7th Jun 2013 14:14
ICAP plc (the "Company")
The Company has issued to shareholders the annual report and financial statements for the year ended 31 March 2013, the notice of annual general meeting 2013 and the form of proxy.
The Company's annual general meeting will be held on Wednesday 10 July 2013 at 11.00am at 2 Broadgate, London EC2M 7UR.
Pursuant to DTR 6.1.2, the Company confirms that one of the resolutions to be proposed at the annual general meeting 2013 is the adoption of new articles of association of the Company. A description of the material changes is contained in the notice of annual general meeting 2013.
Copies of the annual report and financial statements for the year ended 31 March 2013 and the notice of annual general meeting 2013 are available to view or download from the Company's website, www.icap.com.
Copies of the annual report and financial statements for the year ended 31 March 2013, the notice of annual general meeting 2013 and the form of proxy, together with a copy of the new articles of association of the Company proposed to be adopted at the annual general meeting 2013, have been uploaded to the National Storage Mechanism at www.hemscott.com/nsm.do.
The company announced its preliminary results for the year ended 31 March 2013 on 14 May 2013. A condensed set of financial statements formed part of that announcement and included an indication of the important events that occurred during the year together with a responsibility statement regarding the annual report and the financial statements. Certain further information in relation to the annual report and financial statements is provided in full unedited text as required under the Disclosure and Transparency Rules in the appendices to this announcement. This announcement should be read together with the preliminary results announcement.
7 June 2013
ENDS
Appendices:
The following appendices should be read in conjunction with, and not as a substitute for, reading the full annual report and financial statements for the year ended 31 March 2013. Note references and definitions in the text below are as in the annual report and financial statements for the year ended 31 March 2013.
Appendix A: Principal risks and uncertainties
Principal risks
Strategic risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent risk that Group services become obsolete to existing or future customers. First order risk driven by external (regulators, customers, competitors etc) and internal (governance) factors. | The competitive landscape is continually changing with regulation redefiningcertain aspects of our business and changing customer needs. Of particular note is the move towards electronic trading, central clearing of derivatives and the continued uncertainty of the final shape of the reforms. ICAP has a material tolerance of this risk given the strong appetite to explore the introduction of new innovative products and service lines through organic growth and acquisitions and a desire to lead its competition. | ICAP maintains constant dialogue with customers and regulatory bodies in order to leverage environmental and changing customer needs. ICAP is therefore able to use its unique position at the heart of the wholesale financial markets to provide and enhance services that are: - relevant; - scalable; - flexible; and - have realistic opportunities for growth and longevity. | ||
Operational risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent risk of financial (losses, fortuitous gains, fines) or non-financial impact (reputational, opportunity, costs)resulting from human errors, inadequateor failed internal processes or systems,or external events. First order risk driven by internal (human error, system failure) and external (terrorism, fraud) events. | Trade execution or processing errors. Extended failure of IT networks, systems,or communication. Internal or external events affecting buildings or people. Loss of critical staff. Inadequately managed projectsincluding new business initiatives. ICAP has limited tolerance of financialloss as a result of operational risk as ICAP accepts that even after mitigating controls there will be residual risk which could lead to losses. | A control framework exists within which risks and controls are identified, assessed and monitored. The Group continues to invest heavily in infrastructure to mitigate its own risks. Formal business continuity plans and appropriate remote data back-up and disaster recovery facilities are available for each key location. | ||
Liquidity risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent risk that any part of the Group does not have sufficient financial resources available to enable it to meet its financial obligations as they fall due. First order risk driven by internal (operating model) factors. Second order impact from potential operational and credit events. | In exchange traded and matched principal business, as a result of a counterparty not fulfilling its obligations or due to timing issues, ICAP may be required to place margin or collateral at clearing houses of which it is a direct member and at third-party clearing providers who act on the Group's behalf. ICAP has no tolerance of financial loss as a result of liquidity risk given that temporary funding requirements are usually for onlya short period of time and any funding is typically returned to ICAP either intradayor the following day. | There is a centralised provision of contingency funding for Group trading entities; each entity additionally has access to appropriate liquidity.
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Other significant risks
Credit risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent risk of a counterparty failing in its obligations. First order risk driven by external (counterparty default) events which may create a second order liquidity event. | A counterparty failure may result inICAP having: - an open market position; - unpaid receivables; and- loss of access to or loss of funds that the Group has deposited with financial institutions. ICAP has minimal tolerance for financial loss as a result of credit risk noting thatthis credit risk is intrinsic across allbusiness activities. | Processes and controls are in place to limit and monitor potential and actual credit exposure including: - client on-boarding and limit setting process based on internal ratings; and- regional accounts receivable teams monitoring non-receipt of commissions and fee income. | ||
Legal and compliance risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent legal risk of a loss of legal,human or financial integrity, reputationor capital as the result of government action, legislation, contract or other lawsor regulations. Inherent compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation that may be suffered as a result of failure to comply with laws, regulations, rules, related self-regulatory organisation standards and codes of conduct applicable to its activities. | An ICAP entity may: - defend a claim after having a loss through inappropriate or incorrect documentation or responsibility in the conduct of its business; - receive a regulatory enquiry or information request as a result of operational or human failures; or employee breaches of company policy or regulatory rules. ICAP has limited tolerance of financial loss as a result of this risk as we accept that due to the nature of the complex commercial and regulatory environment in which ICAP operates its companies may become involved in contentious matters and litigation and may be required to respond to regulatory inquiries. | ICAP has an internal legal department which acts as an independent advisory and investigation function and is directed to both enable and defend the Group's strategic aims. The Group maintains an independent compliance function which mitigates compliance risk by way of the compliancerisk management framework which is operated globally. Advice is regularly taken from appropriately qualified external advisers and professionals. Training is provided to staff at induction, on an annual, thematic and on-going basis. Legal and compliance risks are assessed and mitigated in the processes and procedures of risk, compliance and audit. | ||
Financial risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent risk that the Group is exposed to losses due to adverse movements in interest rates or FX. First order risk driven by external (changing market rates) events. | The Group presents its consolidated financial statements in pound sterling and conducts business in a number of other currencies. Consequently the Group is exposed to currency risk due to exchange rate movements (see note 11 to the financial statements). The 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 clearing services in certain markets to brokerage customers. ICAP has no tolerance of financial loss as a result of this risk. | Details of the Group's interest rate and currency risk hedging strategy are contained in note 11 to the financial statements. | ||
Reputational risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
Inherent risk of financial loss arising from negative perception on the part of third party relationships including customers, counterparties, shareholders, investorsor regulators. Second order event as a result of the perception that the Group either had material, persistent operational defects or was unable to appropriately identify and mitigate its other risks. | Third-party relationships would be impacted resulting in events such as: - a significant decline in share price; - fewer willing lenders; - potential credit downgrade; - greater difficulty in hiring and retaining high quality staff; and - a decline in customer activity. ICAP has no tolerance for financial loss as a result of this risk as ICAP builds and maintains relationships of openness and trust with its customers and regulators. | The primary mitigation is the appropriate mitigation and management of the other risks as this is a second order impact. | ||
Market risk | ||||
Overview | Potential manifestations and tolerance | Mitigation | ||
As ICAP does not take active market risk in the pursuit of its business activities, this category is a second order impact ofa credit or operational event which resultsin exposure to a change in the value ofthe trade. | As a result of providing its clients with matched principal brokerage and exchange execution ICAP may be exposed to a variety of market risks:- price;- interest; and- FX. ICAP has minimal tolerance for financial loss as a result of market risk. | Matched principal-out trades are minimised wherever possible and every effort is made to liquidate the position as practicably as possible. Exchange traded business control functions monitor all unmatched positions on an ongoing basis; issues are escalated appropriately. |
Appendix B: 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
The Group collected revenue on behalf of IPGL of £39,252 (2011/12 - £nil). During the year, the Group charged IPGL £nil (2011/12 - £37,163) in respect of employees of the Group who provided services to IPGL and its investments and £1,466 (2011/12 - £6,573) in respect of other services. As at 31 March 2013, IPGL owed the Group £771 (2011/12 - £38,556).
Exotix Holdings Ltd (Exotix)
As part of the disposal of Exotix Holdings Ltd to IPGL in 2007, the Group loaned employees of Exotix Ltd , a subsidiary of Exotix, £1.5m to enable them to purchase a shareholding. Interest of £2,606 (2011/12 - £6,793) has been charged on these loans during the year. The Group collected revenue of £11.6m (2011/12 - £8.5m) on behalf of Exotix and recharged Exotix £270,707 (2011/12 - £225,000) for clearing-related services and £237,845 (2011/12 - £30,000) for other services provided during the year. As at 31 March 2013, there was a balance due to Exotix from the Group of £1.6m (2011/12 - £5.0m). The Group holds £1.9m as collateral from Exotix on deposit.
City Index Ltd
During the year the Group has charged FXSolutions (an indirect subsidiary of IPGL) £0.4m (2011/12 - £0.4m) for the provision of FX data from its EBS platform. As at 31 March 2013 there was no balance outstanding with the Group (2011/12 - £nil).
(b) TFS-ICAP LLC, TFS-ICAP Australia, TFS-ICAP Japan, TFS-ICAP Ltd and TFS-ICAP Singapore
The Group invoices and collects revenue on behalf of TFS-ICAP LLC. During the year, the Group invoiced and collected £0.3m (2011/12 - £6.2m) 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 LLC - £nil (2011/12 - £5,610); TFS-ICAP Ltd - £16,750 (2011/12 - £849,907); TFS-ICAP Singapore £nil (2011/12 - £20,311). As at 31 March 2013 the outstanding balance from all the joint ventures to the Group was £2.9m (2011/12 - £2.6m due from the Group).
(c) BSN Capital Partners Ltd (BSN)
The Group provides BSN Capital Partners Ltd (BSN), an associate undertaking, with office space and facility services. During the year, the Group charged BSN £159,147 (2011/12 - £95,462) for these services. The Group also has a preferred brokerage agreement with BSN and has recognised revenue of £0.1m (2011/12 - £1.1m) during the year. As at 31 March 2013 the outstanding balance was £136,994 (2011/12 - £64,616).
(d) Shanghai CFETS-ICAP International Money Broking Co Ltd (CFETS-ICAP)
The Group provides CFETS-ICAP, an associate company based in China, with office space and facilities services. During the year, the Group charged the company £19,131 (2011/12 - £131,091) for these services. The Group also invoiced and collected revenue of £696,561 for CFETS-ICAP in the year (2011/12 - £489,652). As at 31 March 2013 there was a balance due to CFETS-ICAP from the Group of £1,520,569 (2011/12 - £790,159).
(e) Capital Shipbrokers Ltd
The Group collected revenue on behalf of Capital Shipbrokers Ltd, an associate based in Hong Kong, of £2.7m (2011/12 - £2.0m). The Group also recharged Capital Shipbrokers Ltd £395,278 (2011/12 - £214,965) for overheads. The total outstanding balances due from the Group was £1.9m (2011/12 - £1.2m
(f) FCB Harlow Butler Pty Ltd
The Group loaned some minority shareholders of FCB Harlow Butler Pty Ltd, a subsidiary company in South Africa, £629,558 in order to acquire 140,800 shares in the company from the Group. Interest of £nil (2011/12 - £22,061) was charged on the loan during the year. As at 31 March 2013, the outstanding balance due on the loan was £139,376 (2011/12 - £217,349).
(g) CLS Aggregation Services LLC (CLSAS)
The Group recharged CLSAS, an associate company, £4.4m (2011/12 - £2.8m) as compensation for technical services during the year. As at 31 March 2013 the total outstanding balance due to the Group was £1.3m (2011/12 - £1.8m). The Group received £5.2m (2011/12 - £3.5m) from CLSAS during the year.
Related party transactions are made on an arm's length basis.
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 ended31 March2013 | Year ended31 March2012 | ||
Management services expenses | - | (1.5) | |
Net interest from related parties | 1.0 | (4.1) |
Amounts owed to the Company from subsidiaries are disclosed in note 16 and amounts owed by the Company to subsidiaries are disclosed in note 17. In March 2009, the Company novated the Group's bank facilities to its immediate subsidiary ICAP Group Holdings plc (IGHP) and simplified its intra-Group lending and borrowing with its subsidiaries.
Related Shares:
IAP.L