-arithmetic element (which will be smaller, other than in exceptional circumstances) determined by reference to progress towards specific management objectives agreed at the start of the relevant financial year;

–structured to maximise the likelihood of retaining a proven and stable senior management team; and

–structured to align executive directors’ interests with those of ICAP’s shareholders.

This report sets out the Group’s remuneration policy and details the remuneration of each of the directors for the financial year ended 31 March 2010 and, as far as practicable, for subsequent years.

The remuneration committee is responsible for making recommendations to the board on the Company’s remuneration policy and, within the terms of the agreed policy, determining the total individual remuneration packages of the executive directors.

Unaudited informationRemuneration committeeThe following directors served on the committee during the year:

James McNulty (chairman) Nicholas Cosh (retired 31 March 2010) William Nabarro David Puth (resigned 15 September 2009) John Sievwright (appointed 30 September 2009)

All the remuneration committee members are independent non-executive directors.

The remuneration committee does not determine the fees payable to the non-executive directors, which are considered and approved by the executive directors and the Chairman of the board.

The committee consults the Chairman of the board and the Group Chief Executive Officer about its proposals relating to the remuneration of the executive directors.

Details of the number of meetings and attendance at committee meetings during the year are set out in the table on page 50.

AdviceDuring the year the remuneration committee received advice from the following consultants:

–Towers Watson provided advice on aspects of the calculation of the bonus pool;

–Ashurst LLP provided advice on share and share option schemes, in particular on the acceleration of awards;

–Deloitte LLP provided advice on the Long Term Incentive Plan, in particular on the acceleration of awards.

Towers Watson does not have any other connection with the Group. Ashurst LLP provided advice on a broad range of legal issues to the Group and Deloitte LLP provided tax and UK regulatory advice to the Group during the year ended 31 March 2010.

56


Remuneration reportcontinued

In determining the remuneration policy and the size of the awards, the remuneration committee takes account of structures and levels of remuneration for executive directors in other substantial companies that it regards as appropriate comparators and of such companies’ stated remuneration policies. The comparator companies, selected because their and the Group’s activities are in broadly comparable areas of the financial services sector, include Chicago Mercantile Exchange, Collins Stewart, Tullett Prebon, Deutsche Borse, BGC Partners, Euronext, GFI, Jardine Lloyd Thompson, London Stock Exchange and Man Group.

Components of executive remunerationThe executive directors’ remuneration comprises:

–basic salary;

–performance-related bonus;

–participation in the BSMP;

–pension contribution;

–life assurance; and

–medical insurance.

John Nixon’s remuneration for 2009/10 is based on his executive responsibilities as Chief Executive Officer of ICAP Electronic Broking, for the information business, strategic development and as an executive director of ICAP plc. His performance-related bonus comprises a bonus based on profitability of ICAP Electronic Broking and participation (on a limited basis) in the bonus arrangements of the other executive directors. John Nixon’s participation in the BSMP is based on his bonus payment under the executive directors’ arrangements. A significant portion of his benefits comprises the Federal Insurance Contributions Act tax, which is required to be paid by the Company on his behalf.

Salaries and benefitsThe remuneration committee used its discretion and the bonus pool was adjusted downwards to reflect the SEC fine and the losses in the cash equities businesses. In addition, the remuneration committee considered the achievements of the executive directors against previously agreed specified agreed priorities and objectives for the year ended 31 March 2010. While the agreed priorities and objectives were substantially met, the FX adjusted profit fell 10% short of the 2009/10 target. The committee identified a range of possible bonus payouts based on levels of profitability below target and used its discretion during March 2010 to arrive at a total bonus payout (excluding John Nixon’s ICAP Electronic Broking bonus) of £7.3 million of which £6.8 million was allocated in this year and £500,000 will be carried forward to the bonus pool for 2010/11.

Set out below are the salaries and benefits received by the executive directors in (or, in the case of bonuses, in respect of) 2009/10.

Executive director

Salary£

Pension contribution

£Benefits

£

Bonus in lieuof dividend

£Cash bonus

£

BSMPbasic award

£

Year ended 31 March

2010 Total

£

Year ended 31 March

2009 Total

£Variable

%

Michael Spencer 360,000 18,000 5,092 663,842 1,500,000 1,500,000 4,046,934 6,746,359 74Matthew Lester 250,000 11,082 4,241 64,684 500,000 500,000 1,330,007 1,397,503 75John Nixon 315,418 – 67,324 15,556 2,918,919 250,000 3,567,217 3,385,510 89Mark Yallop 225,000 9,973 4,241 369,502 1,150,000 1,150,000 2,908,716 3,532,926 79

There have been no increases in base salaries during the year.

Bonus and other entitlements under the Company’s incentive schemes are not pensionable.

Michael Spencer, Matthew Lester and Mark Yallop will, in addition, be granted matching award options, to the value of the basic award, under the BSMP, and John Nixon a promise to receive matching shares in respect of the bonus amount of £250,000.

Michael Spencer resigned as the non-executive Chairman of Numis Corporation plc in May 2009 and received fees of £4,795 for this period.


65 – 140


141 – 143

57


Governance

43 – 63

ICAP in ten01 –


41

Calculation of the executive directors’ variable remunerationThe structure put in place by the remuneration committee, by which executive directors’ variable remuneration is determined, comprises three elements. A bonus pool is created representing a fixed percentage of profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items and after all remuneration costs.

It has been agreed that, with effect from 1 April 2010, John Nixon’s remuneration will be structured so as to align with the other executive directors as a result of changes to his responsibilities which now include all of ICAP’s activities in the Americas. The importance of these capital markets to the Group merits an executive board member to co-ordinate our activities and operations in this region.

To enable John Nixon to receive his compensation in the same manner as the other executive directors, the remuneration committee has discussed and agreed revisions to the fixed percentages of the bonus pool which are detailed in the bonus arrangements for the year ending 31 March 2011 on page 58. The cost to the Company will be offset to a large extent by eliminating the cost of John Nixon’s bonus from the ICAP Electronic Broking’s bonus accrual.

Of the bonus pool:

(i) half is paid in cash;

(ii) the other half is used to purchase shares of the Company held by the ICAP Trust and over which the executive directors are granted awards (the basic award) but which are not released to the respective executive directors until the end of three years unless they cease employment earlier; and matching awards of shares are granted to executive directors equal in total to the number purchased as the basic award, to be secured through market purchase or by the use of Treasury Shares. An award will usually be released after three years only if the executive director to whom the particular award was made is still employed and has not disposed of his basic award and, for matching awards in respect of 2003/04 onwards, provided performance-related criteria are met.

The performance-related criteria for the release of the matching awards granted under the BSMP for the year ended 31 March 2004 and subsequent years is that adjusted basic EPS must have grown by at least 9% over RPI over the three years from the date of grant.

The structure is designed to result in two-thirds of each executive director’s variable remuneration in respect of each year being locked into the Company’s shares for the subsequent three years, its value varying in direct relation to the price of the Company’s shares.

The matching award is then usually released after three years if the executive director is still employed and has not disposed of his basic award and if the financial performance of the Company is such that the performance-related criteria have been met during the subsequent three-year period.

Under the structure adopted by the remuneration committee, which establishes the pool from which executive directors’ bonuses will be paid, the bonus pool comprises:

(i) a fixed percentage of the Group’s profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items and after all remuneration costs, subject to the achievement of a minimum level of profit for the year set by the remuneration committee at the beginning of the year; and

(ii) a smaller, variable percentage set by the remuneration committee to reflect, first, the progress made towards agreed specific priorities and objectives and, second, financial results outperforming the minimum level in the relevant year.

Remuneration of the non-executive directorsThe remuneration of the non-executive directors is considered and approved by the executive directors. The basic remuneration for Nicholas Cosh, James McNulty, William Nabarro, David Puth (who resigned on 15 September 2009) and John Sievwright (who was appointed on 15 July 2009) was £60,000 per annum (pro-rated for the appropriate period of service within the year ended 31 March 2010).

Nicholas Cosh as chairman of the audit and risk committee (until his resignation as chairman on 30 November 2009), John Sievwright (on his appointment as chairman of the audit and risk committee on 1 December 2009), James McNulty as chairman of the remuneration committee and William Nabarro as chairman of the nomination committee received an additional £20,000 (pro-rated for the appropriate period of service), £10,000 and £5,000 per annum respectively for those functions.

The Chairman, Charles Gregson, received a fee of £200,000 per annum.

With effect from 1 May 2010, the following increases have been approved:

– non-executive director from £60,000 to £80,000 per annum;

– Chairman from £200,000 to £250,000.

There are no changes to the additional fees for the chairing of committees.

Total shareholder returnThe graph below shows, for the five financial years to 31 March 2010, the total shareholder return on a holding of the Company’s ordinary shares compared with the FTSE 100 and the FTSE All Share indices. ICAP plc has been a constituent of the FTSE 100 index since 30 June 2006.

March 05 March 06 March 07 March 08 March 09 March 10

100

150

200

250

– ICAP TSR – FTSE 100 TSR – FTSE All Share TSR

Performance graph – value of £100 investedFive financial years ended 31 March 2010

58



–the remuneration committee will retain the overriding discretion to make such changes to the bonus arrangements as it believes the circumstances warrant. Such changes may lead to either an increase or a decrease in the bonus pool; and

–the matching award will be released only if adjusted basic EPS has grown by at least 9% above RPI over the three financial years beginning with the financial year in which the matching award is granted. If this performance-related criteria is not met at the end of the three years the matching award will lapse.

Share schemes and long-term incentive arrangementsThe Company has a number of share schemes which are described in detail in note 27 to the financial statements.

Following the approval of the BSMP, executive directors no longer receive awards under any of the schemes with the exception of the ICAP 1998 Sharesave Scheme (SAYE). John Nixon was granted 250,000 options under the UCSOP prior to his appointment as an executive director of ICAP plc.

As a continuation of the policy to align the interests of senior managers with those of shareholders, the ICAP plc Senior Management Long Term Incentive Plan (LTIP) was introduced in 2008. Executive directors are not eligible to participate in the LTIP.

The policy in respect of the share schemes and long-term incentive arrangements is that they will be restricted and allocation made only to key executives, senior brokers and senior management. Awards will be of a size, up to the limits allowed by the schemes, to provide a meaningful incentive and an effective retention tool for these particular groups of employees. The SAYE scheme is open to eligible employees to encourage regular saving linked to investment in the shares of the Company.

The Traiana, Inc 2000 Stock Plan (the Traiana Plan), adopted by the board at the time of the acquisition of Traiana in December 2007, had been open to eligible employees of the Traiana group of companies. No new options will be granted under the Traiana Plan.

Executive share options have not been offered at a discount (save as permitted by paragraph 9.4.4 and 9.5.4 of the Listing Rules).

Performance conditionsThe table on page 62 shows the share options and interests under long-term incentive schemes held by directors of the Company. Where a performance condition is attached to options, the condition is that, at the time of vesting, unadjusted basic EPS must be in excess of growth in RPI by at least 9% over the three years from the date of grant. This performance condition applies to all grants since 1 April 2004. The condition was selected to act as a mechanism to safeguard the progress that has been made in the performance of the Group and to underpin continuing forward movement in the Group’s earnings. Details of the performance conditions applicable to those options are described in note 27 to the financial statements.

The remuneration committee does not consider it appropriate to put a cap on the size of the bonus pool that may be generated in light of remuneration practices prevalent in the financial services sector and because the major part of the bonus pool is set as a direct reflection of the financial performance of the Group.

Bonus arrangements for year ended 31 March 2010The bonus arrangements in effect for the executive directors’ bonuses for the year ended 31 March 2010 were set down in the financial statements for the year ended 31 March 2009 and are as follows:

–so long as profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items, is greater than £350 million at an exchange rate of $1.55 (and provided there is a year-on-year increase in adjusted basic EPS), the executive directors’ bonus pool will be 2.87% of that profit;

–an additional amount of up to 1.43% of that profit may be payable as determined by the remuneration committee based on the actual financial performance for the year and progress made towards specified agreed priorities and objectives for the executive directors;

–if adjusted profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items is below £350 million the amount of the executive directors’ bonus pool will be at the discretion of the remuneration committee;

–the remuneration committee will retain the overriding discretion to make such changes to the bonus arrangements as it believes the circumstances warrant. Such changes may lead to either an increase or a decrease in the bonus pool; and

–the matching award will be released only if adjusted basic EPS has grown by at least 9% above RPI over the three financial years beginning with the financial year in which the matching award is granted. If this performance-related criteria is not met at the end of the three years the matching award will lapse.

Bonus arrangements for year ending 31 March 2011The arrangements for the year ending 31 March 2011 are as follows:

–so long as profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items, is greater than £363 million at an exchange rate of $1.55 (and provided there is a year-on-year increase in adjusted basic EPS), the executive directors’ bonus pool will be 3.35% of that profit;

–an additional amount of up to 1.65% of that profit may be payable as determined by the remuneration committee based on the actual financial performance for the year and progress made towards specified agreed priorities and objectives for the executive directors;

–if adjusted profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items is below £363 million the amount of the executive directors’ bonus pool will be at the discretion of the remuneration committee;


65 – 140


141 – 143

59


Governance

43 – 63

ICAP in ten01 –


41

Directors’ service contractsThe Company’s policy is for executive directors to have service contracts with notice periods of no more than one year as recommended by the Combined Code and to provide a reasonable balance between the need to retain the services of key individuals and the need to limit the liabilities of the Company in the event of the termination of a contract. The table below shows details of directors’ service contracts.

No director received compensation for loss of office during the year.

Dateappointed

director

Contract/letterof appointment

date Term Expiry/review

Compensationon early

termination

Executive directorsMichael Spencer 09.09.99 30.09.98 1 year Rolling Note 1Matthew Lester 06.09.06 24.05.06 1 year Rolling Note 2John Nixon 15.05.08 31.12.02 1 year Rolling Note 2Mark Yallop 13.07.05 23.05.05 1 year Rolling Note 2Non-executive directorsCharles Gregson (Chairman) 06.08.98 14.05.10 No notice 01.11.10 Note 3Nicholas Cosh 05.12.00 08.05.07 3 months’ notice

on change of control31.03.10

Note 4James McNulty 30.03.04 14.05.10 3 months’ notice


Note 4William Nabarro 28.10.98 14.05.10 3 months’ notice


Note 4John Sievwright 15.07.09 15.06.09 3 months’ notice


Note 4

Former directorDavid Puth 15.11.07 24.10.07 3 months’ notice on

change of control15.09.09

Notes1 The contract of Michael Spencer, dated 30 September 1998 as amended on 22 July 1999, may be terminated by the Company with no notice in which case the Company

is obliged to make a payment of salary and contractual benefits (excluding any bonus) for 12 months.

2 The contracts of Matthew Lester, John Nixon and Mark Yallop may be terminated by the Company with no notice in which case the Company is obliged to make a payment of salary and contractual benefits (excluding any bonus) for 12 months.

3 The Chairman does not have a contract with the Company and no notice is required to be given by the Company on termination.

4 The non-executive directors, Nicholas Cosh, James McNulty, William Nabarro and John Sievwright, do not have contracts with the Company and no notice is required to be given by the Company on termination except on change of control.

Group pension arrangementsIn the UK, the Group operates a corporate Self Invested Pension Plan (the Plan) which is open to all employees. Contributions made to the Plan by non-broking employees are matched by the Group, up to a limit of 5% of basic salary. In addition, the Group allows all UK employees to sacrifice bonus into the Plan. The Plan is administered by Standard Life Assurance Limited.

The Group also administers a number of historical pension arrangements (including the Group Personal Pension Scheme) for existing employees.

Various 401k plans are run in the US. These are retirement savings schemes with a choice of investment funds and US federal tax law sets savings limits for employees.

The Group operates defined benefit pension schemes in the US, Germany and Indonesia. Further information can be found in note 30 to the financial statements.

60



Audited informationDirectors’ remunerationThe remuneration of the directors of the Company for the year ended 31 March 2010 was as follows:

NoteSalaries/

feesBenefits

£

Bonus inlieu of

dividend on the BSMP

awards£ Cash bonus

Amountsover which

basic awardswill be granted

under BSMP£

Year ended31 March

2010Total

£

Year ended31 March

2009Total

£

Executive directorsMichael Spencer 1,2,4 360,000 5,092 663,842 1,500,000 1,500,000 4,028,934 6,728,359Matthew Lester 1,2,4 250,000 4,241 64,684 500,000 500,000 1,318,925 1,386,421John Nixon 1,2,3 315,418 67,324 15,556 2,918,919 250,000 3,567,217 3,382,610Mark Yallop 1,2,4 225,000 4,241 369,502 1,150,000 1,150,000 2,898,743 3,522,953

Non-executive directorsCharles Gregson – Chairman 200,000 200,000 200,000Nicholas Cosh 73,333 73,333 80,000James McNulty 70,000 70,000 70,000William Nabarro 65,000 65,000 65,000John Sievwright 49,667 49,667 -

Former directorDavid Puth 27,538 27,538 60,000

Total 12,299,357 15,495,343

NotesThe remuneration shown above represents amounts payable in respect of services provided by the directors to the Company and its subsidiaries during the year in which they held office as directors of the Company.

1 In addition to the basic award an equivalent matching award will be granted under the BSMP. Matching awards may, in normal circumstances, be exercised only if the directors still hold office in three years’ time and retain their basic awards. Exercise of matching awards is also subject to the performance criteria attached to the award being satisfied.

2 Benefits may include car allowance, premiums for private medical insurance, permanent health insurance, disability insurance and mobile telephone. In the case of John Nixon, a significant portion of his benefits comprises the Federal Insurance Contributions Act tax which is required to be paid by the Company on his behalf.

3 The elements of John Nixon’s remuneration that are paid in dollars have been converted to sterling using the average exchange rate for the year of $1.5852/£ (2009 – $1.7238/£).

4 A bonus in lieu of dividend on the BSMP was received on the basic awards granted in 2006, 2007, 2008 and 2009 and on the vested matching awards granted in 2005 and 2006 which were unexercised during the year.

5 The figures stated above exclude pension contributions to defined contribution schemes which are shown under salaries and benefits for each executive director on page 56.


65 – 140


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61


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ICAP in ten01 –


41

Bonus Share Matching Plan (BSMP)The BSMP was approved by shareholders at the annual general meeting held in 2003. One half of each executive director’s bonus has been used to purchase ordinary shares (a basic award) which are held by the ICAP Trust. Matching award options will normally be exercisable at the end of three years as long as the basic award options are still held and the executive director remains in employment. The performance-related criteria for the release of the matching awards granted under the BSMP for the year ended 31 March 2004 and subsequent years is that adjusted basic EPS must have grown by at least 9% over RPI over three financial years beginning with the financial year in which the matching award is granted. This condition has been met for the awards granted in 2004, 2005, 2006 and 2007.

The table below sets out the performance year for each grant together with the market price of an ICAP share on the grant date.

Grant date Market price on date of grant Performance year ended

16 July 2003 248.7p4 June 2004 283.5p 31 March 200410 June 2005 292.5p 31 March 200522 June 2006 482.8p 31 March 200624 May 2007 523.8p 31 March 200729 May 2008 610.0p 31 March 200828 May 2009 394.5p 31 March 2009

The exercise price for a basic award is £1 and the exercise price for a matching award is £1.

The table below sets out the shares awarded as part of the executive directors’ variable remuneration.

Notes

Optionsunder the

BSMP heldat 1 April

2009 Grant date

Basicaward

options

Matchingaward

options Exercised

Value ofexercise

£

Total optionsunder the

BSMP heldat 31 March

2010

Michael Spencer 1 16.07.03 766,300 766,300 1,532,600 6.0m2 04.06.04 810,153 810,153 1,620,306 6.3m3 10.06.05 701,712 701,712 1,403,424 5.4m4 22.06.06 525,959 525,959 1,051,918 4.1m5 24.05.07 541,985 541,985 –6 29.05.08 631,973 631,973 –7 7,956,164 28.05.09 607,543 607,543 – 3,563,002

Matthew Lester 5,8 24.05.07 51,932 51,932 103,864 0.4m6,8 29.05.08 98,810 98,810 98,810 0.4m7,8 301,484 28.05.09 140,694 140,694 140,694 0.5m 239,504

Mark Yallop 4 22.06.06 177,056 177,056 354,112 1.3m5,8 24.05.07 212,450 212,450 424,900 1.6m6,8 29.05.08 288,196 288,196 288,196 1.1m7,8 1,355,404 28.05.09 402,897 402,897 402,897 1.5m 691,093

No options lapsed during the year. All option figures shown as at 31 March 2010 remained unchanged as at 12 May 2010.

Notes1 Exercise period 28 May 2006 – 27 May 2011.2 Exercise period 23 May 2007 – 22 May 2012.3 Exercise period 20 May 2008 – 19 May 2013.4 Exercise period 19 May 2009 – 18 May 2014.5 Exercise period 19 May 2010 – 18 May 2015.6 Exercise period commences on the day of the announcement of the Company’s annual results for the financial year ending 31 March 2011 and will last for five years.7 Exercise period commences on the day of the announcement of the Company’s annual results for the financial year ending 31 March 2012 and will last for five years.8 The vesting of basic awards for 2007, 2008 and 2009 was accelerated for UK tax resident participants; the vesting of the 2007 matching award was accelerated when

the remuneration committee had agreed that the performance condition for the award had been met. The remaining matching awards will become exercisable in accordance with the original terms but the participant must retain the balance of the basic award (following any sale of shares to meet income tax and national insurance contributions) in order to exercise the equivalent matching award.

9 John Nixon was given a promise on 28 May 2009 to receive 63,951 basic award shares and 63,951 matching award shares. The market price on 28 May 2009 was 394.5p. No promises have lapsed.

62



Company long-term incentive schemesThe interests of the directors in options over the Company’s shares resulting from the UCSOP and the SAYE scheme are shown below at 31March 2009 and 31 March 2010.

Date ofgrant

Options heldat 31 March

2009Granted

during periodLapsed during

period

Options heldat 31 March

2010Exercise period

fromExercise period

toExerciseprice (p)

Michael SpencerSAYE 18.06.08 1,926 – 1,926 – 01.08.11 31.01.12 488.0SAYE 17.06.09 – 2,832 – 2,832 01.08.12 31.01.13 323.0

Matthew LesterSAYE 22.06.07 2,255 – – 2,255 01.08.10 31.01.11 419.0UCSOP 07.09.06 333,000 – – 333,000 07.09.09 06.09.16 460.0

John NixonUCSOP 01.06.06 250,000 – – 250,000 01.06.09 30.05.16 493.0

Mark YallopUCSOP 01.07.05 1,000,000 – – 1,000,000 01.07.08 30.06.15 297.0

No options were exercised during the year. All option figures shown as at 31 March 2010 remained unchanged as at 12 May 2010.

At the close of business on 31 March 2010 the market price of the Company’s ordinary shares was 373.80p per share and during the year fluctuated in the range 294.00p–467.20p per share.


James McNultyChairman of the Remuneration Committee


65 – 140


141 – 143

63


Governance

43 – 63

ICAP in ten01 –


41

Independent auditors’ report to the members of ICAP plc

Opinion on other matters prescribed by the Companies Act 2006 In our opinion:

–the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006;

–the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

–the information given in the corporate governance statement with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements.

Matters on which we are required to report by exception We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

–adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

–the Company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or

–certain disclosures of directors’ remuneration specified by law are not made; or

–we have not received all the information and explanations we require for our audit; or

–a corporate governance statement has not been prepared by the Company.

Under the Listing Rules we are required to review:

–the directors’ statement, included in the directors’ report, in relation to going concern; and

–the parts of the corporate governance statement relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review.

Christopher Jones (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London

19 May 2010

We have audited the financial statements of ICAP plc for the year ended 31 March 2010 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated statement of cash flows, the Company balance sheet, the Company statement of changes in equity, the Company statement of comprehensive income, the Company statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, included in the directors’ report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements In our opinion:

–the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 March 2010 and of the Group’s profit and the Group’s and Company’s cash flows for the year then ended;

–the Group’s financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

–the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

–the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the lAS Regulation.

Governance

43 – 63

Shareholder information

141 – 143

ICAP in ten01 –


41Financial statem

ents65 –

140

65

Financial statements63 Independent auditors’ report

66Consolidated income statement

68 Consolidated statement of comprehensive income

69Consolidated balance sheet

70 Consolidated statement of changes in equity

71 Consolidated statement of cash flows

72 Company balance sheet

73 Company statement of changes in equity

73 Company statement of comprehensive income

74 Company statement of cash flows

75 Notes to the financial statements

140 Index to the financial statements


Consolidated income statement Year ended 31 March 2010

66

Note

Before amortisation

and impairment of intangibles

arising on consolidation and exceptional items

£m

Amortisation and impairment of

intangibles arising on consolidation

£m

Exceptional items (note 6)

£m Total

£mContinuing operations Revenue 3 1,605 – – 1,605Operating expenses 9 (1,270) (61) (26) (1,357)Other income 5 19 – – 19 Operating profit 3 354 (61) (26) 267Finance income 7 7 – – 7Finance costs 8 (35) – – (35)Share of profit of associates after tax 3 7 1 – 8

Profit before tax from continuing operations 333 (60) (26) 247Tax 11 (107) 20 4 (83)

Profit for the year from continuing operations 226 (40) (22) 164Loss for the year from discontinued operations 4 (18) – (30) (48)

Profit for the year 208 (40) (52) 116 Attributable to: Owners of the Company 208 (40) (52) 116Minority interests – – – –

208 (40) (52) 116 Earnings per ordinary share from continuing

operations − basic 13 25.5p− diluted 13 25.1p Earnings per ordinary share from total

operations − basic 13 18.0p− diluted 13 17.7p

ICAP in ten01 –


41G

overnance43 –

63Financial statem

ents65 –

140Inform



Consolidated income statement Year ended 31 March 2009

67

Note

Before amortisation

and impairment of intangibles

arising on consolidation and exceptional items*

£m

Amortisation and

intangibles arising on consolidation*

£m

Exceptional items(note 6)

£mTotal*

£m

Continuing operations Revenue 3 1,585 – – 1,585Operating expenses 9 (1,243) (63) – (1,306)Other income 5 23 – – 23

Operating profit 3 365 (63) – 302Finance income 7 19 – – 19Finance costs 8 (43) – – (43)Share of profit of associates after tax 3 9 (2) – 7

Profit before tax from continuing operations 350 (65) – 285Tax 11 (117) 22 – (95)

Profit for the year from continuing operations 233 (43) – 190Loss for the year from discontinued operations 4 (4) – – (4)

Profit for the year 229 (43) – 186

Attributable to: Owners of the Company 216 (41) – 175Minority interests 13 (2) – 11

229 (43) – 186

Earnings per ordinary share from continuing operations

− basic 13 28.2p− diluted 13 27.5p

Earnings per ordinary share from total operations

− basic 13 27.6p− diluted 13 26.9p

*The comparative results have been re-presented to disclose separately the results of the discontinued operations (see note 1(a)).

impairment of


Consolidated statement of comprehensive income

68

Note

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Profit for the year 116 186

Other comprehensive income from continuing operations

Revaluation of available-for-sale investments 18 – (1)Net movement on cash flow hedges 28(a) 44 (26)Net exchange adjustments on investments in overseas subsidiaries (41) 221Actuarial losses on retirement benefit obligations – (1)Revaluation gains in the year 28(a) 45 (3)Associate investment transferred to equity on acquisition of subsidiary 17 (10) –Net current tax recognised in other comprehensive income 11 (5) 43Net deferred tax recognised in other comprehensive income 11 (1) (3)

Other comprehensive income for the year from continuing operations 32 230

Total comprehensive income for the year 148 416

Total comprehensive income attributable to: Owners of the Company 148 397Minority interests – 19

148 416

There is no other comprehensive income from discontinued operations.

ICAP in ten01 –


41G

overnance43 –

63Financial statem

ents65 –

140Inform



Consolidated balance sheet 69

Note

As at 31 March

2010 £m

As at 31 March

2009 £m

Assets Non-current assets Intangible assets arising on consolidation 15(a) 1,489 1,404 Intangible assets arising from development expenditure 15(b) 72 54 Property and equipment 16 68 77 Investment in associates 17 30 38 Deferred tax assets 21 34 40Trade and other receivables 19 35 14Available-for-sale investments 18 27 36

1,755 1,663

Current assets Trade and other receivables 19 60,101 31,739Available-for-sale investments 18 1 5Cash and cash equivalents 33(b) 504 433

60,606 32,177

Total assets 62,361 33,840

Liabilities Current liabilities

Trade and other payables 20 (60,098) (31,807)Short-term borrowings and overdrafts 22 (257) (289)Tax payable (100) (85)Short-term provisions 23 (36) (20)

(60,491) (32,201)

Non-current liabilities Trade and other payables 20 (30) (57)Long-term borrowings 22 (395) (270)Deferred tax liabilities 21 (174) (164)Retirement benefit obligations 30 (1) (2)Tax payable – (4)Long-term provisions 23 (55) (2)

(655) (499)

Total liabilities (61,146) (32,700)

Net assets 1,215 1,140

Equity Capital and reserves Called up share capital 26 66 65 Share premium account 425 398 Other reserves 71 (18)Retained earnings 636 680

Equity attributable to owners of the Company 1,198 1,125 Minority interests 17 15

Total equity 1,215 1,140

Approved by the board on 19 May 2010 and signed on its behalf by:

Michael Spencer Matthew Lester Group Chief Executive Officer Group Finance Director


Consolidated statement of changes in equity

70

Sharecapital

£m

Share premium

£m

Other reserves

(note 28(a)) £m

Retained earnings

£m

Attributable to owners of the

Company £m

Minority interests

£m Total

£m

Balance at 1 April 2008 65 398 12 368 843 13 856Comprehensive income Profit for the year – – – 175 175 11 186Other comprehensive income Revaluation of available-for-sale investments – – – (1) (1) – (1)Net movement on cash flow hedges – – (30) 4 (26) – (26)Net exchange adjustments on investments in

overseas subsidiaries – – – 213 213 8 221Actuarial losses on retirement benefit obligations – – – (1) (1) – (1)Revaluation gains realised in the year – – – (3) (3) – (3)Net current tax recognised in other

comprehensive income – – – 43 43 – 43Net deferred tax recognised in other

comprehensive income – – – (3) (3) – (3)

Total comprehensive income for the year – – (30) 427 397 19 416Own shares acquired for employee trusts – – – (10) (10) – (10)Treasury shares acquired in the year – – – (9) (9) – (9)Shares issued from Treasury in the year – – – 2 2 – 2Share-based payments in the year – – – 8 8 – 8Other movements in minority interests – – – – – (1) (1)Dividends paid in the year (note 12) – – – (106) (106) (16) (122)

Balance at 31 March 2009 65 398 (18) 680 1,125 15 1,140

Comprehensive income Profit for the year – – – 116 116 – 116Other comprehensive income Net movement on cash flow hedges – – 44 – 44 – 44Net exchange adjustments on investments in

overseas subsidiaries – – – (41) (41) – (41)Revaluation gains realised in the year – – 45 – 45 – 45Associate investment transferred to equity on

acquisition of subsidiary – – – (10) (10) – (10)Net current tax recognised in other

comprehensive income – – – (5) (5) – (5)Net deferred tax recognised in other

comprehensive income – – – (1) (1) – (1)

Total comprehensive income for the year – – 89 59 148 – 148Own shares acquired for employee trusts – – – (1) (1) – (1)Ordinary shares issued (note 26) – 8 – – 8 – 8Share-based payments in the year – – – 10 10 – 10Other movements in minority interests – – – – – 2 2Dividends paid in the year (note 12) 1 19 – (112) (92) – (92)

Balance at 31 March 2010 66 425 71 636 1,198 17 1,215

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Consolidated statement of cash flows

71

Note

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Cash flows from operating activities 33(a) 276 354Cash flows from investing activities Dividends received from associates 7 4Other equity dividends received 2 1Payments to acquire property and equipment (17) (36)Intangible development expenditure (49) (28)Receipts from sale of property and equipment – 1Net receipts on disposal of available-for-sale investments 14 4Acquisition of interests in businesses net of cash acquired (147) (197)Acquisition of associates and joint ventures (2) (3)

Net cash flows from investing activities (192) (254)

Cash flows from financing activities Dividends paid to minority interests – (16)Dividends paid to owners of the Company (92) (106)Payments to acquire Treasury Shares – (9)Payments to acquire own shares for employee share trusts* (2) (10)Proceeds from issue of ordinary shares – 1Payments in relation to net investment hedges 24(d) – (32)Repayment of borrowings (488) (144)Funds received from borrowing, net of fees 591 264

Net cash flows from financing activities 9 (52)

Exchange adjustments (8) 6

Net increase in cash and cash equivalents 85 54Net cash and cash equivalents at beginning of the year 419 365

Net cash and cash equivalents at end of the year 33(b) 504 419

Net cash and cash equivalents consists of: Cash and cash equivalents 504 433Bank overdrafts 22 – (14)

Net cash and cash equivalents at end of the year 33(b) 504 419

*Payments to acquire own shares for employee share trusts is shown net of £5m (2009 – £12m) of contributions received from participants in the trusts.


Company balance sheet

72

Note

As at 31 March

2010 £m

As at 31 March

2009 £m

Assets Non-current assets Investment in subsidiaries 36(a) 1,989 1,955Investment in joint ventures 36(c) 1 1

1,990 1,956

Current assets Other receivables 19 36 37Tax receivable – 32

36 69

Total assets 2,026 2,025

Liabilities Current liabilities Other payables 20 (660) (614)Short-term borrowings 22 (40) –

(700) (614)

Non-current liabilities Other payables 20 (140) (140)

(140) (140)

Total liabilities (840) (754)

Net assets 1,186 1,271

Equity Capital and reserves Called up share capital 26 66 65Share premium account 425 398Capital redemption reserve 1 1Retained earnings 694 807

Total equity 1,186 1,271

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Company statement of changes in equity

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Share capital

(note 26) £m

Share premium account

£m

Capital redemption

reserve £m

Retained earnings

£mTotal

£mAs at 1 April 2008 65 398 1 388 852Comprehensive income Profit for the year – – – 532 532Dividends paid in the year (note 12) – – – (106) (106)Net Treasury Shares acquired in year – – – (7) (7)

Balance as at 31 March 2009 65 398 1 807 1,271

Profit for the year – – – (1) (1)

Total comprehensive income – – – (1) (1)Ordinary shares issued – 8 – – 8Dividends paid in the year (note 12) 1 19 – (112) (92)

Balance as at 31 March 2010 66 425 1 694 1,186

Company statement of comprehensive income

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Profit for the year (1) 532

Total comprehensive income (1) 532


Company statement of cash flows

74

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Cash flows from investing activities Dividends received from subsidiaries – 76Investments in subsidiaries (34) −Net cash flows from investing activities (34) 76

Cash flows from financing activities Proceeds from issue of ordinary shares 3 −Proceeds from exercise of share options 5 1Equity dividend paid (92) (106)Net payments to acquire Treasury Shares – (7)Loans to employee benefit trusts to acquire own shares (7) (22)Net receipts/(payments) from/(to) subsidiaries 85 (32)Interest paid – (20)Net funds from borrowing, net of fees 40 110

Net cash flows from financing activities 34 (76)

Net movement in cash and cash equivalents – −Net cash and cash equivalents at beginning of year – −

Net cash and cash equivalents at end of year – −

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Notes to the financial statements

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1 Basis of preparation

(a) Basis of preparation – Group and Company The financial statements have been prepared in accordance with IFRS adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have also been prepared under the historical cost convention, as modified to include the fair value of certain financial instruments in accordance with IFRS. The financial statements are prepared in pound sterling, which is the functional currency of the Company and presented in millions.

The Group maintains a columnar format for the presentation of its consolidated income statement. This enables the Group to continue its practice of improving the understanding of its results by presenting profit for the year before amortisation and impairment of intangibles arising on consolidation and exceptional items. This is the profit measure used to calculate adjusted EPS and is considered to be the most appropriate as it better reflects the Group’s underlying cash earnings. Profit before amortisation and impairment of intangibles arising on consolidation and exceptional items is reconciled to profit before tax on the face of the consolidated income statement.

Intangible assets arising on consolidation represent goodwill and other separately identifiable intangible assets on business combinations since 1 April 2004. The amortisation of separately identifiable intangible assets and any impairment of goodwill together with the unwind of related deferred tax liabilities are included in the consolidated income statement within the column “amortisation and impairment of intangibles arising on consolidation”.

Items which are of a non-recurring nature and material, when considering both size and nature, are disclosed separately to give a clearer presentation of the Group’s results. These are shown as “exceptional items” on the face of the consolidated income statement.

The Group has presented its results from the discontinued operations post-tax (note 4) below profit for the year from continuing operations. The prior year results have been re-presented to disclose separately the results of the discontinued operations. This has had no impact on the results of the Group.

On the face of the consolidated income statement, basic and diluted EPS from continuing operations have also been disclosed. This enables the Group to provide clarity of the EPS of the continuing core businesses. The prior year basic and adjusted EPS has been re-presented to reflect the EPS of the continuing operations of the Group and to provide comparative information.

The Company has taken advantage of section 408 of the Companies Act 2006 not to present its own income statement.

(b) Basis of consolidation – Group The Group’s consolidated financial statements include the results and net assets of the Company, its subsidiaries and the Group’s share of joint ventures and associates.

An entity is regarded as a subsidiary if the Group has control over its strategic, operating and financial policies and intends to hold the investment on a long-term basis for the purpose of securing a contribution to the Group’s activities.

The results of companies acquired during the year are included in the Group’s results from the effective date of acquisition. The results of companies disposed of during the year are included up to the effective date of disposal.

The Group adopts the parent model of accounting for minority interests. Purchases from minority interests result in goodwill being recognised, represented by the difference between any consideration paid and the relevant share of the carrying value of net assets acquired.

Where the Group has a put option over shares held by a minority, the Group derecognises the minority interest and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the minority on exercise of those options. The residual amount, representing the difference between any consideration paid/payable and the minority’s share of net assets, is recognised as goodwill. Movements in the estimated liability after initial recognition are recognised as either goodwill or within the consolidated income statement, depending on whether the contract was written as part of a business combination. Where the Group has a call option over shares held by a minority, the Group continues to recognise the minority until it is certain that the option will be called. At that point the accounting treatment is the same as for a put option.


Notes to the financial statements continued

76

1 Basis of preparation continued

(b) Basis of consolidation – Group continued Intercompany transactions, balances and unrealised gains on transactions between Group companies (the Company and its subsidiaries) are eliminated as part of the consolidation process. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

A joint venture is an entity in which the Group has an interest and, in the opinion of the directors, exercises joint control over its operating and financial policies. An interest exists where an investment is held on a long-term basis for the purpose of securing a contribution to the Group’s activities. Joint ventures are proportionately consolidated, whereby the Group’s consolidated income statement and balance sheet include the Group’s share of the income and assets on a line-by-line basis.

An associate is an entity in which the Group has an interest and, in the opinion of the directors, can exercise significant influence, but not control, over its operating and financial policies. An interest exists where an investment is held on a long-term basis for the purpose of securing a contribution to the Group’s activities. Significant influence generally exists where the Group holds more than 20% and less than 50% of the shareholders’ voting rights.

Associates are accounted for under the equity method whereby the Group’s consolidated income statement includes its share of their profits and losses and the Group’s balance sheet includes its share of their net assets.

(c) Business combinations The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of acquisition is measured at fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the costs of the acquisition are less than the fair value of the net assets acquired, the difference is recognised directly in the consolidated income statement (note 2(d)). When the Group increases its investment in an entity resulting in an associate becoming a subsidiary, the intangibles related to the acquisition have been valued and the element of those not previously recognised as a share of net assets have been recorded as revaluation gains realised in the year in other comprehensive income.

2 Principal accounting policies

Recent accounting developments The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 April 2009 and are considered relevant to the Group:

• IAS1 (revised), “Presentation of financial statements”, prohibits the presentation of items of income and expense (that is “non-owner changes in equity”) in the statement of changes in equity, requiring “non-owner changes in equity” to be presented separately from owner changes in equity. All “non-owner changes in equity” are required to be shown in a performance statement.

Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements: an income statement and a statement of comprehensive income. The Group has elected to present the latter.

Comparative information has been re-presented so that it also conforms with the revised standard. As the change in accounting policy impacts only presentation aspects, there is no impact on EPS.

• IFRS8 “Operating Segments” replaces IAS14, “Segment reporting”. It requires a “management approach” under which segment information is presented on the same basis as that used for internal reporting purposes. Management now considers the reportable segments to consist of core voice EMEA, core voice Americas, core voice Asia Pacific, electronic broking, post trade risk and information, and new businesses.

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM has been identified as the executive directors of the board of the Company.

The CODM assesses the performance of the operating segments based on revenue and operating profit. This basis excludes the effect of amortisation and impairment of intangibles and exceptional items. The CODM also reviews regularly the Group’s total cash and total debt. The comparatives for 2009 have been re-presented to conform to the manner consistent with internal reporting.

The Group has adopted both IFRS8 and early adopted the improvements to IFRS in respect of IFRS8 from the Improvements to IFRS (issued in April 2009).

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2 Principal accounting policies continued

Recent accounting developments continued • Amendments to IFRS2, “Share-based payment” clarifies the vesting and service conditions of certain employee share option

schemes, whereby the cancellations of share options by employees are treated in the same way as a cancellation by the Group. This amendment has not had a material effect on the results and net assets of the Group.

• Amendments to IFRS7, “Financial instruments: Disclosures”, which requires enhanced disclosure about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by a level of a fair value hierarchy. The amendment has had no impact on the results of the Group. The Group has chosen to take the exemption not to present the comparative assets and liabilities held at fair value by level of a fair value hierarchy.

• IFRIC16, “Hedges of a net investment in a foreign operation”, applies to accounting periods beginning after 1 October 2008 and the Group has adopted these changes from 1 April 2009. This interpretation provides detailed guidance on the accounting for a hedge of a net investment in a foreign operation in an entities consolidated financial statements.

There has been no impact on the results or net assets of the Group as a result of this adoption.

A number of other interpretations and amendments to existing standards have been made by the IASB and IFRIC but are not considered relevant to the Group’s operations.

The following new standards and amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 April 2009 and have not been early adopted, but are considered relevant to the Group:

• IFRS3 (revised), “Business combinations” and consequential amendments to IAS27, “Consolidated and separate financial statements”, IAS28, “Investments in associates”, and IAS31, “Interests in joint ventures”, apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classed as debt subsequently re-measured through the consolidated income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition related costs should be expensed. The Group will apply IFRS3 (revised) to all business combinations completed after 1 April 2010. The Group expects that this will have no effect on the current results and net assets of the Group, but that prospectively it will depend on the nature of transactions undertaken by the Group.

For the financial year commencing 1 April 2010 it is the intention of the Group to expand the items under “amortisation and impairment of intangibles arising on consolidation” to include the impact to the consolidated income statement resulting from the adoption of IFRS3 (revised) “Business Combinations” effective 1 April 2010. The Group also intends to move the impact of the unwind of deferred consideration and any gains or losses on disposal to the column “amortisation and impairment of intangibles arising on consolidation” which will be redefined as “acquisition and disposal costs”. These items will also be excluded from the calculation of adjusted EPS. The Group believes this change will help to improve users of the financial statements understanding of the underlying results. Upon adoption, the Group plans to restate the prior year comparatives for the impact of the change in presentation. Had the Group adopted the change in the current year, the amount recognised would have increased from £40m to £42m in the consolidated income statement.

The Group has significant influence over a number of investments and the ability to move to a position of control through the exercise of call options. The gains and losses for such options over the exercise price are included within the column “amortisation and impairment of intangible arising on consolidation”.

• IFRIC17, “Distributions of non-cash assets to owners”, effective for annual periods beginning on or after 1 July 2009. This interpretation provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders. This is not currently applicable to the Group and is not expected to have a material effect on the results and net assets of the Group.

• IFRS9, “Financial Instruments” addresses clarification and measurement of financial assets, as the first phase of the replacement of IAS39 “Financial Instruments: Recognition and Measurement” and is effective for annual periods beginning after 1 January 2013, subject to EU endorsement. The impact on the Group’s financial statements of the future adoption of this standard is still under review.



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Group (a) Revenue Revenue comprises commission from the Group’s agency businesses, brokerage from matched principal transaction agency business, execution on exchange transactions, and fees received from the provision of post trade risk and information services and the sale of financial information to third parties.

Matched principal and stock lending business Certain Group companies are involved in a non-advisory capacity as principals in the purchase and sale of securities and other financial instruments between our customers. Revenue is generated from the difference between the purchase and sale proceeds and is recognised in full at the time of the commitment by our customers to sell and purchase the security or financial instrument. The revenue generated by the stock lending business is not material to the Group.

Agency business (name give-up transactions) The Group acts in a non-advisory capacity to match buyers and sellers of financial instruments and raises invoices for the service provided. The Group does not act as principal and only receives and transmits orders between counterparties. Revenue is stated net of rebates and discounts, value added tax and other sales taxes and is recognised in full on the date of the trade. Amounts receivable at the year end are reported as other trade receivables within trade and other receivables (note 19).

For the shipbroking business, the Group acts in a non-advisory capacity to match buyers and sellers of services and recognises revenue, net of rebates and discounts, value added tax and other sales taxes when the Group has a contractual entitlement to commission, normally the point at which there is a completion of contractual terms between the principals of a transaction. Amounts receivable at the year end are reported as other trade receivables within trade and other receivables (note 19).

Execution on exchange business The Group also acts as a broker of exchange listed products, where the Group executes client orders as principal and then novates the trade to the underlying clients’ respective clearing broker for settlement. Revenue is generated from either the difference between the purchase and sale proceeds or by invoice, depending on the product, market and agreements in place with the customer and is recognised on trade date.

Post trade risk and information The Group receives fees from the sale of financial information and provision of post trade risk and information services to third parties. These are stated net of value added tax and other sales taxes and recognised in revenue on an accruals basis to match the provision of the service. Amounts receivable at the year end are reported as other trade receivables within trade and other receivables (note 19).

(b) Government grants Revenue grants received are credited to the consolidated income statement on an accruals basis over the period the related expenditure is charged and are shown separately within other income.

(c) Exceptional items Exceptional items are those significant items of a non-recurring nature and material, when considering both size and nature. These are disclosed separately to enable a full understanding of the Group’s financial performance. Transactions which may give rise to exceptional items are principally gains and losses on disposal of investments, subsidiaries and other large gains and losses not attributable to the normal course of the Group’s activities. These are shown as “exceptional items” on the face of the consolidated income statement.

(d) Intangible assets arising on consolidation Intangible assets arising on consolidation include all goodwill and other separately identifiable intangible assets identified at the time of acquisition of an entity. Amortisation or impairment of these assets is disclosed on the face of the consolidated income statement.

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(d) Intangible assets arising on consolidation continued

(i) Goodwill Goodwill arises on the acquisition of subsidiaries, joint ventures and associates and represents the cost of the acquisition in excess of the fair value of the Group’s share of the net assets acquired. Fair values are determined based on an assessment of the value of the individual assets and liabilities acquired, including reference to market prices, discounting expected future cash flows to present value or using replacement cost as appropriate.

Goodwill is initially recognised at cost and is subsequently held at cost less any provision for impairment. Goodwill is not subject to amortisation but is tested annually for impairment.

Goodwill acquired since 2004 is held in the currency of the underlying assets of the business and is revalued at the closing rate at each end of the reporting period. Goodwill acquired before 2004 is held in pound sterling and is not revalued.

Goodwill acquired prior to 1998 was immediately eliminated against reserves and was not reinstated on transition to IFRS. Goodwill held on the statement of financial position on transition to IFRS in 2004 has been recognised at its book value at the date of transition and is no longer amortised but is tested annually for impairment.

Goodwill arising on the acquisition of subsidiaries and joint ventures is shown within non-current assets. Goodwill arising on the acquisition of associates is included within their carrying value.

On disposal of a subsidiary, joint venture or associate, the attributable goodwill is included in the calculation of the profit or loss on disposal, except for goodwill written off to reserves prior to 1998, which remains eliminated.

(ii) Separately identifiable intangible assets The Group has recognised separately identified intangible assets on acquisitions where appropriate. These generally include customer contracts and customer relationships. Intangible assets acquired by the Group are stated initially at fair value and adjusted subsequently for amortisation and any impairment. Amortisation and impairment of intangibles arising on consolidation are recognised in the second column of the consolidated income statement. Where an impairment has taken place, the asset is reviewed annually for any reversal of the impairment. Any reversals of impairments are credited to the consolidated income statement. All intangible assets have a finite life.

Amortisation of separately identifiable intangible assets is charged to the consolidated income statement on a straight-line basis over their estimated useful lives as follows:

Customer relationships 2–10 years Customer contracts Period of contract Other intangible assets Period of contract

A deferred tax liability is recognised against the asset where the amortisation is non-tax deductible. The liability unwinds over the same period as the asset is amortised.

(iii) Impairment Goodwill is not amortised but is tested for impairment at least annually. The recoverable amount of a Cash Generating Unit (CGU) is determined based on value-in-use calculations. These calculations use cash flow projections which extend forward to perpetuity using a terminal value calculation and which take account of the approved budget for the coming year. The Group applies a suitable discount factor to the future cash flows based on its pre-tax weighted average cost of capital. Growth rates are applied conservatively and do not exceed the expected growth in the local economy after the fifth year. Where the carrying value of the asset exceeds its value-in-use, an impairment charge is recognised immediately in the consolidated income statement, and the asset is impaired to its value-in-use. For goodwill, impairment charges previously recognised are not reversed and impaired intangible assets are reviewed annually for reversal of previously recognised impairment.

(e) Intangible assets arising from development expenditure Development expenditure on software for electronic trading platforms is recognised as an intangible asset in accordance with the provisions of IAS38 “Intangible Assets”. Amortisation of these assets is charged to the consolidated income statement on a straight-line basis over the expected useful economic life of the asset of three to five years.

Amortisation and impairment of intangible assets arising from development expenditure is charged within operating expenses in profit before amortisation and impairment of intangibles arising on consolidation and exceptional items. Amortisation is charged against assets from the date at which the asset becomes available for use.

(f) Discontinued operations When the Group has disposed of or intends to dispose of a business component that represents a major line of business or geographic area of operations it classifies such operations as discontinued. The post-tax profit or loss of the discontinued operations is shown as a single line on the face of the consolidated income statement, separate from the other results of the Group. The consolidated income statement for the comparative periods is restated to show the discontinued operations separate from those generated by the continuing operations.



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(g) Property and equipment Property and equipment is recognised initially at fair value and is presented subsequently at fair value less accumulated depreciation and any provisions for impairment in its value. It is depreciated on a straight-line basis over its expected useful economic life as follows:

Short leasehold property improvements Period of lease Furniture, fixtures and equipment 3-5 years Motor vehicles 3–4 years

The Group reviews its depreciation rates regularly to take account of any changes in circumstances. These rates are determined on consideration of factors such as the expected rate of technological development and anticipated usage levels.

When a leasehold property becomes surplus to the Group’s foreseeable business requirements, provision is made on a discounted basis for the expected future net cost of the property.

Gains and losses on disposals are determined by comparing proceeds with the asset carrying amount and are included in the consolidated statement of income.

(h) Leased assets Operating lease rentals are charged to the consolidated income statement on a straight-line basis over the lease term.

(i) Financial instruments Financial assets are classified as “available-for-sale”, “loans and receivables” or “financial assets at fair value through profit or loss” on initial recognition.

Trade receivables: trade receivables are recognised initially at fair value less any provision for recoverability. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments, are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the assets carrying amount and the present value of the future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the consolidated income statement within “operating expenses”. When a trade receivable is determined to be uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against “operating expenses” in the consolidated statement of income.

Available-for-sale: available-for-sale financial assets are debt and equity non-derivative financial assets and are initially recognised at fair value. Any subsequent changes in fair value are recognised directly in other comprehensive income. When an investment is disposed of or is determined to be impaired, any cumulative gain or loss recognised previously in other comprehensive income is transferred to the consolidated income statement. For equity financial assets, where the fair value cannot be measured reliably, the assets are held at cost less any provision for impairment. These assets are generally expected to be held for the long term and are included in non-current assets. Assets such as shares or seats in exchanges, cash-related instruments, and long-term equity investments that do not qualify as associates or joint ventures are classified as available-for-sale.

Loans and receivables: loans and receivable are non-derivative financial instruments which have a fixed or easily determinable value. They are recognised at cost, less any provisions for impairment in their value. These assets are included within other receivables in trade and other receivables (note 19).

Financial assets at fair value through profit or loss: fair value through profit or loss assets are designated as such where they meet the conditions of IAS39 “Financial Instruments: Recognition and Measurement”. They are recognised initially at fair value and any subsequent changes in fair value are recognised directly in the consolidated income statement. These assets are usually held for short-term gain, or are financial instruments not designated as hedges. The accounting policy for fair value hedges is included in note 2(l). These assets are included in trade and other receivables (note 19).

Cash and cash equivalents: cash and cash equivalents comprise cash on hand, overdrafts and demand deposits and other short-term highly liquid investments which are subject to insignificant risk of change in fair value and are readily convertible into a known amount of cash with less than three months maturity.

Trade payables: accounts payable are recognised initially at fair value based on the amounts exchanged.

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(i) Financial instruments continued

Impairment of financial assets: financial instruments not held at fair value are impaired where there is objective evidence that the value may be impaired. The consolidated amount of the impairment is calculated as the difference between the carrying value and the present value of any expected future cash flows, with any impairment being recognised in the consolidated income statement. Subsequent recovery of amounts previously impaired are credited to the consolidated income statement.

Long-term borrowings: long-term borrowings are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. At subsequent reporting dates long-term borrowings are held at amortised cost using the effective interest rate method, with changes in value recognised through profit or loss. Transaction costs are recognised in the consolidated income statement over the period of the borrowings using the effective interest rate method.

(j) Matched principal business Certain Group companies are involved as principal in the purchase and sale of securities and other financial instruments between our customers. Such trades are complete when all transactions are settled. All amounts due to and payable by counterparties in respect of matched principal business are shown gross as matched principal trade receivables and matched principal trade payables (notes 19 and 20), except where a netting agreement, which is legally enforceable at all times, exists and the asset and liability are either settled net or simultaneously.

If, during the course of trading (e.g. as a result of an error), any unmatched trades remain outstanding, the asset or liability is held within matched principal trade receivables or payables as appropriate and fair valued through the consolidated income statement until the trade is completed.

(k) Matched stock lending business Certain Group companies are involved in collateralised stock lending transactions as an intermediary between counterparties. Such trades are complete only when both the collateral and stock for each side of the transaction is returned. The gross amounts of collateral due and receivable are disclosed in the balance sheet as deposits paid for securities borrowed and deposits received for securities loaned (notes 19 and 20).

(l) Derivative financial instruments and hedge accounting The Group uses various financial instruments as hedges to reduce exposure to FX and interest rate movements. These can include forward FX contracts, currency options and cross currency swaps. All derivative financial instruments are initially recognised on the balance sheet at their fair value, adjusted for transaction costs. Where derivative financial instruments do not qualify for hedge accounting, changes in the fair value are recognised immediately in the consolidated income statement, along with transaction costs. Where they do qualify, gains and losses are recognised according to the nature of the hedge relationship and the item being hedged. Hedges are either classified as fair value hedges, cash flow hedges or net investment hedges.

The fair values of derivative financial instruments are determined by reference to quoted prices in an active market. Where no such active market exists, the fair value is determined using appropriate valuation techniques from observable data, including discounted cash flow analysis and the Black-Scholes option pricing model.

The method of recognising the movements in the fair value of a derivative depends on whether an instrument has been designated as a hedging instrument and, if so, the nature of the exposure being hedged. To qualify for hedge accounting, the terms of the hedge must be documented clearly at inception and there must be an expectation that the derivative will be highly effective in offsetting changes in the fair value or cash flows attributable to the hedged risk. Hedge effectiveness is tested throughout the life of the hedge and, if at any point it is concluded that the relationship can no longer be expected to remain highly effective in achieving its objective, the hedge relationship is terminated.

Fair value hedges: derivative financial instruments are classified as fair value hedges when they hedge an exposure to changes in fair value of a recognised asset or liability that is attributable to a particular risk that could affect the consolidated income statement. The hedging instrument is recorded at fair value on the balance sheet, with changes in fair value being taken through the consolidated income statement. Where the hedged item is measured at cost, and for periods in which the hedge is shown to be effective, the gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised in the consolidated income statement.

Cash flow hedges: derivative financial instruments are classified as cash flow hedges when they hedge the Group’s exposure to changes in cash flows attributable to a particular asset or liability or a highly probable forecast transaction. Gains or losses on designated cash flow hedges are recognised directly in other comprehensive income, to the extent that they are determined to be effective. Any remaining ineffective portion of the gain or loss is recognised immediately in the consolidated income statement. On recognition of the hedged asset or liability, any gains or losses relating to the hedging instrument that had previously been recognised directly in other comprehensive income are included in the initial measurement of the fair value of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity remains there and is recognised in the consolidated income statement when the forecast transaction is ultimately recognised. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is transferred immediately to the consolidated income statement.



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(l) Derivative financial instruments and hedge accounting continued

Net investment hedges: changes in the value of foreign denominated investments due to currency movements are recognised directly in other comprehensive income. The accounting treatment for a net investment hedging instrument, whether it is a derivative financial instrument or a recognised asset or liability on the balance sheet, is consistent with the aforementioned treatment for a cash flow hedge. Gains and losses accumulated in other comprehensive income are included in the consolidated income statement on the ultimate disposal of the foreign denominated investment.

(m) Client money The Group holds money on behalf of clients in accordance with the client money rules of the FSA, where applicable. Since the Group is not beneficially entitled to these amounts, they are excluded from the balance sheet along with the corresponding liabilities to clients. The amounts held on behalf of clients at the end of the reporting period are disclosed in note 34.

(n) Pension costs The Group operates defined contribution schemes. Payments to defined contribution schemes are recognised as an expense in the consolidated income statement as they fall due. Any difference between the payments and the charge is recognised as a short-term asset or liability.

The Group also operates defined benefit pension schemes in the US, Germany and Indonesia that are closed to new entrants. The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each end of the reporting period. The expected return on the scheme’s assets and the interest arising on the pension scheme’s liabilities is recognised in the consolidated income statement within finance income and finance costs. The pension scheme deficit recognised in the balance sheet represents the difference between the fair value of the assets of the plan and the present value of the defined benefit obligation at the end of the reporting period.

Actuarial gains and losses are recognised in full in the period in which they occur in other comprehensive income, net of the deferred tax impact. The expected return on the scheme’s assets reflects the estimate made by management of the long-term yields that will arise from the specific assets held within the pension scheme.

(o) Share-based payments The Group awards share options and other share-based payments as part of employee incentive schemes. The Group has applied IFRS2 “Share-based payment” for all such awards granted since 7 November 2002. The fair value of services acquired is measured by the fair value of the shares or share options awarded at the time of granting and are charged to staff costs over the period the service is received on a straight-line basis. A corresponding amount has been recognised in equity.

The fair value of share options awarded is calculated using the Black-Scholes option pricing model and takes into account various parameters, including the exercise price, current share price, risk free rate of return and the volatility of ICAP’s share price. The expected lives used in the fair value calculations are adjusted for the estimated effect of non-transferability and exercise restrictions.

A cancellation of a share award by the Group or an employee is treated consistently, resulting in an acceleration of the remaining charge within the consolidated income statement in the year of cancellation.

(p) Tax Tax on the profit for the year comprises both current and deferred tax as well as adjustments in respect of prior years. Tax is charged or credited to the consolidated income statement, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the tax is also included in other comprehensive income or directly within equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted, or substantially enacted by the end of the reporting period.

Deferred tax is recognised using the liability method, in respect of temporary differences between the carrying value of assets and liabilities for reporting purposes and the amounts charged or credited for tax purposes. Deferred tax is calculated at the rate of tax expected to apply when the liability is settled or the asset is realised. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. No provision is made in respect of any further tax liability that would arise on the distribution of retained earnings of overseas joint ventures and associates.

Deferred tax liabilities are offset against deferred tax assets within the same taxable entity or qualifying local tax group where there is both the legal right and the intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

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(q) Foreign currencies In individual entities, transactions denominated in foreign currencies are translated into the functional currency of that entity at the rates of exchange prevailing on the dates of the transactions. At each end of the reporting period, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Exchange differences are recognised in the consolidated income statement, except for exchange differences arising on non-monetary assets and liabilities where these form part of the net investment of an overseas business or are designated as hedges of a net investment or cash flow and, therefore, the changes in value are recognised directly in other comprehensive income. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

On consolidation, the results of businesses with non-pound sterling functional currencies are translated into the presentational currency of the Group at the average exchange rates for the period where these approximate to the rate at the date of the transactions. Assets and liabilities of overseas businesses are translated into the presentational currency of the Group at the exchange rate prevailing at the end of the reporting period. Exchange differences arising are recognised within other comprehensive income. Cumulative translation differences arising after the transition to IFRS are taken to the consolidated income statement on disposal of the net investment.

Goodwill and fair value adjustments arising on the acquisition of a non-sterling entity are treated as assets and liabilities of that entity and translated into the presentational currency of the Group at the closing rate. Where applicable, the Group has elected to treat goodwill and fair value adjustments arising before the date of transition to IFRS as denominated in the presentational currency of the Group.

In the statement of cash flows, cash flows denominated in foreign currencies are translated into the presentational currency of the Group at the average exchange rate for the year or at the rate prevailing at the time of the transaction where more appropriate.

(r) Treasury Shares and share ownership trusts Treasury Shares are recognised in equity and are measured at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from the sale and original cost being taken to retained earnings.

Company shares held in connection with the Group’s employee share schemes are held in trust and are deducted from consolidated shareholders’ equity. Purchases, sales and transfers of the Company’s shares are disclosed as changes in consolidated shareholders’ equity. The assets and liabilities of the trusts are consolidated in full into the Group’s consolidated financial statements.

(s) Provisions A provision is recognised where there is a present obligation, either legal or constructive, as a result of a past event for which it is probable there will be a transfer of economic benefits to settle the obligation.

Property provisions are recognised where office space is surplus to requirements at the cost of fulfilling the lease obligations less any expected rental income from sub-letting the property. The provision is discounted when such discount is material.

(t) Earnings per ordinary share The Group presents basic and diluted EPS data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. The Group also calculates adjusted EPS from the adjusted profit which is defined as profit from operations before the effect of amortisation and impairment of intangibles arising on consolidation and exceptional items. The Group believes that this is the most appropriate measurement since it better reflects the business’s underlying cash earnings.

Diluted EPS is determined by adjusting the profit and loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held as Treasury Shares, for the effects of all dilutive potential ordinary shares, which comprise those owned by employee share trusts and share options granted to employees outstanding under the Company’s employee share schemes.

(u) Accounting estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based on amounts which differ from those estimates. Estimates, judgements and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.



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(u) Accounting estimates and judgements continued The accounting policies deemed critical to the Group’s results and financial position, based upon materiality and significant judgements and estimates, are discussed below:

(i) Goodwill and intangible assets The Group reviews goodwill for impairment at least annually at the end of the reporting period or when events or changes in economic circumstances indicate that impairment may have taken place, in line with the Group’s accounting policy. Intangible assets remaining useful lives are reviewed annually and are also reviewed for impairment when events or changes in economic circumstances indicate that impairment may have taken place. This calculation requires the exercise of significant judgement by management; if the estimates made prove to be incorrect or performance does not meet expectations which affect the amount and timing of future cash flows, goodwill and intangible assets may become impaired in future periods. The assumptions and results of the impairment reviews are disclosed in note 15. When the Group makes an acquisition the Group has 12 months from the date of acquisition to finalise the opening balance sheet, including the value of goodwill and intangible assets arising on consolidation. See note 2(d)(iii) for accounting policy on impairment related to intangible assets arising on consolidation.

(ii) Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Determining the value of a grant of equity instruments requires selecting an appropriate valuation model and estimating the required inputs to that model, including the expected life of the option, volatility and dividend yield and making assumptions about them. The assumptions and model used are disclosed in note 27.

(iii) Tax Significant judgement is required in determining the Group’s income tax liabilities. In arriving at the current and deferred tax liability the Group has taken account of tax issues that are subject to ongoing discussions with the relevant tax authorities. Calculations of these liabilities have been based on management’s assessment of legal and professional advice, case law and other relevant guidance. Where the expected tax outcome of these matters is different from the amounts that were recorded initially, such differences will impact the current and deferred tax amounts in the period in which such determination is made.

Company In addition to the above accounting policies, the following relate specifically to the Company.

Investment in subsidiaries An entity is regarded as a subsidiary if the Company has control over its strategic, operating and financial policies and intends to hold the investment on a long-term basis for the purpose of securing a contribution to the Group’s activities.

The Company recognises investments in subsidiaries initially at fair value, and subsequent changes in value as a result of impairment are recognised in the income statement.

Dividends The Company recognises the final dividend payable only when it has been approved by the shareholders of the Company in a general meeting. The interim dividend is recognised when the amount due has been paid. Dividends receivable are recognised when they are received.

3 Segmental information

The Group has re-presented the segmental results as a result of adopting IFRS8 “Operating Segments” from 1 April 2009. There is no effect on the overall results of the Group.

The Group has determined its operating segments based on the management information reviewed on a regular basis by the Company’s board. The Group considers the executive members of the Company’s board to be the Chief Operating Decision Maker (CODM).

The CODM considers the business to consist of core and new business elements. The core business consists of regional voice brokerage businesses in EMEA, the Americas and Asia Pacific, a global electronic brokerage business active in fixed income and FX markets and a global post trade risk and information business. Each of these five core business areas are managed and reviewed by the CODM on a stand-alone basis and, as such, are considered segments. In addition the CODM separately manages and reviews a portfolio of new business initiatives which were either acquired or started during the course of the past two financial years. Each of the operating segments of the Group is managed on a day-to-day basis by one or more members of the GEMG. The management of new businesses is dependent on which core area the business will eventually become a part of.

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3 Segmental information continued

For the current financial year the new businesses segment includes the Group’s investments in ICAP Shipping, Arkhe and Link along with a number of smaller acquisitions and new initiatives. The CODM anticipates that this segment will be dynamic with new businesses, which represent a diversification of ICAP’s existing business, joining the segment on acquisition or at inception. These businesses will normally be reported within this segment for two financial years while the business is integrated within ICAP or, in the case of start-up businesses, move towards operational maturity. The segment will be reviewed at the start of each year and the comparatives restated to reflect any reclassifications between the core and new business segments. For the period commencing 1 April 2010, it is anticipated that Link and ICAP Shipping, both of which have been owned for two years, will be reported in the core voice segment, with comparatives restated to show impact and TriOptima, a business in which the Group has had a 38.22% shareholding, will be reported within post trade risk and information. The now discontinued cash equities business had previously been disclosed within the new business segment at the interim reporting period.

The Group continues to disclose an operating segment for the voice business in Asia Pacific even though this segment does not meet the quantitative thresholds to be mandatory under IFRS8, “Operating Segments”. This is to reflect the importance of the Asia Pacific region to the Group and the way the Group is managed.

Year ended 31 March 2010 Core voice broking

EMEA

£mAmericas

£m

Asia Pacific

£m

Electronic broking

£m

Post trade risk and

information £m

New businesses

£mTotal

£mContinuing operations Revenue 506 434 96 252 142 175 1,605

Operating profit before amortisation and impairment of intangibles arising on consolidation and exceptional items 115 80 1 100 69 (11) 354

Reconciliation to the consolidated income statement:

Amortisation and impairment of intangibles arising on consolidation (61)

Exceptional items (26)

Operating profit 267Finance income 7Finance costs (35)Share of profit of associates after tax 8

Profit before tax for continuing operations 247Tax (83)

Profit for the year for continuing operations 164Loss after tax from discontinued

operations (48)

Profit for the year 116

Details of total gross debt and total net cash reviewed by the CODM can be found in notes 22 and 33(b) respectively.



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3 Segmental information continued

Year ended 31 March 2009 Core voice broking

EMEA£m

Americas £m

Asia Pacific

£m

Electronic broking

£m

Post trade risk and

information £m

New businesses

£m Total

£m

Continuing operations Revenue 520 423 96 252 124 170 1,585

Operating profit before amortisation and impairment of intangibles arising on consolidation and exceptional items 135 76 (2) 88 61 7 365

Reconciliation to the consolidated income statement:

Amortisation and impairment of intangibles arising on consolidation (63)

Exceptional items –

Operating profit 302Finance income 19Finance costs (43)Share of profit of associates after tax 7

Profit before tax for continuing operations 285Tax (95)

Profit for the year for continuing operations 190Loss after tax from discontinued

operations (4)

Profit for the year 186

Revenue earned by product type from continuing operations is disclosed below.

Product type

Year ended 31 March

2010

Year ended31 March

2009

Interest rates 630 678FX 292 245Equities 163 184Emerging markets 141 127Credit 204 192Commodities 175 159

Total revenue 1,605 1,585

The Group did not earn more than 10% of its total revenue from any individual customer.

The Group earned revenue of £581m (2009 – £615m) from entities in the UK. The remainder of £1,024m (2009 – £970m) came from entities outside the UK.

The amortisation and impairment of intangible assets arising from development expenditure recognised by the Group on a segmental basis is as follows: core voice broking EMEA £6m (2009 – £5m), core voice broking Americas £13m (2009 – £7m), core voice broking Asia Pacific £nil (2009 – £nil), electronic broking £1m (2009 – £4m), post trade risk and information £2m (2009 – £2m) and new businesses £1m (2009 – £nil).

The depreciation of property and equipment recognised by the Group on a segmental basis is as follows: core voice broking EMEA £7m (2009 – £7m), core voice broking Americas £8m (2009 – £9m), core voice broking Asia Pacific £2m (2009 – £2m), electronic broking £3m (2009 – £4m), post trade risk and information £1m (2009 – £nil) and new businesses £1m (2009 – £1m).

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4 Discontinued operations

The income statement and cash flows related to the European and Asia Pacific cash equities business are presented as discontinued operations following the decision of the Company’s board on 22 March 2010 to close the European and Asia Pacific integrated full service agency cash equities businesses. These businesses were closed as at the balance sheet date.

(a) Results of discontinued operations An analysis of the results of discontinued operations presented within the consolidated income statement is as follows:

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Revenue 24 16Operating expenses (49) (20)Tax 7 −Loss after tax of discontinued operations before exceptional items (18) (4)Exceptional items (41) −Tax 11 −Loss after tax of discontinued operations (48) (4)

(b) Cash flows of discontinued operations

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Operating cash flows (5) (11)Investing cash flows – (12)Financing cash flows – 28

Total cash flows (5) 5



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5 Other income

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Income from government grants 14 15Other income 5 8

Total other income 19 23

Income from government grants includes amounts relating to a BEIP grant receivable in the US from the state of New Jersey. This grant is receivable until 2014 by the Group provided it maintains its operations in the state of New Jersey until 2019 and is based on the amount of employee tax paid over to the state authorities.

6 Exceptional items

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Exceptional items − continuing businesses SEC settlement and other related fees (21) −Reorganisation of cash equities business (5) −Total exceptional items before tax – continuing business (26) −Tax 4 −Total exceptional items after tax − continuing businesses (22) − Exceptional items − discontinued business Reorganisation of cash equities business (41) −Tax 11 −Total exceptional items after tax − discontinued business (30) −

On 18 December 2009 ICAP Securities USA LLC, a US subsidiary of the Company, announced that it had agreed to a settlement with the SEC, with regard to a multi-year industry wide investigation into the markets in certain fixed income securities, without admitting or denying allegations of any wrongdoing. An exceptional item of £21m has been recognised in 2009/10 to cover the SEC settlement together with related costs.

On 15 February 2010 the Group announced that it was undertaking a strategic review of its cash equities business and, on 22 March 2010, announced that it was going to discontinue its European and Asia Pacific integrated full service agency cash equities business. An exceptional charge of £46m has been recognised in respect of the estimated cost of the reorganisation, which covers personnel costs, write off of assets and provisions against onerous contracts. Exceptional items related to the cash equities strategic review have been split between continuing and discontinued business. The European and Asia Pacific full service agency cash equities businesses were closed at the balance sheet date.

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7 Finance income

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Interest receivable and similar income Bank deposits 2 10Other interest receivable 1 5

3 15

Other finance income Fair value gains on derivative financial instruments (note 22) 11 2Fair value of hedged item (note 22) (9) −Expected return on retirement plan assets – 1Dividends received on equity investments 2 1

4 4

Total finance income 7 19

As described in note 24, the Group converted €200m of its €300m fixed euro-denominated notes from euros to pound sterling, and the coupon from fixed to floating. The fixed to floating swaps have been treated as a fair value hedge, with the mark-to-market of £11m included within fair value gains on derivative financial instruments in other finance income. The corresponding fair value adjustment of £9m to the €200m of the euro-denominated notes, which is comprised of £2m relating to interest rates and £7m to FX, is included within fair value of hedged item in other finance income.

8 Finance costs

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Interest payable and similar charges Bank loans and overdrafts 28 33Unwinding of discount on contingent deferred consideration (note 14(c)) 2 6

30 39

Other finance costs Fair value losses on derivative financial instruments – 3Impairment of loans to associates (note 19) 5 −Interest on retirement plan liabilities – 1

5 4

Total finance costs 35 43



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9 Operating expenses

Profit before tax from continuing operations is stated after charging:

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Employee costs (note 10) 950 931Information technology costs 141 129Amortisation and impairment of intangible assets arising on consolidation − subsidiaries 61 63Professional and legal fees 28 25Amortisation and impairment of intangible assets arising from development expenditure 23 18Depreciation of property and equipment − owned assets 22 23Clearing and settlement fees 18 20Operating lease rentals − minimum lease payments 8 18Exchange adjustments 7 12Other* 99 67

Total 1,357 1,306

Auditors’ remuneration Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements 0.5 0.5Fees payable to the Company’s auditor for other services: − for the audit of the Company’s subsidiaries 2.6 2.0− other services pursuant to legislation 0.3 0.1− tax services 0.5 0.8− corporate finance services 0.2 0.4− other 0.1 0.4

4.2 4.2

*Other includes exceptional costs (note 6) of £26m (2009 – £nil).

10 Employee information

(a) Analysis of employee costs

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m*

Continuing operations Salaries (including bonuses) 879 859Social security costs 54 57Share-based payments 10 8Defined contribution pension costs 7 7

950 931

*The 2009 employee costs have been re-presented to exclude employees of the discontinued cash equities business.

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Discontinued operations Salaries (including bonuses) 27 12Social security costs 3 1Share-based payments – −Defined contribution pension costs – − 30 13

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10 Employee information continued

(b) Number of employees analysed by business segment Continuing operations

Average Year end Year ended

31 March 2010

Year ended 31 March

2009*

As at 31 March

2010

As at 31 March

2009*

Core voice broking: – EMEA 1,309 1,288 1,238 1,255– Americas 1,201 1,223 1,218 1,253– Asia Pacific 619 639 629 632Electronic broking 456 470 466 453Post trade risk and information 232 182 310 205New businesses 580 394 627 465

4,397 4,196 4,488 4,263

*The 2009 employee numbers have been re-presented to exclude employees of the discontinued cash equities business.

Discontinued operations Average Year end

Year ended 31 March

2010

Year ended 31 March

2009

As at 31 March

2010

As at 31 March

2009

Discontinued cash equities business 105 36 116 71

(c) Key management remuneration

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Aggregate emoluments 28 29Share-based payments 6 5Defined contribution pension costs – − 34 34

Key management consists of the members of the GEMG and the executive directors of the board. The executive directors’ remuneration is disclosed separately in the remuneration report. The aggregate remuneration for key management includes amounts paid as variable bonuses. For the year ended 31 March 2010 this amounted to 61% (2009 – 79%) of the aggregate remuneration. Key management remuneration is wholly attributable to continuing operations.

Key management received £33m in the year (2009 – £9m) in aggregate gains on the exercise of stock options.

Retirement benefits are accruing to five (2009 – five) members of the GEMG under defined contribution schemes.

The Company has no employees.



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11 Tax

Tax charged to the consolidated income statement in the year Year ended

31 March 2010

£m

Year ended 31 March

2009 £m

Current tax UK Corporation Tax at 28% (2009 − 28%) − current year 30 43− double tax relief (1) (1)− adjustment to prior years (1) −Overseas tax − current year 68 52− adjustment to prior years (4) (10)

92 84Deferred tax (note 21) (9) 11

Total tax charged to consolidated income statement – continuing operations 83 95

Tax credited to the consolidated income statement for discontinued operations can be analysed

as follows:

Tax credit on discontinued operations, excluding exceptional items (7) −Tax credit on exceptional items – discontinued operations (11) −Total tax credit to the consolidated income statement – discontinued operations (18) −Total tax charged to the consolidated income statement 65 95

Tax charged to the consolidated income statement for continuing operations can be analysed

as follows:

Total tax charged to the consolidated income statement – continuing operations 83 95Tax credit on amortisation and impairment of intangible assets arising on consolidation 20 22Tax credit on exceptional items – continuing operations 4 −Tax on profit before amortisation, impairment of intangible assets arising on consolidation and

exceptional items 107 117

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11 Tax continued

Tax charged/(credited) to other comprehensive income in the year

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Current tax credit on share-based payments (9) (5)Current tax charge/(credit) on exchange adjustments 2 (20)Current tax charge/(credit) on hedging instruments 12 (18)

Net current tax on items recognised in other comprehensive income 5 (43)

Deferred tax credit on revaluation of available-for-sale investments – (1)Deferred tax charge on share-based payments 1 4

Net deferred tax on items recognised in other comprehensive income 1 3

The Group’s tax charge exceeds the UK statutory rate and can be reconciled as follows:

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Profit before tax from continuing operations 247 285Tax on profit at the standard rate of Corporation Tax in the UK of 28% (2009 − 28%) 69 80Expenses not deductible for tax purposes 12 11Adjustments to deferred tax in respect of prior years (1) 1Adjustments in respect of foreign tax rates 10 15Adjustments to current tax in respect of prior years (5) (10)Adjustments in respect of associates (2) (2)

Tax charge from continuing operations 83 95

12 Dividends

Amounts recognised as distributions to equity holders in the year:

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Final dividend for the year ended 31 March 2009 of 12.35p per ordinary share (2008 − 11.95p) 79 76Interim dividend for the year ended 31 March 2010 of 5.11p per ordinary share (2009 − 4.7p) 33 30

Total dividend recognised in year 112 106

The directors have proposed a final dividend of 12.44p per share for the year ended 31 March 2010. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end, the total amount payable would be £81m.

The right to receive dividends has been waived in respect of the shares held in employee share trusts and no dividend is payable on Treasury Shares.

The final dividend for the year ended 31 March 2009 was satisfied with a cash payment of £59m and a scrip dividend of 4,567,807 ICAP plc ordinary shares of 10p each issued at £4.333 (value £20m).



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13 Earnings per ordinary share

The Group is required to disclose basic and diluted EPS on the face of the consolidated income statement. The Group continues to calculate adjusted EPS as it believes that it is the most appropriate measurement since it better reflects the business’s underlying cash earnings and, for the current financial year, has further analysed this to show the adjusted EPS for continuing operations.

Basic EPS is calculated by dividing the profit for the year attributable to the equity holders of the Company of £116m (2009 – £175m) by the weighted average number of ordinary shares in issue during the year of 643m shares (2009 – 634m).

Adjusted basic EPS from continuing operations is calculated by dividing the profit for the year from continuing operations before the effect of amortisation and impairment of intangibles arising on consolidation and exceptional items attributable to the equity holders of the Company of £226m (2009 – £220m) by the weighted average number of ordinary shares in issue during the year of 643m shares (2009 – 634m).The weighted average number of ordinary shares in issue excludes the weighted average number of shares held as Treasury Shares of 2m (2009 – 1m) and those owned by employee share trusts relating to employee share schemes on which dividends have been waived, being 9m shares (2009 – 14m).

Unadjusted and adjusted diluted EPS takes into account the dilutive effect of share options outstanding under the Company’s employee share schemes.

The Group has also disclosed the impact of discontinued operations on the basic, diluted and adjusted EPS.

(a) EPS relating to the Group’s total operations Year ended 31 March 2010 Year ended 31 March 2009

Basic and diluted Earnings

£m Sharesmillions

Earningsper share

penceEarnings

£mShares millions

Earningsper share

pence

Basic 116 643 18.0 175 634 27.6

Dilutive effect of share options – 11 (0.3) − 16 (0.7)

Diluted basic 116 654 17.7 175 650 26.9

Year ended 31 March 2010 Year ended 31 March 2009

Adjusted basic and diluted Earnings

£m Sharesmillions

Earningsper share

penceEarnings

£mShares millions

Earningsper share

pence

Basic 116 643 18.0 175 634 27.6Amortisation and impairment

of intangibles arising on consolidation net of tax and minority interest 40 – 6.2 41 – 6.5

Exceptional items net of tax (note 6) 52 – 8.1 − − −

Adjusted basic 208 643 32.3 216 634 34.1Dilutive effect of share options – 11 (0.5) − 16 (0.9)

Adjusted diluted 208 654 31.8 216 650 33.2

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13 Earnings per ordinary share continued (b) EPS relating to the Group’s continuing operations Year ended 31 March 2010 Year ended 31 March 2009


£mSharesmillions

Earningsper share

penceEarnings

£m Sharesmillions

Earningsper share

pence

Basic 164 643 25.5 179 634 28.2

Dilutive effect of share options – 11 (0.4) − 16 (0.7)

Diluted basic 164 654 25.1 179 650 27.5



£mSharesmillions

Earningsper share

penceEarnings

£m Sharesmillions

Earningsper share

pence

Basic 164 643 25.5 179 634 28.2Amortisation and impairment

of intangibles arising on consolidation net of tax and minority interest 40 – 6.2 41 – 6.5


Adjusted basic 226 643 35.1 220 634 34.7Dilutive effect of share options – 11 (0.5) − 16 (0.9)

Adjusted diluted 226 654 34.6 220 650 33.8

(c) EPS relating to the Group’s discontinued operations Year ended 31 March 2010 Year ended 31 March 2009


£mSharesmillions

Earningsper share

penceEarnings

£m Sharesmillions

Earningsper share

pence

Basic (48) 643 (7.5) (4) 634 (0.6)

Dilutive effect of share options – 11 0.1 − 16 −Diluted basic (48) 654 (7.4) (4) 650 (0.6)



£mSharesmillions

Earningsper share

penceEarnings

£m Sharesmillions

Earningsper share

pence

Basic (48) 643 (7.5) (4) 634 (0.6)Amortisation and impairment

of intangibles arising on consolidation net of tax and minority interest – – – − − −


Adjusted basic (18) 643 (2.8) (4) 634 (0.6)Dilutive effect of share options – 11 – – 16 −Adjusted diluted (18) 654 (2.8) (4) 650 (0.6)



96

14 Acquisitions

Subsidiaries (a) Subsidiaries − current year

TriOptima AB (TriOptima) On 24 March 2010, the Group acquired the remaining 61.78% of the share capital of TriOptima, a supplier of post trade processing services, for an initial cash consideration of Swedish krona (SEK)1,288m (£119m), inclusive of a deferred consideration payment of £7m. At the close of the acquisition SEK1,216m (£112m) was paid with SEK72m (£7m) paid on 10 May 2010 following approval of the 2009 financial statements.

Contingent deferred consideration is payable, in two tranches, following the approval of the TriOptima 2010 and 2012 financial statements and is conditional on the business achieving a minimum pre-tax profit margin and revenue target. The Group has set stretching revenue and profit targets and therefore does not currently expect to pay any deferred consideration. Total deferred consideration is capped at €293m and can be settled at ICAP’s discretion in cash, ICAP plc ordinary shares or a combination thereof.

The fair value adjustments include the recognition of intangible assets arising on consolidation of €81m (£73m) represented by customer relationships of €58m (£52m), trademarks of €9m (£8m) and software of €14m (£13m) which will be amortised over five years, and a deferred tax liability of €21m (£19m). The Group’s share of the identifiable assets and liabilities acquired in previous transactions has been revalued with the credit of €50m (£45m) recognised in other comprehensive income.

The Group has considered the financial profile of the business and, in accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates”, considers the functional currency to be the euro and, as such, has recorded the goodwill and intangibles in euros. Goodwill of €57m (£50m) has been recognised in respect of assets which are not separately identifiable, principally the assembled work force and potential future growth of the business.

In the period from acquisition to 31 March 2010, TriOptima contributed £1m to revenue and was break-even before tax, amortisation of intangibles arising on consolidation and exceptional items. If the acquisition had occurred on the first day of the financial year, the contribution would have been £60m of revenue and £27m profit before tax.

During the period 1 April 2009 to 24 March 2010 the Group recognised profit on a post-tax basis of £7m as associate income based on its 38.22% shareholding.

Arkhe Distribuidora De Títulose e Valores Mobiliários S.A. (Arkhe) On 13 July 2009, the Group completed the acquisition of 100% of the share capital of Arkhe, a leading independent broker in Brazil, for an initial consideration of real (R)$20m (£6m). Contingent deferred consideration, based on the average operating profit of Arkhe and certain complementary ICAP businesses for the three years from 1 July 2009 to 30 June 2012, will be paid in August 2012. Total consideration is capped at US$55m (£33m) (equivalent to R$107m at year end exchange rates).

The fair value adjustments include the recognition of intangible assets arising on consolidation of R$22m (£7m) represented by customer relationships of R$20m (£6m) and the brand value of R$2m (£1m) which are being amortised over seven years, and other provisions R$122m (£38m). Other provisions are for contingent liabilities that existed at acquisition, but were not previously recognised by Arkhe.

The initial consideration and any future contingent deferred consideration will be held in escrow together with the proceeds earned by the vendors by selling certain assets, for a period of up to six years and may be used to settle any of the contingent liabilities. The Group has recognised an asset of R$20m (£6m) which represents the cash currently held in escrow.

Goodwill of R$96m (£29m) has been recognised in respect of assets which are not separately identifiable, principally the assembled workforce and potential future growth of the business.

In the period from the acquisition to 31 March 2010, the Arkhe business has been integrated with certain complementary Group businesses and the results of the acquired business are no longer distinguishable from the combined business.

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14 Acquisitions continued

(a) Subsidiaries – current year continued Others On 15 June 2009, the Group acquired the assets and business of the transactions division of Ocean Tomo LLC (Ocean Tomo), the leading Intellectual Capital Merchant Banc® company, a business based in the US which offers patent brokerage services. Ocean Tomo services include live multi-lot IP auctions and private sales where revenue may be unpredictable in terms of timings and amounts. Consideration of $10m (£6m) has been recognised consisting of $5m (£3m) in cash and 692,226 ICAP shares issued at £4.4395 (value $5m (£3m)). Costs of $0.3m (£0.2m) have also been recognised as consideration.

The fair value adjustments include the recognition of separately identifiable intangible assets arising on consolidation of $3m (£2m) for the Ocean Tomo brand to which the Group has rights for ten years. The asset will be amortised over the ten years. Goodwill of $7m (£5m) has been recognised in respect of assets which are not separately identifiable, principally the assembled workforce and future growth potential of the business.

In the period from the acquisition to 31 March 2010, Ocean Tomo has contributed £3m of revenue and was break-even before tax, before amortisation of intangibles arising on consolidation. If the acquisition had occurred on the first day of the financial year the contribution would have been similar.

On 6 May 2009, ICAP acquired an initial 75% shareholding in an electronic interdealer broking business for £1m. The minority shareholders, under the terms of the shareholder agreement, have the right to put and ICAP has the ability to call the remaining shares, using a pre-agreed pricing formulae, from 1 July 2011. At the opening balance sheet date the exit price was estimated to be £7m with a net present value of £6m and is capped at £116m. Goodwill of £5m has been recognised in respect of assets which are not separately identifiable, principally the potential future growth of the business.

In the period from the acquisition to 31 March 2010, the business has contributed £1.1m of revenues and £0.8m profit before tax, before amortisation of intangibles arising on consolidation. If the acquisition had occurred on the first day of the financial year, the contributions would have been similar.

TriOptima Arkhe Others Total

Book value

£m

Provisional fair value

£mBook value

£mFair value

£mBook value

£m Fair value

£m Book value

£m

Provisional fair value

£mNet assets acquired Intangible assets arising on consolidation 73 – 7 – 2 – 82Tangible assets 1 1 – – – – 1 1Cash and cash equivalents 11 11 2 2 – – 13 13Trade and other receivables 11 11 22 28 – – 33 39Trade and other payables (7) (7) (18) (54) – – (25) (61)Deferred tax liability – (19) – – – – – (19)

16 70 6 (17) – 2 22 55 Goodwill 50 29 10 89

Consideration 120 12 12 144

Satisfied by: – cash 112 6 3 121– acquisition costs capitalised 1 1 – 2– shares issued – – 3 3– deferred consideration 7 – – 7– contingent deferred consideration – 5 6 11

120 12 12 144

(b) Subsidiaries – prior year

Reset In March 2009, the remaining minority shareholder exercised their option to require ICAP to acquire the remaining 15% of Reset. The total cash consideration of $41m (£29m) was paid in April 2009 with $2m (£1m) deferred.

Link In April 2009, ICAP paid the former owner of Link £14m as the first part of the contingent deferred consideration due. As at 31 March 2010, there was £13m of contingent deferred consideration outstanding.



98

14 Acquisitions continued

(c) Contingent deferred consideration A number of acquisitions made by the Group are satisfied in part by contingent deferred consideration. The Group has re-estimated the amounts due as contingent deferred consideration where necessary, with any corresponding adjustments being made to goodwill where the transaction is regarded as a business combination.

Included within contingent deferred consideration are amounts which are exercisable at certain dates in the future on put options over shares held by minorities where the Group considers it highly likely that these options will be exercised.

Year ended 31 March 2010

Link £m

ICAP Shipping

£m

ICAP Equities

£mArkhe

£m Other

£m Total

£m

Contingent deferred consideration outstanding as at 1 April 2009 25 8 13 – 2 48

Acquisitions in the year (note 14(a)) – – – 5 6 11Cash consideration paid in the year (14) (1) (1) – – (16)Unwinding of discount (note 8) 1 – – 1 – 2Re-estimation of provisions which arose on acquisition 9 – – – – 9Adjustments to goodwill during the year

(note 15(a)) (8) (7) (12) (5)

(3) (35)

Contingent deferred consideration outstanding as at 31 March 2010 13 – – 1

5 19

The Group has £5m worth of contingent deferred consideration related to other acquisitions.

Year ended 31 March 2009

Reset £m

Link £m

ICAP Shipping

£m

ICAP Equities

£m Other

£m Total

£m

Contingent deferred consideration outstanding as at 1 April 2008 41 − 9 − − 50

Acquisitions in the year − 23 − − 1 24Amount recognised for options over minority interests − − 3 12 1 16Cash consideration paid in the year (66) − (3) − − (69)Unwinding of discount (note 8) 2 2 1 1 − 6Adjustments to goodwill during the year (note 15(a)) 7 − (2) − − 5Exchange adjustments 16 − − − − 16

Contingent deferred consideration outstanding as at 31 March 2009 − 25 8 13 2 48

Other contingent deferred consideration of £2m related to other acquisitions.

The contingent deferred consideration consists of cash only and is included within trade and other payables (note 20).

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15 Intangible fixed assets

(a) Intangible assets arising on consolidation Intangible assets arising on consolidation include goodwill and other separately identifiable intangible assets such as customer relationships, brands and customer contracts that arose on business combinations since 1 April 2004. The amortisation and any impairment is included in the consolidated income statement within the column “amortisation and impairment of intangibles arising on consolidation”.

Goodwill

£m Other

£mTotal

£mCost As at 1 April 2009 1,035 525 1,560 Additions (note 14) 89 82 171Transfer of goodwill from associates (note 17) 2 – 2Revaluation of intangibles (note 17) 12 45 57Adjustments relating to contingent deferred consideration (note 14(c)) (35) – (35)Exchange adjustments (30) (19) (49)

As at 31 March 2010 1,073 633 1,706

Amortisation and impairment As at 1 April 2009 31 125 156Amortisation charge for the year – 51 51Impairment in the year 5 5 10

As at 31 March 2010 36 181 217

Net book value

As at 31 March 2010 1,037 452 1,489

Cost As at 1 April 2008 725 327 1,052Additions 140 110 250Adjustments relating to deferred consideration (note 14(c)) 5 − 5Exchange adjustments 165 88 253

As at 31 March 2009 1,035 525 1,560

Amortisation and impairment As at 1 April 2008 24 69 93Amortisation charge for the year − 56 56Impairment in the year 7 − 7

As at 31 March 2009 31 125 156

Net book value

As at 31 March 2009 1,004 400 1,404



100

15 Intangible fixed assets continued

(a) Intangible assets arising on consolidation continued Impairment testing of intangible assets arising on consolidation Goodwill and other intangible assets arising on consolidation are allocated to a cash generating units (CGUs) at acquisition. A CGU is the smallest segment on which it is practicable to report, each of which represents one of the Group’s businesses. The carrying amounts are presented below:

Analysis of intangible assets

As at 31 March 2010

Business segmentYear of

acquisitionGoodwill

£mOther

£m

Net book value

£mExco’s acquisition of Intercapital EMEA 1998 23 – 23ICAP Energy Americas 2002 18 – 18First Brokers Americas 2002 12 – 12Acquired Asian Businesses Asia Pacific 2002 12 – 12ICAP Electronic Broking Electronic broking 2003 146 – 146United Fuels Americas 2005 14 – 14EBS Electronic broking 2006 334 170 504Reset Post trade risk

and information 2006 139 1 140

Traiana Post trade risk and information

2007 100 63 163

ICAP Shipping New businesses 2007/08 30 4 34Link New businesses 2009 83 88 171Arkhe New businesses 2010 30 7 37Ocean Tomo New businesses 2010 5 1 6TriOptima Post trade risk

and information 2010 64 116 180Others Various Various 27 2 29

1,037 452 1,489

Goodwill is not amortised but is tested for impairment at least annually. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections which extend forward to a terminal value and which take account of the approved budget for the year ending 31 March 2011 together with assumptions surrounding the expected life of the asset, management’s view of the trading cycles and growth profile facing each CGU and any adjustments required to the discount factor to take account of country or business risk.

The value-in-use calculations are sensitive to changes in these assumptions and, in particular, long-term growth rates. With the exception of Traiana, ICAP Shipping and First Brokers, which each exhibited different trading characteristics to those seen in ICAP’s wider brokerage business, the base model assumes that the budgeted cash flows for 2011 will grow at 2% per annum to a terminal value in year ten and when discounted this shows significant headroom. The base case was then stress tested using a zero growth assumption and continued to show no impairment. The board view these assumptions as conservative and do not believe that any reasonable change in the assumptions would cause the carrying value of these CGU’s to exceed the recoverable amount.

It is anticipated that intangible assets arising on the acquisition of voice broking businesses have a finite life. The Group reviews the performance of the businesses and reassesses the likely period over which the acquired intangible asset is likely to continue to generate cash flows that exceed the recoverable amount. As a result some businesses will have no impairment in a particular year while others will.

First Brokers is dependent on a few key brokers and continues to operate as a stand-alone business. The business is expected to see a decline in projected cash flows resulting from the shorter time remaining on key employees fixed contracts. As a result, the Group has booked an impairment in the year of £4m (2009 – £7m).

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(a) Intangible assets arising on consolidation continued Over the course of the past three years the Group has acquired a number of ship brokerage businesses which have been integrated to create a global platform operating across tankers (wet) and dry chartering, sale and purchase and derivative freight forward agreement.

The performance of the shipping industry is influenced by a combination of factors including global trade volumes, which are a function of world GDP and imbalances in the world fleet. It is deeply cyclical in nature and typically exhibits trading peaks and troughs every three to four years. Our business is no exception to this general rule and as such we have seen our profits in 2008 convert into modest losses in 2009 and 2010 as the industry suffers from a combination of over capacity and lower global trade.

Predicting the exact shape of future cycles is difficult, however, we believe the business will benefit from the increased number of ships needing to be brokered and an improving macro environment, where a recovery in levels of OECD trade and increased appetite by China and India to import raw materials should drive improved freight rates.

The outlook in the near term, however, remains uncertain. We have, therefore, adopted a conservative approach when assessing the business prospects, limiting growth in volumes to world GDP rather than the higher rate of growth of the world fleet (the potential market) and assumed that the next peak in the cycle is delayed until 2015 when tanker rates get back to 2008 levels and dry cargo rates to 50% of 2008 levels. We assume that the cycle then replicates with the next peak in 2019. The resultant cash flows have been discounted using a rate of 11% which includes a 2% premium to reflect the higher level of cyclicality inherent in the shipping business which results in a recoverable amount in excess of the carrying value of the CGU and consequently no impairment. We have also stress tested the model by assuming that the peak operating profit margin is limited to 75% of that seen in 2008 and, under this scenario, would achieve a position with a further 5% fall in volume or freight rates where the carrying value of the CGU equates to the recoverable amount.

The Group acquired Traiana, a leading provider of automated post trade processing services, in December 2007. In early 2009 the Group employed external consultants to validate the business priorities and determine the expected growth trajectory for the next five years. The findings of this report were used to assess the risk of impairment at 31 March 2009 and concluded that the recoverable amount would exceed the CGU’s carrying value.

Traiana’s TRM and Harmony platforms are embedded into its clients systems and represent a key component of the way in which these organisations manage the work flow for the settlement of FX and as such, once installed tend to provide a relatively stable and growing source of revenue.

During the twelve months to 31 March 2010, the business performed ahead of plan and has made significant strategic advances in terms of deploying the Harmony platform to support the joint venture with CLS Group in FX aggregation and to move closer to being able to provide services to equity and futures market participants in 2011.

For the purposes of assessing impairment risk, we have considered the cash flows which will be generated by the established FX business and the expansion into equities and futures separately. We have projected revenue growth for each of the products on a bottom up basis using market based growth assumptions out to 2015 and, thereafter, conservatively assumed no further growth and have applied a premium of 5% over ICAP’s pre-tax cost of capital to the FX business to reflect the fact that the business while offering a proven technological solution, remains relatively small and represents a diversification of ICAP’s core brokerage business and, in the case of the new businesses, a 11% premium reflecting the higher risk inherent in any new product launch. Under these assumptions, the carrying value of the CGU exceeds the recoverable amount.

The recent financial crisis resulted in the loss and/or consolidation of a number of the customers which existed when we acquired the business in December 2007. Now that market conditions have stabilised and we understand how the successor organisations are planning to use the TRM and Harmony platforms, we have considered the value attributed to the customer relationship in respect of both platforms and, to the extent that the relationships are no longer generating platform revenue, the asset has been impaired resulting in the net carrying value being reduced by $8m (£5m) (2009 – nil).

The Group has also taken an impairment of £1m in respect of smaller investments in Latin America.



102


(b) Intangible assets arising from development expenditure Intangible assets arising from development expenditure consist of the software development costs of electronic trading platforms and other assets and are generally amortised over three to five years. The Group reviews the useful economic lives of these assets on a regular basis.

The amortisation and impairment of assets arising on development expenditure is included within profit before amortisation and impairment of intangibles arising on consolidation and exceptional items in the consolidated income statement.

Intangible assets arising from

development expenditure

£mCost As at 1 April 2009 145Additions 49Disposals (6)Exchange adjustments (6)

As at 31 March 2010 182

Amortisation and impairment As at 1 April 2009 91Amortisation charge for the year 21Impairment in the year 2Disposals (1)Exchange adjustments (3)

As at 31 March 2010 110

Net book value

As at 31 March 2010 72

Cost As at 1 April 2008 94Additions on acquisition of subsidiaries 1Additions 28Disposals (2)Exchange adjustments 24

As at 31 March 2009 145

Amortisation As at 1 April 2008 58Charge for the year 17Impairment in the year 1Disposals (2)Exchange adjustments 17


Net book value


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16 Property and equipment

Short leasehold property

improvements £m

Furniture, fixtures and equipment

£m

Motor vehicles

£mTotal

£mCost As at 1 April 2009 20 206 1 227Additions on acquisition of subsidiaries (note 14(a)) – 1 – 1Additions 3 15 – 18Disposals – (8) – (8)Exchange adjustments – (5) – (5)

As at 31 March 2010 23 209 1 233

Depreciation As at 1 April 2009 9 140 1 150Charge for the year 2 20 – 22Disposals – (7) – (7)Exchange adjustments – – – –

As at 31 March 2010 11 153 1 165

Net book value

As at 31 March 2010 12 56 – 68

No assets are held under finance leases. Leasehold property includes £3m of property held as freehold.

Short leasehold property

improvements £m

Furniture, fixtures and equipment

£m

Motor vehicles

£mTotal

£m

Cost As at 1 April 2008 17 135 1 153Additions on acquisition of subsidiaries − 1 − 1Additions 2 34 − 36Disposals (1) (1) − (2)Exchange adjustments 2 37 − 39

As at 31 March 2009 20 206 1 227

Depreciation As at 1 April 2008 7 91 − 98 Charge for the year 1 21 1 23Disposals − (1) − (1)Exchange adjustments 1 29 − 30

As at 31 March 2009 9 140 1 150

Net book value

As at 31 March 2009 11 66 − 77



104

17 Investment in associates

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Cost As at 1 April 44 41Additions 3 3Transfer from available-for-sale investments (note 18) 1 −Share of profit for the year 7 9Dividends received (7) (4)Liquidated in year – (3)Other movements (1) −Transfer to other comprehensive income (10) −Transfer to goodwill (2) −Exchange adjustments 5 (2)


Amortisation and impairment As at 1 April 6 7 Amortisation charge for the year 4 2Liquidated in year – (3)

As at 31 March 10 6

Net book value


Additions

During the year the Group invested a total of $1.9m (£1.2m), including costs of $0.3m (£0.2m), to acquire a 19.9% interest in Walker Street Securities Holdings LP (Walker St Securities), a US investment partnership, and its subsidiary companies, including Ticonderoga Securities LLC (Ticonderoga), a US company involved in securities broking. The Group also acquired an option for $25,000 to acquire a further 55.1% in Walker St Securities. The agreed cost to exercise this option is $2.7m (£1.8m). The option is recognised as a financial derivative current asset within other receivables, at its fair value. At 31 March 2010 the Group considered the fair value of this option to be £nil.

The Group’s partners in Walker St Securities have a put option on the remaining 25% of the shares that allows them to require the Group to acquire their shares at an agreed price of six times profit after tax at any time from June 2012 to June 2016, capped at 4.99% of the value of the Group. The Group also has a call option over these shares exercisable for the same period at eight times profit after tax. In line with Group accounting policies, the put option is regarded as a financial derivative and the amount due recognised as a non-current liability in other payables, which represents the net present value of the amount which the Group expects to pay when the put is exercised. At 31 March 2010 the Group considered the fair value of this put to be £nil.

A non-current asset, representing the value of the shares which will be acquired as a result of the put being exercised, has been established in other receivables. As at 31 March 2010 the fair value of the asset is regarded as £nil.

In addition to the equity investment, the Group has made an initial interest-free loan to Walker St Securities of $2.7m (£1.8m), which is repayable on exercise of the Group’s option for the same amount. This loan is treated as an investment in an associate.

During the year to 31 March 2010 Ticonderoga suffered a loss of $8.8m (£5.5m) of which the Group’s share of $1.8m (£1.1m) has been recognised in the Group’s consolidated income statement. In addition an impairment of $2.7m (£1.8m) has been recognised against the investment in respect of the loan.

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17 Investment in associates continued

Additions continued On 1 October 2009, the Group acquired an equity interest of 19.88% in Amias Berman Holdings Pte Limited and subsidiaries (Amias Berman), a fixed income brokerage business based in Singapore, with operations in the UK and Hong Kong, for an initial consideration of £1,000.

In the period to 31 March 2010, Amias Berman suffered a trading loss of which the Group’s share was £1.3m. The trading loss has been offset against the Group’s investment in Amias Berman reducing the carrying value to £nil and the Group has recognised a loss of £0.3m in the consolidated income statement.

The Group has also acquired a call option for a nominal value of $1. Although the Group has no plans to exercise this call, it provides the Group with the right to acquire a further 31.12% equity interest after two years. In the event that such a decision is taken, on exercise, the remaining shareholders will have the right thereafter to put and ICAP the right to call their shares at a price determined in accordance with a pre-agreed formula linked to the business’s performance.

The call option is recognised as a financial instrument in non-current trade and other receivables and was initially recorded at its fair value of $1. The option has been revalued as at 31 March 2010 to a fair value of £4.5m. The revaluation change has been recognised in the second column, “amortisation and impairment of intangibles arising on consolidation”, of the consolidated income statement on the “share of profits of associates” line.

On 31 December 2009 the Group invested $0.5m for a 49% interest in CLS Aggregation Services LLC, a US limited liability partnership. The partnership is to provide post trade services to the FX market. The Group is responsible for providing all technical and product services for a fixed fee and is entitled to royalty income of 49% of net revenue.

Transfer from available-for-sale As of 1 April 2009, the Group has a significant influence over the financial and operating policies of Amanah Butler Malaysia Sdn Bhd (Amanah Butler) and, accordingly, had transferred its investment in this business from available-for-sale investments to investment in associates at its book value of £0.5m. Amanah Butler operates a voice money broker in Malaysia and the Group owns 32.1% of the equity.

Transfer to subsidiary On 24 March 2010, the Group completed the acquisition of the 61.78% of TriOptima which it did not previously own. TriOptima is now regarded as a subsidiary company and accordingly the investment in associate has been transferred to investment in subsidiaries (note 14). The previously recognised profit of £10m, accounted for under the equity method, has been reversed through other comprehensive income. The assets and liabilities of TriOptima have been removed from the analysis of assets and liabilities of associates, in the table below, and fully consolidated within the Group’s balance sheet. The acquisition of the remaining interest has resulted in the Group’s share of the identifiable assets and liabilities acquired in the previous transaction being revalued with the adjustment of £45m recognised in other comprehensive income.

The Group has recognised its share of the profit after tax for the period to 24 March 2010 in the “share of profits of associates after tax” line. Profits after 24 March 2010 have been fully consolidated within the Group’s consolidated income statement.



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17 Investment in associates continued

Summary financial information for associates The Group’s share of associates’ assets, liabilities and profit is given below:

As at 31 March

2010 £m

As at 31 March

2009 £m

Assets 18 3,062Liabilities (9) (3,047)

Net assets 9 15Goodwill and intangible assets arising on consolidation 19 23Prior year profits not recognised 2 −Net investment in associates 30 38

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Revenue 35 36Operating expenses (25) (26)

Operating profit 10 10Net finance income – 1

Profit before tax 10 11Tax (3) (4)

Share of profit of associates after tax 7 7

Details of the Group’s associates are listed in note 36(d).

The Group has recognised a charge against the investment in BSN Holdings Limited in the year as the amount received on the preferred brokerage agreement in the year has exceeded the Group’s entitlement to dividends and net assets of the business. Therefore, as at 31 March 2010 the Group is not entitled to any of the net assets of the business.

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18 Available-for-sale investments

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

As at 1 April 41 34 Additions 1 21Transfer to associates (note 17) (1) −Disposals (15) (21)Revaluation to fair value in the year recognised in other comprehensive income – (1)Exchange adjustments 2 8


Non-current − listed 1 1− unlisted 26 35

27 36

Current − listed 1 1− unlisted – 4

1 5

Total 28 41

Available-for-sale investments include the following:

Listed securities Equities listed in the US 1 1Equities listed in the rest of the world 1 1

Total listed securities 2 2 Unlisted securities Cash related instruments 2 15Equity investments 22 22Other 2 2

Total unlisted securities 26 39

Total 28 41

Available-for-sale investments are denominated in the following currencies:

Pound sterling

£mDollar

£mEuro £m

Yen £m

Other currencies

£mTotal

£mAs at 31 March 2010 9 3 12 1 3 28

As at 31 March 2009 8 6 13 1 13 41

The fair value of unlisted securities is based on cost less any provision for impairment.

The Group owns 40.0% of the ordinary share capital of KAF-Astley & Pearce Sdn Bhd, a voice broking company based in Malaysia. This investment is not regarded as an associate as the Group does not exert significant influence on the investment, and it is included within unlisted investments above.

The interest rate profile of the Group’s financial assets together with discussion of risk management are included in note 24.



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19 Trade and other receivables

Groupas at

31 March 2010

£m

Groupas at

31 March 2009

£m

Company as at

31 March 2010

£m

Companyas at

31 March 2009

£m

Non-current receivables Derivative financial instruments 17 − – −Other receivables 18 14 – −Total 35 14 – −Current receivables Matched principal trade receivables 58,632 30,454 – −Deposits paid for securities borrowed 1,034 880 – −Other trade receivables 209 216 – −Impairment of other trade receivables (4) (4) – –Financial assets held at fair value through profit or loss 1 5 – −Derivative financial instruments 3 − – −Amounts owed by subsidiaries (note 32) – − 36 37Amounts owed by associates (note 32) 20 4 – −Other receivables 113 102 – −Prepayments 93 82 – − 60,101 31,739 36 37

Matched principal transactions are those where the Group acts in a non-advisory capacity as principal in the commitment to purchase and sell securities and other financial instruments through two or more transactions between our customers. Such trades have no contractual settlement date and are complete only when all sides of the transaction are settled, and therefore an aged analysis of matched principal trade receivables is not appropriate. Substantially all matched principal receivables and payables settle within a short period of time, usually within three days of trade date. Any unsettled trades that have gone beyond their normal settlement date remain in matched principal receivables or payables as appropriate.

Deposits paid for securities borrowed represents the cash paid as collateral in a stock lending transaction. The Group acts as an intermediary between our customers for collateralised stock lending transactions. Such trades are complete only when both the collateral and stock for each side of the transaction are returned. The gross amounts of collateral due and receivable are disclosed on the balance sheet (notes 20 and 24).

Financial assets held at fair value through profit or loss relate to the Group’s investment in the Pronous fund which is currently in the process of being wound up in an orderly manner. The Group expects this liquidation to be completed in the coming year.

As at 31 March 2010 and 31 March 2009, the fair value of trade and other receivables is not materially different from their book values.

Amounts owed by associates includes an interest free loan of £7m to Amias Berman, a $19.5m (£13m) investment in the redeemable preference shares issued by Ticonderoga, a subsidiary of Walker St Securities, and £5m of other loans to associates. An adjustment of £5m has been made in respect of the recovery of these amounts.

Other trade receivables represent amounts receivable in respect of agency business and information services. As at 31 March 2010 the following other trade receivables were past their normal settlement date but had not been impaired.

As at 31 March

2010 £m

As at 31 March

2009 £m

Over 30 days, but less than 90 days 48 44Over 90 days, but less than 180 days 8 11Over 180 days 4 5

60 60

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19 Trade and other receivables continued

The impairment provision is based on historical data for the trade receivables of the Group and represents the expected reduction in the amount receivable as a result of invoicing errors and other disputes and specific provisions for doubtful debts.

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

As at 1 April 4 1Charged to the consolidated income statement in the year 1 4Released to the consolidated income statement in the year (1) (1)

As at 31 March 4 4

The table below gives an indication of the concentration of the Group’s trade receivables by currency:

As at 31 March 2010 Trade receivables

Pound sterling

£mDollar

£mEuro £m

Yen £m

Other currencies

£mTotal

£mMatched principal trade

receivables 3,317 42,772 6,112 5,071 1,360 58,632Deposits paid for securities

borrowed – 1,034 – – – 1,034Other trade receivables (net) 40 115 31 4 15 205

3,357 43,921 6,143 5,075 1,375 59,871

As at 31 March 2009

Trade receivables

Pound sterling

£mDollar

£mEuro £m

Yen £m

Other currencies

£mTotal

£m

Matched principal trade receivables 1,637 19,661 3,627 4,091 1,460 30,476Deposits paid for securities borrowed − 880 − − − 880Other trade receivables (net) 40 117 30 5 20 212

1,677 20,658 3,657 4,096 1,480 31,568

The interest rate profile of the Group’s financial assets together with discussion of risk management are included in note 24.



110

20 Trade and other payables

Group

as at 31 March

2010 £m

Groupas at

31 March 2009

£m

Compamy as at

31 March 2010

£m

Companyas at

31 March 2009

£m

Current payables Matched principal trade payables 58,626 30,446 – −Deposits received for securities loaned 1,034 865 – −Other trade payables 4 7 – −Amounts owed to subsidiaries – − 660 614Amounts owed to associates 2 2 – −Derivative financial instruments 6 48 – −Accruals 339 328 – −Other tax and social security 25 17 – −Deferred income 14 12 – −Other payables 28 65 – −Deferred consideration (note 14(a)) 7 − – −Contingent deferred consideration (note 14(c)) 13 17 – − 60,098 31,807 660 614

Non-current payables Accruals Contingent deferred consideration (note 14(c))

246

2631

– –

−−

Other payables – − 140 140

30 57 140 140

As at 31 March 2010 and 2009, the fair value of trade and other payables is not materially different from their book values.

The interest rate and maturity profiles of the Group’s financial liabilities together with discussion of risk management are included in note 24.

Matched principal trade payables and deposits received for securities loaned are described in note 19.

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21 Deferred tax

The movement in the deferred tax balance is as follows:

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

As at 1 April (124) (48)

Amounts charged to the consolidated income statement (12) (33)Adjustments credited to the consolidated income statement in respect of prior years 1 −Amounts credited to the consolidated income statement in respect of amortisation of intangible assets

arising on consolidation 20 22Amounts recognised on the revaluation of available-for-sale investments – 1Amounts recognised on share-based payments (1) (4)On acquisition of subsidiaries (31) (30)Exchange adjustments 7 (32)

As at 31 March (140) (124)

The net deferred tax balance is represented by: ( )Deferred tax assets 34 40

Deferred tax liabilities (174) (164)

As at 31 March (140) (124)

Deferred tax assets and liabilities comprise:

Accelerated capital allowances 8 7Other timing differences − assets 26 33Other timing differences − liabilities (30) (25)Liabilities on intangible assets arising on consolidation (144) (139)

A( ) (140) (124)



112

22 Borrowings

Long-term borrowings

Groupyear ended 31 March

2010 £m

Groupyear ended 31 March

2009 £m

Company year ended 31 March

2010 £m

Companyyear ended31 March

2009 £m

As at 1 April 270 97 – –New long-term borrowings 257 285 – 285Issue costs capitalised (3) − – −Amortisation of issue costs 1 − – −Repaid in the year (135) (150) – (285)Exchange adjustment 3 38 – −Fair value hedging adjustment 2 − – −As at 31 March 395 270 – −Analysis of long-term borrowings

Subordinated loan notes repayable 2015 127 135 – −Five year senior notes 268 − – −Amortising term loan – 135 – −As at 31 March 395 270 – −

In June 2005, the Group issued $225m of guaranteed subordinated loan notes repayable in 2015. The issue consisted of $32m floating rate notes and a further $193m of notes with a fixed coupon of 5.84% for the first five years and LIBOR plus 1.95% thereafter. In June 2007 the Group redeemed the floating rate notes at par. The carrying value of the loan notes of £270m includes a fair value hedging adjustment of £2m relating to the mark-to-market of the interest rate portion of the notes. The balance of £268m is net of fees of £2m.

In April 2008, the Group entered into a 364-day, £150m term loan with The Royal Bank of Scotland plc to finance the acquisition of Link. The Group subsequently restructured the loan into a £135m amortising term loan on 17 November 2008. The restructured term loan was priced at LIBOR plus 3.0% and was repaid on 28 July 2009. The weighted average effective interest rate for the year was 3.8% (31 March 2009 − 6.0%).

On 28 July 2009, the Group issued €300m of five-year senior notes (the “Notes”) with a coupon of 7.5% under its Global Medium Term Note programme. The Notes were issued at a price of €99.496, accounted for using the effective interest rate base and shown net of both this discount and fees of £2m directly attributable to the issue. The Notes rank as senior obligations of the issuer and provide the investors, following a change of control in the Company, with the right to put the Notes at par in the event that the rating assigned to the Notes falls below investment grade. The Notes are listed and traded on the London Stock Exchange’s regulated market. At 31 March 2010 the Notes were rated BBB+ by Fitch and Baa2 by Moody’s. In the event that either of these ratings fall below investment grade the coupon payable on the Notes will increase by 1.25% until such time as an investment grade rating is restored.

To enable the Group to manage the translational exposure which arises as a result of the Notes being denominated in euros and to meet its risk management objective of minimising both interest cost and the impact of interest volatility on its consolidated income statement, the Group entered into a number of cross-currency swaps to convert its obligations over the life of the Notes from euros to pound sterling. The first €100m of the Notes have been swapped from a fixed euro-denominated coupon of 7.5% to a fixed pound sterling denominated coupon of 8.58% and the remaining €200m from a fixed euro-denominated coupon of 7.5% to a floating pound sterling denominated coupon of six month LIBOR+ 4.92%. The fixed to fixed swaps have been accounted for as a cash flow hedge and at 31 March 2010 have a fair market value of £2m (2009 – nil). These swaps offset the effect of FX on the Notes, which resulted in a nil charge being recognised in the consolidated income statement and £3m in other comprehensive income during the year. The fixed to floating swaps have been treated as a fair value hedge, have a fair market value of £11m (2009 – nil) at 31 March 2010 and resulted in a net £2m gain being recognised in the consolidated income statement during the year.

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22 Borrowings continued

Short-term borrowings and overdrafts

Groupas at

31 March 2010

£m

Group as at

31 March 2009

£m

Companyas at

31 March 2010

£m

Companyas at

31 March 2009

£m

Bank overdrafts – 14 – –Revolving credit facility – net of fees 217 275 – –European commercial paper 40 – 40 –

257 289 40 –

In March 2008, the Group entered into a three-year unsecured revolving credit facility of which £473m is available for general corporate purposes including the financing of acquisitions, with the remaining $94m used as a swingline to meet margin calls. The drawings under the revolving credit facility as at 31 March 2010 of £217m (2009 – £277m) are net of capitalised fees of £nil (2009 – £2m). To take advantage of lower short-term interest rates, the amounts drawn as at 31 March 2010 were for a one-week period and have been included within short-term borrowings. The facility carries a floating interest rate of LIBOR plus 0.45% with an additional 0.10% payable dependent on the debt to earnings ratio. The weighted average effective interest rate for the year was 1.0% (2009 – 3.5%).

On 7 May 2010, the Group refinanced its existing £473m three-year unsecured revolving credit facility and $94m swingline with a new $880m revolving credit facility incorporating an up to $200m swingline facility, and matures on 31 May 2013. The facility carries a floating interest rate at LIBOR plus 2% with an additional 0.50% payable dependent on the debt to earnings ratio.

During March 2009, the Group put in place a €500m European commercial paper programme to provide access to short-term liquidity to provide an alternative mechanism to finance the Group’s working capital and margin requirements. At 31 March 2010 the Group had in issue €45m (£40m) (2009 – nil) from the programme which is due to be repaid by June 2010. The weighted average effective interest rate was 1.0%.

Bank overdrafts are for short-term funding and are repayable on demand, and are generally being repaid within a very short time period.

The Group’s bank facilities contain a number of customary financial and operational covenants. The Group remained in compliance with the terms of these covenants throughout the year ended 31 March 2010.

Under the terms of the Group’s bank financings, the Company is required to remain as the ultimate holding company in the Group. A change in ownership of the Company could result in the Group’s new three-year unsecured revolving credit facility becoming repayable. The fair value of the short-term borrowings is not materially different from their book values.

Maturity of undrawn committed borrowing facilities

Groupas at

31 March 2010

£m

Groupas at

31 March 2009

£m

Within one year – –Between one and two years 318 336Between two and five years – –


As at 31 March 2010, the Company was rated BBB+ by Fitch and Baa2 by Moody’s. There has been no changes in ratings since 31 March 2009.

The interest rate, currency and maturity profiles of borrowings together with discussion on risk management are included in note 24.



114

23 Provisions

Property

£mHoliday pay

£mLegal

£mOther

£m Total

£mAs at 1 April 2009 7 5 – 10 22Amounts recognised on the acquisition of subsidiaries 1 – 46 – 47Amounts charged against provisions (2) – – – (2)Recognised in the consolidated income statement 1 – – 23 24Released to the consolidated income statement (2) – – (4) (6)Exchange adjustment (1) – 7 – 6

As at 31 March 2010 4 5 53 29 91

Property £m

Holiday pay £m

Other £m

Total £m

As at 1 April 2008 1 4 11 16Amounts charged against provisions (1) − (1) (2)Recognised in the consolidated income statement 6 1 2 9Released to the consolidated income statement − − (2) (2)Exchange adjustment 1 − − 1

As at 31 March 2009 7 5 10 22

As at 31 March

2010 £m

As at 31 March

2009 £m

Included in current liabilities 36 20Included in non-current liabilities 55 2

91 22

Property provisions outstanding at 31 March 2010 relate to property dilapidations in London that are not expected to be fully utilised until 2017. The provision for surplus property in London and Asia Pacific has been substantially utilised in the current year.

The holiday pay provision represents the value of employees’ unused holiday entitlement at the end of the reporting period.

Legal provisions represents amounts for certain claims brought against subsidiaries of the Group in relation to certain tax matters. The provisions were those that have been acquired by the Group on the acquisition of subsidiary undertakings. At the present time the timing of any payment is uncertain and the matter is being reviewed by the Group on a regular basis. In the directors’ opinion, after taking legal advice, the outcome of these legal claims will not give rise to any significant loss beyond the amounts provided at 31 March 2010.

Other provisions include obligations for certain employee related costs, including those related to the discontinuance of the European and Asia Pacific full service agency cash equities businesses (as set out in note 6), and pension arrangements in the Group which are expected to be discharged over the next two years.

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24 Financial risk management

Group The Group operates internationally and is exposed to a variety of financial risks including credit, liquidity, currency, interest rate and market price risk. The Group’s funding and exposure to interest rate and FX rate risk are managed by the Group’s treasury function in accordance with a policy framework approved by the finance committee. The framework lays out the Group’s appetite for risk and the steps to be taken to manage these risks. The finance committee receives bi-monthly reports on the activities of the treasury function and is also responsible for approving significant transactions such as new financing arrangements or changes to the Group’s hedging strategy. The group risk committee sets and monitors treasury’s counterparty limits.

The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance by using derivative instruments to lower funding costs, alter interest rate exposures arising as a result of mismatches between assets and liabilities or to achieve greater certainty of future costs. The use of derivatives forms part of the Group’s overall risk management framework as determined by the board through the group risk and finance committees.

(a) Financial assets and liabilities The carrying value less impairment of trade receivables and payables are assumed to approximate to their fair values due to their short-term nature.

As at 31 March 2010 and 2009, the fair values of financial assets are not materially different from their book values.

Classification of financial assets as at 31 March 2010

Held for trading

£m

Hedging instrument

£m

Designated as fair value

£m

Available- for-sale

£m

Loans and receivables

£mTotal

£mCash and cash equivalents – – – – 504 504Available-for-sale financial assets – – – 28 – 28Matched principal trade receivables – – – – 58,632 58,632Deposits paid for securities

borrowed – – – – 1,034 1,034Other trade receivables (net) – – – – 205 205Held at fair value through profit

or loss – – 1 – – 1Derivative financial instruments 5 15 – – – 20Amounts owed by associates – – – – 20 20Other receivables – – – – 91 91

5 15 1 28 60,486 60,535

Classification of financial assets as at 31 March 2009

Held for trading

£m

Designated as fair value

£m

Available- for-sale

£m

Loans and receivables

£mTotal

£m

Cash and cash equivalents − − − 433 433Available-for-sale financial assets − − 41 − 41Matched principal trade receivables − − − 30,454 30,454Deposits paid for securities borrowed − − − 880 880Other trade receivables (net) − − − 212 212Held at fair value through profit or loss − 5 − − 5Derivative financial instruments − − − − −Amounts owed by associates − − − 4 4Other receivables − − − 114 114

− 5 41 32,097 32,143



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24 Financial risk management continued

(a) Financial assets and liabilities continued Financial assets can be reconciled to the balance sheet as follows:

As at 31 March

2010 £m

As at 31 March

2009 £m

Trade and other receivables: current receivables (note 19) 60,101 31,739non-current receivables (note 19) 35 14

Available-for-sale financial assets (note 18) 28 41Cash and cash equivalents (note 33(b)) 504 433Excluded:

non-financial other receivables (40) (2)prepayments (93) (82)

60,535 32,143

Prepayments and certain items included within other receivables are not defined as financial assets under IAS39.

Assets classified as fair value through profit or loss in accordance with the accounting policy in note 2(i) have been analysed in note 24(a) as held for trading and designated as fair value.

As at 31 March 2010 and 2009, the fair values of financial liabilities, with the exception of long-term borrowings, are not materially different from their book values.

Classification of financial liabilities as at 31 March 2010 Held for trading

£m

Hedging instruments

£m

Amortised cost £m

Total £m

Matched principal trade payables – – 58,626 58,626Deposits received for securities loaned – – 1,034 1,034Other trade payables – – 4 4Derivative financial instruments 2 4 – 6Amounts owed to associates – – 2 2Other payables – – 25 25Contingent deferred consideration – – 19 19Deferred consideration – – 7 7Accruals – – 363 363Borrowings and overdrafts – – 652 652Provisions – – 32 32

2 4 60,764 60,770

Classification of financial liabilities as at 31 March 2009

Held for trading

£m

Hedging instruments

£m

Amortised cost £m

Total £m

Matched principal trade payables − − 30,446 30,446Deposits received for securities loaned − − 865 865Other trade payables − − 7 7Derivative financial instruments 1 47 − 48Amounts owed to associates − − 2 2Other payables − − 65 65Contingent deferred consideration − − 48 48Accruals − − 354 354Borrowings and overdrafts − − 559 559Provisions − − 12 12

1 47 32,358 32,406

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(a) Financial assets and liabilities continued Financial liabilities can be reconciled to the balance sheet as follows:

As at 31 March

2010 £m

As at 31 March

2009 £m

Trade and other payables: Current payables 60,098 31,807 Non-current payables 30 57Borrowings and overdrafts (note 22) 652 559Provisions (note 23) 91 22Excluded: Non-financial other provisions (59) (10) Non-financial other payables (3) − Other tax and social security (25) (17) Deferred income (14) (12)

60,770 32,406

Taxes payable, deferred income and certain provisions are not classified as financial liabilities under IAS39.

(b) Credit risk The Group is exposed to credit risk in the event of non-performance by counterparties in respect of its agency, matched principal, exchange trades and corporate treasury operations.

The risk in respect of the agency, post trade risk and information businesses is limited to the collection of agency commission and transaction fees and is managed proactively by the Group’s credit control function. The exposure to credit loss is limited to the carrying value of the receivable. Concentration is limited since the customer base is both large and unrelated. No significant concentrations of risk existed at any time during the year.

The matched principal business involves the Group acting as a counterparty on trades which may involve one or more financial instruments and/or counterparties. The Group manages its credit risk in respect of these transactions by having policies and procedures in place to ensure that the risks inherent in all trades are matched and that appropriate credit limits have been set and are monitored at entity, company and country level to restrict the exposure to potential loss, transacting on a delivery versus payment basis and settling the majority of trades through a central counterparty.

The credit risk on core cash and cash equivalents and derivative financial instruments is limited by the Group’s policy of requiring its corporate treasury transactions to be undertaken with financial institutions which have been approved by the group risk committee and which are investment grade rated or better by one or more recognised credit rating agencies. There were no significant concentrations of risk at the year end.

The Group does not have any significant credit risk exposure to any single counterparty. The Group’s gross counterparty risk did not exceed 18% of Group capital at any time during the year. After taking into account the probability of default of counterparties, the equivalent usage of capital was less than 1% of Group capital.

At least 85% of the Group’s counterparty risk is with institutions which have an internal rating of nine or higher – corresponding to an external credit rating of investment grade or better (BBB–). The remaining counterparties are closely monitored and have strict trading limits.

The maximum exposure to credit risk for the Group is represented by the total fair value of the financial assets plus other off-balance sheet items as disclosed below:

As at 31 March

2010 £m

As at 31 March

2009 £m

Financial assets of the Group 60,533 32,143Guarantees given to counterparties 197 122

60,730 32,265



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(b) Credit risk continued The Group holds cash deposits from a number of counterparties as collateral against their trading lines with the Group. As at 31 March 2010 this amounted to £21m (2009 – £26m). The Group’s cash balance includes £60m which is collateral placed with clearers and other organisations to facilitate the Group’s clearing and settlement activities.

Collateral pledged and received as a result of the stock lending business is disclosed in trade and other receivables and trade and other payables (notes 19 and 20).

(c) Liquidity risk management Through the finance committee, the board regularly reviews the liquidity demands of the Group with the objective of ensuring that each entity has access to appropriate forms of liquidity to meet their forecast regulatory, commercial and settlement requirements and that the Group, in totality, has sufficient headroom to provide constant access, even in periods of market turmoil, to an appropriate level of cash, other forms of marketable securities and committed funding lines to enable it to finance its ongoing operations, proposed acquisitions and other reasonable unanticipated events on cost-effective and attractive terms.

At 31 March 2010, the Group had gross debt of £652m (2009 – £559m) and cash and cash equivalents of £504m (2009 – £433m). It is the Group’s policy to only hold cash necessary to meet local regulatory, commercial, settlement and short-term working capital requirements and for excess cash to be used to minimise gross debt. Cash has increased from 31 March 2009 due to expansion into new businesses, cash held in the newly acquired TriOptima over the year end, cash in the Group’s Brazilian operations and increased cash held centrally for potential liquidity calls.

The Group invests its cash balances in a range of capital protected instruments including money market deposits, AAA liquidity funds and government bonds with the objective of optimising the return, while having regard to security, liquidity and counterparty risk. With the exception of some small, local cash management balances, surplus cash is invested with strong investment grade institutions which have an equivalent credit rating of A or better. Counterparty limits applied are reviewed by the finance and group risk committees.

Although the Group does not undertake proprietary trading, it is subject to a combination of margin and collateral requirements of the clearing houses or exchanges used to settle certain client trades. The most significant margin requirements arise in the US where, as part of its broking business, it provides clearing services to clients and is required to deposit margin with the FICC and NSCC. During the year to 31 March 2010, these deposits averaged $50m. The deposits are met through a combination of internal cash resources and the $94m swingline facility (note 22). The Group has no other material margin requirements on a routine basis.

To provide protection against unexpected events, the Group has traditionally maintained minimum core liquidity, in the form of cash and undrawn debt facilities, of £150m ($250m). The headroom remained undrawn throughout the year. At 31 March 2010, the Group had committed headroom under its core credit facilities of £318m (2009 – £336m).

The table below shows the maturity profile of the Group’s financial liabilities based on the contractual amount payable on the date of repayment:

Maturity of financial liabilities as at 31 March 2010

Less than three months

£m

Three months to one year

£m

One to five years

£m

Greater than five years

£m Total

£mMatched principal trade payables 58,626 – – – 58,626Deposits received for securities loaned 1,034 – – – 1,034Other trade payables 4 – – – 4Derivative financial instruments 3 3 – – 6Amounts owed to associates 2 – – – 2Other payables 25 – – – 25Contingent deferred consideration – 13 6 – 19Deferred consideration 7 – – – 7Accruals 243 95 25 – 363Borrowings and overdrafts 257 – 395 – 652Provisions – 28 4 – 32

60,201 139 430 – 60,770

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(c) Liquidity risk management continued Maturity of financial liabilities as at 31 March 2009

Less than three months

£m

Three months to one year

£m

One to five years

£m

Greater than five years

£mTotal

£m

Matched principal trade payables 30,446 − − − 30,446Deposits received for securities loaned 865 − − − 865Other trade payables 7 − − − 7Derivative financial instruments 15 29 4 − 48Amounts owed to associates 2 − − − 2Other payables 64 1 − − 65Contingent deferred consideration 17 − 31 − 48Accruals 328 − 26 − 354Borrowings and overdrafts 289 − 270 − 559Provisions 3 7 2 − 12

32,036 37 333 − 32,406

The total financial liabilities payable is higher than the amount recognised in trade and other payables as the gross amounts payable have been disclosed, rather than the net present value used in determining trade and other payables.

(d) Currency risk The Group presents its consolidated financial statements in pound sterling and conducts business in a number of other currencies, principally the dollar and euro. Consequently the Group is exposed to FX risk due to exchange rate movements which affect the Group’s transactional revenues and the translation of the earnings and net assets of its non-pound sterling operations.

(i) Transactional exposures The Group’s policy is for subsidiaries with pound sterling functional currency to hedge their main transactional exposures, which are the dollar and the euro, through a combination of forward FX contracts and options for up to two years forward. A maximum of 100% of the forecast exposure is hedged for the first 12 months, 75% for the following six months and 25% thereafter. The Group’s other transactional exposures are monitored and, where deemed appropriate, hedged for a period of 12 months forward.

The Group aims to achieve hedge accounting wherever possible with any gain or loss on the hedge recognised in other comprehensive income to the extent it is highly effective and recycled to the consolidated income statement at the same time as the underlying hedged transaction affects the consolidated income statement. Any ineffectiveness is taken to the consolidated income statement in accordance with IAS39. Where hedge accounting is not achieved, all fair value gains or losses are immediately recognised in the consolidated income statement.

The Group has contracts in place, designated as cash flow hedges under IAS39 where appropriate, covering approximately 79% of its forecast dollar transactional exposure for the year to 31 March 2011 at $1.51. Approximately 84% of the Group’s euro exposure has been hedged for the year to 31 March 2011 at €1.14 and 25% of its exposure to 31 March 2012 at €1.12.

An analysis of the Group’s hedging instruments is given below.

(ii) Balance sheet translational exposure The Group is exposed to balance sheet translational exposures at the local entity level where the local statement of financial position may contain monetary assets or liabilities denominated in a currency other than the entity’s functional currency. It is the Group’s policy to hedge up to 100% of these exposures using a mix of foreign currency swaps and forward FX contracts and these are designated as hedges under IAS39 where appropriate.

Balance sheet translational exposures also arise on consolidation as a result of the retranslation of the balance sheet of the Group’s non-pound sterling operations, principally dollar and euro, into pound sterling, the Group’s presentational currency. The Group’s general policy is not to actively manage these exposures, as active management using instruments with a shorter tenor than the underlying net asset can give rise to a net cash outflow. However, from time to time it will use FX forwards, cross currency swaps or non-pound sterling denominated borrowings to mitigate this exposure. During the financial year ended 31 March 2010, the Group designated the subordinated loan notes as a hedging instrument against the underlying dollar exposure. In the prior year the Group designated the subordinated loan notes and also part of its dollar denominated bank borrowings as a hedge between August 2008 and February 2009. Any gains or losses on revaluation are recognised directly in other comprehensive income to offset the revaluation of the net investment. As at 31 March 2010 this exposure was $0.9bn (2009 – $0.8bn) including intangible assets arising on consolidation, but before $0.2bn of hedging (2009 – $0.2bn). The net cash impact, being the proportion of the borrowings which relate to the cumulative losses recognised in other comprehensive income attributable to the net investment hedges for the 12 months to 31 March 2010 was £nil and in the prior year was £32m.



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(d) Currency risk continued

(ii) Balance sheet translational exposure continued During the year ended 31 March 2010, with respect to pound sterling, the dollar depreciated by 6% and the euro depreciated by 4%. In accordance with IAS21 “The Effects of Changes in Foreign Exchange Rates”, the resulting translational exchange difference is included within the £41m exchange loss taken directly to retained earnings, as disclosed in the consolidated statement of comprehensive income. The Group does not have foreign operations whose functional currency are considered hyperinflationary and would therefore require adjusting to state all items in the measuring unit current at the reporting date.

The table below shows the actual impact on the Group’s 2010 results of the movement during the year of the dollar and euro exchange rates in terms of transactional and translational exposure.

Dollar

£mEuro £m

Total £m

Operating profit 38 13 51Equity 34 7 41

(iii) Earnings translation exposures The Group does not hedge the translation of those profits or losses earned by its non-pound sterling operations.

The table below shows the anticipated impact on the Group’s 2011 results of a 10 cent strengthening in the dollar and euro in terms of transactional and translational exposure.

Dollar

£mEuro £m

Total £m

Operating profit 22 17 39Equity 44 27 71

The principal exchange rates which affect the Group, expressed in currency per pound sterling, are shown below:

Closing rate as at

31 March 2010

Closing rate as at

31 March 2009

Average rate year ended 31 March

2010

Average rate year ended 31 March

2009

Dollar 1.52 1.43 1.59 1.72Euro 1.12 1.08 1.13 1.21Yen 141.74 141.57 147.35 174.74

(iv) Derivative financial instruments It is the Group’s policy to hedge a proportion of its transactional dollar and euro exposures with forward FX contracts. Where these are designated and documented as hedging instruments in the context of IAS39 and are demonstrated to be effective, mark-to-market gains and losses are recognised directly in other comprehensive income and transferred to the consolidated income statement on recognition of the underlying item being hedged.

As at 31 March 2010 As at 31 March 2009 Assets

£mLiabilities

£mAssets

£m Liabilities

£m

Forward FX contracts − cash flow hedges 2 (4) − (47)Cross currency swaps − cash flow hedges 2 – − −Cross currency swaps − fair value hedges 11 – − −Other 5 (2) − (1)

20 (6) − (48)

Cross currency swaps relate to hedging the interest rate and FX risks of the Group for the €300m of five-year senior notes (note 22).

No amounts (2009 – £nil) were recognised in the consolidated income statement in the year as a result of ineffective hedges.

The fair value of financial instruments traded in active markets is based on quoted market prices on the balance sheet date.

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(e) Interest rate risk The Group has an exposure to fluctuations in interest rates on both its cash positions and borrowings which it manages through a combination of pound sterling and dollar debt drawn on fixed and floating rate terms. The Group’s objective is to minimise interest cost and the impact of interest volatility on the Group’s consolidated income statement. In addition to debt, the Group’s treasury policies also permit the use of derivatives including interest rate swaps, interest rate options, forward rate agreements and cross currency swaps to meet these objectives. The details of the cross currency swaps are disclosed in note 22.

At 31 March 2010, after taking into account cross currency and FX swaps of the euro denominated five-year senior notes and commercial paper, the Group had £156m of cash, £437m of floating rate debt and £90m of fixed rate debt denominated in pound sterling, £232m of cash and £127m of fixed rate debt denominated in dollars (or currencies closely related to the dollar) and £116m of cash denominated in other currencies. A 100 basis-points parallel movement in pound sterling LIBOR and LIBID rates would impact profit after tax and other comprehensive income by £3m with a similar movement in dollar rates impacting profit after tax and other comprehensive income by £2m. In the event that LIBOR and LIBID rates diverge, each 100 basis-points movement (i.e. 50 basis-points movement in each) in pound sterling and dollar rates will impact profit after tax and other comprehensive income by £3m and £1m respectively.

The details of the interest rate bearing financial liabilities are disclosed in note 22.

(f) Market price risk The Group’s exposure to market price risk arises mainly through counterparties to matched principal and exchange traded transactions failing to fulfil their obligations or through trade mismatches and other errors. The Group is also exposed to market price risk in respect of its available-for-sale investments.

In matched principal transactions, the Group acts as an intermediary by serving as counterparty for identified buyers and sellers in matching, in whole or in part, reciprocal back-to-back trades. In order to facilitate customer transactions and provide liquidity, the Group may participate in certain marketplaces by posting quotations. On occasion, the act of posting quotations in pursuit of customer orders can result in the Group becoming principal to unmatched trades.

In exchange traded transactions, the Group executes the trade as principal and then novates the contract to its client. A failure by the client to accept the trade would result in the Group becoming exposed to market price risk.

The risk the Group faces in these situations is restricted to short-term price movements in the underlying instrument temporarily held by the Group and movements in FX rates. Any such market price risk arising is identified, monitored and reported to senior management on a daily basis and to the group risk committee. Policies and procedures are in place to reduce the likelihood of such trade mismatches and, in the event that they arise, the Group’s policy is to liquidate or hedge and liquidate these principal positions as soon as reasonably practicable.

The Group has limited exposure to market price risk on its available-for-sale financial assets as the majority of the Group’s equity investments are not listed. The Group estimates that its sensitivity to movements in market price is not material.

(g) Fair value estimation The Group’s assets and liabilities that are measured at fair value are financial assets at fair value through profit or loss and derivative financial instruments.

Financial assets at fair value through profit or loss are valued at the most recent observable quoted price.

Derivative financial instruments are measured using inputs other than quoted prices that are observable for the asset or liability indirectly (that is derived from prices available).

The following table presents the Group’s assets and liabilities that are measured at fair value as at 31 March 2010.

As at 31 March 2010 Level 1

£mLevel 2

£m Level 3

£m Total

£mAssets Available-for-sale investment 2 – 26 28Financial assets at fair value through consolidated income statement – – 1 1Derivative financial instruments – 15 5 20

Total assets 2 15 32 49Liabilities Derivative financial instruments – (6) – (6)

Total liabilities – (6) – (6)



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Company The Company’s approach to risk is governed by the overall Group policies on risk and the limited activities of the Company limit its exposure to risk.

(a) Financial assets and liabilities All of the Company’s financial assets are classified as loans and receivables and the financial liabilities are held at amortised cost. The fair value of these assets and liabilities is not materially different from their book values.

(b) Credit risk The Company is exposed to credit risk in the event of non-performance by counterparties. This risk is considered minimal as all counterparties are Group companies and the risk of non-payment is viewed as low.

(c) Liquidity risk management The Company seeks to ensure that it has constant access to an appropriate level of cash and funding to enable it to fund its ongoing operations, proposed acquisitions and other reasonable unanticipated events on cost effective and attractive terms.

If the Company has any cash, it is loaned intra-group for further investment.

All of the Company’s financial liabilities are payable within three months, with the exception of subordinated loans owed to subsidiaries of £140m, which have a maturity of more than five years.

(d) Currency risk (i) Transactional exposures The Company has an immaterial exposure to transactional exposure.

(ii) Balance sheet translational exposures The Company is exposed to balance sheet translational exposures where the balance sheet contains assets or liabilities denominated in a currency other than pound sterling. While it is the Group’s policy to hedge up to 100% of these exposures at Group level, at Company level these exposures can affect the Company’s profit after tax.

The table below shows the Company’s net financial liabilities denominated in foreign currency and hence the Company’s exposure to currency risk:

As at 31 March 2010 Dollar

£mEuro £m

Other £m

Total £m

Net financial liabilities – 40 – 40

As at 31 March 2009 Dollar

£mEuro £m

Other £m

Total £m

Net financial liabilities 14 − − 14

The Company estimates that a 10 cent movement in the euro/pound sterling exchange rate would result in a translational impact of £3m on the profit after tax of the Company.

(e) Interest rate risk The Company is exposed to interest rate movements as a result of issuance under its commercial paper programme (see below). It is estimated that the impact of a 100 basis-points movement in interest rates would not have a significant impact on the profit after tax of the Company.

The table below gives an indication of the interest rate profile of the financial assets of the Company:

As at 31 March 2010

Non-interest bearing

£m

At fixed interest

rates £m

At floating interest

rates £m

Total £m

Amounts owed by subsidiaries 36 – – 36

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(e) Interest rate risk continued As at 31 March 2009


£m

At fixed interest

rates £m


rates £m

Total £m

Amounts owed by subsidiaries 37 − − 37

The table below gives an indication of the interest rate profile of the financial liabilities of the Company:

As at 31 March 2010


£m

At fixed interest

rates £m


rates £m

Total £m

Amounts owed to subsidiaries 800 – – 800European commercial paper – – 40 40

Net financial liabilities 800 – 40 840

As at 31 March 2009


£m

At fixed interest

rates £m


rates £m

Total £m

Amounts owed to subsidiaries 754 − − 754

(f) Market price risk The Company is not exposed to market price risk as it holds no listed investments.

25 Capital management

ICAP is an international business which provides brokerage, post trade risk and information services in a wide range of products to professional counterparties. The business is subject to consolidated supervision by the FSA under the terms of the CRD.

In March 2007, ICAP obtained a waiver from the consolidated capital adequacy tests which have the effect of excluding goodwill from the capital computation and, in so doing, allows the Group to undertake acquisitions using debt rather than equity finance. The terms of the waiver, which runs until the end of March 2012, limits the Group’s ability to incur market risk and, in effect, prohibits the Group from undertaking proprietary trading activities.

The Group’s Pillar 1 regulatory capital headroom represents the difference between the capital resources of the Company, on a stand-alone basis, and the regulatory capital requirements of the Group calculated, in accordance with the requirements of the waiver, on an aggregate basis.

The Group’s Pillar 1 regulatory capital requirement calculated under the CRD waiver is relatively stable. However, as a result of timing differences in the receipt of dividends from subsidiaries and the payment to ICAP’s shareholders, the Group’s regulatory capital and consequently the Pillar 1 headroom may fluctuate. As at 31 March 2010 the Group had in excess of £500m of Pillar 1 headroom.

CRD requires ICAP, under Pillar 2, to evaluate the risks facing the business and to determine whether the Pillar 1 capital is sufficient to cover any expected losses. The Group has developed a scenario-based model which utilises data provided by the business to assess the economic capital required to cover the expected risks and, at 31 March 2010, viewed the Pillar 1 capital as sufficient to cover the identified risks. The analysis of economic capital is documented in the Group’s Internal Capital Adequacy Assessment Process (ICAAP) which is required by the FSA, regularly updated and formally approved by the board annually.



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25 Capital management continued

In general, higher levels of market volatility result in increased demand for the Group’s brokerage and post trade risk and information. From a regulatory capital perspective, however, the impact is significantly dampened by the fact that much of this incremental business occurs in markets which operate on a name give-up basis or are cleared through a central counterparty. Therefore, we would expect any increase in activity to have a limited impact on the Group’s capital resource requirement and, as such, absent a material acquisition, loss of the waiver or a change in the basis of computation, existing capital resources are viewed as sufficient to both operate and grow the business.

The Group manages its capital to ensure that entities in the Group meet their local regulatory requirements, while maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt which includes borrowings (note 22), cash and cash equivalents (note 33(b)) and equity (note 28). At 31 March 2010, the Group’s net debt was £148m (2009 – £126m) (note 33(c)).

The Group’s finance committee reviews the capital structure on a regular basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital. Based on the recommendations of the committee, the Group balances its overall capital structure through the payment of dividends, new share issues and share buybacks, as well as taking on new debt or refinancing existing debt.

A number of the Group’s trading companies are subject to regulation in the jurisdiction in which they operate, principally by the FSA in the UK and the SEC/FINRA in the US. All such companies have complied with their regulatory capital requirements throughout the year.

26 Share capital

(a) Authorised share capital of the Company As at 31 March 2010 As at 31 March 2009

Number of shares

millions

Nominal value

£m

Number of shares

millions

Nominal value

£m

Equity share capital Ordinary shares of 10p each 1,100 110 900 90

1,100 110 900 90

(b) Issued share capital Year ended 31 March 2010 Year ended 31 March 2009

Allotted, called up and fully paid

Number of shares

millions

Nominal value

£m

Number of shares

millions

Nominal value

£m

As at 1 April 650 65 650 65 Issued during the year 7 1 − −As at 31 March 657 66 650 65

During the year 2,074,617 (2009 – 370,861) ordinary shares of 10p each were issued following the exercise of options held under employee share schemes for a consideration of £4.8m (2009 – £0.4m). 692,226 ordinary shares of 10p each have been issued during the year for the acquisition of Ocean Tomo for a consideration of £3m. 4,567,807 ordinary shares of 10p each have been issued during the year for the purposes of a scrip dividend for which there were notional proceeds of £20m.

The number of ordinary shares of 10p each in issue at 31 March 2010 was 657,104,476 (2009 – 649,769,826) with 2,034,739 (2009 – 2,034,739) held as Treasury Shares and 6,527,547 (2009 – 14,510,959) held in employee share trusts. The cost of Treasury Shares is deducted from retained earnings (note 28). The cost of shares held in employee share trusts is loaned to the trusts by the Company and is treated as other receivables.

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26 Share capital continued

(c) Potential issues of share capital Certain employees hold options over the Company’s shares, which are potentially issuable as follows:

Number of shares millions

Year of grant

Weighted average

exercise price pence

Exercise period from

Exercise period to

As at 31 March

2010

As at 31 March

2009

2000 42.4 30/09/02 29/09/09 – 0.12002 175.6 31/05/04 08/01/12 0.7 1.52003 188.5 31/05/05 19/01/13 0.1 0.22004 270.0 01/08/06 26/11/13 0.6 0.72005 239.6 28/06/07 08/12/14 0.3 0.32006 297.0 01/07/08 30/06/15 1.0 1.02007 486.0 01/06/09 06/09/16 1.6 2.52008 419.0 01/08/10 31/01/11 0.1 0.32009 556.8 22/05/11 21/05/18 0.1 0.62010 323.0 01/08/12 31/03/13 2.5 −Total potential issues of share capital 7.0 7.2

Shares that have been issued but are held in employee share trusts for employee share awards are not included in the above. Full details of share option schemes are given in note 27.

(d) Shares held in trust for employee share schemes The Company has established employee share trusts in respect of the SEEPP, BSMP, LTIP and Traiana Plan which are funded by the Company and have the power to acquire shares in the open market to meet the Company’s future obligations under these schemes. As at 31 March 2010, these trusts owned 6,527,547 ordinary 10p shares in the Company (2009 – 14,510,959) with a market value of £24m (2009 – £45m).


Year ended 31 March

2010

Year ended 31 March

2009

As at 1 April 15 12Acquired during the year 2 4Exercised by employees during the year (10) (1)

As at 31 March 7 15

(e) Treasury Shares During the year the Company purchased none (2009 – 2,620,000) of its own shares (2009 – £9m) to be held as Treasury Shares and re-issued no shares (2009 – 1,636,430) to satisfy employee share options exercised (2009 –£2m). As at 31 March 2010, the number of shares held as Treasury Shares was 2,034,739 (2009 – 2,034,739). Losses made on the re-issue of Treasury Shares are recognised directly in equity.


Year ended 31 March

2010

Year ended 31 March

2009

As at 1 April 2 1Acquired during the year – 3Shares reissued to satisfy options exercised – (2)

As at 31 March 2 2



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27 Share awards

Employee share schemes The total charge to the consolidated income statement in respect of employee share options in the year was £10m (2009 – £8m).

The fair value of options granted during the year was £9m (2009 – £10m).

At the close of business on 31 March 2010, the market price of the Company’s ordinary shares was 373.80p (2009 – 304.25p) per share and during the year fluctuated in the range 294.00p and 467.20p per share.

Options outstanding over the Company’s ordinary shares under the Company’s employee share schemes were as follows:

As at 1 April 2009

millions

Weighted average exercise

price pence

Granted in year millions


price pence

Exercised in year millions

Lapsed in year millions


price pence

As at 31 March

2010 millions


price pence

UESOP 0.4 185.1 − − (0.1) − 46.2 0.3 239.62006 SAYE 0.9 388.0 − − (0.9) − 388.0 – –2007 SAYE 0.3 419.0 − − − (0.2) 419.0 0.1 419.02008 SAYE 0.5 488.0 − − − (0.4) 488.0 0.1 488.02009 SAYE − − 2.7 323.0 − (0.2) 323.0 2.5 323.0SEEPP UK 1.4 − − − (0.9) − − 0.5 –SEEPP US 0.2 31.0 − − (0.2) − 29.3 – –UCSOP 5.1 304.9 − − (1.1) − 125.4 4.0 352.6BSMP* 9.7 − 2.4 − (7.4) − − 4.7 –Traiana Plan 0.7 113.3 − − (0.2) − 61.0 0.5 139.0LTIP 0.9 − 0.5 − (0.4) − − 1.0 –

20.1 5.6 (11.2) (0.8) 13.7

As at 1 April 2008

millions


price pence

Granted in year millions


price pence

Exercised in year millions

Lapsed in year millions


price pence

As at 31 March

2009 millions


price pence

UESOP 1.7 79.1 − − (1.3) − 43.2 0.4 185.12005 SAYE 0.8 224.0 − − (0.7) (0.1) 224.0 − 224.0 2006 SAYE 1.2 388.0 − − − (0.3) 388.0 0.9 388.0 2007 SAYE 0.4 419.0 − − − (0.1) 419.0 0.3 419.0 2008 SAYE − − 0.7 488.0 − (0.2) 488.0 0.5 488.0 SEEPP UK 1.2 − 0.3 − (0.1) − − 1.4 −SEEPP US 0.4 22.4 − − (0.2) − 22.4 0.2 31.0 UCSOP 5.1 299.5 0.1 611.0 (0.1) − 256.3 5.1 304.9BSMP* 7.9 − 2.1 − (0.3) − – 9.7 −Traiana Plan 1.1 110.9 − − (0.4) − 45.2 0.7 113.3LTIP − − 1.0 − (0.1) − − 0.9 − 19.8 4.2 (3.2) (0.7) 20.1 `

* Under the terms of the BSMP, a former director has also been given a promise to receive up to 0.6m shares as at 31 March 2010 (2009 – 0.9m).

Options over ICAP shares are awarded at market price on the date of grant in the UCSOP and UESOP schemes. Those in the SEEPP UK and the BSMP have a nominal exercise price of a £1.00 for each basic award and £1.00 for each matching award. The SEEPP US options have an exercise price of $0.445. Options granted under the SAYE are issued with a 20% discount on market price as permitted by HMRC, and those granted under the Traiana Plan were granted at the equivalent price to the original Traiana option. The awards under the LTIP have no exercise price.

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27 Share awards continued

Employee share schemes continued All share options granted since 7 November 2002 are subject to IFRS2 “Share-based Payment”. A charge to the income statement based on the fair value of each option is made each year. The fair value of each option is calculated using the Black-Scholes option pricing model. The following assumptions have been applied when calculating the fair value of the options granted in the year:

Weighted average market

price pence

Expectedshare

volatility%

Weighted average dividend

yield%

Averagerisk free

rate%

Expected life

years

Probabilityof achieving

performanceconditions

%

Vesting periodyears

2009 SAYE 403.8 55 4.22 2.85 3.1 100 3BSMP 3.90 55 − − 4.0 90 3LTIP 3.90 55 − − 3.0 100 3

Estimated share volatility is a measure of the amount by which the Company’s shares are expected to fluctuate during the life of an option. The expected volatility is estimated based on the historic volatility of the share price over the past three years to the date of grant of the option.

On options where the employee receives a cash bonus in lieu of the dividend foregone the dividend yield is treated as nil and the fair value of the option is equal to the market value of the share.

(i) Unapproved Share Option Plan (UESOP) The UESOP is not approved by HMRC and is open to all executives. The grants of options have a maximum overall grant of four times annual salary including bonuses. Options do not vest until the Group has achieved certain performance criteria (currently growth in adjusted basic EPS in excess of growth in the RPI by an average of 3% per annum over a three-year period).

UESOP options were outstanding over 312,500 (2009 – 435,029) ordinary shares at exercise prices ranging between 233.75p and 263.0p per share. Subject to the Group’s performance during the vesting period, these options are exercisable between June 2007 and December 2014. There was no charge made to the consolidated income statement in the year (2009 – £nil) in respect of these options. These options are all equity settled.

(ii) Sharesave scheme (SAYE) The Save-As-You-Earn (SAYE) scheme is approved by HMRC. The scheme enables directors and eligible employees to acquire options over ordinary shares of the Company at a discount of up to 20% of their market price using the proceeds of a related SAYE contract. All UK employees who have worked for the minimum qualifying period on an invitation date are eligible to join the scheme. Options granted under the SAYE scheme are not subject to performance conditions. These options are all equity settled.

2006 SAYE There were no SAYE options outstanding over ordinary shares (2009 – 945,544) for the 2006 three-year grant at an exercise price of 388.0p per share. A credit of £0.1m (2009 – £0.5m charge) was made to the consolidated income statement in respect of these options in the year.

2007 SAYE SAYE options were outstanding over 88,576 (2009 – 272,266) ordinary shares for the 2007 three-year grant at an exercise price of 419.0p per share. Subject to the participants remaining in the employment of the Group and making 36 monthly contributions, these options will normally be exercisable between August 2010 and January 2011. A charge of £0.1m (2009 – £0.2m) was made to the consolidated income statement in respect of these options in the year.

2008 SAYE SAYE options were outstanding over 59,191 (2009 – 505,824) ordinary shares for the 2008 three-year grant at an exercise price of 488.0p per share. Subject to the participants remaining in the employment of the Group and making 36 monthly contributions, these options will normally be exercisable between August 2011 and January 2012. A charge of £0.6m (2009 – £0.7m) was made to the consolidated income statement in respect of these options in the year.

2009 SAYE SAYE options were granted over 2,745,053 ordinary shares on 17 June 2009 for the 2009 three-year grant at an exercise price of 323.0p per share. Subject to the participants remaining in the employment of the Group and making 36 monthly contributions, these options will normally be exercisable between August 2012 and January 2013. A charge of £1.2m was made to the consolidated income statement in respect of these options in the year. As at 31 March 2010, options over 2,547,548 shares remained outstanding.



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Employee share schemes continued

(iii) Senior Executive Equity Participation Plans (SEEPP) The SEEPP is not approved by HMRC. The SEEPP is a long-term incentive plan where senior executives are invited to waive part of their potential cash bonus in return for rights over the number of shares that can be purchased with the foregone bonus at the market value of the Company’s shares on the date of grant (a basic award). Participants may also be granted a provisional allocation over additional shares (a matching award). These shares are transferred to the executive on a sliding scale if they remain in the Company’s employment as follows: no shares for up to three years; 40% following completion of three years, but less than four years; and the remaining 60% on the fourth anniversary of the date of grant. No performance criteria are attached to these options. These options are all equity settled.

UK SEEPP SEEPP options were outstanding over 545,527 (2009 – 1,440,278) ordinary shares at an exercise price of a nominal sum of 100.0p (2009 – 100.0p). Subject to the participants remaining in the employment of the Group during the vesting period, these options will normally be exercisable between December 2006 and May 2018. A charge of £0.7m (2009 – £0.7m) was made to the consolidated income statement in respect of the matching award in the year.

US SEEPP There were no SEEPP options outstanding (2009 – 163,780) over ordinary shares as at 31 March 2010 (2009 – 31.0p exercise price per share). All these options have vested and were exercisable before June 2009. All these options were granted before 7 November 2002 and therefore no charges have been made to the consolidated income statement in respect of these options.

(iv) Unapproved Company Share Option Plan (UCSOP) The UCSOP is not approved by HMRC. Options may be granted to any eligible employee within the Group. No option may be granted to any individual at any time if, as a result, the aggregate number of shares issued or issuable to the individual under the plan would exceed 1,250,000. Options vest in three equal instalments on the third, fourth and fifth anniversaries of the date of grant, provided that, on the date of vesting, adjusted basic EPS growth exceeds growth in RPI by an average of 3% per annum over the preceding three years. These options are all equity settled.

UCSOP options were outstanding over 3,983,400 (2009 – 5,041,900) ordinary shares at exercise prices ranging between 166.2p and 611.0p per share. Subject to the Company’s performance during the vesting period, these options will normally be exercisable between May 2004 and June 2018. A charge of £0.4m (2009 – £0.6m) has been made to the consolidated income statement in the year in respect of options granted since 7 November 2002.

(v) Bonus Share Matching Plan (BSMP) The BSMP is not approved by HMRC. The BSMP is a long-term incentive plan where executive directors of the Company are required to waive 50% of their potential cash bonus in return for rights over the number of shares that can be purchased with the foregone bonus at the market value of the Company’s shares on the date of grant (a basic award). Participants are also granted a provisional allocation over an equal amount of additional shares (a matching award). These shares are transferred to the director if they remain in the Company’s employment for three years and the Group meets certain performance criteria – currently growth in adjusted basic EPS in excess of growth in RPI by at least 9% over the three years from the date of grant. The performance criteria apply to all grants of matching awards since 1 April 2004. These options are all equity settled.

BSMP options were outstanding over 4,688,748 (2009 – 9,680,299) ordinary shares. These shares are exercisable between 2010 and 2017. A promise to deliver a further 586,724 (2009 – 867,930) ordinary shares has also been made by the Company. A charge of £6.1m (2009 – £4.6m) has been taken to the consolidated income statement in respect of these options in the year, which includes the impact of accelerating the vesting of the 2007 awards from May 2010 to March 2010.

(vi) Traiana Plan The Traiana Plan was set up for the benefit of employees of Traiana who held options over Traiana shares prior to its acquisition by the Group in December 2007. The terms and conditions remain the same but the employees now hold options over ICAP shares in the ratio of 0.307 ICAP shares for each Traiana share option previously held. These options are all equity settled.

Share options vest over four years. After the first 12 months one quarter of the share options vest and thereafter the options vest on a monthly basis so long as the employee remains with the Group. Options may be exercised up to ten years after the date of grant. A total of 470,406 options remain outstanding at 31 March 2010 (2009 – 699,198). A charge of £0.6m (2009 – £0.7m) has been made to the consolidated income statement in respect of these options in the year.

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Employee share schemes continued

(vii) Long Term Incentive Plan (LTIP) The LTIP is not approved by HMRC. The LTIP is a long-term incentive plan where senior executives of the Group are invited to waive 25% of their cash bonus in return for an award of the number of shares that can be purchased with the foregone bonus at the market value of the Company’s shares on the date of grant (a basic award). Participants are also granted a provisional allocation over an amount of additional shares equal to 20% of the basic award (a matching award). The basic award shares are transferred to the employee in equal annual instalments over three years, with the matching award shares being transferred with the final basic award, so long as the employee remains in the Group’s employment. These options are all equity settled.

LTIP options were outstanding over 1,011,420 (2009 – 913,020) ordinary shares. These awards vest between 29 May 2010 and 28 May 2012. A charge of £0.4m (2009 – £0.3m) been made to the consolidated income statement in respect of these options in the year.

During the year the Group converted the shares to a post-tax basis for UK participants. This had no impact on the consolidated income statement charge.

28 Reserves

(a) Analysis of consolidated other reserves

Merger reserve

£m

Capital redemption

reserve £m

Hedging reserve

£m

Revaluation reserve

£m

Total other

reserves £m

As at 1 April 2009 28 1 (47) – (18)Revaluation of intangible assets arising on

consolidation (note 17) – – – 45 45Unrealised revaluation in the year (note 24(a)) – – 24 – 24Revaluation gains realised in the year (note 24(a)) – – 20 – 20

As at 31 March 2010 28 1 (3) 45 71

As at 1 April 2008 28 1 (21) 4 12Revaluation of available-for-sale investments

(note 18) − − − (1) (1)Revaluation of hedging instruments in the year − − (67) − (67)Revaluation losses/(gains) realised in the year − − 41 (3) 38

As at 31 March 2009 28 1 (47) − (18)

The merger reserve was created on the merger of Garban and Intercapital in 1999 and also includes goodwill arising before 1 January 1998 written off to reserves. This amount remains eliminated.

The capital redemption reserve was created as a result of shares cancelled in 1998 and 2005. The revaluation reserve represents revaluations of available-for-sale investments. The hedging reserve arises as a result of recognising the fair value of derivative financial instruments designated as hedging instruments on the balance sheet.

The cost of shares held by employee share trusts of £36m (2009 – £37m) and Treasury Shares £7m (2009 – £7m) has been deducted from retained earnings. The share-based payment reserve of £30m (2009 – £19m) has been included in retained earnings.

(b) Company reserves The Company has retained earnings of £694m, all of which are considered to be distributable.



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29 Commitments

(a) Finance lease commitments The Group has no commitments to future minimum lease payments under finance leases (2009 – £nil).

(b) Operating lease commitments At the end of the financial year, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

As at 31 March 2010 As at 31 March 2009

Property

£m

Other assets

£mTotal

£mProperty

£m

Other assets

£m Total

£m

Within one year 18 1 19 25 1 26Between one and five years 62 2 64 85 − 85After five years 26 – 26 44 − 44

106 3 109 154 1 155

No amounts were expected to be received under non-cancellable sub-leases as at 31 March 2010 (2009 – £nil).

Property operating leases commitments relates to the rental of premises for office space in the UK, US and Asia Pacific, in the locations that the Group operates.

(c) Capital commitments As at 31 March 2010, there was no capital expenditure contracted or provided for (2009 – £nil).

30 Retirement benefit obligations

The Group operates defined benefit pension schemes in the US, Germany and Indonesia. In the case of the scheme operating in Germany, any future obligations that the Group may incur in respect of benefits accrued to members for past service are insured with local insurance companies. The schemes in Germany and Indonesia are not significant in the context of the Group.

The US scheme was closed to new entrants on 1 July 1996 and no benefits have accrued to the members of the scheme in respect of their service after that date. The scheme only provides for pension benefits and does not provide for post-employment medical benefits. For the purposes of determining the Group’s pension cost, the scheme is valued on an annual basis by qualified independent actuaries. The most recent valuation was as at 1 January 2009 with an update as at 31 March 2010 in which the projected unit method was used. The Group expects to contribute £0.8m to its defined benefit pension scheme in the year ending 31 March 2011.

The market value of the pension assets and liabilities of the scheme and the expected rate of return are as follows:

Long-term rate of return

expected 31 March

2010 %

Value as at 31 March

2010 £m

Long-term rate of return

expected 31 March

2009 %

Value as at 31 March

2009 £m

Equities 8.5 2 8.5 1Bonds 6.0 5 6.0 6Cash and other assets 1.0 1 1.0 1

Total market value of scheme assets 6.0 8 6.2 8 Present value of scheme liabilities (9) (10)

Deficit in the scheme (1) (2)

The valuation of the scheme is performed on an annual basis. Given the insignificant size of the pension plan no further disclosure has been provided.

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31 Contingent liabilities

Group (a) From time to time the Group is engaged in litigation in relation to a variety of matters. It is not possible to quantify the extent of any potential liabilities, but there are none currently expected to have a material adverse impact on the Group’s consolidated results or net assets.

(b) In the normal course of business, certain Group companies enter into guarantees and indemnities to cover trading arrangements and/or the use of third party services or software.

Company The Company has provided a subordinated guarantee to a subsidiary company in respect of the $193m subordinated loan notes repayable in 2015 which has a fair value of £nil as at 31 March 2010 (2009 – £nil).

32 Related party transactions

Group (a) IPGL IPGL is a company controlled by Michael Spencer, the Group Chief Executive Officer of ICAP plc. A number of transactions take place between IPGL and its subsidiaries and the Group and these are detailed below.

IPGL During the year, IPGL charged the Group £102,290 (2009 – £263,200) for the net amount of transactions between the two parties. This amount includes £119,170 (2009 – £86,220) paid by IPGL in respect of certain employees of the Group who provided services to IPGL and its subsidiary undertakings. All transactions are carried out on an arm’s length basis. As at 31 March 2010, IPGL owed the Group £136,425 (2009 – the Group owed IPGL £209,693).

Exotix Holdings Limited As part of the disposal of Exotix Holdings Limited to IPGL in 2007, the Group loaned employees of Exotix Limited (Exotix), (a subsidiary of Exotix Holdings Limited), £1.5m to enable them to purchase a shareholding. Interest of £12,730 has been charged on these loans at a fair market rate during the year. As at 31 March 2010 £0.7m (2009 – £0.8m) is still outstanding. The Group also collected revenue of £17.2m (2009 – £11.6m) on behalf of Exotix. The Group recharged the company £122,758 (2009 – £95,408) as compensation for overheads and IT support provided during the year. As at 31 March 2010, there was a balance due to the company from the Group of £0.8m (2009 – £1.4m). The Group holds £2.2m as collateral from Exotix on deposit. The Group collected £60,591 interest on this balance on behalf of Exotix.

City Index Limited In June 2008 the Group agreed to provide FXSolutions, a subsidiary company of City Index Limited, with FX data from its EBS platform for $2m per annum. During the year the Group has charged FXSolutions £1.3m (2009 – £0.6m) for the provision of data. As at 31 March 2010 there was no balance outstanding with the Group.

(b) Hartfield, Titus & Donnelly LLC The Group supplies and maintains electronic broking software on behalf of Hartfield, Titus & Donnelly LLC, a joint venture of the Group. During the year ended 31 March 2010, the Group charged £302,801 (2009 – £278,455) and the balance due from Hartfield, Titus & Donnelly LLC as at the year end was £78,612 (2009 – £82,816).

(c) TFS-ICAP Limited, TFS-ICAP LLC, TFS-ICAP Australia, TFS-ICAP Singapore and TFS-ICAP Japan The Group invoices and collects revenue on behalf of TFS-ICAP LLC. During the year, the Group invoiced and collected £3.5m (2009 – £2.1m) for which it did not receive a fee. During the year the Group recharged the various joint ventures a fee as compensation for overheads and IT support costs as follows: TFS-ICAP Limited – £224,297 (2009 – £208,463 ); TFS-ICAP Australia – £nil (2009 – £134,299 ); TFS-ICAP LLC – £50,269 (2009 – £57,083 ); TFS-ICAP Singapore – £1.7m (2009 – £1.8m). During 2008/09 ICAP Indonesia entered into a memorandum of understanding with TFS-ICAP Singapore to develop a new broking business with a profit/loss share arrangement. Indonesia’s share of the new venture’s profits during the year was £9,679 (2009 – losses of £5,747). As at 31 March 2010 the outstanding balance from all the joint ventures to the Group was £1.1m (2009 – £1.0m).

(d) BSN Capital Partners Limited The Group provides BSN Capital Partners Limited (BSN), an associate undertaking, with office space and other facilities. During the year, the Group charged BSN £141,766 (2009 – £137,702) for these services. The Group also has a preferred brokerage agreement with BSN and has recognised revenue of £8.8m (2009 – £5.1m) during the year. As at 31 March 2010 the outstanding balance was £7.8m (2009 – £5.1m).



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32 Related party transactions continued

(e) CFETS-ICAP The Group provides CFETS-ICAP, a joint venture company based in China, with office space and facilities services. During the year the Group charged the company £79,180 (2009 – £101,459) for these services. As at 31 March 2010 the outstanding balance was £186,221 (2009 – £253,556). The Group also invoiced and collected revenue of £123,078 for CFETS in the year.

(f) Capital Shipbrokers Limited The Group collected revenue on behalf of Capital Shipbrokers Limited, an associate based in Hong Kong, of £1.5m (2009 – £1.1m). The Group also recharged Capital Shipbrokers Limited £185,242 (2009 – £119,750) for overheads. The total outstanding balances due from the Group was £409,539 (2009 – £1,283,582).

(g) FCB Harlow-Butler Pty Limited The Group loaned some minority shareholders of FCB Harlow-Butler, a subsidiary company in South Africa, £629,558 in order to acquire 140,800 shares in the company from the Group. Interest of £35,179 (2009 – £109,713) was charged on the loan during the year. As at 31 March 2010, the outstanding balance due on the loan was £286,309 (2009 – £381,211).

(h) ICAP-JLT Limited ICAP-JLT Limited (ICAP-JLT) is a joint venture company with Jardine Lloyd Thompson Group plc (JLT). William Nabarro, a non-executive director of ICAP plc and an executive director of JLT, is on the board of ICAP-JLT. During the year the Group collected revenue of £13,736 (2009 – £20,169) on behalf of ICAP-JLT, for which it did not receive a fee. The Group also charged ICAP-JLT £140,646 (2009 – £195,123) for IT and facility costs during the year. As at 31 March 2010 ICAP-JLT owed the Group £979 (2009 – £177,610).

(i) ICAP Equities The Group loaned the minority shareholders of ICAP Equities, who are also employees, £870,000 (2009 – £870,000) to acquire shares in the company. No interest is chargeable on these loans and they will be repaid in 2011.

(j) Ticonderoga During the year the Group invested in $19.5m (£13m) of 9% redeemable preference shares issued by Ticonderoga, a wholly–owned subsidiary of Walker St Securities, an associate company. The Group also lent Walker St Securities $2.7m (£1.8m) which is repayable on exercise of a call option over a further 55.1% of the share capital for the same amount and made further loans of $3.4m (£2.1m) for working capital purposes which are repayable on demand. The notes are redeemable subject to certain conditions after one year. As at 31 March 2010 $25.6m (£17m) was outstanding (note 19).

(k) Trading Cross Connects Holdings Limited During the year a new subsidiary of the Group, Trading Cross Connects Holdings Limited issued shares to the value of $4m (£2.5m) as consideration for a technology asset, for which an independent valuation was obtained, to a third party controlled by a member of the Group’s GEMG.

(l) Amias Berman Holdings Pte Limited During the year, the Group lent Amias Berman, an associate, £7m to meet its working capital and regulatory requirements. The loan, which is interest free, has a term of three years. In addition, the Group provides Amias Berman with certain management services. During the year to 31 March 2010 the Group charged £1m in respect of these services. As at 31 March 2010, the amount due from Amias Berman is £8m.

(m) CLS Aggregation Services LLC (CLS) The Group recharged CLS, an associate company, $1.7m (£1.1m) as compensation for technical services during the year. As at 31 March 2010 this amount remains outstanding.

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32 Related party transactions continued

Company ICAP plc is the Group’s ultimate parent company and is incorporated and domiciled in the UK.

During the year the Company entered into the following transactions with subsidiaries:

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Management services expenses (0.5) (0.2)Interest received from related parties – 2.9Interest paid to related parties – (6.7)

Amounts owed to the Company from subsidiaries are disclosed in note 19 and amounts owed by the Company to subsidiaries are disclosed in note 20. In March 2009, the Company novated the Group’s bank facilities to its immediate subsidiary ICAP Group Holdings plc and simplified its intra-Group lending and borrowing with its subsidiaries.

33 Cash flow

(a) Reconciliation of profit before tax to net cash flow from operating activities

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Profit before tax from continuing operations 247 285Loss before tax from discontinued operations (note 4) (66) (4)Discontinued operations exceptional item (note 6) 41 −Operating exceptional items 26 −Share of operating profits of associates after tax (7) (7)Amortisation and impairment of intangible assets arising on consolidation 61 63Amortisation and impairment of intangible assets arising from development expenditure 23 18Depreciation of property, plant and equipment 22 23Other amortisation and impairments 4 3Share-based payments 10 8Profit on disposal of available-for-sale investments – (4)Net finance expense 28 24

Operating cash flows before movements in working capital 389 409Decrease in trade and other receivables 26 55Decrease in trade and other payables (53) (8)Net receipts in respect of financial assets held at fair value 4 (1)

Cash generated by operations before exceptional items 366 455Operating exceptional items paid (21) −Cash generated by operations 345 455Interest received 3 15Interest paid (17) (34)Tax paid (55) (82)

Net cash flow from operating activities 276 354

The movement in trade and other receivables and trade and other payables excludes the impact of the gross-up of matched principal trades as permitted by IAS7 “Statement of cash flow”. The gross-up has no impact on the cash flow or net assets of the Group. The cash flow movement in trade and other receivables includes the net movement on matched principal transactions and deposits for securities borrowed/loaned. The movement for the year ended 31 March 2010, after accounting for acquisitions, is an inflow of £20m (2009 inflow of £7m).

For details of the cash flow related to discontinued operations see note 4.



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33 Cash flow continued

(b) Net cash and cash equivalents Net cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Net cash and cash equivalents comprise the following amounts:

As at 31 March

2010 £m

As at 31 March

2009 £m

Cash and cash equivalents included in current assets 504 433Short-term bank overdrafts – (14)

Net cash and cash equivalents 504 419

(c) Net debt Net debt comprises cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, bank overdrafts and other debt.

As at 31 March

2010 £m

As at 31 March

2009 £m

Gross debt (note 22) (652) (545)Net cash and cash equivalents 504 419

Net debt (148) (126)

34 Client money

At 31 March 2010 the Group held client money of £34m (2009 – £20m). This amount, together with the corresponding liabilities to clients, is not included in the Group’s balance sheet.

35 Events after the balance sheet date

On 7 May 2010, the Group refinanced its existing £473m three-year unsecured revolving credit facility and $94m swingline with a new $880m revolving credit facility incorporating an up to $200m swingline facility, and which matures on 31 May 2013. The facility carries a floating interest rate at LIBOR plus 2% with an additional 0.50% payable dependent on the debt to earnings ratio.

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36 Principal subsidiaries, joint ventures and associates

(a) Investment in subsidiaries − Company Cost and net book value

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Cost and net book value As at 1 April 1,955 988 Additions 67 2,379Disposals (33) (1,412)

As at 31 March 1,989 1,955

During the year the Company, as part of an internal reorganisation, purchased Link Brokers Derivatives Inc from a subsidiary undertaking for cash of £33m. Link Brokers Derivatives Inc was then sold to ICAP Group Holdings plc (formerly ICAP Group Holdings Limited) (IGHP), a subsidiary company by way of a share issue by IGHP of 33,478,000 £1 ordinary shares, which increased the value of the Company’s investment by £33m.

During the prior year, the Company acquired ICAP Holdings (Asia Pacific) Limited, ICAP Holdings Limited and ICAP Securities Limited and then disposed of them, along with ICAP America Investments Limited, in exchange for shares in IGHP. As all companies remain wholly-owned subsidiaries of the Company, this is regarded as a transaction of no substance and the investment in IGHP is recognised at the same value as the companies disposed of.

The Company’s immediate subsidiary companies are IGHP, Intercapital Limited and Garban Group Holdings Limited, all of which are incorporated in England and are 100% owned by the Company. All of the Company’s other subsidiaries are indirectly owned. The Company’s principal subsidiaries and their country of incorporation and the Group’s ownership are listed below:

% held

Argentina ICAP Securities SA 100

Australia ICAP Australia Pty Limited 100 ICAP Brokers Pty Limited 100

Bahrain ICAP (Middle East) WLL* 49

Brazil ICAP do Brasil Corretora De Títulose e Valores Mobiliários Ltda 100 Arkhe Distribuidora De Títulose e Valores Mobiliários SA 100

China ICAP (Hong Kong) Limited 100 ICAP Shipping (Hong Kong) Limited 75 Link Securities (Hong Kong) Limited 100

Colombia ICAP FX Colombia SA 89 ICAP Securities Colombia SA 95

Denmark ICAP Scandinavia Fondsmaeglerselskab A/S 100 ICAP Shipping (Denmark) ApS 75

* ICAP (Middle East) WLL is treated as a subsidiary since the Group exercises control over the company as the majority shareholder takes no part in the management of the company.



136

36 Principal subsidiaries, joint ventures and associates continued % held

England EBS Dealing Resources International Limited 100 Harlow (London) Limited 100 ICAP Electronic Broking Limited 100 ICAP Energy Limited 100 ICAP Europe Limited 100 ICAP Management Services Limited 100 ICAP Securities Limited 100 ICAP Shipping Derivatives Limited 75 ICAP Shipping Limited 75 ICAP Shipping Tanker Derivatives Limited 75 ICAP Shipping Tankers Limited 75 ICAP WCLK Limited 100 My Treasury Limited 75 The Link Asset and Securities Company Limited 100 Traiana Limited 100 ICAP America Investments Limited 100 ICAP Group Holdings plc 100 ICAP Holdings Limited 100 ICAP Holdings (Asia Pacific) Limited 100 ReMatch Limited 70 Trading Cross Connects UK Limited 64 TriOptima UK Limited 100

Germany ICAP Deutschland GmbH 100 ICAP Shipping (Germany) GmbH 75

Gibraltar ICAP Shipping (Gibraltar) Limited 75

India ICAP India Private Limited 51

Indonesia PT ICAP Indonesia 85

Israel Traiana Technologies Limited 100

Japan EBS Dealing Resources Japan Limited 100 ICAP Totan Securities Co Limited 60 TriOptima Japan KK 100

Korea ICAP Foreign Exchange Brokerage Limited 100

Mexico ICAP Referenciadora, S.A. de C.V. (formerly Escorfin SA) 100

Netherlands ICAP Holdings (Nederland) BV 100New Zealand ICAP New Zealand Limited 80

Norway ICAP Energy AS 100

Philippines ICAP Philippines Inc 100

Poland ICAP (Poland) Sp. Zo.o. 100Singapore ICAP AP (Singapore) Pte Limited 100

ICAP Currency Options Pte Limited ICAP Energy Pte Limited

100100

ICAP Financial Products Pte Limited 100 ICAP Shipping Singapore Pte Limited 75 Reset Pte Limited 100 TriOptima Asia Pacific Pte Limited 100

South Africa FCB-Harlow Butler Pty Limited 51

Sweden TriOptima AB 100

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36 Principal subsidiaries, joint ventures and associates continued % held

United States EBS Dealing Resources Inc 100 First Brokers Securities LLC 100 ICAP Securities USA LLC 100 ICAP Capital Markets LLC 100 ICAP Corporates LLC 100 ICAP Electronic Broking LLC 100 ICAP Energy LLC 100 ICAP Futures LLC 100 ICAP Information Services Inc. 100 ICAP Ocean Tomo LLC 100 ICAP Services North America LLC 100 ICAP Shipping USA Inc (formerly Skaarup Shipbrokers Inc) 75 ICAP United, Inc 100 Intercapital Securities LLC 100 Link Brokers Derivatives Corporation 100 Moving Pictures Film and Television LLC 100 ReMatch Inc 70 Trading Cross Connects US LLC 64 Traiana Inc 100 TriOptima North America LLC 100 Wrightson ICAP LLC 100

The percentage held represents the percentage of issued ordinary share capital held (all classes) and also represents the voting rights of the Company. The Group also owns 100% of the non-voting preference share capital of ICAP India Private Limited.

TriOptima, and each of its subsidiaries, and Arkhe each have a 31 December year end. TriOptima is required to have a 31 December year end in order to determine any potential earn out payments required under the terms of the acquisition, and Arkhe is required to as part of local regulatory requirements. All other subsidiaries have a 31 March year end.

All companies operate in their country of incorporation, except ICAP Securities USA LLC and ICAP Futures LLC which also operate in the UK, ICAP Energy AS which also operates in the Netherlands and in Spain and EBS Dealing Resources Limited which operates worldwide.

The principal activity of ICAP Information Services Inc and Wrightson ICAP LLC is the provision of financial information to third parties. All other subsidiaries are involved in voice broking, electronic broking, post trade or activities related to broking activity.

(b) Joint ventures – Group The Group’s principal joint ventures and their country of incorporation are listed below:

% held Principal activity

Australia TFS-ICAP 25.0 Voice brokingChina Shanghai CFETS-ICAP International Money Broking Co Limited 33.0 Voice brokingEngland TFS-ICAP Limited 22.5 Voice brokingGermany TFS-ICAP Gmbh 12.5 Voice brokingJapan TFS-ICAP 25.0 Voice brokingMexico

SIF ICAP, S.A. de CV BCIE – ICAP Capital Markets S.A. de C.V.

50.0 50.0

Voice brokingVoice broking

Singapore TFS-ICAP 25.0 Voice brokingUnited States Hartfield, Titus & Donnelly LLC 33.0 Voice broking TFS-ICAP LLC 22.5 Voice broking

All joint ventures have a 31 December year end.



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36 Principal subsidiaries, joint ventures and associates continued

(b) Joint ventures – Group continued Summary financial information of joint ventures

The Group’s share of joint ventures’ assets and liabilities included in the balance sheet and their results included in the consolidated income statement is given below:

As at 31 March

2010 £m

As at 31 March

2009 £m

Assets 16 18Liabilities (4) (6)

Net assets 12 12Goodwill included in the Group’s balance sheet 1 1

Net investment in joint ventures 13 13

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Revenue 16 22Administrative expenses (13) (17)

Profit before tax 3 5Tax (1) (1)

Profit for the year 2 4

Attributable to Equity holders of the Company 2 4

Y d d(c) Investment in joint venture – Company Cost and net book value

Year ended 31 March

2010 £m

Year ended 31 March

2009 £m

Cost and net book value As at 1 April 1 −Additions – 1

As at 31 March 1 1

The Company’s joint venture is CFETS-ICAP, a moneybroking company in China, of which the Company owns 33%.

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36 Principal subsidiaries, joint ventures and associates continued

(d) Associates – Group The Group’s principal associates and their country of incorporation are listed below:

% held Principal activity

England BSN Capital Partners Limited 25.1 Voice brokingChina Capital Shipbrokers Limited 37.5 Voice brokingIndia CTI Shipbrokers (India) Pvt Limited 22.5 Voice brokingJapan Totan Capital Markets Co. Limited 28.1 Voice brokingMalaysia Amanah Butler Malaysia Sdn Bhd 32.1 Voice brokingSingapore Amias Berman Holdings Pte Limited 35.0 Voice broking Island Shipbrokers Pte Limited 16.9 Voice brokingUnited States Blockcross Holdings LLC 20.0 Electronic trading CLS Aggregation Services LLC 49.0 Post trade risk Confirmhub LLC 25.0 Post trade risk Ticonderoga Securities LLC 19.88 Voice broking

Island Shipbrokers Pte Limited is regarded as an associate of the Group, as a company controlled by the Group owns 22.5% of the equity and has significant influence on the accounting and operational policies of Island Shipbrokers Pte Limited.

The Group owns 19.88% of the equity of Amias Berman Holdings Pte Limited, but has contractual rights to 35% of the net profits.

The Group also owns 100% of the non-voting 9% redeemable preference share capital of Ticonderoga.

BSN Capital Partners Limited has a 31 December year end and all other associates have a 31 March year end.


140 Index to the financial statements

Financial statementsConsolidated income statement 66Consolidated statement of comprehensive income 68Consolidated balance sheet 69Consolidated statement of changes in equity 70Consolidated statement of cash flows 71Company balance sheet 72Company statement of changes in equity 73Company statement of comprehensive income 73Company statement of cash flows 74

Notes to the financial statements

1 Basis of preparation 75 2 Principal accounting policies 76 3 Segmental information 84 4 Discontinued operations 87 5 Other income 88 6 Exceptional items 88 7 Finance income 89 8 Finance costs 89 9 Operating expenses 9010 Employee information 9011 Tax 9212 Dividends 9313 Earnings per ordinary share 9414 Acquisitions 9615 Intangible fixed assets 9916 Property and equipment 10317 Investment in associates 10418 Available-for-sale investments 10719 Trade and other receivables 10820 Trade and other payables 11021 Deferred tax 11122 Borrowings 11223 Provisions 11424 Financial risk management 11525 Capital management 12326 Share capital 12427 Share awards 12628 Reserves 12929 Commitments 13030 Retirement benefit obligations 13031 Contingent liabilities 13132 Related party transactions 13133 Cash flow 13334 Client money 13435 Events after the balance sheet date 13436 Principal subsidiaries, joint ventures and associates 135


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141Information for shareholders

Information on ICAP plc (Company No 3611426) can be found on the Company’s website, www.icap.com.

Financial calendar2010

19 May Results for year ended 31 March 2010 announced

14 July Annual general meeting, London

21 July Ex-dividend date for final dividend

23 July Record date for final dividend

20 August Final dividend payment

November Results for half year to 30 September 2010 announced

2011

January Ex-dividend date for interim dividend

January Record date for interim dividend

February Interim dividend payment

May Results for year ending 31 March 2011 announced

July Annual general meeting, London

August Final dividend payment

November Results for half year to 30 September 2011 announced

RegistrarCapita Registrars Ltd, Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0GA. Telephone: 0871 664 0565* or +44 800 280 2584, www.capitaregistrars.com.

Information about current holdings is available at www.icap-shares.com. Shareholders will need their investor code (account number) and postcode to view information on their own holding.

Frequent shareholder enquiriesNotifying the Company of a change of address Shareholders should notify the Company’s registrar, in writing of any change. If shares are held in joint names, the notification must be signed by the first named shareholder.

Notifying the Company of a change of name To ensure the details of a shareholding are correct, notification of a change of name should be made in writing to Capita. A copy of any marriage certificate or change of name deed should be provided as evidence of the name change.

Dividend payments directly into bank/building society accounts Dividends for shareholders are paid through BACS and can be paid directly into a UK bank or building society account with the tax voucher sent direct to the shareholder’s registered address. A dividend mandate form is available from Capita or from its website, www.icap-shares.com, under the forms and booklets section.

Scrip dividend election formsIf you would like to make an election to receive a scrip dividend alternative, a personalised election form is available by calling the ICAP shareholder helpline, 0871 664 0565* or +44 800 280 2584.

Transferring ICAP shares Transferring shares to someone else requires the completion of a stock transfer form. These forms are available by calling the ICAP shareholder helpline 0871 664 0565* or +44 800 280 2584.

Lost ICAP share certificate(s)Shareholders who have lost their share certificate(s) or have had their certificate(s) stolen should inform Capita immediately by calling the ICAP shareholder helpline, 0871 664 0565* or +44 800 280 2584*.

Following the share split only the ICAP ordinary 10p share certificates are valid.

ShareGiftShareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to charity through ShareGift, a registered charity administered by The Orr Mackintosh Foundation. Further information about ShareGift is available at www.sharegift.org or by telephone, 020 7930 3737.

Disability helplineFor shareholders with hearing difficulties a text phone number is available, 0871 664 0532* or +44 20 8639 2062.

Depositary for ICAP plc Level 1 ADR ProgramThe Company has established a Level 1 American Depositary Receipt (ADR) program. The Bank of New York acts as the depositary bank for the program. ICAP’s ADRs trade on the OTC market under the symbol “IAPLY” and its CUSIP number is 450936109. Each ADR represents two ordinary shares.

* Calls to this number are charged at 10p per minute plus network extras.


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Acquired Asian Businesses

The acquisition from Nittan Capital of its voice broking interests in Asia (Nittan Capital (Hong Kong) Ltd, Nittan AP (Singapore) Pte Ltd, Noranda Investments Pte Ltd, NextGen Holding Co Ltd and certain subsidiaries including ICAP-AP (Thailand) Co. Ltd)

Arkhe Arkhe Distribuidora De Titulose e Valores Mobiliarios SA

Baltic Dry Index Daily index which tracks worldwide international shipping prices of various dry bulk cargoes

BEIP grant Business Employment Incentive Program, a grant run by the New Jersey Economic Development Authority

BrokerTec see ICAP Electronic Broking below

BSMP The Bonus Share Matching Plan

BSN BSN Holdings Limited

CDS Credit Default Swaps

CFETS-ICAP Shanghai CFETS-ICAP International Money Broking Co. Limited

Combined Code the Combined Code on Corporate Governance (2008 version)

Companies Act Companies Act 2006

Company or ICAP ICAP plc (formerly Garban-Intercapital plc and Garban plc)

CRD Capital Requirements Directive

Demerger the demerger of Garban from United on 17 November 1998

dollar or $ unless otherwise specified all references to dollars or $ symbol are to the currency of the US

EBS EBS Group Limited and its subsidiaries

EMEA Europe, the Middle East and Africa

EPS Earnings per share

EU European Union

Exco Exco plc, which changed its name to Intercapital plc on 26 October 1998

Exco/Intercapital merger

the acquisition of the Intercapital companies by Exco on 26 October 1998

Exotix or Exotix business

Exotix Holdings Limited and its subsidiaries

FICC Fixed Income Clearing Corporation

FINRA Financial Industry Regulatory Authority

First Brokers First Brokers Securities Inc

Definitions

In this Annual Report the following words shall have the following meanings:


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Link the businesses of The Link Asset and Securities Company Limited, Link Securities Hong Kong Limited and Link Brokers Derivatives Corporation

Merger the merger of Garban and Intercapital on 9 September 1999

MiFID Markets in Financial Investments Directive

Moody’s Moody’s Investors Services

NSCC National Securities Clearing Corporation

OTC over-the-counter

Pillar 1 the minimum capital requirements firms will be required to meet for credit, market and operational risk under the Basel Accord

Pillar 2 a supervisory review process

ReMatch ReMatch Holdings Limited and its subsidiaries

Reset Reset Holdings Private Limited and its subsidiaries

RPI Retail Price Index

SEC Securities and Exchange Commission

Share split at an extraordinary general meeting held on 4 February 2004 shareholders approved a five for one share subdivision which divided the Group’s ordinary shares of 50p each into five ordinary shares of 10p each. The subdivision was effective from 9 February 2004.

Traiana Traiana Inc and subsidiaries

Treasury Shares shares as defined by the Companies Acquisition of Own Shares (Treasury Shares) Regulations 2003 which came into force on 1 December 2003

TriOptima TriOptima AB and its subsidiaries

United Fuels the acquisition of the majority of the assets of United Fuels International, Inc and its affiliates

In this document, according to context, the expressions ICAP and the Group are also used to mean the ICAP plc group as a whole, or ICAP plc and/or its relevant subsidiaries. The business of ICAP plc is solely that of a holding company. ICAP plc itself conducts no broking or other activities.

Fitch Fitch Ratings Limited

FRC Financial Reporting Council

FRS Financial Reporting Standard

FSA Financial Services Authority

FTSE 100 index comprised of the 100 largest companies listed on the London Stock Exchange in terms of their market capitalisation

FTSE All Share the aggregation of the FTSE 100, FTSE 250 and FTSE Small Cap Indices

FX foreign exchange

Garban Garban plc

Garban Trust Garban Employee Share Ownership Trust

Group the Company and its subsidiary undertakings

HMRC Her Majesty’s Revenue & Customs

ICAAP Internal Capital Adequacy Assessment Process

ICAP Electronic Broking

the businesses of ICAP Electronic Broking LLC (formerly BrokerTec USA LLC) and ICAP Electronic Broking Limited (formerly BrokerTec Europe Limited)

ICAP Energy ICAP Energy LLC and ICAP Energy A/S (formerly APB Financial LLC and APB Energy Europe A/S)

ICAP shares ICAP plc ordinary shares of 10p each

ICAP Shipping ICAP Shipping Limited (formerly ICAP Hyde & Company Limited) and related companies

ICAP Trust ICAP Employee Share Trust

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial Reporting Standards

INFBV INCAP Finance BV

Intercapital Intercapital Limited (formerly Intercapital plc)

Intercapital companies

those companies acquired from IPGL at the time of their merger with Exco in October 1998

IPGL IPGL Limited

ISDA International Swaps and Derivatives Association

ISMA International Securities Market Association

LIBID London Interbank Bid Rate

LIBOR London Interbank Offered Rate


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Inside this report 01 ICAP in ten 17 Business review 18 Group Chief Executive Officer’s review 24 Business review 30 Risk and control environment 43 Governance 44 Directors’ profiles 46 Chairman’s statement 47 Directors’ report 50 Corporate governance 55 Remuneration report 63 Independent auditors’ report 65 Financial statements 66 Financial statements 75 Notes to the financial statements 140 Index to the financial statements 141 Shareholder information 141 Information for shareholders 142 Definitions

for the year ended 31 March 2010

Annual Report 2010

ICAP plc2 Broadgate London EC2M 7UR United KingdomTelephone +44 20 7000 5000 Facsimile +44 20 7000 5975 Email [email protected] Website www.icap.comCompany number 3611426


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