TP ICAP Annual Report and Accounts 2016 Creating the world’s largest interdealer broker Annual Report and Accounts 2016 Introduction TP ICAP is a global brokerage and information firm that plays Strategic report a central role at the heart of the world’s wholesale financial, Highlights 1 Who we are 2 energy and commodities markets. Our transformation and the > Our brokers match buyers and sellers of financial, energy and benefits it creates 4 commodities products and facilitate price discovery Our business model 6 Our strategy 8 > We provide independent data to participants in the financial, Key performance indicators 10 energy and commodities markets, including live and historical Chairman’s statement 12 pricing content, and advanced valuation and risk analytics Chief Executive’s review 14 Business and operating review 18 > We are a trusted partner to our clients, enabling them to transact Financial review 26 with confidence Risk management 32 > We facilitate the flow of capital and commodities around the world, Our principal risks and uncertainties 34 enhancing investment and contributing to economic growth Resources, relationships and responsibilities 38 Governance report Chairman’s Governance review 42 Board of Directors 44 This Annual Report has been prepared for, and only for, the members of the Company as a body, and no other persons. The Company, Corporate governance report 46 its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and such responsibility is expressly disclaimed. By their nature, the statements concerning the risks Report of the Nominations Committee 50 and uncertainties facing the Group in this Annual Report involve uncertainty since future events and circumstances can cause results Report of the Audit Committee 51 and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this Annual Report and the Company undertakes no obligation to update these forward-looking Report of the Risk Committee 54 statements. Nothing in this Annual Report should be construed as a profit forecast. Report on Directors’ Remuneration 56 Directors’ report 78 Statement of Directors’ Responsibilities 81 Financial statements Independent Auditor’s Report to the Members of TP ICAP plc 82 Consolidated Income Statement 90 Consolidated Statement of Comprehensive Income 91 Consolidated Balance Sheet 92 Consolidated Statement of Changes in Equity 93 Consolidated Cash Flow Statement 94 Notes to the Consolidated Financial Statements 95 Company Balance Sheet 138 Statement of Changes in Equity 139 Notes to the Financial Statements 140 Shareholder information 143 Group undertakings 144 Glossary 153 TP ICAP Annual Report and Accounts 2016 Strategic report Governance report Financial statements 1 Highlights1 Revenue Operating profit Strategic and (£m) (£m) operational highlights 891.5 Strategic developments 796.0 131.5 121.9 > Completion of acquisition of ICAP’s 703.5 107.9 Global Broking and Information 100.7 Business (‘ICAP’) Planning and commencement 73.3 > of the integration 47.6 > Strategic reorganisation into new global product areas complete > Energy & Commodities revenues 28% of Group total 2014 2015 2016 2014 2015 2016 Operational summary > Introduction of new rigorous approach Operating margin Profit before tax to client relationship management (%) (£m) > New product launches in our Data & Analytics business > Ongoing focus on conduct and culture 15.3 14.3 14.8 in all that we do 13.6 121.6 105.7 93.7 Dividend 86.6 > Second interim dividend of 11.25p 8.2 declared 9 December 2016 and paid 6.8 56.8 13 January 2017. Accordingly, no final dividend to be declared for 2016. Total 33.5 dividends declared and paid for 2016 – 16.85p. (2015: 16.85p) 2014 2015 2016 2014 2015 2016 Key to our strategy To help you see where our activities Basic earnings per share Average broker headcount are in line with our strategy, look for (p) these icons: Hire brokers 42.5 1,735 1,702 Energy & Commodities 34.0 32.3 32.2 1,625 Broader client base Data & Analytics 17.8 Investing in technology 11.2 Client relationship management Acquisitions 2014 2015 2016 2014 2015 2016 Investment framework HR 2 3 Reported Underlying Brand Notes: 1 These highlights relate to the performance of the Group prior to the acquisition of the ICAP Global Broking and Information Business, which completed on 30 December 2016. The performance of the acquired business is not reflected in the financial results for the year ended 31 December 2016. 2 Reported results represent the statutory results after acquisition, disposal and integration costs and exceptional items. Please refer to page 26 to 27 of the Financial Statements. 3 Underlying results represent the performance of the Group before acquisition, disposal and integration costs and exceptional items. Please refer to pages 26 to 27 of the Financial Statements. www.tpicap.com 2 Strategic report Who we are We are a global brokerage and information firm that plays a central role at the heart of the world’s wholesale financial, energy and commodities markets. Our business TP ICAP provides broking professional We operate a hybrid model, where brokers financial, energy and commodities products. intermediary services to match buyers and provide business-critical intelligence to Our market data is independent, unbiased sellers of different financial, energy and clients, supplemented by proprietary screens and non-position influenced. commodities products. Our role is to create that provide historical data, analytics and liquidity and price discovery in these execution functionality. Our clients include banks, insurance markets and provide insight and context companies, pension funds, asset managers, to our clients. We are the leading provider of proprietary hedge funds, central banks, energy over the counter (‘OTC’) pricing information producers and refiners, risk and compliance in the world with a unique source of data on managers and charities. Our divisions Global Broking Energy & Commodities Data & Analytics Our Global Broking division covers Rates, Our Energy & Commodities division operates Our Data & Analytics division provides FX and Money Markets, Emerging Markets, markets in oil, gas, power, renewables, unique data sets of OTC pricing products Equities and Credit products and brings ferrous metals, base metals, precious metals, to enable clients to analyse, trade and together buyers and sellers, providing them soft commodities and coal. risk manage their portfolios. with a range of services and venues that enables them to execute trades efficiently Institutional Services Corporate Services and successfully. Our Institutional Services division provides Our Corporate Services division provides broking and execution services to a range technology, compliance, risk, finance, of institutions such as asset managers, HR and other essential services to our hedge funds and insurance companies. business divisions. Following the acquisition of the ICAP Global Broking and Information Business, from January 2017, TP ICAP will report the performance of the divisions above. We have reported the performance for the year end 31 December 2016 on a regional basis in line with the management structure of the Group during 2016. TP ICAP Annual Report and Accounts 2016 Strategic report Governance report Financial statements 3 Where we operate Americas EMEA Asia Pacific USA UK Singapore Brazil Austria Australia Canada Bahrain China 73 locations Colombia Denmark Hong Kong Ecuador Dubai India Mexico France Indonesia Germany Japan Luxembourg New Zealand Netherlands Philippines countries Norway South Korea 31 Poland Thailand South Africa Spain Switzerland www.tpicap.com 4 Strategic report Our transformation and the benefits it creates Combining Tullett Prebon and ICAP creates value for all stakeholders. On 30 December 2016 Tullett Prebon Rationale acquired ICAP to create the largest The acquisition of ICAP is truly transformational for TP ICAP, for our shareholders, our clients interdealer broker in the world. The deal and our employees. In creating the world’s largest interdealer broker in wholesale markets, combines the complementary strengths of we have a platform from which to pursue our strategy and develop our services to our clients. two leading global hybrid voice broking franchises with a leading market position, 2016 2016 2016 and revenue diversity by region and TP ICAP Pro forma product mix. Unaudited Pro Forma Income Statement £m £m £m Revenue 891.5 795.1 1,686.6 Underlying operating profit 131.5 108.0 239.5 Underlying operating profit margin 14.8% 13.6% 14.2% Finance income 5.3 3.0 8.3 Finance costs (15.2) (1.0) (16.2) Underlying profit before tax 121.6 110.0 231.6 Tax (22.1) (30.0) (52.1) Effective tax rate 18% 27% 23% Share of JVs and associates less non-controlling interests 3.5 4.9 8.4 Net income 103.0 84.9 187.9 Exceptional items (1.9) – (1.9) Acquisition, disposal and integration costs (57.9) – (57.9) Earnings 43.2 84.9 128.1 Weighted average shares in issue 242.3 310.3 552.6 Underlying EPS 42.5p 27.4p 34.0p Reported EPS 17.8p 27.4p 23.2p The information included here represents what the income statement would have looked like had the transaction taken place on 1 January 2016. The unaudited pro forma Income Statement is compiled based on TP ICAP plc’s 2016 audited financial statements discussed in this Annual Report together with financial data extracted from the books and records of ICAP over the 12 month period to December 2016. The transaction has created an organisation with historical annual pro forma revenues of £1.7bn. Approximately 50% of the revenues are generated in the EMEA region, 36% from the Americas, and 14% from Asia Pacific. The combined business has approximately 3,000 brokers. Underlying operating profit in 2016 on a pro forma basis would have been £239.5m.