Statement re. Press Comment

RNS Number : 8323E

Tullett Prebon PLC

06 November 2015

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

FOR IMMEDIATE RELEASE

6 November 2015

Tullett Prebon plc

Possible acquisition of the global broking business of ICAP plc

Tullett Prebon plc ("Tullett Prebon") notes the recent press speculation and confirms that it is in discussions with ICAP plc ("ICAP") regarding the possible acquisition by Tullett Prebon of ICAP's global broking business, including ICAP's associated technology and broking platforms (including iSwap and Fusion), ICAP's associated information services revenue and certain of ICAP's joint ventures and associates ("IGBB") (the "Transaction").

If the Transaction were to be completed, it is envisaged that it would be structured as an acquisition of IGBB by Tullett Prebon, with new shares in Tullett Prebon issued as consideration. It is envisaged that Tullett Prebon would issue more than 100% of its existing share capital as consideration and the Transaction would be structured such that the majority of such new Tullett Prebon shares would be distributed to ICAP's shareholders, with ICAP retaining a minority stake in the enlarged Tullett Prebon.

Discussions regarding the Transaction are currently ongoing and there can be no certainty that any transaction will be agreed. Tullett Prebon will update the market when it is appropriate to do so.

Under the envisaged structure, the Transaction would constitute a reverse takeover for the purposes of the Listing Rules. Listing Rule ("LR") 5 therefore requires Tullett Prebon to ensure that there is sufficient publicly available information about the proposed transaction to avoid a suspension of Tullett Prebon's shares. As IGBB is not subject to a public disclosure regime, the information required under LR 5.6.15G is set out below. This information assumes the perimeter of IGBB is as set out below. The precise perimeter of IGBB is under consideration by both parties.

Information required under LR 5.6.15G

Description of IGBB including key non-financial operating or performance measures

In accordance with LR 5.6.15G(2), set out below is a description of IGBB, including key non-financial operating and performance measures relating to IGBB.

Operating across 37 locations in 23 countries, IGBB provides voice and voice-electronic hybrid inter‐dealer broking services and complementary information services products across a wide range of asset classes including rates, emerging markets, commodities, equities, FX and money markets and credit.

For the purposes of this announcement, the perimeter of IGBB includes the following constituent parts of ICAP:

·      ICAP's three regionally managed voice broking businesses in EMEA, the Americas and Asia Pacific[1] ("APAC"), including all e-trading products and services developed by ICAP's e-Commerce team (including Fusion[2] and Scrapbook[3]) (together "Global Broking");

·      ICAP's 40.23% economic interest in iSwap, a global electronic trading platform for EUR, USD, GBP and AUD interest rate swaps;

·      Revenues and operating profits from sales of information services products directly attributable to Global Broking and iSwap ("Information Services"); and

·      Certain of ICAP's joint ventures, associates and investments, including SIF ICAP, SA de CV (Mexico), Totan ICAP Co Limited (Japan), Central Totan Securities Co Limited (Japan) and Corretaje e Informacion Monetaria y de Divisas, SA (Spain).

IGBB offers its customers a choice of trading venues and services, allowing them to select the execution method (matched principal, agency/name give-up or execution on-exchange) appropriate for the liquidity of the product and their specific needs. Market participants use IGBB's voice and voice-electronic hybrid broking services to assess trading availability and successfully execute trades. Customers range from investment banks for fixed income products to end-user corporates and industrials for commodities.

IGBB's 1,458 voice brokers (as at the end of March 2015) draw on their deep customer relationships, market expertise and IGBB's suite of pre-trade price discovery screens to identify potential trading interest, and in doing so create transparency, liquidity and facilitate the price discovery process. This is particularly important in markets where there is a wide range of potential transaction types and the number of parties willing to enter into certain transactions at any moment may be limited.

IGBB is separately managed from ICAP's other businesses by a dedicated management team. IGBB is supported by 871 dedicated support staff within the business and additional staff within ICAP's central functions including IT, legal, HR, finance, risk and compliance.

iSwap is a global electronic trading platform for EUR, USD, GBP and AUD interest rate swaps. Since its creation in 2010, iSwap has continued to build on its market position and has brought increased transparency, greater efficiency and lower transaction costs to the world's largest over-the-counter ("OTC") derivative market. iSwap operates as a regulated multilateral trading facility ("MTF") in Europe and within the IGBB Swap Execution Facility in the US.

Information Services delivers independent data solutions to financial market participants, generating subscription-based fees from a suite of products and services directly attributable to Global Broking and iSwap. Information Services charges licence fees based on financial instruments linked to proprietary indices as well as licensing other index administrators for the use of IGBB data in their indices.

A breakdown of IGBB's revenue for the three financial years ended 31 March 2015, split between the three regions of Global Broking (including iSwap) and Information Services, is set out in the table below.

	Year ended
	31 March 2013	31 March 2014	31 March 2015
	£m	£m	£m
Global Broking and iSwap:
EMEA	452	411	374
Americas	394	362	297
APAC	110	102	96
Information Services	36	38	41
Total	992	913	808

IGBB - asset class information

Set out below is a description of IGBB's business by asset class.

Rates

Rates comprises interest rate derivatives, government bonds, repos and financial futures broking and is the largest asset class by revenue for IGBB. The main revenue contributors are voice/voice-electronic hybrid broking of OTC interest rate derivatives and government bonds in London, Jersey City and, to a smaller extent, Australia. Rates includes the electronic interest rate swap platform iSwap.

Emerging Markets

IGBB is active in emerging markets across APAC, Latin America, Central and Eastern Europe and Africa. Emerging Markets revenue includes domestic broking in local markets and cross-border broking activity in globally traded emerging markets money and interest rate products. Emerging Markets revenues are generated largely from interest rates and foreign exchange in a combination of offshore centres and onshore centres. The largest offshore centres are London and Jersey City with the largest onshore presence in Brazil.

Commodities

IGBB is involved in the broking of transactions in various commodities, in particular energy (including power and electricity, oils, natural gas, coal and alternative fuels), shipping, metals and other bulk commodities. It is largely comprised of broking oils, natural gas and power in the United States and Europe. The United States business is spread across numerous locations with Jersey City and Kentucky being the largest offices. The European business is largely based in London and has smaller offices across Continental Europe including Norway, Spain and Holland.

Equities

Equities revenues are largely generated from equity derivatives broking in IGBB's Jersey City and London offices.

FX and Money Markets

FX and Money Markets revenues are generated largely from FX forwards with smaller businesses in spot FX and cash deposits. These revenues are primarily generated in Jersey City and London.

Credit

Credit revenues are generated virtually all from corporate bonds with a small presence in credit derivatives, largely from IGBB's Jersey City and London offices.

A breakdown of IGBB's revenue for the three financial years ended 31 March 2015, by asset class, is set out in the table below.

	Year ended
	31 March 2013	31 March 2014	31 March 2015
	£m	£m	£m
Rates	390	360	315
Emerging Markets	150	150	132
Commodities	162	139	121
Equities	106	113	103
FX and Money Markets	91	78	74
Credit	93	73	63
Total	992	913	808

Trend information

IGBB's revenue from continuing businesses for the six months ending 30 September 2015, on a constant currency basis, was in line with the same period in the prior year. An increase in revenue from Information Services and iSwap was offset by a decrease in Global Broking revenue.

The performance of Global Broking in the period has been mixed across regions as lower levels of market activity in EMEA and the Americas were offset by an improved performance in APAC. Volatility driven by the Chinese stock market slide boosted revenue in Equities across all regions.

Global Broking revenue in EMEA was adversely impacted as traders held positions in the lead up to the UK general election and due to reduced activity levels driven by Greece uncertainty. Revenue in the Americas was down due to the continued low interest rate volatility, lack of clear movement from the Federal Reserve and slow market trading (especially in FICC), driven by uncertainties over the health of the United States economy. APAC revenue improved on the prior year driven by Australian rates and government bonds following the announcement of a further interest rate cut.

Additional information

Eligibility of the enlarged Tullett Prebon

As it is envisaged that the Transaction would classify as a reverse takeover under the Listing Rules, upon completion, the listing on the premium listing segment of the Official List of all the existing ordinary shares of Tullett Prebon would be cancelled. Application would therefore need to be made to the UK Listing Authority and the London Stock Exchange for the immediate readmission of the ordinary shares of Tullett Prebon, including the new Tullett Prebon ordinary shares issued as consideration for IGBB, to the premium listing segment of the Official List and to trading on the London Stock Exchange's Main Market for listed securities. The eligibility of the enlarged Tullett Prebon to be admitted to the Official List would need to be agreed with the UK Listing Authority.

Regulatory capital resources requirements

Discussions have been initiated with the Financial Conduct Authority ("FCA") on the regulatory capital resources requirements which would be applicable to the enlarged Tullett Prebon and its subsidiaries regulated by the FCA following the Transaction.

Historical financial information relating to IGBB

In accordance with LR 5.6.15G(1), set out below is the relevant unaudited historical financial information relating to IGBB for the years ended 31 March 2013, 31 March 2014 and 31 March 2015.

IGBB has not in the past constituted a separate legal group and has not previously prepared or reported any combined or consolidated financial information.

The basis of preparation of the historical financial information relating to IGBB is set out in Appendix 1.

Should the proposed Transaction proceed, a prospectus will be required to be published in relation to the application for admission to the Official List of the new and existing shares in Tullett Prebon. In accordance with the Listing Rules and the Prospectus Rules of the UK Listing Authority, such a prospectus would include audited financial statements of IGBB prepared in accordance with such rules. It is possible that the financial information contained in any such prospectus may differ from the combined accounts of IGBB set out below.

Combined income statement

Year ended 31 March 2015
		Trading £m	Acquisitions and disposal costs £m	Exceptional items £m	Total £m
Revenue		808	--	--	808
Operating expenses		(727)	(1)	(73)	(801)
Other income		3	--	--	3
Operating profit		84	(1)	(73)	10
Finance income		2	1	--	3
Finance expense		(1)	--	--	(1)
Share of profit of associates and JVs after tax		8	--	--	8
Profit before tax		93	--	(73)	20
Tax		(15)	(3)	19	1
Profit for the year		78	(3)	(54)	21
Attributable to:
Owners of the group		79	(3)	(54)	22
Non-controlling interests		(1)	--	--	(1)
		78	(3)	(54)	21

Year ended 31 March 2014
		Trading £m	Acquisitions and disposal costs £m	Exceptional items £m	Total £m
Revenue		913	--	--	913
Operating expenses		(803)	(14)	(76)	(893)
Other income		5	--	--	5
Operating profit		115	(14)	(76)	25
Finance income		10	--	--	10
Finance expense		--	(1)	--	(1)
Share of profit of associates and JVs after tax		6	--	--	6
Profit before tax		131	(15)	(76)	40
Tax		(30)	22	12	4
Profit for the year		101	7	(64)	44
Attributable to:
Owners of the group		103	7	(64)	46
Non-controlling interests		(2)	--	--	(2)
		101	7	(64)	44

Year ended 31 March 2013
		Trading £m	Acquisitions and disposal costs £m	Exceptional items £m	Total £m
Revenue		992	--	--	992
Operating expenses		(872)	(88)	(36)	(996)
Other income		8	--	--	8
Operating profit		128	(88)	(36)	4
Finance income		6	--	--	6
Finance expense		(1)	--	--	(1)
Share of profit of associates and JVs after tax		6	--	--	6
Profit before tax		139	(88)	(36)	15
Tax		(32)	19	7	(6)
Profit for the year		107	(69)	(29)	9
Attributable to:
Owners of the group		106	(69)	(29)	8
Non-controlling interests		1	--	--	1
		107	(69)	(29)	9

Combined statement of comprehensive income

			Year ended 31 March 2013 £m	Year ended 31 March 2014 £m	Year ended 31 March 2015 £m
Profit for the year			9	44	21
Other comprehensive profit/(loss)
Items that will be reclassified subsequently to profit or loss when specific conditions are met:
- Exchange differences			13	(66)	25
Other comprehensive profit/(loss) for the year, net of tax			13	(66)	25
Total comprehensive profit/(loss) for the year			22	(22)	46
Total comprehensive profit/(loss) attributable to:
Owners of the group			21	(19)	45
Non-controlling interests			1	(3)	1
			22	(22)	46

Combined balance sheet

			As at 31 March 2013 £m	As at 31 March 2014 £m	As at 31 March 2015 £m
Assets
Non-current assets
Intangible assets arising on consolidation			96	80	82
Intangible assets from development expenditure			32	48	44
Property and equipment			35	30	26
Investment in joint ventures			8	5	7
Investment in associates			32	36	36
Available-for-sale investment			22	12	9
Deferred tax asset			21	15	12
Trade and other receivables			4	1	2
Retirement benefit assets			1	--	--
			251	227	218
Current assets
Trade and other receivables			16,793	22,757	24,236
Receivable from affiliates			98	112	122
Restricted funds			33	35	35
Cash and cash equivalents			439	368	350
			17,363	23,272	24,743
Total assets			17,614	23,499	24,961
Liabilities
Current liabilities
Trade and other payables			(16,751)	(22,725)	(24,194)
Payable to affiliates			(104)	(92)	(75)
Bank overdraft			(1)	(1)	(33)
Tax payable			(46)	(21)	(30)
Provisions			--	(8)	(14)
			(16,902)	(22,847)	(24,346)
Non-current liabilities
Trade and other payables			(7)	(6)	(6)
Deferred tax liabilities			(12)	(7)	(11)
Retirement benefit obligations			(3)	(2)	(4)
Provisions			(12)	(10)	(20)
			(34)	(25)	(41)
Total liabilities			(16,936)	(22,872)	(24,387)
Net assets			678	627	574
Invested capital
Invested capital attributable to:
Owners of the group			640	602	548
Non-controlling interests			38	25	26
Total invested capital			678	627	574

Combined statement of changes in invested capital

Year ended 31 March 2015			Owners £m	Non-controlling interests £m	Total £m
Balance as at 1 April 2014			602	25	627
Profit/(loss) for the year			22	(1)	21
Other comprehensive profit for the year, net of tax			23	2	25
Total comprehensive profit for the year			45	1	46
Net distributions in the year			(99)	--	(99)
Balance as at 31 March 2015			548	26	574

Year ended 31 March 2014			Owners £m	Non-controlling interests £m	Total £m
Balance as at 1 April 2013			640	38	678
Profit/(loss) for the year			46	(2)	44
Other comprehensive loss for the year, net of tax			(65)	(1)	(66)
Total comprehensive loss for the year			(19)	(3)	(22)
Net distributions in the year			(19)	--	(19)
Dividend to non-controlling interests*			--	(10)	(10)
Balance as at 31 March 2014			602	25	627
*Dividend payments to non-controlling interest of an IGBB subsidiary.

Year ended 31 March 2013			Owners £m	Non-controlling interests £m	Total £m
Balance as at 1 April 2012			723	42	765
Profit for the year			8	1	9
Other comprehensive profit for the year, net of tax			13	--	13
Total comprehensive profit for the year			21	1	22
Net distributions in year			(104)	--	(104)
Other movement in non-controlling interests			--	(5)	(5)
Balance as at 31 March 2013			640	38	678

Combined statement of cash flows

			Year ended 31 March 2013 £m	Year ended 31 March 2014 £m	Year ended 31 March 2015 £m
Cash flows from operating activities			122	(8)	24
Cash flows from investing activities
Dividends received from associates			1	4	4
Dividends received from joint ventures			--	5	1
Other equity dividends received			2	2	--
Payments to acquire property and equipment			(1)	(7)	(3)
Intangible development expenditure			(31)	(28)	(16)
Proceeds from disposal of subsidiary			--	--	1
Proceeds from disposal of available-for-sale investments			3	--	--
Acquisition of associates and joint ventures			(2)	--	(1)
Net cash flows from investing activities			(28)	(24)	(14)
Cash flows from financing activities
Dividends paid to non-controlling interest*			--	(10)	--
Net cash distributions to affiliates			(103)	(22)	(131)
Net cash flows from financing activities			(103)	(32)	(131)
Net (decrease)/increase in cash and cash equivalents			(9)	(64)	(121)
Cash and cash equivalents at beginning of the year**			410	438	367
FX adjustments			37	(7)	71
Cash and cash equivalents at end of the year**			438	367	317
*Dividend payments to non-controlling interest of an IGBB subsidiary. **Net of bank overdraft.

Accounting policies

Tullett Prebon prepares its consolidated financial statements in accordance with International Financial Reporting Standards, as adopted by the European Union and the Companies Act 2006. ICAP also prepares its consolidated financial statements in accordance with International Financial Reporting Standards, as adopted by the European Union and the Companies Act 2006. The financial statements of ICAP include the results, assets and liabilities of entities and businesses that would not form part of IGBB, therefore unaudited combined financial information has been prepared for IGBB for the financial years ended 31 March 2013, 31 March 2014 and 31 March 2015 (collectively the "Combined Financial Information"). No material differences in the accounting policies adopted by Tullett Prebon and those adopted by IGBB in the Combined Financial Information have been identified.

Confirmations

In accordance with LR 5.6.15G(3), the Directors of Tullett Prebon consider that this announcement contains sufficient information about IGBB to provide a properly informed basis for assessing its financial position.

In accordance with LR 5.6.15G(4), Tullett Prebon confirms that it has made the necessary arrangements with ICAP to enable it to keep the market informed without delay of any developments concerning IGBB that would be required to be released were IGBB part of Tullett Prebon.

Enquiries

Tullett Prebon
Stephen Breslin, Head of Communications	[phone]
Rothschild (Financial Adviser and Sponsor)	[phone]
Robert Leitão
Stephen Fox
Brunswick	[phone]
Kim Fletcher	[e-mail]
Mike Smith
Craig Breheny

Important notice

N M Rothschild & Sons Limited ("Rothschild"), which is authorised by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as sponsor and financial adviser to Tullett Prebon in connection with the Transaction referred to in this announcement. Rothschild is acting exclusively for Tullett Prebon and no-one else in connection with the Transaction and save for any responsibilities and liabilities, if any, which may be imposed on Rothschild, in its capacity as sponsor by the Financial Services and Markets Act 2000, as amended, Rothschild will not be responsible to anyone other than Tullett Prebon for providing the protections afforded to clients of Rothschild or for providing advice in relation to the Transaction or the contents of this announcement or any transaction, arrangement or matter referred to herein.

This announcement has been issued by and is the sole responsibility of Tullett Prebon.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities pursuant to this announcement or otherwise. The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

This announcement does not constitute an offer of securities for sale in the United States or an offer to acquire or exchange securities in the United States. No offer to acquire securities or to exchange securities for other securities has been made, or will be made, and no offer of securities has been made, or will be made, directly or indirectly, in or into, or by use of the mails, any means or instrumentality of interstate or foreign commerce or any facilities of a national securities exchange of, the United States of America or any other country in which such offer may not be made other than (i) in accordance with the requirements under the US Securities Exchange Act of 1934, as amended, a registration statement under the US Securities Act of 1933, as amended, or the securities laws of such other country, as the case may be, or (ii) pursuant to an available exemption therefrom.

This announcement has been prepared for the purposes of complying with the applicable law and regulation of the United Kingdom (including the Listing Rules and the Disclosure and Transparency Rules) and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and involve predictions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect Tullett Prebon's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to Tullett Prebon's or IGBB's results of operations, financial position, liquidity, prospects, growth or strategies and the industry in which Tullett Prebon and IGBB operate. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. Save as required by law or regulation, Tullett Prebon disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements in this announcement that may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement.

Nothing in this announcement is intended, or is to be construed, as a profit forecast or to be interpreted to mean that earnings per Tullett Prebon share for the current or future financial years, or those of the enlarged Tullett Prebon, will necessarily match or exceed the historical published earnings per Tullett Prebon share.

Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given.

Except as explicitly stated, neither the content of Tullett Prebon's nor ICAP's website, nor any website accessible by hyperlinks on Tullett Prebon's or ICAP's website is incorporated in, or forms part of, this announcement.

This announcement is an advertisement and not a prospectus and has been prepared solely for the purpose of the Transaction.

Appendix 1 - Basis of preparation

Preparation of Combined Financial Information

The Combined Financial Information of IGBB, which has been prepared specifically for the purpose of this announcement, has been prepared on a basis that combines the results and assets and liabilities of IGBB by applying the principles underlying the consolidation procedures of IFRS 10 (revised) "Consolidated Financial Statements". The Combined Financial Information has been prepared from the ICAP consolidation schedules which include the individual financial returns of IGBB companies and the ICAP consolidation and other adjustments attributable to IGBB entities and businesses.

This basis of preparation describes how the Combined Financial Information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and as issued by the International Accounting Standards Board. References to IFRSs hereafter should be construed as references to IFRSs as adopted by the EU. IFRS does not provide for the preparation of combined financial information or for specific accounting treatment set out below, and accordingly, in preparing the Combined Financial Information, certain accounting conventions commonly used for the preparation of historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 "Standards for Investment Reporting applicable to public reporting engagements on historical financial information" issued by the UK Auditing Practices Board have been applied.

The accounting policies that were in force as at 1 April 2014 and were adopted by ICAP for the financial year ending 31 March 2015 were applied in the preparation of the Combined Financial Information for all periods. Measurement and presentation of IGBB's financial statements for the years ending 31 March 2013 and 31 March 2014 were restated based on new IFRSs and/or changes in IFRSs that were adopted by ICAP for the first time from 1 April 2014.

The preparation of Combined Financial Information requires ICAP management to apply judgements and the use of estimates and assumptions about future conditions. ICAP management considers impairment review of goodwill and other intangible assets arising on consolidation to be the area requiring exercise of increased judgement. Estimates 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. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based on amounts which differ from those estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

The following summarises the key accounting and other principles applied in preparing the combined historical financial information:

·      IGBB has not in the past constituted a separate legal group and therefore it is not meaningful to show share capital or an analysis of reserves for IGBB. The net assets of IGBB are represented by invested capital, the cumulative investment of ICAP and its subsidiaries (that are not part of IGBB). Any funding to, investments in and dividends received from/paid to ICAP affiliates are shown as movements in invested capital.

·      The trading results of IGBB are stated after the allocation of ICAP head office and corporate costs comprising those directly attributable to IGBB and of indirect costs consistent with the historical allocations to ICAP's operating segments. The indirect costs, which in the year ended 31 March 2015 were £14m, are not proposed to be charged to IGBB by ICAP after the signing of the share purchase agreement under the terms currently under discussion. The results of IGBB presented might have been different had the entities operated as a separate group from 1 April 2012. The results are not necessarily indicative of future periods since the relationship of costs in respect of IGBB functions and services provided by ICAP affiliates and related parties may be different.

·      The tax charges in the Combined Financial Information have been determined based on the analysis of ICAP's tax charge and assessment of how much is attributable to IGBB, taking into account legal entity charges and applicable group level adjustments. The tax charges recorded in the combined income statement may have been affected by the taxation arrangements within ICAP, and are not necessarily representative of the tax charges that could apply in the future.

·      Current tax receivable/payable and deferred tax assets and liabilities were determined based on the analysis of ICAP's current tax position and temporary differences at each period end and assessment of how these relate directly or indirectly to IGBB.

·      Tax payments made in the year as presented in the combined statement of cash flows have been determined based on the aggregated payments made by IGBB entities including service companies. IGBB cash outflows relating to tax are not necessarily representative of tax payments that would be made by IGBB in the future.

·      Transactions and balances between entities included within IGBB have been eliminated.

·      Trading balances between IGBB entities and other ICAP companies have been presented in the combined balance sheet as current receivables and current payables.

·      Assets including intangible assets arising from development expenditures and property and equipment in the combined balance sheet have been determined based on the assets recorded in IGBB companies, excluding assets recorded in IGBB service companies that are attributable to other businesses of ICAP outside IGBB but including assets of £24m shared across all ICAP divisions (the "Shared Assets"). This approach follows how management views assets employed by each ICAP operating segment. The same approach has been adopted to determine the amortisation and depreciation expenses relating to these assets in the combined income statement. The Shared Assets, which as at 31 March 2015 were £24m, are not proposed to be acquired by Tullett Prebon under the terms currently under discussion.

·      The Combined Financial Information does not include borrowings and the finance costs associated with those borrowings. Funding is made available to IGBB as part of central treasury arrangements within ICAP. Therefore the finance costs and liabilities in the IGBB's combined income statement and combined balance sheet are not necessarily representative of finance costs and liabilities that may arise if IGBB was seen in isolation.

Presentation of the combined income statement

IGBB has presented its combined income statement in a columnar format, which enables IGBB to improve the understanding of its results by presenting its trading profit, which is reconciled to profit before tax on the face of the combined income statement.

The column 'acquisitions and disposal costs' includes: any gains, losses or other associated costs on the full or partial disposal of investments, associates, joint ventures or subsidiaries and costs associated with a combination that do not constitute fees relating to the arrangement of financing; amortisation or impairment of intangible assets arising on consolidation; any re-measurement after initial recognition of deferred contingent consideration which has been classified as a liability; any gains or losses on the revaluation of previous interests. The column may also include items such as gains or losses on the settlement of pre-existing relationships with acquired businesses and the re-measurement of liabilities that are above the value of indemnification.

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 IGBB's results. These are shown as 'exceptional items' on the face of the combined income statement.

Foreign currencies

In individual entities, transactions denominated in foreign currencies are recorded at the prior month closing exchange rate between the functional currency and the foreign currency. At the end of each 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 combined 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 resulting from exchange, differences are recognised directly in other comprehensive

income.

On combination, the results of businesses with non-pound sterling functional currencies are translated into the presentational currency of IGBB at the average exchange rates for the year 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 IGBB at the exchange rate prevailing at the end of the reporting period. Exchange differences arising are recognised within other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a non-pound sterling entity are treated as assets and liabilities of that entity and translated into the presentational currency of IGBB at the period closing rate. Where applicable, IGBB has elected to treat goodwill and fair value adjustments arising before the date of transition to IFRS as denominated in the presentational currency of IGBB.

In the combined statement of cash flows, cash flows denominated in foreign currencies are translated into the presentational currency of IGBB at the average exchange rates for the year or at the rate prevailing at the time of the transaction where more appropriate.

Risk management

IGBB as part of its day-to-day operations faces certain risks including liquidity risk, credit risk, financial and market risks including interest rate risk and currency translation risks. These risks are maintained and managed centrally as part of IGBB's risk management framework.

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[1] Excluding the minority interest held by ICAP in the Howe Robinson shipping business.

[2] Fusion is an e-Commerce portal for trading venues, which acts as a front-end service to distribute an increasing number of broker-assisted matching sessions in products with more episodic liquidity.

[3] In January 2015, Scrapbook was launched as an anonymous, session-based e-solution for the corporate bond market. Accessed via ICAP's e-Commerce portal, Scrapbook helps corporate bond traders identify opportunities and manage their positions more efficiently.

 

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