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MF Global 2009 Annual Report

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MF Global 2009 Annual Report capture your market 2009 Annual Report This is a relationship business. Our focus never wavers from our clients and what they are trying to achieve. Whether it’s cash, futures or options, foreign exchange, commodities or fixed income markets, our clients trust that MF Global is working for them. Our message is simple: We capture our clients’ markets— wherever they are, whatever they trade. 1 Financial Highlights in millions, except for per share data FISCAL YEAR ENDED MARCH 31, 2009 2008 2007 Execution-only commissions $ 381.1 $ 486.2 $ 386.5 Cleared commissions 1,261.3 1,528.6 1,280.0 Principal transactions (1) 287.7 333.3 299.6 Net interest income 377.2 503.8 351.1 Net revenue (1) 1,371.7 1,687.7 1,378.7 Pre-tax income (1) $ 98.6 $ 300.9 $ 227.6 Net income (1) $ 57.8 $ 199.8 $ 147.7 Earnings (loss) per share (1) $ 0.47 $ 1.57 $ 1.16 (1) Information is presented on an adjusted basis, which is a non-GAAP measure. For a reconciliation of non-GAAP measures with the comparable GAAP measures, please see our Annual Report on Form 10-K for the fiscal year ended March 31, 2009. 2 Letter to Shareholders Bernard W. Dan Chief Executive Officer Dear Shareholders, Fiscal 2009 was a year of tremendous change for MF Global. As we are all aware, the broader financial landscape underwent a significant transformation. After years of operating in a climate that fostered growth, the world quickly was forced to confront new and difficult dynamics. Interest rates shrank to zero, credit markets were paralyzed by fear and instability, and volatility reached record levels. The consequences were disastrously far reaching, with hundreds of thousands of people losing their jobs, homes and savings. I am proud that MF Global navigated this unprecedented During the past year, MF Global proved its resilience under environment skillfully and with great perseverance. Most extraordinary circumstances. Perhaps one of our greatest importantly, we have maintained our commitment to our accomplishments was that the unprecedented events of last three core constituencies — our clients, shareholders and year did not define us. Instead, we achieved something employees — throughout the global crisis. far greater: As I write this letter, my first to you, a degree of stabilization We transformed MF Global to deliver greater value to clients. is starting to take hold. We are in the process of redefining our expectations of the markets, the economic factors that drive BUILDING A FRAMEWORK FOR SUCCESS them and the opportunities they present. I have great To understand our fiscal 2009 performance, it is important confidence in the financial services industry as a whole to recognize the enormous cultural shift that occurred and firmly believe in the benefits it brings to clients, our throughout our company and the actions we took to effect communities and the global economy. those changes. In the last year, we faced a number of challenges. Many felt that MF Global should rely on short-term I am optimistic that market participants, along with the solutions. We disagreed, believing that our stakeholders governments and agencies that regulate us, will work together would reap far greater benefits if we concentrated on to build an even stronger future for our industry. I also am positioning our company for the future. To that end, we hopeful that as modifications are made, the financial services implemented a strategy to continually enhance our credibility, industry’s profound capacity for innovation — the force that institute greater consistency throughout our organization, has allowed a wide variety of businesses to thrive around the and substantially increase our operating efficiency. world — will remain intact. 3 The companies with best-in-class risk management will emerge as long-term leaders in the financial services industry, so our goal in this area is nothing short of setting the standard, today and in the years to come. Enhancing our credibility An outstanding reputation is Delivering consistency As we contemplated making invaluable in our business. Transparency, ethical behavior and significant changes within our organization, we knew that simply doing the right thing are our guiding principles. our team needed shared, clearly established goals to achieve To strengthen our ability to attract new clients and retain success. I spent considerable time talking with employees existing ones, we took critical steps to further enhance our throughout MF Global to learn more about their day-to- credibility. day interactions with our clients and to identify areas of opportunity. These discussions were a catalyst for creating One of the first areas we reviewed was our approach to our new mission, vision and values, which reflect both the risk management. I believe that the companies with best-in- philosophy of our firm and our aspiration to discover and class risk management will emerge as long-term leaders capitalize on opportunities for clients. in the financial services industry, so our goal in this area is nothing short of setting the standard, today and in the After better defining our value proposition, we created a years to come. In this regard, we adopted an enterprise risk framework for growing it. We standardized the approach management framework, with everyone at the firm assuming we use to evaluate every initiative we contemplate, instituting responsibility for managing risk. a set of metrics that determine the opportunities, drive growth and deliver the greatest scale to our organization. We took these actions well before the credit crisis peaked, This effort has allowed us to right-size our business relative giving us a distinct competitive advantage when events to the opportunities that exist for our clients. outside our control reached full momentum. At that point, we already had a solid risk management system in place, Some of the initiatives we undertook to ensure greater accomplishing exactly what it was designed to do. consistency throughout our organization may not be immediately apparent to our clients. Other efforts, such Our success in optimizing our capital is another effort that as forming a Client Solutions group, were designed to reinforced our clients’ trust in us. For the first time since we have a direct impact on clients from the outset. By better became a public company, MF Global has no short-term aligning our organization with clients’ needs, the division financing risk. We significantly reduced our balance sheet, is implementing a structure to deliver a consistent, high strengthening our capital and liquidity position. At the same level of service across all of our global product platforms. time, we maintain enough resources on hand to execute our This puts us in a much better position to exceed client growth strategy and drive further operational efficiencies. expectations and simultaneously expand our share of the market. 4 Increasing operational efficiency Finally, the changes we made last year substantially improved efficiency and At the same time, we capitalized on our clients’ demand accountability throughout our company. Instituting a global for a trusted intermediary with extensive product governance model was one of our most vital initiatives to knowledge. Our clients’ preference for our predominantly prepare MF Global for the future. This structure has enhanced agency model — a commitment to putting the interests of clients’ access to our extensive array of products and our clients first — supported our matched-principal businesses, expansive network of market professionals. Our global such as commodities and fixed income. approach also allowed us to centrally manage our resources, ultimately freeing capital around the world. MOVING FORWARD We believe that taking excellent care of our clients is the best Along with re-engineering the structure of our organization, way to build a productive and profitable business, partner we also renewed our emphasis on directing capital to the best with our employees and reward shareholders who have possible uses. We created new policies and procedures that invested in our company’s future. Our plan for 2010 identifies increased discipline and brought new levels of efficiency to the best opportunities to drive greater shareholder value and our allocation of resources. meet the needs of existing and potential clients. This strategy includes: 1) increasing our global footprint in areas of the DEMONSTRATING STABILITY IN VOLATILE TIMES world with growing markets and healthy demand for our While positioning MF Global to deliver greater value to products and expertise; 2) expanding our existing, successful our clients, we never lost sight of our responsibility to our businesses; and 3) adding new services that our clients will shareholders. Adjusted net revenue in fiscal 2009 was find attractive, while diversifying our revenue through $1.4 billion, and adjusted net income was $57.8 million. Taken fee-based income. within the context of the prevailing economic landscape, our results are a sign of strength and a reflection of our diversified Amid the many positive changes we made last year to better business model. That said, I believe we can do better, serve our clients, we were very careful to leave our company’s particularly as we reap the rewards from our decisive actions greatest attributes firmly in place. We have an extremely of fiscal 2009. talented team. Our extensive global presence is unsurpassed. And we continue to live up to and reinforce our reputation for At the beginning of this letter I mentioned last year’s industry honesty and integrity every single day. head winds. In part, this simply meant that we had to work harder to find profitable opportunities. The diversity of our Perhaps the biggest differentiator of all for MF Global is business was critical in this regard. The wide variety of clients the opportunity that lies ahead. Regardless of the insights, and geographies MF Global serves, coupled with the breadth products or services our clients need, MF Global is committed of products we offer, enabled us to add 40,000 new accounts to working with them to capture their markets.
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