TP ICAP Group Annual Report 2010

FY2010 Annual Report · TP ICAP Group
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Annual Report
2010

Tullett Prebon plc 
Annual Report 2010

Tullett Prebon is one of the world’s 
largest inter-dealer brokers, and 
acts as an intermediary in the 
wholesale ﬁ nancial markets, 
facilitating the trading activities of 
its clients, in particular commercial 
and investment banks.

The business covers the following major product groups: 
Fixed Income Securities and their derivatives, Interest Rate Derivatives, 
Treasury Products, Equities and Energy. The business brokers the 
products on either a ‘Name Give-Up’ basis (where all counterparties to 
a transaction settle directly with each other) or a ‘Matched Principal’
basis. Tullett Prebon does not take any proprietary positions.

Tullett Prebon’s business is conducted through voice broking, where 
brokers, supported by proprietary screens displaying historical data, 
analytics and real-time prices, discover price and liquidity for their 
clients; and through hybrid electronic platforms, which cover asset 
classes that include US, European, Australian and Scandi Repo, US 
Fixed Income, global FX Options, Cash Credit and CDS, and the US & 
European Energy markets.

Tullett Prebon also has an established data sales business, Tullett Prebon 
Information, which collects, cleanses, collates and distributes real-time 
information to data providers, and a smaller Risk Management Services 
business, launched in 2009, which provides clients with post-trade, 
multi-product matching services (including tpMATCH), associated 
market data and independent valuation services.

For more information see 
our corporate website: 
www.tullettprebon.com

Tullett Prebon electronic 
broking products:
For more information see 
our corporate website: 
Hybrid platforms:
www.tullettprebon.com
tpTRADEBLADE – Volatility
tpCREDITDEAL – Credit
tpENERGYTRADE – Energy
tpSWAPDEAL – Rates

Post trade and 
risk management services:
tpMATCH – Rates
tpDELTADEAL – Credit

Pure electronic platforms:
tpREPO – Rates

Financial highlights

Revenue

Operating proﬁ t*

£943.6m £947.7m

£908.5m

£175.1m £170.8m

£152.4m

£753.8m

£654.1m

£131.8m

£114.8m

Tullett Prebon plc 
Annual Report 2010

 02

02  Chairman’s Statement
Business Review

05  Objectives, strategy and risk proﬁ le
06  Regulatory developments
06  Overview
08  Operating review
11  Financial review
15  Risk management
20  Corporate social responsibility 

2006

2007

2008

2009

2010

2006

2007

2008

2009

2010

Operating margin*

Adjusted Proﬁ t before tax**

17.6%

17.5%

18.6%

18.0%

16.8%

£155.4m £157.0m

£139.7m

£110.8m £114.4m

 24

25  Board of Directors
26  Directors’ Report
28  Corporate Governance Report
32  Report on Directors’ Remuneration
39  Statement of Directors’ Responsibilities

2006

2007

2008

2009

2010

2006

2007

2008

2009

2010

Adjusted EPS***

Dividend

47.1p

49.2p

46.4p

15.75p

15.0p

12.75p

12.0p

33.5p

31.6p

2006

2007

2008

2009

2010

2007

2008

2009

2010

* 
** 

 Operating proﬁ t and operating margin for 2008 are stated before exceptional items.
 Adjusted Proﬁ t before tax is stated before non cash gains and losses in net ﬁ nance 
income/(expense), and for 2008 is before exceptional items. 

***   Adjusted EPS is stated before non cash gains and losses in net ﬁ nance income/(expense) net of 

tax, prior year tax items, and tax on capital related items, and for 2008 is before exceptional items.

40

41 

Group
Independent Auditor’s Report to the 
Members of Tullett Prebon plc
42  Consolidated Income Statement
43  Consolidated Statement of 
Comprehensive Income
44  Consolidated Balance Sheet
45  Consolidated Statement of Changes in Equity
46  Consolidated Cash Flow Statement
47  Notes to the Consolidated Financial 

Statements
Company
Independent Auditor’s Report to the 
Members of Tullett Prebon plc

85 

86  Company Balance Sheet
87  Notes to the Financial Statements

 91

92  Shareholder Information

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Tullett Prebon plc 
Annual Report 2010

Chairman’s 
Statement

The ﬁ nancial results for 2010 reﬂ ect the enduring strength of 
the business in challenging market and competitive conditions, 
and the progress that has been made in re-establishing our 
position in North America. 

Results
The results are explained in detail in the Business Review.

In February this year, Fitch upgraded the Company’s credit rating
to BBB with stable outlook.

Revenue for the year of £908.5m was 4% lower than reported for 
2009 mainly due to the effect of the defection of a large number of 
brokers in North America following the raid by a competitor called 
BGC in the second half of 2009. Underlying revenue, adjusting for 
these broker defections, was unchanged compared with the prior 
year. Given that market activity was more subdued overall in 2010 
than in 2009 this was a good performance. 

Operating proﬁ t of £152.4m was 11% lower than for 2009, 
reﬂ ecting a reduction in operating margin to 16.8%. There is some 
operational leverage in the business, and operating margins were 
adversely affected by lower levels of revenue. The operating margin 
was also adversely affected by the additional costs incurred in 
rebuilding the business in North America. This process of rebuilding 
the desks affected is now complete.

After lower ﬁ nancing costs, adjusted proﬁ t before tax of £139.7m 
compares with £157.0m in 2009. With a reduction in the effective 
tax rate to 29.2%, adjusted basic earnings per share were 6% lower 
than last year at 46.4p.

One of the most attractive features of the business is its excellent 
cash ﬂ ow generation. Operating cash ﬂ ow for the year was 
£132.0m and at the end of the year net funds amounted to £67.8m, 
an increase in the year of £58.8m.

Dividends and shareholder returns
The Company’s overall objective is to maximise returns to 
shareholders over the medium to long term, at an acceptable
level of risk. 

The Company is not managed around the short term share price 
but we are mindful of the returns to our shareholders over time. 
Total shareholder return for 2010 was 43% which compares to the 
return from the FTSE 250 index of 28% and the General Financials 
sector index of 28%. This reﬂ ects the continuation of the recovery 
of the share price from a very low level at the end of 2008, but the 
Board remains aware that the earnings multiple currently applied 
to the Company continues to be only single digit. 

The Board recognises that dividends are an important element of 
shareholder return and is recommending a ﬁ nal dividend of 10.5p 
per share, making the total dividend for the year 15.75p per share, 
an increase of 5% on the 15.0p per share paid for 2009. The ﬁ nal 
dividend will be payable on 19 May 2011 to shareholders on the 
register on 26 April 2011.

Financing
The Company is conservatively ﬁ nanced, which we consider is 
appropriate in current market circumstances. Since the year end the 
Company has entered into new £235m bank facilities that mature 
in February 2014 to replace the existing facilities that would have 
matured in January 2012. The facilities include a £115m committed 
revolving credit facility that allows the Company to reduce its gross 
borrowings whilst retaining all of its previous ﬁ nancial ﬂ exibility. 
The Company’s other signiﬁ cant borrowing is through a £141m 
bond that matures in 2016. The Company therefore has an 
attractive debt maturity proﬁ le.

I am also pleased to be able to report that the Company’s two 
deﬁ ned beneﬁ t pension schemes in the UK now both have a 
funding surplus, achieved through a combination of contributions 
and very good investment returns. These schemes, which became 
obligations of the Company through the acquisitions of Tullett and 
Prebon, had signiﬁ cant funding deﬁ cits at the time of acquisition, 
with an accounting deﬁ cit of £37m at the end of 2005. At the end 
of 2010 the accounting surplus in the schemes was £24m.

Strategy and return on capital
Our strategy is to continue to focus on providing services as an 
intermediary in wholesale Over The Counter (‘OTC’) markets, and to 
continue to build a business with the scale and breadth to deliver 
superior performance and returns, whilst maintaining strong 
ﬁ nancial management disciplines.

We will continue to focus on those areas of business in which
we have a strong advantage and the opportunity to make good 
returns. We are investing in the development of the business and in 
broadening its activities as an inter-dealer broker and in the related 
areas of information sales and risk management services. Return on 
capital is a key driver in our investment decisions and together with 
cash ﬂ ow and operating margin is one of the key measures the 
Board uses to assess the quality of the ﬁ nancial performance.

The return on capital employed was 40% in 2010, despite the 
reduction in operating proﬁ t in the year.

Regulatory developments
There have been signiﬁ cant developments during 2010 in the 
process of agreeing and introducing reforms designed to 
strengthen the ﬁ nancial system and to improve the operation
of the ﬁ nancial markets.

Although these developments will result in changes in the way in 
which some OTC trades are executed, reported and settled, we 
believe that the effective operation of the vast majority of 
wholesale OTC markets will continue to need broker support in 
providing liquidity, and that the introduction of the proposals will 
be positive for the business as the role of the intermediary in these 
markets is formalised.

Risk
The risk inherent in our activities is low. As an intermediary, the 
business does not take any trading risk and does not hold principal 
trading positions. The majority of our broking activities are on a 
Name Give-Up basis where the business is not at any time a 
counterparty to the trade, and in Matched Principal activities the 
business only holds ﬁ nancial instruments for identiﬁ ed buyers and 
sellers in matching trades. Such transactions are settled rapidly and 
the business does not retain any contingent risks.

The Board and the Audit Committee, chaired by my colleague 
Richard Kilsby, has continued to thoroughly analyse the risks faced 
by the business and the controls in place to mitigate and manage 
them. This process is helped considerably by the fact that the 
business is well controlled, transparent and prudently managed. 
The Board has good visibility of the ﬁ nancial and operational 

02

performance of the business and actively engages with senior 
executives and internal specialists in understanding how the risks 
are monitored and controlled.

The Business Review includes a detailed analysis of our risks. It is 
not possible to eliminate risk in any business but, provided this one 
continues to be competently managed and led, the nature of its 
trading activities and the controls in place should not give rise to 
unacceptable levels of risk.

Remuneration
The Remuneration Report is set out on pages 32 to 38. The 
Remuneration Committee is chaired by my colleague Rupert Robson.

One of the key areas of focus for the Remuneration Committee 
during the year was the FSA Remuneration Code (the ‘Code’) which 
was issued in ﬁ nal form in December. The main principle of the 
Code is that remuneration policies must be consistent with and 
promote sound and effective risk management. The low risk nature 
of the business is recognised in our classiﬁ cation as a Tier Four ﬁ rm 
for the purposes of the application of the Code.

In my statement last year I noted that after careful review of the 
relationship between remuneration and risk, undertaken with the 
beneﬁ t of external expert advice, we concluded that the risk arising 
from our remuneration policies is low and that we did not believe 
that our approach to remuneration gives rise to an increase in 
risk – indeed since remuneration is performance based and 
losses can be rapidly identiﬁ ed it should discourage risk. We have 
reviewed our remuneration policies and the terms of reference for 
the Remuneration Committee in the light of the Code, in order to 
ensure that we were compliant with the policies and governance 
aspects by the end of the year. No signiﬁ cant changes were required.

Board composition and governance
The Company beneﬁ ts from having a strong and experienced 
Board of directors who work well together in guiding the long term 
success of the Company. The Board has carefully considered its 
composition during the year.

Michael Fallon MP resigned as a non-executive director of the 
Company in June following the general election as a precautionary 
measure in the event that his other commitments might have 
prevented him from serving effectively as a director. When it 
became clear that this would not be an issue, we invited Michael to 
rejoin the Board, and he was re-appointed in September. His depth 
of experience with the Company and the perspective he brings on 
City matters generally and on regulation in particular are very 
valuable to the Board and I am delighted he was able to rejoin us.

My colleague David Clark has been associated with the Tullett 
business as a non-executive director since 2000, and joined the 
Board of Collins Stewart Tullett in 2003 following the acquisition
of the Tullett business. He has therefore served as a director for 
eight years and as Senior Independent Director since June 2007. 
David has kindly agreed to continue to serve as the Senior 
Independent Director until we complete the process of identifying 
his successor.

Tullett Prebon plc 
Annual Report 2010

The Board has continued to consider succession planning 
both to ensure that the Company has developing managers to 
take leadership roles and to plan the succession of the non-
executive team.

With effect from the beginning of this year the Company is subject 
to the new UK Corporate Governance Code. One of the new 
provisions is that all directors of FTSE 350 companies should be 
subject to annual re-election by shareholders. We expect that we 
will transition to adopting this policy for the AGM in 2012 when we 
will also seek shareholder approval to amend the Articles of 
Association to replace the current requirement for directors to 
retire by rotation after three years with a requirement for directors 
to seek annual re-election.

Outlook
The world’s ﬁ nancial markets remain unsettled, and although it is 
difﬁ cult to predict market conditions, it seems reasonable to expect 
that there will continue to be periods of volatility. 

Underlying revenue, adjusting for the impact of the closure of the 
six satellite ofﬁ ces in North America, is 3% higher in the ﬁ rst two 
months of the year than a year ago. This reﬂ ects the beneﬁ t of the 
rebuilding in North America and the continued recovery in Asia. 
We will continue to invest in the development of the business 
across all three regions.

The enduring strength of the business is the valuable service it 
provides to clients through its ability to create liquidity through 
price and volume discovery to facilitate trading in a wide range of 
ﬁ nancial instruments. We believe that the introduction of the 
various regulatory proposals affecting the OTC markets will be 
positive for our business as the proposals formalise the role of the 
intermediary in those markets. The changes in the regulatory 
environment will result in changes in the way in which some trades 
are executed, reported and cleared. We believe that we are well 
positioned to continue to provide a valuable service to clients and 
that our offering can be developed to meet the requirements 
being proposed.

Keith Hamill
Chairman
8 March 2011

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Tullett Prebon plc 
Annual Report 2010

Business Review

In this section:

05  Objectives, strategy and risk proﬁ le
06  Regulatory developments
06  Overview
08  Operating review
11  Financial review
15  Risk management
20  Corporate social responsibility 

04

 
Tullett Prebon plc 
Tullett Prebon plc 
Annual Report 2010
Annual Report 2010

The balance of the revenue is derived from Matched Principal 
activities, where we are the counterparty to both sides of a 
matching trade. To mitigate settlement risk the business 
undertakes transactions on a strict delivery-versus-payment basis. 
In the event of a client default in a Matched Principal trade, our 
exposure is not to the principal amount but to the movement in 
the market value of the underlying instrument, and so our exposure 
becomes a market risk. This risk is mitigated by use of central 
counterparty services and other default risk transfer agreements 
wherever possible, and where such services are not available, by 
taking swift action to close out any position that arises as a result 
of a client default. Once a Matched Principal transaction has
settled (usually 1-3 days after trade date), there is no ongoing risk 
for the business.

Discussion of our risk management governance structure and the 
Group’s risk proﬁ le is included on pages 15 to 19.

Objectives, strategy and risk proﬁ le

The Company’s objective is to maximise returns to shareholders 
over the medium to long term with an acceptable level of risk.

The strategy to achieve this objective is to continue to build a 
business, operating as an intermediary in the wholesale OTC 
ﬁ nancial markets internationally, with the scale and breadth to 
deliver superior performance and returns, whilst maintaining 
strong ﬁ nancial management disciplines.

The key actions to deliver this strategy are:

– 

 Develop and maintain strong pools of liquidity in all major 
ﬁ nancial products and all major ﬁ nancial centres;

–  Attract and retain key revenue producers;

– 

 Development of electronic broking capabilities to support
our voice broking expertise;

–  Focus on improving contribution rates; and

–  Focus on maintaining an appropriately sized support cost base.

As an intermediary, the business does not take trading risk and 
does not hold principal trading positions. The key day to day risks 
faced by the business are counterparty credit risk (which in the 
event of a counterparty default becomes a market risk) and 
settlement risk.

Around three-quarters of the revenue is derived from Name 
Give-Up activities, where the business is not at any time 
counterparty to the trade, and where its exposure to a client is 
limited to outstanding invoices for commission. All activity relating 
to derivatives is undertaken Name Give-Up. The level of invoiced 
receivables is monitored closely, by individual client and in 
aggregate, and there have been very few instances in the past 
few years when invoiced receivables have not been collected.

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05

 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

Regulatory developments

There have been signiﬁ cant developments during 2010 in the 
process of agreeing and introducing reforms designed to 
strengthen the ﬁ nancial system and to improve the operation of 
the ﬁ nancial markets.

In the United States the Dodd-Frank Wall Street Reform and 
Consumer Protection Act was enacted on 21 July 2010 and includes 
legislation governing the regulation and operation of OTC 
derivatives markets. The Act requires the CFTC and SEC to establish 
detailed rules and regulations to apply the principles of the 
legislation by July 2011. Most pertinently for the inter-dealer broker 
industry the CFTC published its proposed rules on the Core 
Principles and Other Requirements for Swap Execution Facilities 
(SEFs) in early January 2011. The CFTC rules governing SEFs are due 
to come into force in the ﬁ nal quarter of 2011 although this could 
be delayed pending the outcome of the comment process.

In Europe, the European Commission tabled proposals on the 
regulation of OTC derivatives markets, commonly known as the 
European Markets Infrastructure Regulation (EMIR), in September 
2010, and in December published a consultation on the review of 
the Markets in Financial Instruments Directive, commonly known 
as MiFID II. It is envisaged that the EMIR and MiFID II reforms will 
come into force during 2013.

We continue to be engaged both directly and through our trade 
associations in responding to these consultation and discussion 
documents, and with assisting the rule setters in understanding 
how the OTC markets currently operate, to help ensure that the 
ﬁ nal regulations achieve their stated objectives and avoid 
unintended negative consequences.

Although the ﬁ nal rules are still to be agreed, focusing on the 
impact on the OTC markets, there are four general themes that 
emerge in these proposals:

– 

 the requirement for market participants to use central 
counterparties (CCPs) to clear certain contracts (to be 
determined by a central authority), with exemptions for 
non-ﬁ nancial counterparties;

– 

 the requirement for trades to be reported to trade repositories;

–  enhanced pre and post trade transparency; and

– 

 the requirement for trades which are settled through a central 
counterparty to be traded through regulated execution venues 
that meet particular criteria in how they operate and how they 
are governed – termed SEFs in the US and ‘qualifying organised 
trading facilities’ in Europe.

We agree with the objectives and support the direction of these 
proposals. We believe that their introduction will be positive 
for our business as the proposals formalise the role of the 
intermediary in the OTC markets. Speciﬁ cally, we would make 
the following observations:

– 

– 

– 

– 

– 

 the increased use of CCPs transfers rather than eliminates risk, 
and as acknowledged by the proposals, the decision as to which 
trades are suitable for CCP clearing needs to be made in 
conjunction with the CCP in the context of their ability to 
manage the risk;

 the increased use of CCPs is likely to increase the number of 
counterparties able to be served by the business;

 access to clearing should be open to all execution venues in 
order to maintain efﬁ ciency and market ﬂ exibility, and this is 
recognised by the proposals;

 the provision of trade information to central repositories would 
be useful for regulators to understand total market and 
individual participant exposures, but too much pre and post 
trade transparency can be harmful to liquidity, reduce market 
efﬁ ciency and undermine the efﬁ cacy of regulation; and

 there are only a very few highly liquid products that are suitable 
for execution solely on pure electronic platforms without 
intervention and support from brokers. The proposed 
requirements for execution venues include the increased use 
of electronic facilitation, but we believe that given the nature 
of the markets, broker support in providing liquidity will remain 
essential to the effective operation of those markets. We believe 
that our hybrid electronic broking model means that we are well 
positioned to continue to provide a valuable service to clients, 
and that our offering can be developed to meet the 
requirements being proposed.

Overview

Although ﬁ nancial markets have remained unsettled and risk 
appetite has started to return, market activity was more subdued 
overall in 2010 than in 2009. There were only a few limited periods 
of sustained higher volatility during the year, most notably in May, 
and in November and the ﬁ rst two weeks in December.

Underlying revenue in 2010 was unchanged compared with the 
prior year which was a good performance in these market 
conditions. The net effect of the broker defections in North 
America, following the raid by BGC in the second half of 2009, 
reduced revenue by 5%. In addition the action taken during the
year to close six satellite ofﬁ ces in North America that made only
a limited contribution to operating proﬁ t reduced revenue by 1%. 
The impact of currency movements on the translation of our 
non-UK operations was slightly favourable. Overall, revenue of 
£908.5m was 4% lower than reported for 2009. Operating proﬁ t
for the year was £152.4m, 11% lower than 2009, with an operating 
margin of 16.8%.

Excellent progress has been made in re-establishing our presence
in all of the major product areas in North America affected by the 
broker defections. Including the 26-strong credit broking team who 
started with the business in early January 2011, broker headcount 
on the affected desks is now largely back to the levels before 
the defections.

06

Tullett Prebon plc 
Annual Report 2010

In addition to the hiring programme, action has been taken to 
reduce costs and complexity in North America including reductions 
in broking support staff and the closure of six satellite ofﬁ ces in the 
region. The ofﬁ ces that have been closed accounted for around 2% 
of Group revenue in 2010, mainly in cash equities and energy 
products, and their closure allows management to focus on the 
two main ofﬁ ces in New Jersey and New York.

The presidential election in Brazil has delayed the ﬁ nal approval
of our acquisition of Convenção, one of the leading and most well 
respected brokers in Brazil, which will facilitate our expansion both 
in the market in Brazil and in other Latin American markets, and
will complement our existing emerging markets activities in
North America.

We have continued to develop our electronic broking capabilities, 
focused on the hybrid electronic broking model, developing 
electronic platforms which complement and support existing
voice broker liquidity. This approach is preferred by both clients
and brokers as it is better suited to the majority of OTC products
for which liquidity will continue to depend on the support of voice 
brokers, and it facilitates the development and introduction of 
trade execution methods and other capabilities as necessary to 
meet regulatory requirements and market demands. We have a 
well established development process with access to market 
leading technology and we are well placed to launch new platforms 
as and when they are required.

The Information Sales business has continued to expand its 
customer base and investment is being made to increase the 
breadth of the data it offers to customers. The post trade Risk 
Management Services business has established a signiﬁ cant 
market share in electronic LIBOR reset matching through the 
tpMATCH platform that was launched at the end of 2009.

Revenue from products supported by electronic platforms, 
together with Information Sales and Risk Management Services 
revenue, continues to account for one-sixth of total revenue, as
no new platforms were launched in 2010. The proportion of that 
revenue derived from voice-only execution continues to reduce, 
with an increasing proportion derived from trades conducted 
through the platforms.

There have been signiﬁ cant developments during 2010 in the 
process of agreeing and introducing reforms designed to 
strengthen the ﬁ nancial system and to improve the operation of 
the ﬁ nancial markets. In the United States the Dodd-Frank Wall 
Street Reform and Consumer Protection Act has passed into law, 
and the European Commission has published proposals on the 
regulation of OTC derivatives markets and on the review of the 
Markets in Financial Instruments Directive. We support the general 
direction of these developments, and more detailed comments on 
them and their potential impact on the business are set out below. 
Whilst these developments will introduce increased regulation of 
OTC derivatives markets and changes in the way in which some 
trades are executed, they reinforce and formalise the role of the 
intermediary in the wholesale markets for ﬁ nancial instruments. 
There are only a very few highly liquid products that are suitable for 
execution solely on pure electronic platforms without intervention 
and support from brokers. We believe that our investments in 
electronic platforms and associated infrastructure, and our hybrid 
electronic broking model, means we are well positioned to respond 
to, and to beneﬁ t from, changes in the way in which OTC markets 
and our customers operate.

The enduring strength of our business is the valuable service it 
provides to clients through its ability to create liquidity through 
price and volume discovery to facilitate trading in a wide range of 
ﬁ nancial instruments. Our strategy is to continue to focus on 
providing services as an intermediary in wholesale OTC markets, 
and to continue to build a business with the scale and breadth to 
deliver superior performance and returns, whilst maintaining 
strong ﬁ nancial management disciplines.

Our key ﬁ nancial and performance indicators for 2010 compared 
with those for 2009 are summarised in the table below.

Reported revenue in 2010 of £908.5m was 5% lower than 2009 at 
constant exchange rates. Year end broker headcount was 1% lower 
at 1,601 but this reﬂ ects the closure of the six satellite ofﬁ ces in 
North America. Adjusting for that action, year end broker 
headcount was 3% higher than last year. Average revenue per 
broker at £540k was 5% lower at constant exchange rates 
reﬂ ecting the generally lower level of activity in the market and
the impact of new hires building up to their full run rate of revenue.

Key ﬁ nancial and performance indicators 
Revenue 
Operating proﬁ t 
Operating margin 

Broker headcount (year end) 
Average revenue per broker (£’000) 
Broker employment costs : broking revenue 
Broking support headcount (year end) 

Change

2010 
£908.5m 
£152.4m 
16.8% 

2009 
£947.7m 
£170.8m 
18.0% 

Reported 
-4% 
-11% 
-1.2% points 

1,601 
540 
58.5% 
679 

1,612 
565 

-1% 
-4% 
58.0%  + 0.5% points 
-5% 

712 

Constant
Exchange
Rates
-5%
-11%

-5%

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Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

Operating proﬁ t of £152.4m was 11% lower than for 2009 with
the operating margin at 16.8% compared to 18.0% for 2009. There 
is some operational leverage in the business and the reduction in 
operating margin primarily reﬂ ects the effect of the reduction in 
revenue in North America. In addition broker compensation as a 
percentage of broking revenue increased by 0.5% points to 58.5% 
due to the increased costs of employment in North America as a 
result of the unlawful poaching raid on the business by BGC, and 
the initial inefﬁ ciencies experienced as the affected desks were 
re-established. The 5% reduction in broking support headcount 
reﬂ ects cost reduction action taken in North America.

Litigation
On 18 March 2010 Judgment was handed down in the legal action 
that the Company had taken in London against BGC, two of BGC’s 
senior directors and 10 former Company brokers, in response to a 
raid by BGC in early 2009 on the London business. The Judge held 
that there was an unlawful conspiracy between BGC and its two 
senior directors to poach the Company’s employees and that the 
Company was and is entitled to a 12 month injunction against all 
but one of the former brokers, and also against BGC, as well as 
ﬁ nancial remedies. The Judge dismissed BGC’s counter-claim 
against the Company. BGC’s appeal against some of the grounds in 
the Judgment was heard in December 2010. On 22 February 2011 
the Court of Appeal handed down its Judgment which rejected all 
the appeals lodged by BGC. The Company is seeking substantial 
damages from BGC. The damages trial has been ﬁ xed for four 
weeks commencing in March 2011.

Legal action continues to be pursued against BGC and former 
employees in the United States. The subsidiary companies in the 
United States directly affected by the raid have brought a claim 
against BGC in arbitration pursuant to the rules of the Financial 
Industry Regulatory Authority (‘FINRA’). The outcome of this case 
is unlikely to be determined before 2012.

A separate action brought by Tullett Prebon plc issued in the United 
States Court for the District of New Jersey against BGC alleging, 
among other causes of action, violations of the New Jersey RICO 
statute has been dismissed, and is under appeal. This case was 
dismissed by the Judge on technical grounds, in part based on the 
pendency of the FINRA arbitration, and which did not consider the 
merits of the claim. This appeal is likely to be heard in 2012.

Legal action also continues to be pursued against former employees 
in Hong Kong and Singapore who have unlawfully terminated their 
employment with the Company in order to join BGC.

Operating review

The tables on pages 09 and 10 analyse revenue and operating 
proﬁ t for 2010 compared with 2009. A signiﬁ cant proportion of 
the Group’s activity is conducted outside the UK and the reported 
results are therefore impacted by the movement in the foreign 
exchange rates used to translate the results of non-UK operations. 
In order to give a more meaningful analysis of performance, 
revenue and operating proﬁ t growth rates for 2010 shown on 
pages 09 and 10 are presented both as reported, and calculated 
using translation exchange rates for 2009 consistent with those 
used for 2010. The following commentary refers to growth rates 
at constant exchange rates.

Revenue in most product areas was higher in 2010 than 2009 
reﬂ ecting the strength of the business in the traditional ‘ﬂ ow’ 
products of foreign exchange and interest rate swaps, and the 
continuing development of the Energy business.

Within Treasury Products, good growth in forward FX in all three 
regions, particularly in emerging market forward FX including 
non-deliverable forwards, offset a decline in revenue from cash 
and deposits broking. FX options revenue was little changed.

Similarly, within Interest Rate Derivatives, revenue growth was 
driven by the strong performance in emerging market interest rate 
derivatives across all three regions. Revenue from G7 interest rate 
swaps and interest rate options was also higher than last year.

The decline in revenue in Fixed Income reﬂ ects the impact of the 
broker defections in North America, together with the decline in 
activity in credit derivatives in both Europe and North America, and 
in agency bonds in North America. The traditional ‘ﬂ ow’ European 
government bond business continued to perform well, boosted 
by the volatility in those markets in periods during the year, and 
the business increased market share in exchange traded futures 
and options.

In Equities, the decline in revenue was primarily driven by 
reductions in activity in cash equities, including the equities 
business acquired with Chapdelaine that was exited as part of the 
satellite ofﬁ ce closures. Revenue from equity derivatives was also 
slightly lower than last year.

Energy markets were relatively buoyant during the year and the 
Energy business in Europe which covers power, gas and oil products 
performed strongly, and offset a decline in revenue from the 
Energy business in North America which is mainly focused on 
power products.

08

Tullett Prebon plc 
Annual Report 2010

The Information Sales business continued to beneﬁ t from 
increasing customer demand for both real time and end of day 
data and from an expansion of the customer base. In addition, the 
post trade Risk Management Services business has established a 
signiﬁ cant market share in electronic LIBOR reset matching through 
the tpMATCH platform that was launched at the end of 2009, and 
made a substantial contribution to revenue. 

Europe
Revenue in Europe was 1% lower than in 2009. Broker headcount in 
Europe at 807 was 2% higher than a year ago but average revenue 
per broker declined slightly reﬂ ecting the more subdued market. 
The business continued to perform well in the traditional ‘ﬂ ow’ 
products of foreign exchange, interest rate swaps and government 
bonds, with revenue held back by slower market activity in the 
‘volatility’ products of FX and interest rate options, and credit and 
equity derivatives.

In Fixed Income the business maintained its leading position in 
government bonds and increased market share in exchange traded 
futures and options, but did experience lower activity in the credit 
markets for corporate bonds and particularly credit derivatives. 
Despite the loss of revenue from the cash, forward FX and interest 
rate swap desks affected by the BGC raid in the ﬁ rst half of 2009, 
revenue in Treasury Products and Interest Rate Derivatives was 
little changed with strong growth in emerging markets products 
(Eastern Europe, Russia, Turkey and South Africa). The Equities 
business, the smallest product group in Europe, suffered from 
lower activity in equity derivatives which offset growth in revenue 
from the development of the alternative investments desk. The 
Energy business continued to beneﬁ t from active markets and 
delivered strong revenue growth in all three main product areas 
of oil, power and gas.

North America
In North America, revenue fell by 19%. Almost all this decline was 
due to lower revenue from those desks affected by the broker 
defections following the raid on the business by BGC in the second 
half of 2009, and to the reduction in revenue from desks in the six 
satellite ofﬁ ces that were closed during the year.

Underlying revenue in North America, excluding the affected desks 
and the impact of the ofﬁ ce closures, was 3% lower than last year, 
reﬂ ecting slightly lower average revenue per broker with broker 
headcount little changed. Good revenue growth in Treasury 
Products and Interest Rate Derivatives, particularly from Latin 
American emerging markets products, was offset by weaker 
markets in agency bonds and credit derivatives in Fixed Income.

Year end broker headcount in North America at 437 was 7% lower 
than at the end of 2009, reﬂ ecting the 52 brokers who left the 
business as a result of the closure of the six satellite ofﬁ ces. 
Adjusting for this, year end broker headcount was 5% higher 
than last year reﬂ ecting the rebuilding of the desks affected 
by the raid in 2009. Including the 26-strong credit broking 
team who joined the business at the beginning of 2011, broker 
headcount on the affected desks is now largely back to the levels 
before the defections.

Revenue from the desks in the ofﬁ ces that were closed during 
the year accounted for around 7% of the total revenue in North 
America in 2010, mainly in Equities and Energy.

Revenue by product group 
Treasury Products 
Interest Rate Derivatives 
Fixed Income 
Equities 
Energy 
Information Sales and Risk Management Services   

Revenue by region 
Europe 
North America 
Asia Paciﬁ c 

Change

Reported 
+4% 
+7% 
-21% 
-9% 
+5% 
+31% 
-4% 

Change

Reported 
-1% 
-19% 
+30% 
-4% 

Constant
Exchange
Rates
+2%
+5%
-21%
-9%
+5%
+31%
-5%

Constant
Exchange
Rates
-1%
-19%
+22%
-5%

2009 
£m 
238.9 
192.0 
317.1 
74.0 
100.6 
25.1 
947.7 

2009 
£m 
542.6 
318.0 
87.1 
947.7 

2010 
£m 
248.4 
205.0 
249.3 
67.2 
105.8 
32.8 
908.5 

2010 
£m 
536.1 
259.0 
113.4 
908.5 

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Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

Asia
Revenue increased by 22% in Asia. Year end broker headcount 
of 357 was little changed on last year, with average revenue per 
broker up by 13% reﬂ ecting the strong recovery of market activity 
in the region due to the return of risk appetite and capital deployed 
by clients. The increased revenue in 2010 also reﬂ ects the 
development of the Risk Management Services business, much 
of which is operated from Singapore.

Much of the business in Asia is focused on Treasury Products and 
Interest Rate Derivatives and revenue grew strongly in these areas 
reﬂ ecting the return of liquidity in regionally based products and 
market share gains. The business also beneﬁ ted from investment 
in the development of other products, including the oil products 
desks in Singapore and the equity derivatives activity in Tokyo.

Although the three largest centres in the region, Singapore, Hong 
Kong and Tokyo, represented over 80% of the region’s revenue, the 
business is proﬁ tably developing scale in other Asia Paciﬁ c ﬁ nancial 
centres, including the joint venture in Shanghai. 

Operating proﬁ t
Operating proﬁ t and operating margin in Europe were both 
slightly lower than last year, primarily reﬂ ecting the small decline 
in revenue. Broker employment costs as a percentage of revenue 
were little changed compared with 2009, and support costs were 
also in line with last year.

Operating proﬁ t in North America nearly halved and the operating 
margin reduced to 8.7%. The reduction in proﬁ tability reﬂ ects 
the reduction in the scale of the business following the broker 
defections, as although support costs in the region reduced, they 
still represented a higher percentage of revenue in 2010 than in 
2009. Broker employment costs as a percentage of revenue were 
also higher than a year ago reﬂ ecting the increased costs of 
employment in the light of competitor action and the initial 
inefﬁ ciencies experienced as new hires build up to their full run 
rate of revenue.

The business in Asia Paciﬁ c has a relatively high level of operational 
gearing, and the operating margin in the region more than doubled 
with operating proﬁ t increased to £9.2m, primarily due to the 
beneﬁ t of increased revenue. Broker employment costs as a 
percentage of revenue were also lower than last year as the 
inefﬁ ciencies arising from the lower levels of revenue in 2009 
were reduced, and support costs were little changed year on year.

Change

Reported 
-2% 
-49% 
+188% 
-11% 

Constant
Exchange
Rates
-2%
-49%
+168%
-11%

2010 
£m 
120.7 
22.5 
9.2 
152.4 

2010 
22.5% 
8.7% 
8.1% 
16.8% 

2009 
£m 
123.2 
44.4 
3.2 
170.8 

2009
22.7% 
14.0%
3.7% 
18.0%

Operating proﬁ t by region 
Europe 
North America 
Asia Paciﬁ c 
Reported 

Operating margin by region 
Europe 
North America 
Asia Paciﬁ c 

10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

2010 
£m 
908.5 
152.4 
(12.7) 
139.7 
(40.8) 
1.5  
(0.6) 
99.8 

2009
£m
947.7
170.8
(13.8)
157.0
(53.0)
1.8 
(0.6)
105.2

214.9m 
46.4p 

213.9m
49.2p

2010 
£m 
139.7 
1.6 
141.3 

2010 
£m 
99.8 
1.6 
(0.5) 
1.6 
6.0 
108.5 

2009
£m
157.0
(0.5)
156.5

2009
£m
105.2
(0.5)
0.2
5.9
– 
110.8

Financial review

The results for 2010 compared with those for 2009 are shown in the table below: 

Revenue 
Operating proﬁ t 
Finance expense 
Adjusted Proﬁ t before tax1 
Tax 
Associates 
Minority interests 
Adjusted Earnings2 

Weighted average number of shares 
Adjusted Earnings per share 

Note 1. Adjusted PBT reconciles to reported PBT as follows: 
Adjusted Proﬁ t before tax 
Non cash ﬁ nance income/(expense) 
Reported Proﬁ t before tax 

Note 2. Adjusted Earnings reconciles to reported Earnings as follows: 
Adjusted Earnings 
Non cash ﬁ nance income/(expense) 
Deferred tax on non cash ﬁ nance (expense)/income 
Prior year tax items 
Tax on capital related items 
Reported Earnings 

Finance expense
The net ﬁ nance expense comprises the interest payable on the 
ﬁ xed rate bonds, the interest payable on the ﬂ oating rate bank 
debt, the interest income on cash deposits, and the amortisation of 
debt issue costs which are paid upfront and charged to the income 
statement over the term of the debt to which they relate.

The reduction in ﬁ nance expense in 2010 compared to 2009 
reﬂ ected the full year beneﬁ t of the lower interest rates on the 
bonds which took effect in July and August 2009, and lower 
interest on the bank debt due to lower interest rates and the lower 
average amount outstanding, partly offset by the lower interest 
receivable on cash balances.

Non cash ﬁ nance income/(expense) items are excluded from 
adjusted proﬁ t before tax and adjusted earnings. In 2010 and 2009 
these items comprised only the expected return and interest on 
pension scheme assets and liabilities. In 2010 these pension related 
items netted to a credit of £1.6m; in 2009 these items netted to a 
charge of £0.5m.

Tax
The effective rate of tax on adjusted proﬁ t before tax was 29.2% 
(2009: 33.8%). The reduction in the effective rate compared with 
2009 results primarily from the increase in the proportion of 
taxable proﬁ ts generated in the UK and Asia relative to the US.

Tax charges and credits arising on non cash ﬁ nance income/
(expense) items, prior year tax items and tax charges and credits
on capital related items are excluded from the calculation of the 
effective tax rate on adjusted proﬁ t before tax, as they do not 
relate to current trading. Prior year tax items primarily reﬂ ect the 
release of tax provisions made in previous years as tax matters 
are settled. The tax credit on capital related items reﬂ ects the tax 
beneﬁ t arising in the US from the write down of goodwill under 
US GAAP in the local accounts. The statutory effective rate of tax, 
including these items was 23.8% (2009: 30.0%).

Adjusted Basic EPS
Adjusted Basic EPS is calculated using adjusted earnings shown in 
the table above and the undiluted weighted average number of 
shares in issue of 214.9m (2009: 213.9m).

11

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Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

Exchange and hedging
The income statements of the Group’s non-UK operations are 
translated into sterling at average exchange rates. The most 
signiﬁ cant exchange rates for the Group are the US dollar, the Euro, 
the Singapore dollar and the Japanese Yen. The Group’s current 
policy is not to hedge income statement translation exposure.

The balance sheets of the Group’s non-UK operations are translated 
into sterling using year end exchange rates. The major balance sheet 
translation exposure is to the US dollar. Since October 2008 the 
Group’s policy is not to hedge balance sheet translation exposure.

Average and year end exchange rates used in the preparation of the 
ﬁ nancial statements are shown below:

US dollar 
Euro 
Singapore dollar 
Japanese Yen 

Average 

Year End

2010 
$1.55 
€1.17 
S$2.12 
¥136 

2009 
$1.55 
€1.12 
S$2.26 
¥145 

2010 
$1.57 
€1.17 
S$2.01 
¥127 

2009
$1.61
€1.13
S$2.27
¥150

Cash ﬂ ow and ﬁ nancing
Cash ﬂ ow before dividends and debt repayments and draw downs is summarised in the table below:

2010 
£m 
152.4 
(0.9) 
9.4 
160.9 

(12.4) 
(16.5) 
132.0 

– 
(11.5) 
– 
(27.5) 
(8.8) 
1.7 
1.1 
(2.4) 
1.7 
86.3 

2009
£m
170.8
(0.4)
8.2
178.6

(9.4)
(31.3)
137.9

(6.8)
(11.7)
(10.0)
(30.4)
(8.1)
1.5
1.2
(3.5)
–
70.1

Operating proﬁ t 
Share-based compensation 
Depreciation and amortisation 
EBITDA 

Capital expenditure (net of disposals) 
Working capital 
Operating cash ﬂ ow 

Exceptional items – restructuring cash payments 
Interest 
Derivative ﬁ nancial instruments 
Taxation 
Deﬁ ned beneﬁ t pension scheme funding 
ESOT transactions 
Dividends received from associates/(paid) to minorities 
Acquisitions/investments 
Sale of investments 
Cash ﬂ ow 

12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

In 2010 the Group again delivered a substantial operating cash 
ﬂ ow, representing 87% of operating proﬁ t. The working capital 
outﬂ ow of £16.5m in 2010 reﬂ ects the increase in the broker 
sign-on prepayment balance, as new sign-on payments during the 
year were higher than the amortisation. Net capital expenditure 
of £12.4m relates to investment in electronic platforms and 
associated infrastructure, and ofﬁ ce ﬁ t out costs including the 
new disaster recovery centre in Piscataway, New Jersey, and was 
slightly higher than the £9.4m of depreciation and amortisation.

The exceptional items cash payments of £6.8m in 2009 represent 
the completion of the cash outﬂ ows arising from the cost 
reduction actions taken at the end of 2008.

Interest payments in 2010 were in line with the proﬁ t and loss 
charge adjusted for the amortisation of debt issue costs.

The cash ﬂ ow from derivative ﬁ nancial instruments in 2009 related 
to the maturity of the cross currency interest rate swap, which until 
October 2008 was designated as a net investment hedge of part of 
the US dollar denominated net assets, and of the forward FX 
contract executed at that time to close out the FX position inherent 
in the swap.

Tax payments in 2010 were lower than in 2009 reﬂ ecting the lower 
tax charge in the year, particularly in the US, where we also received 
a refund of tax paid in the prior year.

During 2010 and 2009 the Group made regular contributions to 
its deﬁ ned beneﬁ t pension schemes to match the beneﬁ ts paid 
and the administration expenses. In addition, in each of January 
2010 and January 2009 contributions of £4.5m were made under 

agreements with the trustees of the schemes aimed at eliminating 
the actuarial deﬁ cits by 31 December 2010. 

Expenditure on acquisitions and investments in 2010 comprised 
the deferred consideration payments relating to the acquisitions of 
Primex and Aspen, and the initial consideration for the acquisition 
of OTC Valuations.

During the year the Group sold its investment in a software 
development company for initial cash consideration of £1.7m.

At 31 December 2010 the Group held cash, cash equivalents and 
other ﬁ nancial assets of £425.7m which exceeded the debt 
outstanding by £67.8m.

At 31 December 2010 the Group’s outstanding debt comprised 
£141.1m Eurobonds due July 2016, £8.5m Eurobonds due August 
2014, £210m drawn under an amortising bank term loan facility, 
and a small amount of ﬁ nance leases. The term loan was subject 
to a repayment of £30m in January 2011 with £180m maturing in 
January 2012. The Group also had a committed £50m revolving 
credit facility that remained undrawn throughout the year.

On 8 February 2011 the Group entered into £235m of new bank 
facilities, comprising a £120m amortising term loan facility, and 
a committed £115m revolving credit facility, which replace the 
previous bank facilities discussed above. The term loan is subject to 
repayments of £30m in each of February 2012 and February 2013 
with £60m maturing in February 2014. The committed revolving 
credit facility, which has not been drawn, will also mature in 
February 2014. 

The movement in cash and debt is summarised below:

At 31 December 2009 
Cash ﬂ ow 
Dividends 
Debt repayments/draw downs 
Effect of movement in exchange rates 
Amortisation of debt issue costs 
At 31 December 2010 

Cash 
£m 
396.2 
86.3 
(32.7) 
(30.4) 
6.3 
– 
425.7 

Debt  
£m 
(387.2) 
– 
– 
30.4 
0.1 
(1.2) 
(357.9) 

Net
£m
9.0
86.3
(32.7)
–
6.4
(1.2)
67.8

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Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

Pensions
The Group has two deﬁ ned beneﬁ t pension schemes in the UK 
which were acquired with Tullett and Prebon, both of which are 
closed to new members and future accrual.

During 2010 the value of the schemes’ assets has increased
from £137.7m to £169.5m reﬂ ecting strong investment returns
and the additional contributions. Under IAS 19 the value of the 
schemes’ liabilities have increased from £139.0m to £145.9m, 
resulting in a net surplus at 31 December 2010 of £23.6m 
(2009: net deﬁ cit £1.3m).

Triennial actuarial valuations of both schemes were undertaken 
during 2010. These actuarial valuations concluded that each 
scheme has a signiﬁ cant funding surplus. As a result, the Group 
agreed with the trustees of each scheme that, with effect from 
February 2011 until the next actuarial valuation, contributions 
will be equal to the schemes’ administration expenses.

Return on capital employed
The return on capital employed in 2010 was 40% (2009: 47%) 
which has been calculated as operating proﬁ t divided by average 
shareholders’ funds adding back cumulative amortised goodwill 
and acquisition related reorganisation costs net of tax, less net 
funds, and adjusting for the IAS 19 pension surplus or deﬁ cit.

Regulatory capital
The Group’s lead regulator is the Financial Services Authority (‘FSA’). 
The Group applied for and received a waiver from the FSA in 
relation to the Consolidated Supervision requirements of the 
Capital Requirements Directive effective from 1 January 2007 to 
31 December 2011. 

Under the terms of the waiver, the Group is subject to the ‘ﬁ nancial 
holding company test’ whereby the aggregate ﬁ nancial resources 
of the Group are calculated by reference to the capital and reserves 
of the parent company, Tullett Prebon plc, and the Group’s 
aggregated ﬁ nancial resources requirement is calculated as the 
sum of the requirements of all the Group’s subsidiaries under 
Pillar 1 of the FSA framework. 

The Group’s regulatory capital headroom at 31 December 2010 
was £461m (2009: £358m).

The Board is responsible for approving the Group’s Internal Capital 
Adequacy Assessment Process (‘ICAAP’) required by the FSA. 
The ICAAP formally documents that the Group’s capital resources 
are sufﬁ cient to cover the Pillar 1 requirements and assesses 
whether any additional capital is required to cover those 
additional risks identiﬁ ed during the Pillar 2 review. The ICAAP 
documentation is regularly updated and formally approved by 
the Board at least annually. 

Information disclosure under Pillar 3 is available on the Group’s 
website www.tullettprebon.com.

Many of the Group’s broking entities are also regulated on a ‘solo’ 
basis, and are obliged to meet the regulatory capital requirements 
imposed by the local regulator of the jurisdiction in which they 
operate. The Group maintains a signiﬁ cant excess of ﬁ nancial 
resources in such entities. 

14

Tullett Prebon plc 
Annual Report 2010

Risk management

Risk management governance structure
Introduction
Risk management is embedded throughout the business, with 
the overall risk appetite and risk management strategy being 
approved by the Board, and then propagated down throughout 
the business as appropriate. The principal elements of the Group’s 
risk management and governance structure are set out below. 

The systems of internal control operated by the Group are designed 
to manage rather than eliminate the risk of failure to achieve 
business objectives, and can only provide reasonable and not 
absolute assurance against material misstatement or loss.

The Board
The Board is responsible for setting the Group’s risk appetite, 
ensuring that it has an appropriate and effective risk management 
framework, and for monitoring the ongoing process for identifying, 
evaluating, managing and reporting the signiﬁ cant risks faced by 
the Group. 

Risk assessment framework
The Group identiﬁ es, assesses and monitors risk through the use 
of a Risk Assessment Framework, which is approved by the Board.

The Risk Assessment Framework identiﬁ es risks within eight risk 
categories: Market Risk, Credit Risk, Operational Risk, Strategic and 
Business Risk, Governance Risk, Regulatory, Legal and Human 
Resources Risk, Reputational Risk and Financial Risk. The risks within 
each area are analysed, mitigating factors assessed, and relevant 
controls identiﬁ ed. The risks are then graded for their expected 
severity and probability, and assigned a risk rating. Action is taken 
by the Board to manage the key risks, as appropriate, to safeguard 
the Group and the interests of its shareholders.

The Risk Assessment Framework is regularly updated and is 
reviewed at least twice each year by the Board, with particular 
focus on high priority risks. The Risk Assessment Framework is 
used to identify the risks to be considered in the Internal Capital 
Adequacy Assessment Process (‘ICAAP’) and to determine the 
scope of the internal audit plan, as well as determining the 
frequency and content of the ongoing risk reporting provided 
by the Group Risk Control function.

Group Risk Management Principles and Policies
The Group Risk Management Principles and Policies document 
sets out the principles and policies adopted by the Board to 
manage the various risks to which the Group is exposed, as 
identiﬁ ed in the Risk Assessment Framework, and allocates the 
responsibility for implementing each policy to speciﬁ c members 
of senior management.

ICAAP
The Board is responsible for approving the Group’s ICAAP, as required 
by the FSA. The Group is required to ensure that it maintains overall 
ﬁ nancial resources, including both capital resources and liquidity 
resources, which are adequate, both as to amount and quality, to 
ensure that there is no signiﬁ cant risk that its liabilities cannot be 
met as they fall due. The ICAAP formally documents the assessment 
as to whether the Group’s capital and liquidity resources are 
sufﬁ cient to cover the risks identiﬁ ed in the Risk Assessment 
Framework, and incorporates the results of the liquidity and 
capital resources stress tests undertaken in accordance with FSA 
requirements. The ICAAP documentation is regularly updated and 
formally approved by the Board at least annually. 

Executive management
Risk management and the operation of the internal control systems 
within the Group are primarily the responsibility of the executive 
directors and senior management. These individuals are permitted 
commercial independence and ﬂ exibility within parameters agreed 
by the Board to ensure that risks are clearly owned and managed on 
a day to day basis and that systems of control operate effectively.

Under the overall supervision of the Board and the Chief Executive, 
the management team continues to implement their business 
development plans and monitor operational projects. The 
executive directors monitor activities on a daily basis and ensure 
that appropriate controls are exercised over the Group’s operations. 
The Board considers the monthly management accounts, budgets 
and plans and discusses any issues arising.

Group Risk Control
The Group Risk Control function is responsible for developing 
policies and monitoring mechanisms which ensure that the Group 
operates in accordance with the Board’s risk appetite and for 
maintaining the Group Risk Management Policies and Procedures 
document. The Group Risk Control function also provides daily and 
monthly reports to senior management which are reviewed by the 
Group Treasury and Risk Committee. The Group Treasurer and Head 
of Risk Control reports to the Finance Director, and has direct access 
to and dialogue with, the Chairman of the Audit Committee. 

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15

 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

The members of the Group Treasury and Risk Committee are the 
Chief Executive, who acts as chairman, the Finance Director and the 
Group Treasurer and Head of Group Risk Control. The minutes of 
the Group Treasury and Risk Committee are circulated to the Board.

Risk reporting
The embedded risk management processes ensure that the Group 
Treasury and Risk Committee, executive directors and senior 
management receive appropriate information and exception 
reports to comply with the Group’s risk management principles 
and policies, and identify any new risks or exposures that may 
arise. These include reports detailing the current status of existing 
controls, audits, loss events, and any required action plans to 
remedy any identiﬁ ed shortcomings in the control environment. 

Compliance
The Group’s lead regulator is the FSA. The Group’s broking 
subsidiaries are categorised as either Limited Activity Firms (for 
subsidiaries that undertake any Matched Principal or exchange 
traded ‘give-up’ business) or Limited Licence Firms (for subsidiaries 
that undertake only Name Give-Up business).

The Group’s Compliance Departments monitor compliance with 
the various regulatory requirements to which the Group is subject, 
including those imposed by the UK regulatory regime and also 
those imposed by the regulatory framework of the other 
jurisdictions in which the Group operates. The compliance ofﬁ cers 
are in regular contact with the executive directors and compliance 
reports are made to the Board on a regular basis.

Internal audit
PricewaterhouseCoopers were appointed to act as the Group’s 
internal auditor in December 2007, following an extensive review 
of internal audit arrangements by the Audit Committee.

The objectives of Internal Audit are to assess the effectiveness of 
the Group’s risk management, internal controls and governance 
process; whether operational and ﬁ nancial controls are appropriate 
and consistently applied; the effectiveness of internal controls 
for the safeguarding of assets; the reliability and integrity of 
management information; and the adequacy of processes to 
ensure compliance with applicable laws and regulations.

Internal Audit work during 2010 covered the full ‘audit universe’ 
within the Group at different levels of intensity based upon the 
results of a risk assessment exercise carried out and agreed with
the Audit Committee in December 2009. The work included site 
visits and meetings with senior management, both at Group level 
and in each of the geographic regions in which Tullett Prebon 
operates. The ﬁ ndings of all audits undertaken are reported to the 
Audit Committee and, where appropriate, action taken by 
management in response to them is tracked and reported to the 
Audit Committee. The Audit Committee approved the internal 
audit plan for 2011 at its December 2010 meeting.

Business initiative management process
The Business Initiative Proposal (‘BIP’) process is a core risk 
mitigation process used throughout the Group to identify, assess 
and manage the potential risks arising in relation to any new 
business initiative and the potential impact the new business could 
have on Tullett Prebon’s capital resources and liquidity resources. 

A BIP proposal must be submitted for all signiﬁ cant business 
changes, whether this is the introduction of a new product or 
business line, or a material modiﬁ cation to an existing business line. 
Each BIP requires authorisation by the appropriate member of 
senior management. 

Group risk proﬁ le
The Group’s Risk Assessment Framework categorises the risks 
facing the Group into eight categories: Market Risk, Credit Risk, 
Operational Risk, Strategic and Business Risk, Governance Risk, 
Regulatory, Legal and HR Risk, Reputational Risk and Financial Risk.

All risk management sections are unaudited except those relating 
to market risk, credit risk and ﬁ nancial risk, which form part of the 
Group’s IFRS 7 ‘Financial Instruments: Disclosures’. 

1. Market risk
Market risk is the vulnerability of the Group to movements in the 
value of ﬁ nancial instruments. The Group does not take trading risk 
and does not hold proprietary ﬁ nancial positions. Consequently, 
the Group is exposed to market risk only in relation to incidental 
positions in ﬁ nancial instruments arising as a result of the Group’s 
failure to match clients’ orders precisely. Such positions are valued 
and measured from trade date on a daily mark-to-market basis.

16

Tullett Prebon plc 
Annual Report 2010

Policies and procedures exist to reduce the likelihood of such trade 
mismatches and, in the event that they arise, the Group’s policy is 
to close out such balances immediately. All market risk arising 
across the Group is identiﬁ ed and monitored on a daily basis.

2. Credit risk
The credit risk faced by the Group consists of counterparty 
credit risk (as opposed to issuer risk), and principally arises from 
the following:

–  Pre-settlement risk arising from Matched Principal broking;

–  Settlement risk arising from Matched Principal broking; 

– 

 Cash deposits held at banks and money market 
instruments; and

–  Name Give-Up brokerage receivables.

In addition to counterparty risk, the Group is also exposed to 
concentration risk in the level of exposure to counterparties, 
representing the aggregate of the exposures arising from Name 
Give-Up brokerage receivables, unsettled Matched Principal 
transactions or cash on deposit.

Pre-settlement risk arises in the Matched Principal broking 
business in which Group subsidiaries interpose themselves as 
principal to two (or more) contracting parties to a Matched 
Principal transaction and as a result the Group is at risk of loss 
should one of the parties to a transaction default on its obligations. 

The risk is that the counterparty may default prior to settlement 
date, in which case the Group would have to replace the defaulted 
contract in the market. This is a contingent risk in that the Group 
will only suffer loss if the market price of the securities has moved 
adversely to the trade price over the period between the trade and 
ﬁ nal settlement date.

Counterparty exposures are kept under constant review and the 
Group will take steps to reduce counterparty risk where market 
conditions require. Particular attention is paid to more illiquid 
markets where the price movement (and hence the mark-to-market 
credit exposure) is more volatile, such as trading in GDR, ADR and 
emerging markets instruments.

Settlement risk is the risk that on settlement date a counterparty 
defaults on its contractual obligation to make payment for a 
securities transaction after the corresponding value has been 
paid away by the Group. Unlike pre-settlement risk the exposure 
here is to the full principal value of the transaction. 

In practice the Group is not exposed to this risk as settlement is 
almost invariably effected on a ‘Delivery-versus-Payment’ (‘DvP’) 
basis. ‘Free of payment deliveries’ (where an immediate exposure 
arises due to the Group’s settling its side of the transaction whilst 
receipt of the countervalue is at some future date) occur very 
infrequently and may only be effected under the application of 
stringent controls.

Cash deposits – The Group is exposed to counterparty risk in 
respect of cash deposits held with ﬁ nancial institutions. The vast 
majority of the Group’s cash deposits are held with highly rated 
clearing banks and settlement organisations (as set out in the 
Credit risk analysis in Note 25 to the Accounts). 

As with trading counterparties, cash deposit counterparty 
exposures and limits are kept under constant review and steps 
taken to reduce counterparty risk where market conditions require. 

Name Give-Up brokerage receivables – The majority of 
transactions brokered by the Group are on a Name Give-Up basis, 
where the Group acts as agent in arranging the trade and is not a 
counterparty to the transaction. Whilst the Group does not suffer 
any exposure in relation to the underlying instrument brokered 
(given that the Group is not a principal to the trade), it is exposed 
to the risk that the client fails to pay the brokerage it is charged. 
Debtors arising from Name Give-Up brokerage are closely 
monitored by senior management. 

Concentration risk – The possibility of concentration risk exists 
in the level of exposure to counterparties. The Group controls its 
credit exposure to counterparties and groups of counterparties 
through the application of a system of counterparty credit limits 
(based on the mark-to-market exposure for Matched Principal 
trades, outstanding brokerage receivables for Name Give-Up 
trades, and amount on deposit for cash deposit exposure). 
Counterparty limits are set by the European and North American 
Credit Committees according to a methodology agreed by the 
Group Treasury and Risk Committee. 

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17

 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

3. Operational risk
Operational risk is the risk of loss resulting from inadequate or 
failed internal processes, people activities, systems or external 
events. Operational risk covers a wide and diverse range of risk 
types, and the overall objective of the Group’s approach to 
operational risk management is not to attempt to avoid all 
potential risks, but proactively to identify and assess risks and risk 
situations in order to manage them in an efﬁ cient and informed 
manner. Examples of operational risk include:

– 

– 

– 

– 

 IT systems failures, breakdown in security or loss of data 
integrity;

 Failure or disruption of a critical business process, through 
internal or external error or event;

 Failure or withdrawal of settlement and clearing systems, errors 
in instructions;

 Events preventing access to premises, telecommunications 
failures or loss of power supply which interrupt business 
activities; and

–  Broker errors.

Operational risks are managed through a combination of effective, 
relevant and proportional control processes and experienced 
managers who are alert to the risks involved in the business they 
process. As with credit and market risk the policy of devolved 
responsibility within the Group places the initial emphasis for the 
management of operational risks on the senior management of 
each entity and business unit. Finance, Operations, Compliance,
Risk Control (reporting), Internal Audit, and the administrative 
functions support management through a segregated review 
process of the controls.

4. Strategic and business risk
The Group operates in an environment characterised by intense 
competition, rapid technological change and a continually evolving 
regulatory framework. Failure to adapt to changing market 
dynamics, customer requirements or the way OTC markets and their 
participants are regulated constitutes a signiﬁ cant long term risk.

The Group’s strategies for managing and mitigating these risks 
include geographic and product diversiﬁ cation, the continued 
development of new products and the Group’s electronic broking 
capability, and where appropriate, acquisitions. Regular 
management review of results and key performance indicators, 
competitor benchmarking and active management of client 
relationships all act as controls on the Group’s strategic and 
business risk.

In addition, the Group maintains active dialogues with regulators 
and other competent authorities responsible for the drafting and 
implementation of relevant regulatory reforms, to ensure that any 
changes to the regulation and operation of OTC markets achieve 
their stated objectives and avoid unintended negative 
consequences.

5. Governance risk
Governance risk is the risk of loss or damage to the business arising 
as a result of a failure of management structures or processes. This 
includes failure to adhere to applicable corporate governance 
requirements (such as those imposed by the UK Corporate 
Governance Code), a failure to ensure adequate succession to key 
management positions, or the inappropriate use of authority and 
inﬂ uence by current or former senior members of staff. 

The risk of accounting error or fraud is mitigated by the strong 
control environment which exists within the Group, in particular 
the involvement of the Audit Committee, the Internal Audit 
function and the Group Treasury and Risk Committee. Succession 
planning within the Group is overseen by the Board.

6. Regulatory, legal and human resource risk
This risk concerns the potential loss of value due to regulatory 
enforcement action (such as for breaches of conduct of business 
requirements or market abuse provisions); the possible costs and 
penalties associated with litigation; and the possibility of a failure 
to retain and motivate key members of staff. The Group also faces 
the risk that changes in applicable laws and regulations could have 
a serious adverse impact on the business. 

The Group’s lead regulator is the FSA, but the Group is also subject 
to the requirements imposed by the regulatory framework of the 
other jurisdictions in which the Group operates. The Group’s 
compliance ofﬁ cers monitor compliance with applicable 
regulations and report regularly to the Board. The Group’s legal 
department oversees contracts entered into by Group companies, 
and manages litigation which arises from time to time. Salaries, 
bonuses and other beneﬁ ts are designed to be competitive and the 
Group’s HR function monitors staff turnover on an ongoing basis.

7. Reputational risk
Reputational risk is the risk that the Group’s ability to do business 
might be damaged as a result of its reputation being tarnished. 
Clients rely on the Group’s integrity and probity. The Group has 
policies and procedures in place to manage this risk to the extent 
possible, which include conduct of business rules, procedures for 
employee hiring and the taking on of new business.

18

Tullett Prebon plc 
Annual Report 2010

8. Financial risk
The nature and scope of the Group’s operations mean that it is 
exposed to a number of ﬁ nancial risks, principally liquidity risk 
(including the risk of being required to fund margin calls and failed 
settlements), interest rate risk, currency risk, taxation risks, and 
pension obligation risk.

funding. The ﬁ rm is rated Investment Grade by both Moody’s and 
Fitch with issuer ratings of ‘Baa3 Stable’ and ‘BBB Stable’ 
respectively.

Further details of the Group’s borrowings and cash are provided in 
Notes 21, 25 and 31.

Liquidity risk – The Group seeks to ensure that it has access to an 
appropriate level of cash, other forms of marketable securities or 
funding to enable it to ﬁ nance its ongoing operations, proposed 
acquisitions and any other reasonable unanticipated events, on 
cost effective terms. Cash and cash equivalent balances are held 
with the primary objective of capital security and availability, with 
a secondary objective of generating returns. Funding requirements 
are monitored by the Group Risk and Treasury Committee.

The Group is exposed to potential margin calls from clearing 
houses and correspondent clearers, both in the UK and US. 
Following a major project to mitigate its exposure to margin calls 
completed in 2009, the Group has not been subjected to any 
signiﬁ cant margin call requirements. However, the Group remains 
alert to the risk of large margin calls in the future. 

As a normal part of its operations, the Group has a liquidity risk 
through the risk of being required to fund transactions that fail to 
settle on the due date. From a risk perspective, the most 
problematic scenario concerns ‘fail to deliver’ transactions, namely 
where the business has received a security from the selling 
counterparty (and has paid cash in settlement of the same) but is 
unable to effect onward delivery of the security to the buying 
counterparty. 

Such settlement ‘fails’ give rise to a funding requirement, namely 
the cost of funding the security which we have ‘failed to deliver’ 
until such time as the delivery leg is ﬁ nally settled and we have 
received the associated cash.

The Group has addressed this funding risk by arranging overdraft 
facilities to cover any ‘failed to deliver’ trades, either with the 
relevant settlement agent/depository itself or with a clearing bank. 
Under such arrangements, the facility provider will fund the value 
of any ‘failed to deliver’ trades until delivery of the security is 
effected. Certain facility providers require collateral (such as a cash 
deposit or parent company guarantee) to protect them from any 
adverse mark-to-market movement, and some also charge a 
funding fee for providing the facility. 

In the event of a liquidity issue arising, the ﬁ rm has recourse to 
existing global cash resources after which it could draw down on a 
£115m committed revolving credit line as additional contingency 

Interest rate risk – The Group is exposed to interest rate risk due to 
the short term nature of its cash deposits, which are typically held 
at maturities of less than three months, primarily for liquidity and 
other operational reasons. The exposure on sterling cash is 
partially hedged by rolling the term loans under the bank facility 
for similar short term periods. Cash denominated in currencies 
other than sterling is not hedged and remains at short term 
ﬂ oating rate. The Eurobond debt is not swapped and remains 
a ﬁ xed sterling rate cost.

The Group’s Treasury and Risk Committee periodically considers the 
Group’s exposure to interest rate volatility.

Analysis of the Group’s sensitivity to movements in interest rates is 
set out in Note 25.

Currency risk – The Group trades in a number of currencies around 
the world, but reports its results in sterling. The Group therefore 
has translation exposure to foreign currency exchange rate 
movements in these currencies, principally the US dollar and the 
Euro, and transaction exposure within individual operations which 
undertake transactions in one currency and report in another.

Analysis of the Group’s sensitivity to movements in foreign 
currency exchange rates is set out in Note 25.

Taxation risk is the risk of ﬁ nancial loss or misstatement as a result 
of non-compliance with regulations relating to direct, indirect or 
employee taxation. The Group employs experienced qualiﬁ ed staff 
in key jurisdictions to manage this risk and in addition uses 
professional advisers as appropriate.

Pension obligation risk is the risk that the Group is required, in the 
short and medium term, to fund a deﬁ cit in any of the Group’s 
deﬁ ned beneﬁ t pension schemes.

The latest triennial actuarial valuations of the two UK deﬁ ned 
beneﬁ t schemes undertaken during 2010 show that both schemes 
have a substantial funding surplus. As a result, the trustees of both 
schemes have agreed that no further funding contributions are 
required, pending the next actuarial valuations.

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19

 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

Corporate social responsibility 

Introduction
Throughout the reporting period the Company continued to 
provide support for the efﬁ cient operation of the global capital 
markets, which helped to ensure that its clients were able to 
continue to prosper and to achieve their own business objectives, 
and to meet expectations of their own shareholders and their other 
stakeholders. In this way Tullett Prebon found continued expression 
for its positive contribution to society more widely.

By successfully providing a critical component of the global capital 
markets infrastructure Tullett Prebon is best able to maximise 
returns to shareholders over the medium to long term. As a publicly 
listed company Tullett Prebon continues to enjoy a positive record 
in creating value for both institutional and individual investors. 

In turn this allows the Company to make a signiﬁ cant contribution 
to society through social transfer payments in the form of tax 
remittances.

The Company intends that its high standards of governance and 
business ethics contribute to the wider social good through the 
example it sets and the high standards it maintains, both in the 
United Kingdom and in all other geographies where the Company 
is present, complying with all laws and regulations, trading fairly, 
and only participating in legitimate trading activities permitted by 
its various licences.

Governance
Responsibility for social, ethical and environmental matters rests 
with the Board, and is included in its terms of reference. The Chief 
Executive Ofﬁ cer is the Board member responsible for Corporate 
and Social Responsibility (‘CSR’).

The Company’s CSR Governance Committee, which was 
established in 2009 in recognition of the increasing importance 
of the CSR agenda and which comprises all members of the 
Company’s Executive Committee, oversaw and helped reﬁ ne the 
CSR activities of the Company in 2010. This Committee and its 
members in their executive roles will continue to oversee and guide 
the CSR activities of the Company, reﬂ ecting the continued 
importance the Company places on this broad and increasingly 
visible area of responsibility.

Policies and ethical issues
The Board expects the Company to maintain high standards of 
governance and of ethical behaviour throughout the business, and 
policies and procedures exist to ensure employees at all levels 
maintain the standards that are set and which are expected of them.

Policies on equal opportunities
Tullett Prebon is committed to attract, retain, develop and advance 
the most qualiﬁ ed persons without regard to their race, ethnicity, 
religion, or belief, gender, age, sexual orientation or disability. This 
commitment is underpinned by policies on equal opportunities, 
harassment and discrimination, to which all employees are required 
to adhere.

Ethical issues
The Company’s approach to ethical behaviour and corporate 
governance is speciﬁ cally written into policy and Tullett Prebon 
documents, for observance by all members of staff, and provide for:

– 

– 

– 

– 

– 

 Maintaining high standards of compliance and risk management 
activities – ultimately reporting to the Chief Executive and 
monitored by the Board and Audit Committee;

 Fully complying with legal and regulatory requirements in each 
of the jurisdictions in which it operates, including the Financial 
Services Authority’s Conduct of Business Sourcebook and the 
Bank of England’s Non-Investment Products Code;

 Disallowing corrupt practices such as inappropriate payments 
to any third party – directly or indirectly;

 Fully complying with tax laws in each of the jurisdictions in 
which it operates relating to its affairs and the deduction of 
taxes from staff remuneration;

 Trading fairly, knowing its clients and properly understanding 
its trades with its clients. The Company has a policy of not 
participating in trading activities which it suspects may not be 
for legitimate trading purposes, or whose sole purpose appears 
to be tax reduction by the counterparty;

– 

 Guiding employees involved in procurement activities, including 
a requirement to adhere to the highest ethical and social 
standards; and

– 

 Maintaining appropriate guidelines on gifts, hospitality, 
entertainment and conﬂ icts of interest.

Employees
Attracting and retaining the best brokers, professional and other 
support staff, and management remain crucial to the Company’s 
ongoing success. Management recognise that the Company’s 
ability to maximise returns to shareholders is dependent on 
employing and retaining the best staff in all the geographies in 
which it operates. The Company is committed to developing and 
motivating its staff and offers training where appropriate and 
measures performance to achieve this objective.

Building on the management training review conducted in 2009 as 
part of the succession planning process, the Company undertook 
an extensive middle management career development programme 
across its European businesses in 2010. This involved some 50 
directors and desk heads from the United Kingdom, France, 
Germany, Luxembourg, Poland and Switzerland completing a 
ﬁ nancial analysis and training package designed and delivered by 
staff from one of the United Kingdom’s leading business schools. 
Concurrent with the director and desk head development 
programme, a parallel development programme for the Company’s 
Managing Directors across its European ofﬁ ces was also launched 
and will continue into the subsequent reporting period. Together, 
these two development programmes will provide the foundations 
for the Company’s succession planning in its European region.

20

Tullett Prebon plc 
Annual Report 2010

 In 2010 there was a further reduction in absence due to short 
term employee sickness in the UK and in Asia Paciﬁ c, in terms of 
both total days taken and average time off work. In the UK the 
Company lost 1,679 sick days (2009: 2,080 sick days) and the 
average time off work due to short term sickness was 1.70 days 
per employee (2009: 2.18 days). In Asia Paciﬁ c 1,175 days were 
lost due to short term sickness (2009: 1,200 days), an average of 
2.13 days per employee (2009: 2.23 days). The US do not report 
short term sickness in the same way as in Asia Paciﬁ c or the UK, 
but in terms of longer term ‘disability’ sickness the average rate 
was 1.77 workdays per employee compared to 1.50 days per 
employee in 2009; and

– 

 2010 saw 2 minor reported staff accidents in the UK, compared 
to 11 in 2009. Again, no visitors suffered injury on Company 
premises during 2010.

As the Company is highly dependent on its employees the 
retention of key personnel remains one of management’s core 
tasks. 2010 has continued to present challenges in this regard, but 
management believe that, in the ordinary course of its business, 
retention policies in general have proved successful in retaining 
staff at all levels.

To better track the health of the Company in respect of staff 
retention beyond the simple end-of-year headcount numbers, 
which whilst useful as a general guide does not help with 
developing an understanding of retention in a qualitative way, the 
Company monitors length of service of all staff. This provides a 
more qualitative measure as it implicitly reﬂ ects staff attitudes to 
employment with the Company, as a dissatisﬁ ed workforce would 
be expected to be highly ﬂ uid with few long serving members of 
staff. This approach has the added merit of being able to be 
delivered within existing resource constraints.

Accordingly, the Company records percentages of staff, by region, 
that have ﬁ ve and ten years or more service. In the US 55.4% 
(2009: 55.5%) of employees have ﬁ ve plus years service, and 
38.6% (2009: 34.7%) have ten plus years service. In the UK the 
percentages are 55.9% (2009: 54.9%) and 32.9% (2009: 31.6%), 
and in Asia Paciﬁ c the percentages are 41.0% (2009: 31.5%) and 
15.8% (2009: 18.7%) respectively.

The productivity and welfare of employees in a business so 
dependent on people, such as Tullett Prebon, continued to attract 
considerable senior management attention, and management 
at all levels are aware of the importance of active engagement 
with employees.

– 

To this end, the Company maintains effective internal 
communications channels at both group and regional levels 
to ensure staff are informed in a timely way about major 
developments in the business, such as the launch of new products, 
key hires, and ﬁ nancial announcements. Information is provided to 
employees regularly through integrated and complimentary 
channels such as internal emails, the Company’s intranet site, print 
collateral and town hall meetings, as appropriate. The use made of 
posters for internal communications across all the Company’s 
ofﬁ ces was reviewed in 2010 and will provide for an enhanced 
communications channel going forward.

Staff welfare remains a serious matter for the Company especially 
given the demanding nature of the broking environment. Day to 
day responsibility for staff welfare and the management of stress 
rests with line management and the Human Resources 
department, and this is supplemented by an Employee Assistance 
programme which provides counselling and advice to staff and 
their families and the further use of an occupational health 
specialist if required. The Company’s policies on health and safety 
provide a formal framework for line management responsibilities in 
this area to be discharged.

Records on employment and pastoral care matters are maintained 
as required in each legal and regulatory jurisdiction. These help to 
provide senior management with a metric to measure both the 
performance and welfare of staff:

– 

– 

– 

 In 2010 the average revenue generated by each broker was 
£540,000 (2009: £565,000);

 The Company employed 2,461 full time equivalent employees 
and directors worldwide in 2010 (48% in Europe, 30% in North 
America and 22% in Asia Paciﬁ c) compared to 2,479 staff in 
2009 (45% in Europe, 33% in North America and 22% in Asia 
Paciﬁ c). Total remuneration for all staff in 2010 was £555m 
(2009: £566m);

 Claims for compensation for work-related accidents and 
illnesses remained minimal in 2010 with two claims for Worker’s 
Compensation in the US which resulted in 221 workdays total 
absence. There were no such claims in the UK or Asia Paciﬁ c. 
(In 2009 there was only one claim in the US with none in the 
UK or Asia Paciﬁ c);

5 years + service 
10 years + service 

US 

UK 

Asia Paciﬁ c

2010 
55.4% 
38.6% 

2009 
55.5% 
34.7% 

2010 
55.9% 
32.9% 

2009 
54.9% 
31.6% 

2010 
41.0% 
15.8% 

2009
31.5%
18.7%

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Tullett Prebon plc 
Annual Report 2010

Business Review
 continued

To help alleviate the high-stress work environment the Company’s 
pastoral care programme has continued to respond to staff requests 
for an improved work/life balance and speciﬁ cally for support with 
access to improved physical exercise and active outdoor pursuits. 
The business beneﬁ ts of this are clear and are evidenced in the 
dictum mens sana in corpore sano. Accordingly, the Company has 
been keen to support the provision of a general physical ﬁ tness 
agenda where there is demand for it and as resources allow.

In 2009 the Company introduced a scheme to provide team 
clothing to staff taking part in team and other sports competitions. 
This scheme has continued in 2010 with over 10% of the 
Company’s staff globally taking part in some form of regular team 
based or other competitive physical sport: cycling, running and 
football being the most popular activities. The Company continued 
to provide military style circuit training for its London based staff 
and this programme remained oversubscribed. In addition, the UK 
government’s Cycle to Work scheme has seen a further 93 staff 
purchase cycles in the reporting period, on top of the 133 who took 
advantage of this scheme in 2009. Yet again, and in response to 
staff demand, the Company provided resources in 2010 for staff 
to participate in the annual JP Morgan Chase runs in London, 
New York and Singapore.

Management hope that the Company’s support for physical 
activities and exercise will improve staff welfare and general 
health, and thereby contribute to an improved work/life balance.

Support has also been given to employees in the UK with access to 
childcare provision and charitable giving, by the Company running 
salary sacriﬁ ce programmes for these two schemes.

Social and community issues
Service in the Volunteer Reserve Forces
Recognising that members of the Volunteer Reserve Forces in 
both the UK and the US (the two countries that account for around 
80% of Tullett Prebon’s revenues) continue to provide a critical 
component of the Armed Forces of both countries, the Company 
amended its terms of employment in the Staff Handbook to reﬂ ect 
the commitment it had made to provide additional support to its 
employees who are members of the reserve forces in these two 
countries. In the UK by providing one additional week of paid leave 
to help a volunteer complete his or her annual training 
commitment. In the US to make up a volunteer’s mobilised pay to 
their civilian salary to ensure they are not worse off as a result of 
their public service commitment.

In furtherance of this support, the Company also signed up to the 
UK Ministry of Defence’s employers organisation SaBRE which 
seeks to foster greater understanding between the Armed Forces, 
employers and service personnel.

During this reporting period one of the Company’s employees, 
a member of the UK’s Territorial Army, has been mobilised and 
is currently serving in an infantry unit in Afghanistan.

Tax and other social payments
The Company continues to strive to maintain a Low Risk rating 
from HMRC. The Company has earned this Low Risk rating in each 
of the last ﬁ ve years since HMRC started to publish the names of 
those companies achieving this important status.

The Board continue to believe that as Tullett Prebon is registered, 
regulated and publicly listed in the UK, the Company has a social 
duty to pay the right tax at the right time.

Tullett Prebon made payments to tax authorities (principally in the 
UK and US, the main jurisdictions in which it operates) for 2010 of 
£267m (2009 of just under £280m), covering corporation tax, 
employer’s social security payments, and income taxes and social 
security paid on behalf of employees.

In addition the Company makes further income tax and employee 
social security payments to the tax authorities in all tax 
jurisdictions in which it operates.

Donations
The Company has maintained the policy of making no donations 
to political parties. Similarly, charitable donations are not normally 
allowed. These two policies reﬂ ect the Board’s view that 
shareholders’ funds should be retained for use within the business 
and that it is for shareholders to determine what non-business use 
should be made of their resources.

Public policy engagement
Tullett Prebon continued its engagement in the public policy 
debate surrounding the future of the ﬁ nancial services sector. 
Notwithstanding being a relatively small UK listed entity the 
Company, using its position at the very heart of the capital markets 
which gives it an informed view available to very few others, was 
consistently able to punch above its weight.

Continuing the pattern established in the previous reporting 
period, the Company concentrated on three strands of public 
 policy activity during 2010:

– 

 Deepening involvement with the several trade and other 
professional bodies that the Company is a member of. In 
particular further ﬁ nancial support was provided to the 
Wholesale Markets Brokers Association (‘WMBA’) in the UK, and 
to the Wholesale Markets Brokers Association of the Americas 
(‘WMBAA’) in North America, who are the inter-dealer brokers’ 
trade bodies. Both of these organisations now have active and 
well resourced lobby programmes seeking to engage with 
lawmakers, ofﬁ cials and regulators in their respective jurisdictions. 
In addition, the Company has continued to develop its 
involvement with other key professional and industry speciﬁ c 
bodies in all the countries in which it has an ofﬁ ce. Focusing the 
Company’s representation in the key trade bodies in one member 
of the Company’s Executive Committee has ensured coordinated 
and effective advocacy throughout the reporting period;

22

Tullett Prebon plc 
Annual Report 2010

– 

– 

 The Company’s Chief Executive Ofﬁ cer continued his engagement 
in public debate on issues relevant to the ﬁ nancial services 
sector, where appropriate and where opportunity arose; and

 The Company’s Global Head of Research, who was recruited 
into a new post established in 2009 to increase the Company’s 
visibility in, and penetration of, the public policy arena, was 
very active publishing papers addressing the principal economic 
themes of 2010. Two products were developed during the 
reporting period: Strategy Insights, larger and in-depth papers 
of which six were published in 2010; and Strategy Notes, shorter 
and quicker to write, and designed to respond to “issues of the 
moment” of which 21 were published in the reporting period. 
Considerable traction has been achieved with this product and 
the Company’s visibility in serious political commentary has 
increased as a consequence. 

The Company’s public policy engagement programme will continue 
into the subsequent reporting period as required by the debate 
surrounding the reform and regulation of the ﬁ nancial services 
sector, to ensure that the Company is able to continue to develop 
and to grow shareholder value.

Environment
Tullett Prebon, as an ofﬁ ce based business, is not engaged in 
activities that are generally regarded as having a high environmental 
impact. However, the Board has agreed that it will seek to adopt 
policies to safeguard the environment to meet statutory 
requirements or where such policies are commercially sensible. 

The emission of greenhouse gases (‘GHG’), as a result of ofﬁ ce 
based business activities and from business travel, is the main 
environmental impact from the Company’s business. A stringent 
cost control regime continues to minimise business travel and 
increasing use is still made of video and telephone conferencing.

With the assistance of specialist external consultants a Group-wide 
environmental policy was developed and adopted during the 
reporting period, as was an environmental policy speciﬁ cally for the 
UK. The Company’s procurement policy similarly contains a strong 
statement in support of the environmental policy:

“It is TP’s policy to encourage awareness and commitment to 
improved environmental performance amongst its people, 
suppliers and clients. In this regard, our procurement choices will 
favour products showing clear environmental advantages unless 
there are signiﬁ cant reasons for not doing so.”

Anticipating the introduction of Carbon Reduction Commitment 
(‘CRC’) obligations on UK companies in April 2010 the Company 
took advice from professional specialist consultants and was 
prepared to comply with CRC requirements when the scheme 
came into force. Similarly, during 2010 the Company prepared 
to meet the new requirements for reporting on GHG under the 
Climate Change Act 2008, which are expected to come into force 

in 2012, by introducing the necessary monitoring of its GHG 
emissions. With this in mind, the Company completed a second 
carbon footprint and GHG audit in its key geographies for 2010 
which will allow it to compare its emissions with its benchmark 
year of 2008, and to comply with the new reporting requirements 
when they come into force in 2012.

The Company’s environmental management system (‘EMS’) 
has been successful in achieving savings in energy use at the 
Company’s two largest properties in the UK in 2010 compared to 
2009: the trading ﬂ oor at 155 Bishopsgate and the Company’s head 
ofﬁ ce, both in the City of London, have seen reductions in energy 
consumption of 12.2% and 16.0% respectively, representing a 
saving of circa £60,000.

Contractual or other arrangements essential to the 
business of the Group
The success of the Company relies on certain contractual or 
other arrangements within individual entities and across the 
Group relating to revenue generation, operational performance 
or ﬁ nancing.

The successful generation of revenue relies on the Group’s ability 
to hire and retain highly qualiﬁ ed employees. Employment costs 
made up 79% of the Group’s administration expenses in 2010. 
A number of legal arrangements, including in certain circumstances 
rolling contracts and non-compete arrangements, are used to 
enhance the Group’s ability to attract and retain key personnel.

The Group facilitates a ﬁ nite number of customer relationships. 
These relationships are serviced over a wide range of products 
and across a geographically diverse business.

The efﬁ ciency of the Group’s operations depends on certain 
key supplier relationships. The Group’s clearing is provided by, or 
executed through, the DTCC, Euroclear, Clearstream, and certain 
key banking relationships.

The Group is dependent upon certain information, communication 
and IT system providers and operates from a limited number of 
properties. The Group seeks to ensure its systems are robust and 
are capable of operation from tested business continuity sites.

The Group relies on a number of international banks to provide 
banking services and credit facilities. The new committed facilities 
are provided by ﬁ ve banks, The Royal Bank of Scotland, Lloyds 
Banking Group, HSBC, Bank of America and the Australia and 
New Zealand Banking Group. Further analysis of the Group’s debt 
structure can be found in Note 21.

Terry Smith
Chief Executive
8 March 2011

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23

 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Governance

In this section:
25  Board of Directors
26  Directors’ Report
28  Corporate Governance Report
32  Report on Directors’ Remuneration
39  Statement of Directors’ Responsibilities

24

 
Board of Directors

Tullett Prebon plc 
Annual Report 2010

Michael Fallon MP (aged 58)
Independent Non-executive Director
Michael Fallon was re-appointed as a Director of Tullett Prebon plc 
in September 2010. He is a member of the Remuneration, Audit 
and Nominations Committees. He had previously served as a 
Director of the Company from December 2006 to May 2010 and 
as a Director of Collins Stewart Tullett plc from September 2004 
to December 2006. He is the Conservative MP for Sevenoaks and 
is a member of the Treasury Select Committee of the House of 
Commons. He was Opposition spokesman on Trade and City matters 
from 1997-1998. He is a Director of Attendo AB, a provider of long 
term care in Scandinavia and was previously a Director of Just 
Learning Ltd, Quality Care Homes PLC and Bannatyne Fitness Ltd.

Richard Kilsby (aged 59)
Independent Non-executive Director
Richard Kilsby joined the Board in December 2006 and is Chairman 
of the Audit Committee and a member of the Remuneration and 
Nominations Committees. He had previously been a Director of 
Collins Stewart Tullett plc since June 2005. He is Non-executive 
Chairman of 888 Holdings plc. He has formerly held many positions 
in ﬁ nance and the City including: Vice Chairman of the virt-x stock 
exchange (created by the merger of the Swiss Exchange with 
Tradepoint), Chief Executive of Tradepoint (an AIM quoted electronic 
exchange), Non-executive Director of Collins Stewart plc and 
an Executive Director of the London Stock Exchange responsible 
for listing, secondary regulation and the introduction of the SETS 
trading system. He is a chartered accountant and was previously 
an audit partner at Price Waterhouse.

Rupert Robson (aged 50)
Independent Non-executive Director
Rupert Robson was appointed to the Board in January 2007. He is 
Chairman of the Remuneration Committee and a member of the 
Audit and Nominations Committees. He has held a number of 
senior roles in City institutions, most recently Non-executive 
Director of London Metal Exchange Holdings Ltd, Global Head, 
Financial Institutions Group, Corporate Investment Banking and 
Markets at HSBC between 2003 and 2006 and, prior to that, Head 
of European Insurance, Investment Banking at Citigroup Global 
Markets. He is Chairman of Charles Taylor Consulting plc and 
Silkrouteﬁ nancial Group Ltd and a Non-executive Director of OJSC 
Nomos-Bank.

Keith Hamill (aged 58)
Chairman
Keith Hamill became Chairman of Tullett Prebon plc in December 
2006. He served as Chairman of Collins Stewart plc and 
subsequently Collins Stewart Tullett plc from 2000 to 2006. He is 
also Non-executive Chairman of Alterian plc, Deputy Chairman of 
Travelodge, a Non-executive Director of easyJet plc and Samsonite 
and Pro-Chancellor of Nottingham University. He is also a partner 
in Fundsmith LLP. He is a chartered accountant and was previously 
Finance Director of WH Smith, Forte and United Distillers, Director 
of Financial Control at Guinness and a partner in Price Waterhouse. 
He was also a member of the Urgent Issues Task Force of the 
Accounting Standards Board and Chairman of the CBI Financial 
Reporting Panel. He is Chairman of the Nominations Committee.

Terry Smith (aged 57)
Chief Executive
Terry Smith started his career with Barclays Bank and became a 
stockbroker in 1984 with W Greenwell & Co. He was top rated bank 
analyst in London from 1984 to 1989, during which period he also 
worked at BZW and James Capel. In 1990 he became head of UK 
Company Research at UBS Phillips & Drew, a position he left in 
1992 following the publication of his best selling book, ‘Accounting 
for Growth’. He joined Collins Stewart (subsequently Collins 
Stewart Tullett plc) shortly after and became a Director in 1996. 
He is an Associate of the Chartered Institute of Bankers, has an MBA 
from The Management College, Henley and is qualiﬁ ed as a Series 7 
Registered Representative and a Series 24 General Securities 
Principal with FINRA. He has been Chief Executive of Tullett Prebon 
plc since December 2006, and until December 2010, when he 
resigned from the Board, he was also Deputy Chairman of Collins 
Stewart plc. In November 2010 Terry Smith launched Fundsmith, 
a fund management company, of which he is Chief Executive.

Paul Mainwaring (aged 47)
Finance Director
Paul Mainwaring qualiﬁ ed as a chartered accountant with Price 
Waterhouse in 1987, and obtained an MBA from Cranﬁ eld School 
of Management in 1991. From 1993 to 2000, he worked for 
Caradon plc in a number of ﬁ nancial roles, including three years as 
Finance Director of MK Electric. In 2000, he was appointed as Group 
Finance Director of TDG plc. He was appointed as Group Finance 
Director of Mowlem plc in 2005. He was appointed to the Collins 
Stewart Tullett plc Board in October 2006, and has been Finance 
Director of Tullett Prebon plc since December 2006. 

David Clark (aged 63)
Senior Independent Non-executive Director
David Clark worked for Bankers Trust, Commerzbank and Midland 
Bank before being appointed Treasurer, Europe of HSBC Holdings 
in 1992. In 1995 he joined Bankgesellschaft Berlin AG becoming 
Managing Director of Bankgesellschaft Berlin (UK) plc until 
June 1999. He was Senior Adviser to the Major Financial Groups 
Division of the Financial Services Authority until March 2003. 
He is a Non-executive Director of Westpac Europe Limited. 
He was appointed as a Non-executive Director of Tullett Liberty 
in September 2000 and to the Collins Stewart Tullett plc 
Board in March 2003, and subsequently became a Director of 
Tullett Prebon plc in December 2006. He is a member of the Audit, 
Remuneration and Nominations Committees.

25

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Tullett Prebon plc 
Annual Report 2010

Directors’ Report

The directors present their report, together with the audited 
ﬁ nancial statements of the Company and its subsidiaries for the 
year ended 31 December 2010.

Principal activities
Tullett Prebon plc operates as an intermediary in wholesale 
ﬁ nancial markets facilitating the trading activities of its clients, in 
particular commercial and investment banks. The main subsidiary 
undertakings through which the Group conducts its business are 
set out in Note 37 to the consolidated ﬁ nancial statements.

Results and dividends
The results for the year are set out in the Consolidated Income 
Statement on page 42.

The directors recommend a ﬁ nal dividend for the year of 10.5p 
per ordinary share. The ﬁ nal dividend, if approved, will be paid 
on 19 May 2011 to ordinary shareholders whose names are 
on the register on 26 April 2011.

Tullett Prebon plc paid a ﬁ nal dividend for 2009 of 10.0p per 
ordinary share and an interim dividend for 2010 of 5.25p per 
ordinary share.

Business review
The information that fulﬁ ls the requirements of the Business 
Review can be found on pages 05 to 23. The Business Review is 
incorporated into this Directors’ Report by reference. It includes an 
analysis of the development and performance of the Group during 
the year, the position of the Group at the end of the year, ﬁ nancial 
and non-ﬁ nancial performance indicators, and information on 
the main trends and factors likely to affect the development, 
performance, key performance indicators and position of the 
business. A description of the principal risks and uncertainties 
facing the Group is included in the Risk Management section of the 
Business Review. Information on environmental, employee, social 
and community issues and information about persons with whom 
the Group has contractual or other arrangements which are 
essential to the business, is included in the Corporate Social 
Responsibility section of the Business Review.

This Annual Report has been prepared for, and only for, the 
members of the Company as a body, and no other persons. 
The Company, 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 and uncertainties facing the 
Group in this Annual Report involve uncertainty since future events 
and circumstances can cause results and developments to differ 
materially from those anticipated. The forward-looking statements 
reﬂ ect knowledge and information available at the date of 
preparation of this Annual Report and the Company undertakes no 
obligation to update these forward-looking statements. Nothing in 
this Annual Report should be construed as a proﬁ t forecast.

The Corporate Governance Report includes the information that 
fulﬁ ls the requirements of section 7.2 of The Disclosure and 
Transparency Rules (‘DTR’) with the exception of the information 
referred to in DTR 7.2.6 which is located in this Directors’ Report.

Directors
The directors who served throughout the year, except as noted, 
were as follows:

Keith Hamill 
(Non-executive Chairman)

Terry Smith 
(Chief Executive)

Paul Mainwaring
(Finance Director)

David Clark
(Senior Independent Non-executive Director)

Michael Fallon
(Independent Non-executive Director)
–  resigned 1 June 2010
–  re-appointed 28 September 2010

Richard Kilsby
(Independent Non-executive Director)

Rupert Robson
(Independent Non-executive Director)

Biographical details of the directors are set out on page 25.

The Company has made qualifying third party indemnity provisions 
for the beneﬁ t of its directors which remain in place at the date of 
this report.

Directors’ interests
The interests (all beneﬁ cial) of those persons who were directors 
at the end of the year in the ordinary share capital of the Company, 
together with comparatives for the previous year or the date of 
appointment, were as follows:

Keith Hamill 
Terry Smith 
Paul Mainwaring 
David Clark 
Michael Fallon 
Richard Kilsby 
Rupert Robson 

2010 
Number 
80,299 
9,645,510 
221,339 
– 
2,000 
– 
7,000 

2009
Number
80,299
9,245,510
123,683
–
2,000
–
7,000

A separate Corporate Governance Report is included within this 
Annual Report on pages 28 to 31 and which is, where relevant, 
incorporated into this Directors’ Report by reference. 

There were no changes in the interests of the directors in the 
ordinary share capital of the Company from the end of the year 
to the date of this report.

26

 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

The Tullett Prebon plc Employee Share Ownership Trust held 1,196 
shares at 31 December 2010 (2009: 555,631) and the Tullett Prebon 
plc Employee Beneﬁ t Trust 2007 held 200,833 shares (2009: 
677,797). The beneﬁ ciaries of the trusts are the employees of the 
Group, including the executive directors. Under Schedule 1 of the 
Companies Act 2006 the executive directors are deemed to be 
interested in these shares.

Directors’ share options are set out in the Report on Directors’ 
Remuneration, including changes which have occurred since the 
end of the ﬁ nancial year.

Share capital and control
Details of the authorised and issued share capital, together with 
details of the movements in the Company’s issued share capital 
during the year are shown in Note 26 which is incorporated into this 
Directors’ Report by reference.

The Company has one class of ordinary shares, which carry no right 
to ﬁ xed income. Each share carries the right to one vote at general 
meetings of the Company.

No person has any special rights of control over the Company’s 
share capital and all issued shares are fully paid.

The voting rights of the ordinary shares held by the Tullett Prebon 
plc Employee Share Ownership Trust and the Tullett Prebon plc 
Employee Beneﬁ t Trust 2007 are exercisable by the trustees in 
accordance with their ﬁ duciary duties. The right to receive 
dividends on these shares has been waived.

There are no speciﬁ c restrictions on the size of a holding nor on the 
transfer of shares, which are both governed by the provisions of the 
Articles of Association (the ‘Articles’) and prevailing legislation. The 
directors are not aware of any agreements between holders of the 
Company’s shares that may result in restrictions on the transfer of 
securities or on voting rights, nor are there any arrangements by 
which, with the Company’s co-operation, ﬁ nancial rights carried by 
securities are held by a person other than the holder of those 
securities.

Details of employee share schemes are set out in Note 28 which 
is incorporated into this Directors’ Report by reference.

With regard to the appointment and replacement of directors, the 
Company is governed by its Articles, the UK Corporate Governance 
Code (which applies to the Company with effect from 1 January 
2011), the Companies Act 2006 and related legislation.

The Articles may be amended by special resolution of the 
shareholders.

The powers of the directors include the authorities to allot shares 
and to buy the Company’s shares in the market as granted by 
shareholders at the Annual General Meeting (‘AGM’). At the last 
AGM a resolution was passed granting authority to the directors 
to purchase up to 21,531,358 ordinary shares. This authority will 
expire at the conclusion of the next AGM or, if earlier, on 1 July 2011, 
unless renewed before that time.

Further powers of the directors are described in the Schedule of 
matters reserved for the Board, which is available on the Company’s 
website, and in the Corporate Governance Report on pages 28 to 31. 
The Schedule of matters reserved for the Board is incorporated into 
this Directors’ Report by reference.

Substantial interests
At 7 March 2011, being the latest practicable date before signing of 
this document, the following (not being directors, their families or 
persons connected, within section 252 of the Companies Act 2006) 
had notiﬁ ed the Company that they were interested in 3% or more of 
the voting rights of the issued ordinary share capital of the Company:

Lloyds Banking Group plc 
Jupiter Asset Management Limited   
JP Morgan Asset Management Holdings Inc. 
Legal & General Group Plc 
Norges Bank 

%
12.02
 5.09
 4.89
 3.94
 3.11

Policy of payment to suppliers
It is the Group’s policy that all transactions are settled in accordance 
with relevant terms and conditions of business agreed with the 
supplier, provided all such terms and conditions have been 
complied with. The Company does not have any trade creditors.

Annual General Meeting
The AGM of the Company will be held at 2.30pm on 12 May 2011. 
Details of the resolutions to be proposed at the AGM are set out in 
a separate Notice of Meeting sent to all shareholders entitled to 
receive such Notice.

Political and charitable donations
During 2010 no political donations were made by the Group (2009: 
£nil). No charitable donations were made during 2010 (2009: £nil).

Auditor
A resolution to re-appoint Deloitte LLP as the auditor will be 
proposed at the forthcoming AGM.

Disclosure of information to the auditor
Each of the persons who is a director at the date of approval of this 
Annual Report conﬁ rms that:

– 

– 

 so far as the director is aware, there is no relevant audit 
information of which the Company’s auditor is unaware; and

 the director has taken all the steps that he ought to have taken 
as a director in order to make himself aware of any relevant 
audit information and to establish that the Company’s auditor 
is aware of that information.

This conﬁ rmation is given and should be interpreted in accordance 
with the provisions of section 418 of the Companies Act 2006.

By order of the Board

Paul Mainwaring
Company Secretary
8 March 2011

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Tullett Prebon plc 
Annual Report 2010

Corporate Governance Report

The directors are responsible for the corporate governance of the 
Group. They support the principles of good corporate governance 
and code of best practice laid down by the Combined Code on 
Corporate Governance issued by the Financial Reporting Council 
in June 2008 (the ‘Combined Code’).

Throughout the year ended 31 December 2010 the Board believes 
it has complied with the principles and provisions recommended 
by the Combined Code. The manner in which the Company 
has applied the principles of good governance set out in the 
Combined Code during 2010 is outlined below. For the ﬁ nancial 
year commencing on 1 January 2011 the Company is subject to the 
UK Corporate Governance Code issued by the Financial Reporting 
Council in June 2010. The Combined Code and the UK Corporate 
Governance Code are publicly available at www.frc.co.uk.

Directors
Composition of the Board
The Board currently comprises two executive directors, four 
independent non-executive directors and a non-executive Chairman. 
There were no changes to the membership of the Board during 2010, 
except that Michael Fallon resigned as a non-executive director 
with effect from 1 June 2010 and was re-appointed as a non-
executive director on 28 September 2010. The directors’ biographies 
are shown on page 25 and demonstrate the Board’s depth of 
experience and skill. The non-executive directors also have the range 
of experience and the calibre to exercise independent judgement 
and contribute to Board discussions. Four of the directors (and three 
of the non-executive directors) have extensive previous experience 
at a senior level in the ﬁ nancial services sector and three of the 
directors are chartered accountants (two of whom were audit 
partners in a major ﬁ rm of accountants), one of the non-executive 
directors was a Senior Adviser to the Financial Services Authority, 
and both the Chairman and the Finance Director were previously 
Finance Directors of a number of other companies. The average 
age of the members of the Board is 56 (non-executive directors, 
including the Chairman – 58) and the average length of service 
of the non-executive directors excluding the Chairman (including 
membership of the Board of Collins Stewart Tullett plc) is six years.

The Chairman, Keith Hamill was, at appointment, independent 
of the Company and the management, but, as Chairman, is not 
classiﬁ ed as independent. His other signiﬁ cant commitments 
are noted in his biography on page 25.

There is a clear division of responsibilities between the Chairman 
and the Chief Executive. The primary responsibility of the Chairman 
is the leadership of the Board. The primary responsibility of the 
Chief Executive, Terry Smith, is the running of the Company’s 
operations and the development and implementation of strategy 
in order to maximise shareholder value.

In the event that any of the executive directors wished to take up a 
non-executive appointment with another company, the Board would 
be amenable to such a proposal, provided that the time commitment 
involved would not be too onerous. Following the demerger of 
Collins Stewart plc on 19 December 2006, Terry Smith became 
Chairman of Collins Stewart plc. On 1 April 2010 Terry Smith 
handed over the Chairmanship and served as Deputy Chairman 
until 6 December 2010 when he retired as a director. Terry Smith 

received fees of £97,744 for the year ended 31 December 2010 from 
Collins Stewart plc, which he is entitled to retain.

The terms of the directors’ service agreements and letters of 
appointment are summarised in the Report on Directors’ 
Remuneration set out on pages 32 to 38. The terms and conditions 
of appointment of the non-executive directors will be available for 
inspection during normal business hours on any weekday (other 
than public holidays) at the Company’s ofﬁ ces from the date the 
notice of AGM is posted until the conclusion of the AGM.

Independence of directors
The Board has determined that all four of the non-executive 
directors are independent. 

The Senior Independent Non-executive Director, David Clark, has 
responsibility for dealing with any shareholders who have concerns, 
which contact through the normal channels of Chairman, Chief 
Executive or Finance Director has failed to resolve, or for which such 
contact is inappropriate. 

Induction and professional development
All directors receive induction on joining the Board and relevant 
training is available to directors to assist them in the performance 
of their duties. The Audit Committee and the Remuneration 
Committee receive brieﬁ ngs on current developments. The 
non-executive directors take advantage of sector and general 
conferences and seminars and training events organised by 
professional ﬁ rms and receive circulars and training materials 
from the Company and other professional advisers. Regular 
presentations are made to the Board by members of the 
Company’s Executive Committee, and arrangements are made for 
non-executive directors to meet members of the management 
teams and they attend the Company’s management conferences. 
Non-executive directors regularly visit the Company’s international 
ofﬁ ces, usually in connection with other activities. 

Conﬂ icts of interest
The Company’s Articles of Association permit the Board to consider 
and, if it sees ﬁ t, to authorise situations where a director has an 
interest that conﬂ icts, or may possibly conﬂ ict, with the interests 
of the Company (a ‘Relevant Situation’). The Board has a formal 
system in place for directors to declare Relevant Situations to be 
considered for authorisation by those directors who have no 
interest in the matter being considered. In deciding whether to 
authorise a Relevant Situation, the non-conﬂ icted directors must 
act in the way they consider, in good faith, would be most likely to 
promote the success of the Company, and they may impose limits 
or conditions when giving the authorisation or subsequently if they 
think this is appropriate. The Board has followed the prescribed 
procedures in deciding whether, and on what terms, to authorise 
Relevant Situations and believes that the systems it has in place for 
reporting and considering Relevant Situations, including an annual 
review of authorisations, continue to operate effectively.

During the year the independent non-executive directors, led by 
the Senior Independent Non-executive Director, reviewed the 
external business commitments of members of the Board and 
concluded that none of these gave rise to conﬂ icts of interest or 
other factors which might affect the effective operation of the 
Company or the Board.

28

Tullett Prebon plc 
Annual Report 2010

–  Board appointments and removals;
–  reporting to shareholders; and
– 

 environmental, social and governance policies, including 
corporate social responsibility policy.

Beneath the Board there is a structure of delegated authority which 
sets out the authority levels allocated to the individual directors 
and senior management.

The Board has established Audit, Remuneration and Nominations 
Committees to which it has delegated some of its responsibilities. 
Each of the Committees has detailed terms of reference, which can 
be viewed on the Company’s website and a schedule of business to 
be transacted during the year. The responsibilities of each of the 
Committees together with an overview of their meetings during 
the year are described below.

The Board and its Committees are provided with appropriate 
information on a timely basis to enable them to discharge their 
duties. All directors receive written reports prior to each meeting 
which enable them to make an informed decision on corporate and 
business issues under review. All Board meetings are minuted and 
any unresolved concerns are recorded in such minutes. 

The Board has a schedule of eight meetings each year to discuss the 
Group’s ordinary course of business. Every effort is made to arrange 
these meetings so that all directors can attend; additional 
meetings are arranged as required. 

The following table sets out the Board and Committee attendance 
record during the year:

Audit 
Board*  Committee 

Remuneration  Nominations
Committee

Committee 

Executive Directors 
Terry Smith 
Paul Mainwaring 
Non-executive Directors 
Keith Hamill 
David Clark 
Michael Fallon** 
Richard Kilsby 
Rupert Robson 

8/8 
8/8 

8/8 
8/8 
4/5 
8/8 
8/8 

– 
– 

– 
4/4 
2/2 
4/4 
4/4 

– 
– 

– 
5/5 
3/5 
4/5 
5/5 

–
–

2/2
2/2
–
2/2
2/2

* 

 Excludes meetings of committees of the Board appointed to 
complete business approved by the Board or routine business.
**   During 2010 Michael Fallon served as a director from 1 January 
to 1 June and from 28 September onwards. In the period when 
Michael Fallon was a director there were no meetings of the 
Nominations Committee.

All directors have access to the services of the Company Secretary 
and there are procedures in place for taking independent 
professional advice at the Company’s expense if required.

The Company Secretary is responsible for ensuring that the Board 
keeps up to date with key changes in legislation which affect the 
Company. The appointment or removal of the Company Secretary 
is a matter reserved for the Board.

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Performance evaluation
Reviews of the performance of the Board, its Committees and 
individual directors in respect of the previous ﬁ nancial year have 
been undertaken. In this process, consideration was given to 
whether the Board or Committee fulﬁ lled its terms of reference 
satisfactorily, whether the terms of reference needed to be revised, 
whether the administration operated effectively and whether 
individual directors performed their roles effectively. 

In March 2010 and March 2011, the Chairman formally met with 
the non-executive directors without the executive directors being 
present to evaluate, amongst other matters, the performance 
of the individual executive directors. The Senior Independent 
Non-executive Director met with the other non-executive directors 
without the Chairman being present to evaluate the Chairman’s 
performance. Appropriate feedback was provided following these 
meetings. The Chairman has also provided feedback on performance 
to the non-executive directors.

Re-election
Under the Company’s Articles of Association (the ‘Articles’) all 
directors are subject to election by shareholders at the ﬁ rst AGM 
after their appointment. Thereafter, any director who has held 
ofﬁ ce for three years or more is required to retire by rotation at the 
AGM but is entitled to seek re-election.

Michael Fallon is subject to election at the AGM in May 2011, as he 
was re-appointed since the last AGM. Michael Fallon ﬁ rst joined the 
Board of Collins Stewart Tullett plc in September 2004.

David Clark and Richard Kilsby will seek re-election at the AGM in 
May 2011. David Clark joined the Board of Collins Stewart Tullett plc 
in March 2003. Richard Kilsby joined the Board of Collins Stewart 
Tullett plc in June 2005.

The Board is satisﬁ ed that, following particularly rigorous review given 
the length of service of these directors on the Board of the Company 
and its predecessor company, and after formal performance 
evaluation, each of these directors’ performance continues to 
be effective, and each demonstrates commitment to their role.

Following review during 2010 the Board concluded that David Clark 
should continue to act as the Senior Independent Director until a 
successor is identiﬁ ed.

Under the new UK Corporate Governance Code all directors 
of FTSE 350 companies should be subject to annual re-election by 
shareholders. The Company expects that it will transition to 
adopting this policy for the AGM in 2012 when the Company also 
intends to seek shareholder approval to amend the Articles to replace 
the current requirement for directors to retire by rotation after three 
years with a requirement for directors to seek annual re-election.

Board administration
The Board has a formal Schedule of matters reserved to it for 
decision, which can be viewed on the Company’s website (www.
tullettprebon.com). The Schedule includes, among other things:
–  approval of the Group’s strategy;
–  changes to the Group’s management and control structure;
–  approval of any material borrowing or commitment;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Corporate Governance Report
continued

Audit Committee
The Audit Committee is chaired by Richard Kilsby, who has recent 
and relevant ﬁ nancial experience. The other members of the Audit 
Committee are David Clark, Michael Fallon and Rupert Robson, all 
of whom are independent non-executive directors. 

The Chairman, the executive directors, the Company’s external and 
internal auditors, the Group Treasurer and Head of Risk Control, and 
other senior ﬁ nance personnel may attend Committee meetings 
by invitation. The Committee has a discussion with the external 
auditor at least once a year without executive directors being 
present, to ensure that there are no unresolved issues of concern.

Throughout 2010 the Committee’s terms of reference included:
–  recommendation on appointment of the external auditor;
–  review of independence and objectivity of the external auditor;
–  review of effectiveness of the audit process;
– 
–  monitoring the integrity of the ﬁ nancial statements;
–  review of the results of the audit;
– 

 approval of the annual audit plan and scope of audit engagement;

 review of the effectiveness of the Company’s internal control 
procedures;
 review of the effectiveness of the internal audit function and 
consideration of internal audit reports; and
 review of the arrangements by which staff may, in conﬁ dence, 
raise concerns about improprieties in ﬁ nancial reporting and 
other matters.

– 

– 

The Audit Committee has reviewed the cost effectiveness, 
objectivity and independence of the external auditor, and the level 
of fees received in respect of the various services provided by them 
in addition to the audit during 2010. The non-audit fees paid 
to the auditor are disclosed in Note 6 to the accounts. The auditor 
conﬁ rmed to the Audit Committee that they did not believe that 
the level of non-audit fees had affected their independence. The 
Audit Committee additionally considered the professional and 
regulatory guidance on auditor independence and was satisﬁ ed 
with the auditor’s representations. The Company’s policy is to use 
the most appropriate advisers for non-audit work, taking account 
of the need to maintain independence. The Audit Committee 
has approved a formal policy governing the engagement of the 
external auditor for non-audit services.

The Audit Committee is responsible for reviewing the half-year and 
preliminary announcements of results and the statutory accounts 
prior to their approval by the Board. When conducting the review, 
the Committee considers the continuing appropriateness of the 
accounting policies, judgements made in the production of the 
numbers and the adequacy and appropriateness of disclosures.

The Committee has reviewed arrangements by which staff may, 
in conﬁ dence, raise concerns about improprieties in matters of 
ﬁ nancial reporting or other matters. In conducting the review, the 
Committee took into account whether the policies were in line 
with guidance published by the Financial Services Authority.

The Audit Committee received reports from the internal auditor, 
PricewaterhouseCoopers, during the year and reviewed the 
schedule of work proposed by the internal auditor, the resources 

30

available to carry out the schedule and key ﬁ ndings. A system of 
reporting to follow up on all matters raised by both internal and 
external audit was taken into account in assessing the 
effectiveness of the internal audit function.

The terms of reference of the Audit Committee will be available for 
inspection during normal business hours on any weekday (other 
than public holidays) at the Company’s ofﬁ ces from the date the 
notice of AGM is posted until the conclusion of the AGM, and are 
also available on the Company’s website. 

Remuneration Committee
The Remuneration Committee is chaired by Rupert Robson. The 
other members of the Remuneration Committee are Michael 
Fallon, David Clark and Richard Kilsby, all of whom are independent 
non-executive directors.

The Board has delegated the following responsibilities to the 
Remuneration Committee:
– 

 reviewing and approving the general principles of the 
Company’s remuneration policies;
 reviewing the relationship between incentives and risk;
 determining the application of the Company’s remuneration 
policies to the Executive Directors;
 determining the remuneration of Executive Directors and the 
Chairman;
 reviewing the application of the Company’s remuneration 
policies to Senior Management, Brokers and other employees;
 approving the remuneration of Senior Management after 
consultation with the Chief Executive; and
 approving all share and long term incentive schemes and their 
application.

– 
– 

– 

– 

– 

– 

The Chairman and the executive directors attend certain parts of 
certain meetings of the Remuneration Committee by invitation. 
The Chairman and the executive directors do not attend meetings 
where their own remuneration is being discussed.

During 2010 and subsequently, the Remuneration Committee has 
been advised by PricewaterhouseCoopers executive compensation 
consultants.

Further details of the Company’s policies on remuneration, service 
contracts and share options are given in the Report on Directors’ 
Remuneration set out on pages 32 to 38.

The terms of reference of the Remuneration Committee will be 
available for inspection during normal business hours on any week 
day (other than public holidays) at the Company’s ofﬁ ces from the 
date the notice of AGM is posted until the conclusion of the AGM, 
and are also available on the Company’s website.

Nominations Committee
The Nominations Committee is chaired by Keith Hamill. The other 
members of the Nominations Committee are David Clark, Michael 
Fallon, Richard Kilsby and Rupert Robson, all of whom are 
independent non-executive directors. The terms of reference of the 
Nominations Committee provide that the Chairman of the Board 
would not be permitted to chair the Committee if it were dealing 
with the issue of his replacement.

The Board has delegated responsibility to the Nominations 
Committee for:
– 

 reviewing the balance and skill, knowledge and experience of 
the Board;
 agreeing and implementing procedures for the selection of new 
Board appointments; and
 making recommendations to the Board on all proposed new 
appointments.

– 

– 

In considering the appointment of new non-executive directors, 
the Committee takes account of the time commitment likely to be 
required of the appointee. The likely time commitment is referred 
to in all new letters of appointment.

The terms of reference of the Nominations Committee will be 
available for inspection during normal business hours on any week 
day (other than public holidays) at the Company’s ofﬁ ces from the 
date the notice of AGM is posted until the conclusion of the AGM 
and are also available on the Company’s website.

Risk management and internal control
The Board is responsible for setting the Group’s risk appetite and 
ensuring that it has an appropriate and effective risk management 
framework and for monitoring the ongoing process for identifying, 
evaluating, managing and reporting the signiﬁ cant risks faced by 
the Group. The Group’s risk management governance structure and 
the Group’s risk proﬁ le are described in the Risk Management 
section of the Business Review.

The Board is also responsible for the Group’s system of internal 
control and for reviewing its effectiveness. In discharging its 
responsibilities in this respect, the Board has appointed the Audit 
Committee to carry out the annual review of the effectiveness of 
the internal control and risk management systems and to report to 
the Board thereon. This process has been in place for the year under 
review and up to the date of approval of the Annual Report, is 
reviewed regularly by the Board and accords with the Turnbull 
guidance appended to the Combined Code. The Audit Committee 
conducted a formal review of the effectiveness of the Group’s 
internal control systems for 2010, considering reports from 
management, external audit and the work of the risk control 
and internal audit functions.

The Group has a comprehensive system for ﬁ nancial reporting 
which is subject to review by both internal and external audit. 
Budgets, regular re-forecasts and monthly management accounts 
including balance sheets and cash ﬂ ows are prepared at all levels of 
the business and consolidated reports are reviewed by the Board. 
These reports include comparisons of performance and position 
against prior year, budgets and forecasts.

The Group has investments in a number of joint ventures and 
associated companies. Where the Group is not directly involved in 
the management of the investment, it can inﬂ uence, 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.

Tullett Prebon plc 
Annual Report 2010

Relations with shareholders
The Board recognises the importance of communication with 
shareholders. The Company’s website, www.tullettprebon.com, 
provides information for shareholders on the Group’s activities, 
results, products and recent developments.

There is regular dialogue with institutional investors, fund 
managers and analysts, including presentations around the time 
of the results announcements and also on request. The Chairman 
maintains ongoing relations with shareholders when necessary 
or appropriate and is available to those shareholders who have a 
policy of regular contact or who wish to discuss speciﬁ c matters. 
The Senior Independent Non-executive Director and the other 
non-executive directors are available to meet with shareholders, 
should such meetings be requested.

Annual General Meeting
The Board uses the AGM to communicate with investors and 
welcomes their participation. Notice of the AGM, and related 
papers, are sent to shareholders at least 20 working days before the 
meeting. The Chairman aims to ensure that all of the directors, 
including Chairmen of the Committees of the Board, are available 
at AGMs to answer questions and meet shareholders. The proxy 
votes cast on each resolution proposed at general meetings are 
disclosed at those meetings. To encourage shareholder participation, 
those shareholders whose shares are held via the CREST system are 
offered the facility to submit their proxy votes via CREST.

Accountability and Audit
The directors’ statement regarding their responsibility for preparing 
the Annual Report is set out on page 39 and the independent 
auditor’s report regarding their reporting responsibility is on page 41.

Going concern
The Group’s business activities and performance, and the ﬁ nancial 
position of the Group, its cash ﬂ ows, liquidity position, borrowing 
facilities and hedging strategy, together with the factors likely to 
affect its future development, performance and position, are 
discussed in the Business Review on pages 05 to 23. Analysis of the 
Group’s key risks and approach to risk management is also set out 
in the Business Review on pages 15 to 19. Details of the Group’s 
interest bearing loans and borrowings, obligations under ﬁ nance 
leases, derivative ﬁ nancial instruments, long term provisions, 
other long term payables and ﬁ nancial instruments are set out in 
Notes 21 to 25.

The Group has considerable ﬁ nancial resources both in the regions 
and at the corporate centre to comfortably meet the Group’s 
ongoing obligations. 

After making enquiries, the directors have a reasonable expectation 
that the Company and the Group have adequate resources to 
continue in operational existence for the foreseeable future. 
Accordingly, the annual report and accounts continue to be 
prepared on the going concern basis.

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Tullett Prebon plc 
Annual Report 2010

Report on Directors’ Remuneration

The Report on Directors’ Remuneration sets out the role of the 
Remuneration Committee, the Company’s general remuneration 
policies and how they are applied to directors and details of 
directors’ remuneration for the year ended 31 December 2010. 
The report has been prepared in accordance with Schedule 8 
of the Large and Medium Sized Companies and Groups (Accounts 
and Reports) Regulations 2008, the Listing Rules and the Combined 
Code, and will be put to shareholders for approval at the AGM 
on 12 May 2011.

The Companies Act 2006 requires the auditor to report to the 
Company’s members on certain parts of the Report on Directors’ 
Remuneration and to state whether in their opinion those parts of 
the report have been properly prepared in accordance with the Act. 
All sections of this report, except for ‘Long term share incentive 
plans’ and ‘Details of directors’ remuneration’, are unaudited.

In this report, we use the following terminology:

‘Executive Director’ means any executive member of the Board;

‘Senior Management’ means those members of the Company’s 
Executive Committee (other than the Executive Directors) and the 
ﬁ rst level of management below that level; and

‘Broker’ means front ofﬁ ce revenue generators.

Remuneration Committee
The members of the Remuneration Committee and its 
responsibilities are set out in the Corporate Governance Report 
on page 30, and that section of the Corporate Governance Report 
is incorporated into this Report on Directors’ Remuneration by 
reference. The Remuneration Committee is responsible, on behalf 
of the Board, for:
– 

 reviewing and approving the general principles of the 
Company’s remuneration policies;
 reviewing the relationship between incentives and risk;
 determining the application of the Company’s remuneration 
policies to the Executive Directors;
 determining the remuneration of Executive Directors and 
the Chairman;
 reviewing the application of the Company’s remuneration 
policies to Senior Management, Brokers and other employees;
 approving the remuneration of Senior Management after 
consultation with the Chief Executive; and
 approving all share and long term incentive schemes and their 
application.

– 
– 

– 

– 

– 

– 

The Committee’s terms of reference are available on the Company’s 
website or, on request, from the Company Secretary.

The Chairman of the Remuneration Committee attends Annual 
General Meetings of the Company and is available to answer 
questions raised by shareholders.

Developments during 2010
The Remuneration Committee keeps up to date with the latest 
regulatory and market developments, guidelines and codes of 
practice published by various bodies, and research published by 
professional advisers.

32

During 2010 there has been a considerable amount of regulation 
and guidance issued on remuneration in the ﬁ nancial services 
sector, most notably the FSA’s Policy Statement on Revising the 
Remuneration Code (the ‘Remuneration Code’), to which the 
Company is now subject. The Company is a Tier Four ﬁ rm for the 
purposes of the application of proportionality under the 
Remuneration Code. The Company’s remuneration policies and the 
Remuneration Committee’s terms of reference were reviewed in 
the light of the Remuneration Code. The revised remuneration 
policies are set out below and the revised terms of reference are 
available on the Company’s website. As a result of the changes 
made, the Remuneration Committee is satisﬁ ed that the 
Company’s remuneration policies, processes and governance were 
in compliance with Principles 1 to 11 of the Remuneration Code by 
the end of 2010, as required. The Remuneration Committee is 
conscious of the obligation on the Company to comply with those 
aspects of Principle 12 of the Remuneration Code that apply to it by 
no later than the end of June 2011.

Professional advice
During 2010 and subsequently the Remuneration Committee 
received advice from PricewaterhouseCoopers executive 
compensation consultants (PwC) on regulatory developments 
affecting remuneration, all aspects of the remuneration of the 
Executive Directors, the risk proﬁ le of the Company and the 
implications of the risk proﬁ le for the Company’s remuneration 
policies. PwC were appointed by the Remuneration Committee.

During 2010 and subsequently PricewaterhouseCoopers LLP have 
also provided outsourced internal audit services, tax advice, and 
other associated services.

Remuneration policies
The Company’s objective is to maximize returns to shareholders 
over the medium to long term, at an acceptable level of risk. The 
strategy to achieve this objective is to continue to build a business, 
operating as an intermediary in the wholesale OTC ﬁ nancial 
markets internationally, with the scale and breadth to deliver 
superior performance and returns, whilst maintaining strong 
ﬁ nancial management disciplines.

The Company’s remuneration policies are designed to attract, 
motivate and retain staff with the necessary skills and experience 
to deliver the strategy, in order to achieve the Company’s objective.

The Remuneration Committee has carefully considered the 
relationship between incentives and risk. Details of the Company’s 
key risks and risk management are set out in the Business Review in 
the Annual Report. The majority of transactions are brokered on a 
Name Give-Up basis where the business acts as agent in arranging 
the trade. Commissions earned on these activities are received 
monthly in cash. The business does not take any trading risk and 
does not hold principal trading positions. The business only holds 
ﬁ nancial instruments for identiﬁ ed buyers and sellers in matching 
trades which are settled within 1-3 days. The business does not 
retain any contingent risks. The business does not have valuation 
issues in measuring its proﬁ ts. The Remuneration Committee 
considers that the Company’s remuneration policies reﬂ ect the low 
risk proﬁ le of the Company, are consistent with and promote sound 
and effective risk management, and do not encourage risk taking.

The Remuneration Committee considers that the Company’s 
remuneration policies are consistent with the measures set out in 
the business’s compliance manuals relating to conﬂ icts of interest.

In common with other businesses operating in the sectors in which 
the Company operates, the Company’s remuneration policies are in 
some respects distinct from the normal practices of UK listed 
companies. The majority of the Company’s competitors are not UK 
listed companies. It is considered to be in the best interests of the 
Company and the shareholders to pay remuneration in line with 
market practice in the sectors in which the Company operates. 

The application of this policy takes account of general practices in 
the parts of the ﬁ nancial services sector in which the Company 
operates, which is characterised by high levels of remuneration 
dependent upon the achievement of correspondingly high levels 
of performance, in contrast to many other sectors. It is considered 
that failure to do so would not be in the best interests of 
shareholders.

The Company’s remuneration policies for Executive Directors and 
Senior Management include the following:

1.   Remuneration includes high levels of variable rewards that are 
dependent on performance. The main component of these 
variable rewards is annual bonuses which are used to motivate 
and retain staff and to achieve superior returns for shareholders. 

2.   Salaries are paid monthly and are normally set at a level to 

provide a reasonable level of ﬁ xed remuneration which would 
be appropriate in circumstances where bonuses are not paid 
due to weak performance. Salaries are reviewed annually. These 
reviews give rise to salary increases only if information on 
comparable sector practice indicates that salary levels are out 
of line with the market.

3.   Performance bonuses are discretionary and not contractual, 
with the level of annual bonus determined on the basis of 
judgements on performance relative to the trading conditions 
and other circumstances and the achievement of objectives.

4.   Discretionary bonuses for an individual, and in aggregate for the 
Executive Director and Senior Management population, are 
determined taking into account the overall performance of the 
business and its regulatory capital requirements. As the 
business does not take any trading risk and does not hold 
principal trading positions, does not have valuation issues in 
measuring its proﬁ ts, and does not retain any contingent risks, 
it is not necessary for the determination of bonuses to reﬂ ect 
an adjustment for risk in reviewing ﬁ nancial performance.

5.   The payment of discretionary bonuses to the Executive Director 
and Senior Management population is at least two months 
after the end of the ﬁ nancial year. The business realises its 
revenues in cash within a short time frame, and all of the 
reported revenues will have been realised in cash before these 
bonuses are paid.

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Tullett Prebon plc 
Annual Report 2010

6.   Discretionary bonus payments to the Executive Directors are 
subject to deferral through the requirement for an element of 
the bonuses to be invested in the Company’s shares which are 
to be held for a period before they can be realised. Given the 
Company’s risk proﬁ le, as discussed above, it is not considered 
necessary for the discretionary bonuses paid to Senior Managers 
to be subject to deferral, or to attach claw back conditions to 
bonuses paid to Executive Directors or Senior Managers.

7.   In determining individual performance bonuses, the primary 

objective is to motivate and retain key staff. While bonuses will 
reﬂ ect, to a degree, short term ﬁ nancial outcomes against 
budget, other factors are taken into account. Consequently, it is 
possible that, in some market circumstances, individual superior 
performance may not be reﬂ ected in the achievement of 
budgets but may merit the payment of signiﬁ cant bonuses. This 
approach is balanced by the Company’s principle that the cost of 
staff should be sensitive to returns to shareholders.

8.   The Remuneration Committee does not believe that the formal 
capping of performance bonuses is consistent with the delivery of 
enhanced returns to shareholders. In addition, it is not appropriate 
to apply percentages or multiples of salary to the determination 
of bonuses given the policy of paying ﬁ xed remuneration of 
a relatively low proportion of overall remuneration.

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9.    Long term incentive plans have been utilised in the recent past, 

where appropriate, to motivate the Company’s executive 
management. Awards have been structured to reward the 
achievement of medium term operational objectives, ﬁ nancial 
performance and growth in shareholder value. The Remuneration 
Committee recognises the importance of aligning the interests 
of Executive Directors with those of shareholders and equity 
incentive awards will continue to form part of their 
remuneration packages. The Remuneration Committee has 
concluded that the provision of long term equity based incentives 
to Senior Management is not consistent with market practice in 
the Company’s key competitor organisations and consequently 
no further awards will be made to Senior Management 
under the Long Term Incentive Plan for the foreseeable future. 

10.  The Company provides deﬁ ned contribution pension 

arrangements only and does not pay discretionary pension 
beneﬁ ts.

11.  The Company provides employees with medical insurance but 
otherwise seeks to avoid the provision of beneﬁ ts in kind. 

The Company’s remuneration policy for Brokers is based on the 
principle that remuneration is directly based on ﬁ nancial performance, 
generally at a desk team level, and is calculated in accordance with 
formulae set out in ﬁ xed term contracts of employment. These 
formulae take into account the ﬁ xed costs of the Brokers and the 
commission payments are therefore based on the proﬁ ts that the 
Brokers generate for the business. Sign-on bonuses are only paid 
upfront when a claw back provision is included in the contract of 
employment. Typically, Brokers receive a ﬁ xed salary paid regularly 
throughout the year, with a signiﬁ cant proportion of variable 
remuneration dependent on revenue, which is paid after the 
revenue has been fully received in cash. Once cash has been 
received, revenue is not subject to any remaining contingency.

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Tullett Prebon plc 
Annual Report 2010

Report on Directors’ Remuneration
continued

The Company’s remuneration policy for employees engaged in 
functions such as Compliance, Legal, HR, Finance and Risk Control, 
is that remuneration is adequate to attract qualiﬁ ed and 
experienced staff, is in accordance with the achievement of 
objectives linked to their functions, and is independent of the 
performance of the business areas they support. Employees in such 
functions report through an organisation structure that is separate 
and independent from the business units. The heads of such 
functions report to members of the Executive Committee and as 
Senior Management their remuneration is reviewed and approved 
by the Remuneration Committee.

The Company’s policy is to ensure that variable remuneration is not 
paid through vehicles or methods that facilitate avoidance of the 
Remuneration Code.

The implementation of the remuneration policies set out above is 
subject to annual independent review.

Application of policies to Executive Directors
The Company currently has two Executive Directors who are Terry 
Smith (Chief Executive) and Paul Mainwaring (Finance Director). 
The above policies are applied to the Executive Directors as follows.

Salaries
Salaries are reviewed and determined by the Remuneration 
Committee. In accordance with the Company’s policies, salaries are 
not routinely increased annually. In determining salaries the 
Remuneration Committee takes into account salary levels for 
equivalent positions in comparable sector businesses, most of 
which are not UK listed companies.

Discretionary performance bonuses
Executive Directors’ bonuses are discretionary and no director has 
an entitlement to a bonus.

In determining the annual performance bonus, the Remuneration 
Committee establishes a bonus pool for the Executive Directors. 
The pool is then allocated between Executive Directors taking into 
consideration their personal contribution and internal relativities. 
It is the policy of the Remuneration Committee not to pay bonuses 
to a director if it is not satisﬁ ed with personal performance. 
If, following this process, not all of the bonus pool has been 
allocated, the unallocated proportion is retained by the Company.

As set out in the Report on Directors’ Remuneration in last year’s 
Annual Report, in determining the annual performance bonus for 
2010 and subsequent years, the Remuneration Committee will 
establish a bonus pool for all Executive Directors using the formula 
of 4.0%-4.5% of the surplus of operating proﬁ t over a threshold 
calculated as the weighted average cost of capital multiplied by 
capital employed. The weighted average cost of capital (‘WACC’) is 
currently approximately 11.5%.

The determination of the total bonus pool within the range will 
take account of additional factors, such as the achievement of the 
Company’s and individuals’ objectives and corporate performance 
relative to market circumstances. The Remuneration Committee 
will report on its assessment of these factors in the Report on 
Directors’ Remuneration.

In exceptional circumstances, the Remuneration Committee may 
decrease or increase the amounts resulting from the formula to 
take account of, for example, the impact of strategic investments 
that depress short term results if it concludes that doing so would 
be in the interests of shareholders. The Remuneration Committee 
will record and explain any such variation in the Report on 
Directors’ Remuneration.

In addition, the Remuneration Committee may change the formula 
in the future to take account of factors such as changes in the 
number of Executive Directors participating in the bonus pool. The 
Remuneration Committee will record and explain any such change 
in the Report on Directors’ Remuneration.

Bonus for 2010
The annual performance bonus pool for 2010 for the Executive 
Directors, determined using the formula above and a WACC of 
11.5%, is a range of £4.34m-£4.89m.

In determining the total annual bonuses for the Executive Directors 
within this range, the Remuneration Committee assessed that the 
Executive Directors had met their individual objectives, and that 
the Company had performed well relative to market circumstances. 
However, the operating proﬁ t of the Company in 2010 was lower 
than in 2009, and it was considered that the annual bonuses should 
be lower than 2009 in a similar proportion. As a result, the total 
annual bonuses for Executive Directors for 2010 were determined 
to be £4.615m (2009 bonuses: £5.0m). The allocation of the 
bonuses to each of the Executive Directors is shown below.

Consistent with the approach taken for the 2008 and 2009 annual 
bonuses, one-half of the 2010 annual bonuses for each of the 
Executive Directors is awarded on condition that the net of tax 
amount will be invested in the Company’s shares, to be held for 
a minimum of two years.

Bonus for 2011
The Remuneration Committee intends to apply the formula set 
out above to determine the bonus pool for the Executive Directors 
for 2011.

Long term and share incentive schemes
The participation of Executive Directors in long term and share 
incentive schemes is determined by the Remuneration Committee 
which agrees each year performance conditions to attach to the 
awards that are consistent with the Company’s strategic objectives 
at that time. Assessment of the achievement of non-market based 
performance targets is calculated by the Finance Director and 
reviewed by the auditor. Assessment of market-based performance 
conditions is undertaken by the Remuneration Committee’s 
independent remuneration consultant. 

34

The Tullett Prebon Long Term Incentive Plan (‘LTIP’) was approved 
by shareholders in 2006. The initial grants were made in 2008 at 
200% of salary plus bonus. Subsequent awards are limited to 300% 
of annual salary. Details of awards made are set out below.

Total remuneration levels for Executive Directors
Comparable levels of remuneration for Executive Directors in 
similar companies have been reviewed, with the aid of professional 
advice. The review conﬁ rmed that Tullett Prebon’s approach is in 
line with normal practices adopted in the inter-dealer broker sector. 

The Remuneration Committee has also taken into account the pay 
and employment conditions of other employees in the Company, 
particularly the remuneration of Senior Management, in 
determining Executive Directors’ remuneration. The Company aims 
to reward all employees according to the nature of their role, their 
performance and market forces, and therefore does not have 
a policy on the ratio of Executive Directors’ remuneration to that 
of other groups of employees in the Company.

The relative importance of the ﬁ xed and variable elements of 
remuneration for the Executive Directors has been carefully 
considered by the Remuneration Committee. Apart from ﬁ xed 
salaries, all other elements of remuneration are related to 
performance. Including the value of the LTIP awards as at the date 
of grant in total remuneration, for 2010 the proportion of 
remuneration that is related to performance for Terry Smith was 
90% (2009: 90%) and for Paul Mainwaring was 84% (2009: 87%).

Long term share incentive plans
Tullett Prebon Long Term Incentive Plan
Shareholder approval was granted in November 2006 for the 
discretionary long term incentive plan, the LTIP. The principal aim 
of the Tullett Prebon LTIP is to improve operating performance. 
The ﬁ rst awards under this plan were made in 2008.

2008 awards
For awards made in 2008, minimum vesting of awards will be 
achieved if annual revenue growth is 5% per annum for the three 
years to 31 December 2010 with maximum vesting of awards if 
annual revenue growth is 10% per annum over the same period, 
subject in both cases to achieving in 2010 operating margins of 
17.5% and a return on capital employed (‘ROCE’) of not less than 
25% on operating assets and goodwill, including on future 
acquisitions. The Remuneration Committee selected these 
measures as they were consistent with business objectives at 
that time.

The awards made in 2008 are in the form of share options, 
exercisable for £1 in total.

The Remuneration Committee attached an investment condition 
to LTIP awards made in 2008 under which holders of those awards 
are required to use one-half of their annual bonuses in respect of 
2008 and 2009 to purchase shares in the Company in order to 
retain their right to the award. Shares acquired under the 
investment condition are required to be held until the ﬁ rst date 
on which the awards become exercisable (March 2011). 

Tullett Prebon plc 
Annual Report 2010

As the 2010 operating margin is less than 17.5%, none of the 
awards made in 2008 will vest.

2009 Awards
For awards made in 2009, minimum vesting of 25% of the awards 
will be achieved if the ranking percentile of the Company’s TSR over 
the three years to 31 December 2011 relative to the TSR over that 
period of all other companies comprising the FTSE 250 (excluding 
investment trusts) at 1 January 2009 is 50th, with maximum 
vesting of 100% if the ranking percentile is 25th or better, subject 
in both cases to achieving in 2011 ROCE of not less than 25% on 
operating assets and goodwill, including on future acquisitions. 
The Remuneration Committee considers that relative TSR meets 
investors’ expectations of outperformance against a peer group 
for LTIP vesting and the ROCE measure provides a ﬁ nancial 
performance hurdle.

The awards made in 2009 are in the form of share options, 
exercisable for £1 in total.

2010 Awards
For two-thirds of the awards made in 2010, minimum vesting of 
25% of the awards will be achieved if the ranking percentile of the 
Company’s TSR over the three years to 31 December 2012 relative 
to the TSR over that period of all other companies comprising the 
FTSE 250 (excluding investment trusts) at 1 January 2010 is 50th, 
with maximum vesting of 100% if the ranking percentile is 25th or 
better. For one-third of the awards made in 2010, minimum vesting 
of 25% of the awards will be achieved if the Company’s annualised 
TSR over the three years to 31 December 2012 is equal to RPI +4.5%, 
with maximum vesting of 100% if annualised TSR is equal to RPI 
+9.5% or above. Vesting of awards is subject in all cases to achieving 
in 2012 a ROCE of not less than 25% on operating assets and 
goodwill, including on future acquisitions. The Remuneration 
Committee considers that the use of both relative and absolute 
TSR measures meets investors’ expectations of outperformance 
against a peer group for LTIP vesting and the ROCE measure 
provides a ﬁ nancial performance hurdle.

The awards made in 2010 are in the form of share options, 
exercisable for £1 in total.

35

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Tullett Prebon plc 
Annual Report 2010

Report on Directors’ Remuneration
continued

Details of directors’ remuneration 
Total emoluments received by directors during the year ended 31 December 2010 were as follows:

Salaries and fees 

Beneﬁ ts 

Cash 

Bonuses

Subject to
investment requirement 

Total

Executive Directors 
Terry Smith 
Paul Mainwaring 
Non-executive Directors 
Keith Hamill 
David Clark 
Michael Fallon 
Richard Kilsby  
Rupert Robson 

2010 
£000 

650 
275 

150 
50 
33 
50 
50 
1,258 

2009 
£000 

650 
275 

150 
45 
45 
45 
41 
1,251 

2010 
£000 

2009 
£000 

2010 
£000 

2009 
£000 

2010 
£000 

2009 
£000 

2010 
£000 

2009
£000

2 
1 

– 
– 
– 
– 
– 
3 

2 
1 

– 
– 
– 
– 
– 
3 

1,846 
462 

2,000 
500 

1,846 
461 

– 
– 
– 
– 
– 
2,308 

– 
– 
– 
– 
– 
2,500 

– 
– 
– 
– 
– 
2,307 

2,000 
500 

– 
– 
– 
– 
– 
2,500 

4,344 
1,199 

4,652
1,276

150 
50 
33 
50 
50 
5,876 

150
45
45
45
41
6,254

Executive Directors
Salaries
The salary of the Chief Executive, Terry Smith, is £650,000 and has not been changed since 2005. The salary of the Finance Director, 
Paul Mainwaring, is £275,000 and has not changed since his appointment in 2006. 

Annual bonuses
The Remuneration Committee has determined the following awards in respect of 2010 (2009 awards in brackets):

Terry Smith:
– £1.846m (2009: £2.0m) in cash; and
–  £1.846m (2009: £2.0m) to be awarded on condition that the net of tax amount is invested in the Company’s shares, to be held for 

a minimum of two years.

Paul Mainwaring:
– £461.5k (2009: £500k) in cash; and 
–  £461.5k (2009: £500k) to be awarded on condition that the net of tax amount is invested in the Company’s shares, to be held for 

a minimum of two years.

2010 is the third successive year for which the Remuneration Committee has determined that 50% of the annual bonus awarded to 
each of the Executive Directors is on condition that it is invested in the Company’s shares, to be held for a minimum of two years. The 
investments made in the Company’s shares by the Executive Directors with 50% of the bonuses awarded for 2008 can now be divested, 
and the Remuneration Committee has determined that the investment condition for the 50% of the bonuses awarded for 2010 will be 
met by the Executive Directors being required to hold the requisite number of shares purchased with the 2008 bonuses for a further 
period of two years.

36

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Long term incentives
The outstanding share options granted to each person who served as a director of the Company at any time in the ﬁ nancial year are 
as follows:

Director 
Terry Smith 

Terry Smith 

Terry Smith 

Shares 
under 
option at 
1 Jan 
2010 
  18 March  1,860,465 

Date of 
grant 

2008 

Granted 
during 
the year 
–  

Lapsed 
Exercised  unexercised 
during the 
year 
–  1,860,465 

during 
the year 

Shares
under 
option at 
1 Jan 
2011 
–  

22 June  671,441 

– 

2009 
21 May 
2010 

–   634,559 

Paul Mainwaring 

  18 March  360,465 

2008 

Paul Mainwaring 

22 June  284,071 

–  

–  

Paul Mainwaring 

2009 
21 May 
2010 

–   162,707 

– 

–  

–   671,441 

–   634,559 

–   360,465 

–  

– 

–  

–   284,071 

–   162,707 

Exercise 
price 
£1 
in total 
£1 
in total 
£1 
in total 
£1 
in total 
£1 
in total 
£1 
in total 

Date from 
which ﬁ rst 
exercisable 

Date of
expiry of
option
n/a  18 March  
2018
22 June 
2019
21 May
2020
n/a  18 March  
2018
22 June 
2019
21 May
2020

22 June 
2012 
21 May 
2013 

22 June 
2012 
21 May 
2013 

The value of the share options granted during the period to Terry Smith was £2.0m (2009: £1.95m) and to Paul Mainwaring was £0.5m 
(2009: £0.825m). The lowest closing price of Tullett Prebon plc ordinary shares during the year to 31 December 2010 was 262.2p and the 
highest closing price was 417.2p. At 31 December 2010 the closing share price was 382.8p. 

Beneﬁ ts
No pension contributions were made in respect of Terry Smith during 2010 (2009: £nil). Paul Mainwaring received pension contributions 
during 2010 of £6,336 (2009: £6,336). These contributions were made to the Tullett Prebon Group Personal Pension Plan. 

Terry Smith and Paul Mainwaring received private medical cover at a cost of £2,072 and £811 respectively during 2010.

Outside directorships
At the time of the demerger of Collins Stewart plc it was decided that it would be in the best interests of the then shareholders if Terry 
Smith undertook the role of Chairman of that company. On 1 April 2010 Terry Smith handed over the chairmanship and served as Deputy 
Chairman until 6 December 2010 when he retired as a director. Terry Smith received fees of £97,744 for the year ended 31 December 2010 
from Collins Stewart plc. 

Paul Mainwaring has no outside directorships. 

Non-executive directors
The fees paid to the non-executive directors are determined by the Board and the fees paid to the Chairman are determined by the 
Remuneration Committee. These are benchmarked against published information on the fees paid to the non-executive directors of UK 
listed companies of comparable size and activities. It was determined that with effect from 1 December 2009 all non-executive directors 
would receive fees of £50,000 per annum, irrespective of committee responsibilities. The Chairman’s fee was unchanged. Non-executive 
directors and the Chairman are not eligible to participate in short or long term incentive plans or to receive any pension from the Company. 

37

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Tullett Prebon plc 
Annual Report 2010

Report on Directors’ Remuneration
continued

Directors’ contracts
The Company’s current policy is that Executive Directors’ serve under contracts terminable on 12 months’ notice with entitlement to 
salary and contractual beneﬁ ts subject to mitigation, and with restrictive covenants. It is the Remuneration Committee’s policy that 
termination payments will not exceed 100% of base salary plus annual bonus. The contracts provide for retirement at the age of 65 in 
all cases.

Details of the Executive Directors’ service contracts are set out below:

Director   
Terry Smith 
Paul Mainwaring  25 September 2006

Date of contract
29 January 2007

The Non-executive Directors serve under letters of appointment subject to 12 months’ notice, as set out below:

Director   
Keith Hamill 
David Clark 
Michael Fallon 
Richard Kilsby 
Rupert Robson 

Date of letter of appointment
22 September 2000
10 March 2003
28 September 2010
3 June 2005
4 January 2007

Total shareholder returns
A graph depicting the Company’s total shareholder return in comparison to other companies in the FTSE Mid 250 index and the FTSE 
General Financials index in the ﬁ ve years to 31 December 2010 is shown below:

180

160

140

120

100

80

60

40

20

Collins Stewart Tullett plc
Tullett Prebon plc
FTSE250
FTSE350 General Financials

2006

2007

2008

2009

2010

The Board believes that the above indices are most relevant as they comprise either businesses of similar size or engaged in the ﬁ nancial 
services industry.

On behalf of the Board

Rupert Robson
Chairman of the Remuneration Committee
8 March 2011

38

Statement of Directors’ Responsibilities

Tullett Prebon plc 
Annual Report 2010

The directors are responsible for preparing the Annual Report and 
the ﬁ nancial statements in accordance with applicable laws and 
regulations. Company law requires the directors to prepare ﬁ nancial 
statements for each ﬁ nancial year. Under that law the directors are 
required to prepare ﬁ nancial statements for the Group in 
accordance with International Financial Reporting Standards (‘IFRS’) 
as adopted by the European Union and Article 4 of the IAS 
Regulation and have chosen to prepare the Parent Company 
Financial Statements in accordance with United Kingdom Generally 
Accepted Accounting Practice (‘UK GAAP’). Under company law the 
directors must not approve the accounts unless they are satisﬁ ed 
that they give a true and fair view of the state of affairs of the 
Company and of the proﬁ t or loss of the Company for that period.

In the case of the Group Financial Statements, International 
Accounting Standard 1 requires that directors:

– 

 select and apply accounting policies properly;

– 

– 

 present information, including accounting policies, in a manner 
that provides relevant, reliable, comparable and understandable 
information;

 provide additional disclosures when compliance with the 
speciﬁ c requirements in IFRS is insufﬁ cient to enable users to 
understand the impact of particular transactions, other events 
and conditions on the entity’s ﬁ nancial position and ﬁ nancial 
performance; and

The directors are responsible for keeping proper accounting records 
which disclose with reasonable accuracy at any time the ﬁ nancial 
position of the Company, for safeguarding the assets, for taking 
reasonable steps for the prevention and detection of fraud and 
other irregularities and for the preparation of a Directors’ Report 
and Directors’ Remuneration Report which comply with the 
requirements of the Companies Act 2006.

The directors are responsible for the maintenance and integrity of 
the Company website. Legislation in the United Kingdom governing 
the preparation and dissemination of ﬁ nancial statements differs 
from legislation in other jurisdictions.

Responsibility statement
The directors conﬁ rm, to the best of their knowledge, that:

– 

– 

 the ﬁ nancial statements, prepared in accordance with the 
relevant ﬁ nancial reporting framework, give a true and fair view 
of the assets, liabilities, ﬁ nancial position and proﬁ t or loss of the 
Company and the undertakings included in the consolidation 
taken as a whole; and

 the business review, which is incorporated into the Directors’ 
Report, 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.

– 

 make an assessment of the Company’s ability to continue as 
a going concern.

By order of the Board

Terry Smith
Chief Executive
8 March 2011

In the case of the Parent Company Financial Statements, the 
directors are required to:

– 

– 

– 

– 

 select suitable accounting policies and then apply them 
consistently;

 make judgements and estimates that are reasonable and 
prudent;

 state whether applicable accounting standards have been 
followed; and

 prepare the ﬁ nancial statements on the going concern basis 
unless it is inappropriate to presume that the Company will 
continue in business.

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Tullett Prebon plc 
Annual Report 2010

Financial Statements

In this section:
Group

Company

41  Independent Auditor’s Report to 

85  Independent Auditor’s Report 

the Members of Tullett Prebon plc

to the Members of Tullett Prebon plc

86  Company Balance Sheet
87  Notes to the Financial Statements

42  Consolidated Income Statement
43  Consolidated Statement 

of Comprehensive Income
44  Consolidated Balance Sheet
45  Consolidated Statement of Changes 

in Equity

46  Consolidated Cash Flow Statement
47  Notes to the Consolidated Financial 

Statements

40

 
 
 
Independent Auditor’s Report 
to the Members of Tullett Prebon plc

Tullett Prebon plc 
Annual Report 2010

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:

– 

– 

 certain disclosures of directors’ remuneration speciﬁ ed by law 
are not made; or

 we have not received all the information and explanations we 
require for our audit.

Under the Listing Rules we are required to review:

– 

– 

 the directors’ statement, contained within the Business Review, 
in relation to going concern; 

 the part of the Corporate Governance Statement relating to the 
Company’s compliance with the nine provisions of the June 
2008 Combined Code speciﬁ ed for our review; and

– 

 certain elements of the report to shareholders by the Board on 
directors’ remuneration.

Other matter
We have reported separately on the Parent Company Financial 
Statements of Tullett Prebon plc for the year ended 31 December 
2010 and on the information in the Directors’ Remuneration Report 
that is described as having been audited.

Manbhinder Rana (Senior Statutory Auditor)
for and on behalf of

Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom
8 March 2011

We have audited the Group Financial Statements of Tullett Prebon 
plc for the year ended 31 December 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 
Cash Flow Statement and the related Notes 1 to 38. The ﬁ nancial 
reporting framework that has been applied in their preparation is 
applicable law and International Financial Reporting Standards 
(IFRSs) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in 
accordance with Chapter 3 of Part 16 of the Companies Act 2006. 
Our audit work has been undertaken so that we might state to the 
Company’s members those matters we are required to state to 
them in an auditor’s report and for no other purpose. To the fullest 
extent permitted by law, we do not accept or assume responsibility 
to anyone other than the Company and the Company’s members 
as a body, for our audit work, for this report, or for the opinions we 
have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, 
the directors are responsible for the preparation of the Group 
Financial Statements and for being satisﬁ ed that they give a true 
and fair view. Our responsibility is to audit and express an opinion 
on the Group 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.

Scope of the audit of the ﬁ nancial statements
An audit involves obtaining evidence about the amounts and 
disclosures in the ﬁ nancial statements sufﬁ cient to give reasonable 
assurance that the ﬁ nancial 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 circumstances and have been consistently applied and 
adequately disclosed; the reasonableness of signiﬁ cant accounting 
estimates made by the directors; and the overall presentation of 
the ﬁ nancial statements.

Opinion on ﬁ nancial statements
In our opinion the Group Financial Statements:

– 

– 

– 

 give a true and fair view of the state of the Group’s affairs as 
at 31 December 2010 and of its proﬁ t for the year then ended;

 have been properly prepared in accordance with IFRSs as 
adopted by the European Union; and

 have been prepared in accordance with the requirements of the 
Companies Act 2006 and Article 4 of the IAS Regulation. 

Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for 
the ﬁ nancial year for which the Group Financial Statements are 
prepared is consistent with the Group Financial Statements.

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41

 
 
 
Tullett Prebon plc 
Annual Report 2010

Consolidated Income Statement

for the year ended 31 December 2010

Revenue 
Administrative expenses 
Other operating income 
Operating proﬁ t 
Finance income 
Finance costs 
Proﬁ t before tax 
Taxation 
Proﬁ t of consolidated companies 
Share of results of associates 
Proﬁ t for the year 

Attributable to: 
Equity holders of the parent 
Minority interests 

Earnings per share 
Basic 
Diluted 

Adjusted earnings per share is disclosed in Note 11 

Notes 
4 

5 

8 
9 

10 

6 

2010 
£m 
908.5 
(764.4) 
8.3 
152.4 
11.3 
(22.4) 
141.3 
(33.7) 
107.6 
1.5 
109.1 

2009
£m
947.7
(781.2)
4.3
170.8
20.2
(34.5)
156.5
(46.9)
109.6
1.8
111.4

108.5 
0.6 
109.1 

110.8
0.6
111.4

11 
11 

50.5p 
50.3p 

51.8p
51.2p

42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

Tullett Prebon plc 
Annual Report 2010

Proﬁ t for the year 
Other comprehensive income: 
Revaluation of available-for-sale assets 
Gain on net investment hedge 
Effect of changes in exchange rates on translation of foreign operations 
Actuarial gains/(losses) on deﬁ ned beneﬁ t pension schemes 
Taxation charge on components of other comprehensive income 
Other comprehensive income for the year 
Total comprehensive income for the year 

Attributable to:
Equity holders of the parent 
Minority interests 

Notes 

22 

34 
10 

2010 
£m 
109.1 

0.3 
– 
9.1 
14.5 
(6.8) 
17.1 
126.2 

125.3 
0.9 
126.2 

2009
£m
111.4

0.9
2.5
(17.2)
(0.5)
(1.9)
(16.2)
95.2

94.9
0.3
95.2

43

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Tullett Prebon plc 
Annual Report 2010

Consolidated Balance Sheet

as at 31 December 2010

Non-current assets 
Goodwill 
Other intangible assets 
Property, plant and equipment 
Interest in associates 
Other ﬁ nancial assets 
Deferred tax assets 
Retirement beneﬁ t assets 

Current assets 
Trade and other receivables 
Other ﬁ nancial assets 
Cash and cash equivalents 

Total assets 
Current liabilities 
Trade and other payables 
Interest bearing loans and borrowings 
Current tax liabilities 
Short term provisions 

Net current assets 
Non-current liabilities 
Interest bearing loans and borrowings 
Retirement beneﬁ t obligations 
Deferred tax liabilities 
Long term provisions 
Other long term payables 

Total liabilities 
Net assets 
Equity 
Share capital 
Share premium 
Reverse acquisition reserve 
Other reserves 
Retained earnings 
Equity attributable to equity holders of the parent 
Minority interests 
Total equity 

Notes 

13 
14 
15 
16 
17 
18 
34 

19 
17 
30(b) 

20 
21 

23 

21 
34 
18 
23 
24 

26 
27(a) 
27(a) 
27(b) 
27(c) 
27(c) 
27(c) 

2010 
£m 

376.5 
12.1 
24.3 
3.6 
4.1 
13.0 
23.6 
457.2 

4,186.9 
35.6 
390.1 
4,612.6 
5,069.8 

(4,229.4) 
(30.1) 
(40.3) 
(0.5) 
(4,300.3) 
312.3 

(327.8) 
– 
(19.5) 
(3.9) 
(6.5) 
(357.7) 
(4,658.0) 
411.8 

53.8 
9.9 
(1,182.3) 
146.7 
1,380.9 
409.0 
2.8 
411.8 

2009
£m

373.5
7.4
25.6
3.5
4.8
13.7
–
428.5

5,765.0
30.1
366.1
6,161.2
6,589.7

(5,825.5)
(30.2)
(36.7)
(1.5)
(5,893.9)
267.3

(357.0)
(1.3)
(8.1)
(7.8)
(9.1)
(383.3)
(6,277.2)
312.5

53.8
9.9
(1,182.3)
128.6
1,300.3
310.3
2.2
312.5

The consolidated ﬁ nancial statements of Tullett Prebon plc (registered number 5807599) were approved by the Board of directors 
and authorised for issue on 8 March 2011 and are signed on its behalf by:

Terry Smith
Chief Executive

44

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

Tullett Prebon plc 
Annual Report 2010

Balance at 1 January 2010 
Proﬁ t for the year 
Other comprehensive income 
for the year 
Total comprehensive income 
for the year 
Equity component 
of deferred consideration 
Dividends paid in the year 
Sale of own shares 
Shares used to meet 
share award exercises 
Debit arising on share-based 
payment awards 
Balance at 
31 December 2010 

Balance at 1 January 2009 
Proﬁ t for the year 
Other comprehensive 
income for the year 
Total comprehensive 
income for the year 
Dividends paid in the year 
Sale of own shares 
Shares used to meet 
share award exercises 
Increase in minorities’ 
equity interests 
Debit arising on 
share-based payment awards 
Balance at 
31 December 2009 

Equity attributable to equity holders of the parent

Share 
Reverse 
Share  premium 
acquisition 
account 
capital 
reserve 
£m 
£m 
£m 
9.9  (1,182.3) 
53.8 
– 
– 

– 

Re- 
Equity  valuation 
reserve 
reserve 
£m 
£m 
2.3 
– 
– 
– 

Hedging 
and 
Merger 
reserve  translation 
£m 
7.6 
– 

£m 
121.5 
– 

– 

– 

– 
– 
– 

– 

– 

– 

– 

– 
– 
– 

– 

– 

– 

– 

– 
– 
– 

– 

– 

– 

– 

5.3 
– 
– 

– 

– 

0.3 

0.3 

– 
– 
– 

– 

– 

– 

– 

– 
– 
– 

– 

– 

9.8 

9.8 

– 
– 
– 

– 

– 

Own 
shares 
£m 

Retained 
earnings 
£m 

Total 
£m 
(2.8)  1,300.3  310.3 
108.5  108.5 

– 

  Minority 
Total
interests 
equity
£m 
£m
2.2  312.5
0.6  109.1

– 

– 

– 
– 
2.3 

0.4 

6.7 

16.8 

0.3 

17.1

115.2  125.3 

0.9  126.2

– 
(32.7) 
(0.6) 

5.3 
(32.7) 
1.7 

– 
(0.3) 
– 

5.3
(33.0)
1.7

(0.4) 

– 

– 

(0.9) 

(0.9) 

– 

– 

–

(0.9)

53.8 

9.9  (1,182.3) 

5.3 

2.6 

121.5 

17.4 

(0.1)  1,380.9  409.0 

2.8  411.8

53.8 
– 

9.9  (1,182.3) 
– 

– 

– 

– 
– 
– 

– 

– 

– 

– 

– 
– 
– 

– 

– 

– 

– 

– 
– 
– 

– 

– 

– 

53.8 

9.9  (1,182.3) 

– 
– 

– 

– 
– 
– 

– 

– 

– 

– 

1.4 
– 

121.5 
– 

23.9 
– 

(6.9)  1,220.8  242.1 
110.8  110.8 

– 

2.4  244.5
0.6  111.4

0.9 

0.9 
– 
– 

– 

– 

– 

– 

– 
– 
– 

– 

– 

– 

(16.3) 

– 

(0.5) 

(15.9) 

(0.3) 

(16.2)

(16.3) 
– 
– 

– 

– 

– 

– 
– 
2.6 

1.5 

– 

– 

110.3 
(27.8) 
(1.1) 

94.9 
(27.8) 
1.5 

0.3 
(0.7) 
– 

95.2
(28.5)
1.5

(1.5) 

– 

– 

– 

– 

–

0.2 

0.2

(0.4) 

(0.4) 

– 

(0.4)

2.3 

121.5 

7.6 

(2.8)  1,300.3  310.3 

2.2  312.5

45

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Tullett Prebon plc 
Annual Report 2010

Consolidated Cash Flow Statement

for the year ended 31 December 2010

Net cash from operating activities 
Investing activities 
Purchase of other ﬁ nancial assets 
Interest received 
Dividends from associates 
Sale/(purchase) of available-for-sale assets 
Expenditure on intangible ﬁ xed assets 
Purchase of property, plant and equipment 
Proceeds on disposal of property, plant and equipment 
Investment in subsidiaries 
Net cash used in investment activities 

Financing activities 
Dividends paid 
Dividends paid to minority interests 
Sale of own shares 
Repayment of debt 
Repayment of obligations under ﬁ nance leases 
Eurobond issue costs 
Payments relating to net investment hedges 
Receipts relating to net investment hedges 
Net cash used in ﬁ nancing activities 
Net increase in cash and cash equivalents 

Cash and cash equivalents at the beginning of the year 
Effect of foreign exchange rate changes 
Cash and cash equivalents at the end of the year   

Notes 
30(a) 

12 

30(b) 

2010 
£m 
94.7 

(5.2) 
1.9 
1.4 
1.7 
(7.5) 
(4.9) 
0.2 
(2.4) 
(14.8) 

(32.7) 
(0.3) 
1.7 
(30.3) 
(0.3) 
– 
– 
– 
(61.9) 
18.0 

366.1 
6.0 
390.1 

2009
£m
85.3

(0.8)
5.0
1.9
(0.1)
(4.1)
(5.2)
0.2
(3.4)
(6.5)

(27.8)
(0.7)
1.5
(30.1)
(3.7)
(2.5)
(12.5)
2.5
(73.3)
5.5

374.9
(14.3)
366.1

46

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements

for the year ended 31 December 2010

Tullett Prebon plc 
Annual Report 2010

1. General information
Tullett Prebon plc is a company incorporated in England and Wales 
under the Companies Act. The address of the registered ofﬁ ce is 
given on page 92. The nature of the Group’s operations and its 
principal activities are set out in the Directors’ Report on pages 26 
and 27 and in the Business Review on pages 05 to 23.

2. Basis of preparation
(a) Basis of accounting
The Group Financial Statements have been prepared in accordance 
with International Financial Reporting Standards (‘IFRSs’) adopted 
by the European Union and comply with Article 4 of the EU IAS 
Regulation.

The ﬁ nancial statements have been prepared on the historical cost 
basis, except for the revaluation of certain ﬁ nancial instruments. 
As discussed on page 31 of the Corporate Governance Report 
the directors have a reasonable expectation that the Group has 
adequate resources to continue in operational existence for the 
foreseeable future. Accordingly, the going concern basis continues 
to be used in preparing these ﬁ nancial statements.

The ﬁ nancial statements are presented in pounds sterling because 
that is the currency of the primary economic environment in which 
the Group operates and are rounded to the nearest hundred 
thousand (expressed as millions to one decimal place – £m), except 
where otherwise indicated. The signiﬁ cant accounting policies are 
set out in Note 3.

(b) Basis of consolidation
The Group consolidated ﬁ nancial statements incorporate the 
ﬁ nancial statements of the Company and entities controlled by the 
Company made up to 31 December each year. Control is achieved 
where the Company has the power to govern the ﬁ nancial and 
operating policies of an investee enterprise so as to obtain beneﬁ ts 
from its activities.

The results of subsidiaries acquired or disposed of during the year 
are included in the Consolidated Income Statement from the 
effective date of acquisition or up to the effective date of disposal, 
as appropriate. Where necessary, adjustments are made to the 
ﬁ nancial statements of subsidiaries to bring the accounting policies 
used into line with those used by the Group. All inter-company 
transactions, balances, income and expenses are eliminated on 
consolidation.

Non-controlling interests, also referred to as minority interests, 
in subsidiaries are identiﬁ ed separately from the Group’s equity 
therein. The interests of non-controlling shareholders may be 
initially measured at fair value or at the non-controlling interests’ 
proportionate share of the fair value of identiﬁ able net assets. The 
choice of measurement is made on an acquisition by acquisition 
basis. Subsequent to acquisition, the carrying amount of non-
controlling interests is the amount of those interests at initial 
recognition plus the non-controlling interests’ share of subsequent 
changes in equity. Total comprehensive income is attributed to 
non-controlling interests even if this results in the non-controlling 
interest having a deﬁ cit balance. 

Changes in the Group’s interests in subsidiaries that do not result 
in a loss of control are accounted for as equity transactions. The 
carrying amount of the Group’s interests and the non-controlling 
interests are adjusted to reﬂ ect the changes in their relative 
interests in the subsidiaries. Any differences between the amount 
by which the non-controlling interests are adjusted and the fair 
value of the consideration paid or received is recognised directly 
in equity and attributed to the owners of the Company.

When the Group loses control of a subsidiary, the proﬁ t or loss on 
disposal is calculated as the difference between (i) the aggregate 
of the fair value of the consideration received and the fair value of 
any retained interest and (ii) the previous carrying amount of the 
assets, including goodwill, less liabilities of the subsidiary and any 
non-controlling interests. Amounts previously recognised in other 
comprehensive income in relation to the subsidiary are accounted 
for in the same manner as would be required if the relevant assets 
or liabilities are disposed of. The fair value of any investment 
retained in the former subsidiary at the date when control was lost 
is regarded as the fair value on initial recognition for subsequent 
accounting under IAS 39 ‘Financial Instruments: Recognition and 
Measurement’ or, when applicable, the cost on initial recognition 
of an investment in an associate or jointly controlled entity.

(c) Adoption of new and revised Standards
In the current year, the following new and revised Standards 
and Interpretations have been adopted which affected the 
ﬁ nancial statements:

– 

 IFRS 3 (2008) ‘Business Combinations’, IAS 27 (2008) 
‘Consolidation and Separate Financial Statements’, IAS 28 (2008) 
‘Investments in Associates’ and IAS 31 (2008) ‘Interests in Joint 
Ventures’. These standards introduced a number of changes 
in the accounting for business combinations when acquiring 
a subsidiary, an associate or investing in a joint venture. These 
changes are reﬂ ected in Note 2(b) ‘Basis of consolidation’ and 
3(b) ‘Business combinations’. IFRS 3 (2008) also introduced 
additional disclosure requirements for acquisitions. The revisions 
and amendments to these standards apply prospectively 
to business combinations acquired after 1 January 2010.

The following new and revised Standards and Interpretations 
have been adopted in the current year although their adoption 
has not had any signiﬁ cant impact on the ﬁ nancial statements:

– 

– 

 Amendments to IFRS 2 ‘Share-based Payment’ relating to group 
cash settled share-based payment transactions;

 Amendment to IAS 39 ‘Financial Instruments: Recognition and 
Measurement’ relating to eligible hedged items;

– 

 Improvements to IFRSs (2009);

– 

 IFRIC 17 ‘Distributions of Non-Cash Assets to Owners’; and

– 

 IFRIC 18 ‘Transfers of Assets from Customers’.

47

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

2. Basis of preparation continued
At the date of authorisation of these ﬁ nancial statements, the 
following EU endorsed Standards and Interpretations were in issue 
but not yet effective. The Group has not applied these Standards or 
Interpretations in the preparation of these ﬁ nancial statements:

– 

– 

 Amendment to IAS 32 ‘Financial Instruments: Presentation’ 
regarding the Classiﬁ cation of Rights Issues;

 IFRIC 19 ‘Extinguishing Financial Liabilities with Equity 
Instruments’;

– 

 Revised IAS 24 ‘Related Party Disclosures’; and

– 

 Amendment to IFRIC 14 ‘Prepayments of a Minimum 
Funding Requirement’.

The following Standards and Interpretations have not been 
endorsed by the EU and have not been applied in the preparation 
of these ﬁ nancial statements:

– 

 IFRS 9 ‘Financial Instruments’;

– 

 Amendments to IFRS 7 ‘Financial Instruments: Disclosures’;

– 

 Improvements to IFRSs (2010); and

– 

 Amendment to IAS 12 ‘Income Taxes’ relating to deferred tax: 
recovery of underlying assets.

The adoption of IFRS 9, which the Group plans to adopt in 2013, will 
impact both the measurement and disclosures of ﬁ nancial 
instruments. The Group does not expect the adoption of the other 
standards listed above will have a material impact on future 
ﬁ nancial statements of the Group.

3. Summary of signiﬁ cant accounting policies
(a) Income recognition
Revenue, which excludes sales taxes, includes gross commissions, 
brokerage, fees earned and subscriptions for information sales. Fee 
income is recognised when the related services are completed and 
the income is considered receivable. 

Revenue comprises:

(i)   Name Give-Up brokerage, where counterparties to a transaction 
settle directly with each other. Invoices are raised monthly for 
the provision of the service of matching buyers and sellers of 
ﬁ nancial instruments. Revenue is stated net of sales taxes, 
rebates and discounts and is recognised in full on trade date; 

(ii)  Matched Principal brokerage revenue, being the net of the buy 

and sell proceeds from counterparties who have simultaneously 
committed to buy and sell the ﬁ nancial instrument, is 
recognised on trade date; and

(iii)  Fees earned from the sales of price information from ﬁ nancial 
and commodity markets to third parties is recognised on an 
accruals basis.

Interest income is accrued on a time basis, by reference to the 
principal outstanding and at the effective interest rate applicable. 
Dividend income from investments is recognised when the Group’s 
right to receive the payment is established.

(b) Business combinations
Acquisition of subsidiaries and businesses are accounted for using 
the acquisition method. The consideration for each acquisition 
is measured at the aggregate of the fair values (at the date of 
exchange) of assets given, liabilities incurred or assumed, and 
equity instruments issued by the Group in exchange for control 
of the acquiree. Acquisition costs are recognised in proﬁ t or loss 
as incurred.

Where applicable, the consideration for the acquisition includes 
any asset or liability resulting from a contingent consideration 
arrangement, measured at its acquisition date fair value. 
Subsequent changes in such fair values are adjusted against the 
cost of the acquisition where they qualify as measurement period 
adjustments. The measurement period is the period from the date 
of acquisition to the date the Group obtains complete information 
about the facts and circumstances that existed as of the acquisition 
date, and is subject to a maximum of one year. All subsequent 
changes in the fair value of contingent consideration classiﬁ ed as 
an asset or a liability are accounted for in accordance with relevant 
IFRSs. Changes in the fair value of contingent consideration 
classiﬁ ed as equity are not recognised.

Where a business combination is achieved in stages, the Group’s 
previously held interests in the acquired entity are remeasured to 
fair value at the acquisition date and any resulting gain or loss is 
recognised in proﬁ t or loss. Amounts arising from interests in the 
acquiree prior to the acquisition that have previously been 
recognised in other comprehensive income are reclassiﬁ ed to proﬁ t 
or loss, where such treatment would be appropriate if that interest 
was disposed of.

The acquiree’s identiﬁ able assets, liabilities and contingent 
liabilities that meet the conditions for recognition under IFRS 3 
(2008) are recognised at their fair value at the acquisition date, 
except that:

– 

– 

– 

 Deferred tax assets or liabilities are recognised and measured 
in accordance with IAS 12 ‘Income Taxes’;

 Liabilities or assets related to employee beneﬁ t arrangements 
are recognised and measured in accordance with IAS 19 
‘Employee Beneﬁ ts’;

 Acquiree share-based payment awards replaced by Group 
awards are measured in accordance with IFRS 2 ‘Share-based 
Payments’; and

48

Tullett Prebon plc 
Annual Report 2010

– 

 Assets or disposal groups that are classiﬁ ed for sale are 
measured in accordance with IFRS 5 ‘Non-Current Assets Held 
for Sale and Discontinued Operations’.

If the initial accounting for a business combination is incomplete 
by the end of the reporting period in which the business 
combination occurs, provisional amounts are reported. Those 
provisional amounts are adjusted during the measurement period, 
or additional assets or liabilities recognised, to reﬂ ect the facts 
and circumstances that existed as at the acquisition date.

(c) Investment in associates
An associate is an entity over which the Group is in a position to 
exercise signiﬁ cant inﬂ uence. Signiﬁ cant inﬂ uence is the power to 
participate in the ﬁ nancial and operating decisions of the investee 
but is not control or joint control over these policies.

The results and assets and liabilities of associates are incorporated 
in these ﬁ nancial statements using the equity method of 
accounting except when classiﬁ ed as held for sale. Investments 
in associates are carried in the balance sheet at cost as adjusted 
by post-acquisition changes in the Group’s share of the net assets of 
the associate, less any impairment in the value of individual 
investments. Losses of the associates in excess of the Group’s 
interest in those associates are recognised only to the extent that 
the Group has incurred legal or constructive obligations or made 
payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the 
fair values of the identiﬁ able net assets of the associate at the date 
of acquisition is recognised as goodwill. Any discount in the cost 
of acquisition below the Group’s share of the fair value of the 
identiﬁ able net assets of the associate at the date of acquisition 
(i.e. discount on acquisition) is credited to proﬁ t and loss in the year 
of acquisition.

Where a Group company transacts with an associate of the Group, 
proﬁ ts and losses are eliminated to the extent of the Group’s 
interest in the relevant associate. Losses may provide evidence 
of impairment of the asset transferred in which case appropriate 
provision is made for impairment.

(d) Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group 
and other parties undertake an economic activity that is subject 
to joint control.

Joint venture arrangements, which involve the establishment of a 
separate entity in which each party has an interest, are referred to 
as jointly controlled entities. The Group reports its interests in 
jointly controlled entities using proportionate consolidation – the 
Group’s share of the assets, liabilities, income and expenses of 
jointly controlled entities are combined with the equivalent items 
in the consolidated ﬁ nancial statements on a line-by-line basis.

(e) Goodwill
Goodwill arising on consolidation represents the excess of the cost 
of acquisition over the Group’s interest in the fair value of the 
identiﬁ able assets, liabilities and contingent liabilities of a 
subsidiary or associate at the date of acquisition. Goodwill is initially 
recognised at cost and is subsequently measured at cost less any 
accumulated impairment losses. Goodwill arising on acquisitions 
before the date of transition to IFRS has been retained at the 
previous UK GAAP amounts at that date.

Goodwill recognised as an asset is reviewed for impairment at least 
annually. Any impairment loss is recognised as an expense 
immediately and is not subsequently reversed. For the purpose of 
impairment testing goodwill is allocated to each of the Group’s 
cash-generating units expected to beneﬁ t from the synergies of 
the combination. Cash-generating units to which goodwill has 
been allocated are tested for impairment annually, or more 
frequently when there is an indication that the unit may be 
impaired. If the recoverable amount of the cash-generating unit is 
less than the carrying amount of any goodwill allocated to the unit, 
the impairment loss is allocated ﬁ rst to reduce the carrying amount 
of any goodwill allocated to the unit and then to the other assets of 
the unit pro-rata on the basis of the carrying amount of each asset 
in the unit.

Goodwill arising on the acquisition of an associate is included 
within the carrying value of the associate. Goodwill arising on 
the acquisition of subsidiaries is presented separately in the 
balance sheet. 

On disposal of a subsidiary, associate or jointly controlled entity, the 
attributable amount of goodwill is included in the determination of 
the proﬁ t or loss on disposal. 

The interest of minority shareholders in the acquired entity is 
initially measured at the minority’s proportion of the net fair 
value of the assets, liabilities and contingent liabilities recognised. 

(f) Intangible assets
Software and software development costs
An internally-generated intangible asset arising from the Group’s 
software development is recognised at cost only if all of the 
following conditions are met:

– 

 an asset is created that can be identiﬁ ed; 

– 

 it is probable that the asset created will generate future 
economic beneﬁ ts; and

– 

 the development costs of the asset can be measured reliably.

Where the above conditions are not met costs are expensed 
as incurred. 

49

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

3. Summary of signiﬁ cant accounting policies  continued
Acquired separately or from a business combination
Intangible assets acquired separately are capitalised at cost and 
intangible assets acquired in a business acquisition are capitalised 
at fair value at the date of acquisition. The useful lives of these 
intangible assets are assessed to be either ﬁ nite or indeﬁ nite. 
Amortisation charged on assets with a ﬁ nite useful life is taken to 
the income statement through ‘other administrative expenses’. 

Other than software development costs, intangible assets created 
within the business are not capitalised and expenditure is charged 
to the income statement in the year in which the expenditure is 
incurred.

Intangible assets are amortised over their ﬁ nite useful lives 
generally on a straight-line basis, as follows:

Software – purchased or developed 
Software licences 

 up to 5 years
 over the period of the licence

Intangible assets are subject to impairment review if there are 
events or changes in circumstances that indicate that the carrying 
amount may not be recoverable.

Gains or losses arising from derecognition of an intangible asset are 
measured as the difference between the net disposal proceeds and 
the carrying amount of the asset and are recognised in the income 
statement when the asset is derecognised.

(g) Property, plant and equipment
Freehold land is stated at cost. Buildings, furniture, ﬁ xtures, 
equipment and motor vehicles are stated at cost less accumulated 
depreciation and any recognised impairment loss.

Depreciation is provided on all tangible ﬁ xed assets at rates 
calculated to write off the cost, less estimated residual value based 
on prices prevailing at the date of acquisition, of each asset on a 
straight-line basis over its expected useful life as follows:

Furniture, ﬁ xtures, equipment and motor vehicles 
Short and long leasehold land and buildings 
Freehold land 
Freehold buildings   

3 to 10 years
period of the lease
inﬁ nite
50 years

Assets held under ﬁ nance leases are depreciated over their 
expected useful lives on the same basis as owned assets or, 
where shorter, the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is 
determined as the difference between the sales proceeds and the 
carrying amount of the asset and is recognised in income.

(h) Impairment of tangible and intangible assets 
excluding goodwill
At each balance sheet date, the Group reviews the carrying 
amounts of its tangible and intangible assets with ﬁ nite lives to 
determine whether there is any indication that those assets have 
suffered an impairment loss. If any such indication exists, the 
recoverable amount of the asset is estimated in order to determine 
the extent of the impairment loss. Where the asset does not 
generate cash ﬂ ows that are independent from other assets, the 
Group estimates the recoverable amount of the cash-generating 
unit to which the asset belongs. Intangible assets with indeﬁ nite 
useful lives are tested for impairment annually and whenever there 
is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less any cost to sell 
and value in use. In assessing value in use, the estimated future 
cash ﬂ ows are discounted to their present values using a pre-tax 
discount rate that reﬂ ects current market assessments of the time 
value of money and the risks speciﬁ c to the asset.

If the recoverable amount of an asset (or cash-generating unit) is 
estimated to be less than its carrying amount, the carrying amount 
of the asset (or cash-generating unit) is reduced to its recoverable 
amount. Impairment losses are recognised as an expense 
immediately. Where an impairment loss subsequently reverses, the 
carrying amount of the asset (or cash-generating unit) is increased 
to the revised estimate of its recoverable amount, but so that the 
increased carrying amount does not exceed the carrying amount 
that would have been determined had no impairment loss been 
recognised for the asset (or cash-generating unit) in prior years. 
A reversal of an impairment loss is recognised as income 
immediately, unless the relevant asset is carried at a re-valued 
amount, in which case the reversal of the impairment loss is 
treated as a revaluation increase. 

(i) Broker contract signing incentives
Contract signing incentives paid to brokers are amortised over the 
lesser of the contract life or recoverable period. Such assets are 
subject to annual review.

(j) Financial assets and ﬁ nancial liabilities
Financial assets and ﬁ nancial liabilities are recognised on the 
Group’s balance sheet when the Group has become a party to 
the contractual provisions of the instrument. 

Financial instruments are derecognised when all derecognition 
criteria of IAS 39 are met and the Group no longer controls the 
contractual rights that comprise the ﬁ nancial instrument. This is 
normally the case when the instrument is sold, or all of the cash 
ﬂ ows attributable to the instrument are passed through to an 
independent third party.

Financial assets are classiﬁ ed on initial recognition as ‘available-for-
sale’, ‘loans and receivables’ or ‘at fair value through the income 
statement’. Financial liabilities are classiﬁ ed on initial recognition 
as either ‘at fair value through the income statement’ or as ‘other 
ﬁ nancial liabilities’.

50

 
Tullett Prebon plc 
Annual Report 2010

Available-for-sale 
The Group’s investment in equity securities and certain debt 
securities are classiﬁ ed as available-for-sale ﬁ nancial assets. 
Subsequent to initial recognition, they are measured at fair value 
and changes therein, other than impairment losses and foreign 
exchange gains and losses on available-for-sale monetary items, are 
recognised directly in other comprehensive income. For equity 
ﬁ nancial assets, where the fair value cannot be reliably measured, 
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 holdings in exchanges, 
cash related instruments and long term equity investments that do 
not qualify as associates or joint ventures are classiﬁ ed as available-
for-sale. When an investment is derecognised, the cumulative 
gain or loss in other comprehensive income is transferred to proﬁ t 
or loss.

Loans and receivables
Loans and receivables are non-derivative ﬁ nancial instruments that 
have ﬁ xed or determinable payments that are not listed in an active 
market. Loans and receivables are measured at amortised cost 
using the effective interest method, less any impairment. Interest 
income is recognised using the effective interest rate, except for 
short term receivables when the recognition of interest would be 
immaterial. Settlement balances, trade receivables, loans and other 
receivables are classiﬁ ed as ‘loans and receivables’.

Fair value through the income statement
Financial assets and liabilities can be designated at fair value 
through the income statement where they meet speciﬁ c criteria 
set out in IAS 39 ‘Financial Instruments: Recognition and 
Measurement’ or where assets or liabilities are held for trading. 
Subsequent changes in fair value are recognised directly in the 
income statement.

Other ﬁ nancial liabilities
Other ﬁ nancial liabilities, including borrowings, are initially 
measured at fair value, net of transaction costs, and are 
subsequently measured at amortised cost using the effective 
interest method, with interest expense recognised on an effective 
yield basis.

Financial assets, other than those at fair value through the income 
statement, are assessed for indicators of impairment at each 
balance sheet date. Financial assets are impaired where there is 
objective evidence that, as a result of one or more events that 
occurred after the initial recognition of the ﬁ nancial asset, the 
estimated future cash ﬂ ows of the investment have been 
impacted. Impairment is recognised in the income statement.

(k) Derivative ﬁ nancial instruments
From time to time, the Group uses derivative ﬁ nancial instruments 
such as foreign currency contracts and interest rate swaps to 
manage its risks associated with interest rate and foreign currency 
ﬂ uctuations. The Group does not use derivative ﬁ nancial 
instruments for speculative purposes.

Derivatives are initially recognised at fair value at the date a 
derivative contract is entered into and are subsequently 
remeasured to their fair value at each balance sheet date. 
The resulting gain or loss is recognised immediately unless the 
derivative is designated and effective as a hedging instrument, in 
which event the timing of the recognition in proﬁ t or loss depends 
on the nature of the hedge relationship. The Group designates 
certain derivatives as either hedges of the fair value of recognised 
assets or liabilities or ﬁ rm commitments (fair value hedges) or 
hedges of net investments in foreign operations. The Group has not 
designated any derivatives as hedges of probable forecast 
transactions or hedges of foreign currency risk of ﬁ rm 
commitments (cash ﬂ ow hedges).

The fair value of forward exchange contracts and interest rate 
swaps is calculated on a discounted cash ﬂ ow basis using relevant 
market data on foreign exchange and interest rates.

A derivative is presented as a non-current asset or a non-current 
liability if the remaining maturity of the instrument is more than 
12 months and it is not expected to be realised or settled within 
12 months. Other derivatives are presented as current assets or 
current liabilities.

(l) Hedge accounting
The Group designates certain derivatives as either ‘fair value 
hedges’ or ‘hedges of net investments in foreign operations’.

Fair value hedges 
Changes in the fair value of derivatives that are designated and 
qualify as fair value hedges are recorded in proﬁ t or loss 
immediately, together with any changes in the fair value of the 
hedged item that is attributable to the hedged risk. The changes 
in the fair value of the hedging instrument and the changes in the 
hedged item attributable to the hedged risk are recognised in the 
line of the income statement relating to the hedged item.

Hedge accounting is discontinued when the Group revokes the 
hedging relationship, the hedging instrument expires or is sold, 
terminated, or exercised, or no longer qualiﬁ es for hedge 
accounting. The adjustment to the carrying amount of the hedged 
item arising from the hedged risk is amortised to proﬁ t or loss from 
that date.

Net investment hedges 
The effective portion of changes in the fair value of derivatives that 
are designated and qualify as net investment hedges is recognised 
in the hedging and translation reserve in other comprehensive 
income. The gain or loss relating to the ineffective portion is 
recognised immediately in proﬁ t or loss, and is included in ﬁ nancial 
income or ﬁ nancial expense respectively.

Gains and losses deferred in the hedging and translation reserve 
are recognised in proﬁ t or loss on disposal of the foreign operation.

51

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

3. Summary of signiﬁ cant accounting policies  continued 
(m) Settlement balances
Certain Group companies engage in Matched Principal brokerage 
whereby securities are bought from one counterparty and 
simultaneously sold to another counterparty. Settlement of such 
transactions typically takes place within a few business days of the 
transaction date according to the relevant market rules and 
conventions. The amounts due from and payable to counterparties 
in respect of as yet unsettled Matched Principal transactions are 
shown gross.

(n) Securities borrowing
Securities are borrowed in the ordinary course of business. 
All borrowing is collateralised and such collateral is included 
in settlement balances.

(o) Cash and cash equivalents
Cash comprises cash in hand and demand deposits which may be 
accessed without penalty. Cash equivalents comprise short term 
highly liquid investments with a maturity of less than three months 
from the date of acquisition. For the purposes of the Consolidated 
Cash Flow Statement, cash and cash equivalents consist of cash 
and cash equivalents as deﬁ ned above, net of outstanding bank 
overdrafts.

(p) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value, being 
the consideration received net of issue costs associated with the 
borrowing.

After initial recognition, interest bearing loans and borrowings are 
measured at amortised cost using the effective interest rate 
method. Amortised cost is calculated taking into account any issue 
costs and any discounts or premium on settlement. Gains and 
losses are recognised in the income statement when the liabilities 
are derecognised, as well as through the amortisation process.

(q) Client money
Client money to settle transaction bargains is held separately and 
included in the Group’s balance sheet. The net return received on 
managing client money is included within interest.

(r) Provisions
Provisions are recognised when the Group has a present obligation, 
legal or constructive as a result of a past event where it is probable 
that this will result in an outﬂ ow of economic beneﬁ ts that can be 
reasonably estimated.

Provisions for restructuring costs are recognised when the Group 
has a detailed formal plan for the restructuring, which has been 
notiﬁ ed to affected parties.

(s) Foreign currencies
The individual ﬁ nancial statements of each Group company are 
prepared in the currency of the primary economic environment in 

which it operates (its functional currency). For the purpose of the 
consolidated ﬁ nancial statements, the results and ﬁ nancial position 
of each Group company are expressed in pounds sterling, which is 
the functional currency of the Group and the presentation currency 
for the consolidated ﬁ nancial statements.

In preparing the ﬁ nancial statements of the individual companies, 
transactions in currencies other than the functional currency are 
recorded at the rates of exchange prevailing on the dates of the 
transactions. Gains and losses arising from the settlement of these 
transactions, and from the retranslation of monetary assets and 
liabilities denominated in currencies other than the functional 
currency at rates prevailing at the balance sheet date, are 
recognised in the income statement. Non-monetary assets and 
liabilities denominated in currencies other than the functional 
currency that are measured at historical cost or fair value, are 
translated at the exchange rate at the date of the transaction 
or at the date the fair value was determined.

For the purpose of presenting consolidated ﬁ nancial statements, 
the assets and liabilities of the Group’s foreign operations are 
translated at exchange rates prevailing on the balance sheet date. 
Exchange differences arising are classiﬁ ed as other comprehensive 
income and transferred to the Group’s translation reserve. Such 
translation differences are recognised as income or as expense in 
the year in which the operation is disposed of. Income and expense 
items are translated at average exchange rates for the year.

(t) Taxation
The tax expense represents the sum of tax currently payable and 
movements in deferred tax.

The tax currently payable is based on taxable proﬁ t for the year 
using tax rates that have been enacted or substantively enacted by 
the balance sheet date, and any adjustment to tax payable in 
respect of prior years.

Deferred tax is accounted for using the balance sheet liability 
method in respect of temporary differences arising between the 
carrying amount of assets and liabilities in the ﬁ nancial statements 
and the corresponding tax basis used in the computation of taxable 
proﬁ t. Deferred tax liabilities are generally recognised for all 
temporary differences and deferred tax assets are recognised to 
the extent that it is probable that taxable proﬁ ts will be available 
against which deductible temporary differences may be utilised. 
Temporary differences are not recognised if they arise from 
goodwill or from initial recognition of other assets and liabilities 
in a transaction which affects neither the tax proﬁ t nor the 
accounting proﬁ t.

Deferred tax liabilities are recognised for taxable temporary 
differences arising on investments in subsidiaries and associates, 
except where the Group is able to control the reversal of the 
temporary difference and it is probable that the temporary 
difference will not reverse in the foreseeable future.

52

Tullett Prebon plc 
Annual Report 2010

Deferred tax is calculated at the rates that are expected to apply 
when the asset or liability is settled or when the asset is realised. 
Deferred tax is charged or credited in the income statement, except 
when it relates to items credited or charged directly to other 
comprehensive income, in which case the deferred tax is also dealt 
with in other comprehensive income.

(u) Leases
Assets held under ﬁ nance leases, which transfer to the Group 
substantially all the risks and beneﬁ ts incidental to ownership of 
the leased item, are capitalised at the inception of the lease at the 
fair value of the leased property or, if lower, at the present value of 
the minimum lease payments. Lease payments are apportioned 
between the ﬁ nance charges and reduction of the lease liability so 
as to achieve a constant rate of interest on the remaining balance 
of the liability. Finance charges are charged directly against income. 

Capitalised leased assets are depreciated over the shorter of the 
estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and 
beneﬁ ts of ownership of the asset are classiﬁ ed as operating leases. 
Operating lease payments are recognised as an expense in the 
income statement on a straight-line basis over the lease term.

(v) Retirement beneﬁ t costs
Deﬁ ned contributions made to employees’ personal pension plans 
are charged to the income statement as and when incurred. 

For deﬁ ned beneﬁ t retirement beneﬁ t plans, the cost of providing 
the beneﬁ ts is determined using the projected unit credit method. 
Actuarial gains and losses are recognised in full in the year in which 
they occur. They are recognised outside the income statement and 
are presented in other comprehensive income.

Past service cost is recognised immediately to the extent that the 
beneﬁ ts have already vested, and is otherwise amortised on a 
straight-line basis over the average period until the amended 
beneﬁ ts become vested.

The amount recognised in the balance sheet represents the present 
value of the deﬁ ned beneﬁ t obligation as adjusted for actuarial 
gains and losses and past service cost, and reduced by the fair value 
of plan assets. Any asset resulting from this calculation is limited to 
the unrecognised actuarial losses and past service cost, plus the 
present value of available refunds and reductions in future 
contributions to the plan.

(w) Share-based payments
The Group issues equity-settled share-based payments to certain 
employees. Equity-settled share-based payments are measured at 
fair value at the date of grant. The fair value determined at the 
grant date of the equity-settled share-based payments is expensed 
on a straight-line basis over the vesting period, based on the 
Group’s estimate of shares that will eventually vest.

The fair value of share options issued is determined using 
appropriate valuation models. The expected life used in the models 
has been adjusted, based on management’s best estimate for the 
effects of non-transferability, exercise restrictions, and behavioural 
considerations.

The estimated fair value of shares granted is based on the share 
price at grant date, reduced where shares do not qualify for 
dividends during the vesting period. Market based performance 
conditions for equity-settled payments are reﬂ ected in the initial 
fair value of the award.

(x) Equity instruments
Equity instruments issued by the Company are recorded at the 
value of proceeds received, net of direct issue costs. An equity 
instrument is any contract that evidences a residual interest in the 
assets of the Group after deducting all of its liabilities. 

(y) Treasury shares
Where share capital recognised as equity is repurchased, the 
amount of the consideration paid, including directly attributable 
costs, net of any tax effects, is recognised as a deduction from 
equity. When treasury shares are sold or re-issued subsequently, 
the amount received is recognised as an increase in equity, and the 
resulting surplus or deﬁ cit on the transaction is transferred to or 
from retained earnings.

(z) Accounting estimates and judgements
In the application of the Group’s accounting policies, the directors 
are required to make judgements, estimates and assumptions 
about the carrying amounts of assets and liabilities that are not 
readily apparent from other sources. The estimates and associated 
assumptions are based on historical experience and other factors 
that are considered to be relevant. Actual results may differ from 
these estimates.

Estimates and assumptions are reviewed on an ongoing basis and 
revisions to accounting estimates are recognised in the period an 
estimate is revised. Signiﬁ cant judgement and estimates are 
necessary in the application of the following accounting policies:

Impairment of goodwill
Determining whether goodwill is impaired requires an estimation 
of the value in use of the cash-generating units to which goodwill 
has been allocated. The value in use calculation requires estimation 
of future cash ﬂ ows expected to arise and a suitable discount rate 
in order to calculate the present value. 

Taxation
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. Liabilities have been calculated 
based on management’s assessment of relevant information and 
advice. Where outcomes differ from the amounts initially recorded, 
such differences impact current and deferred tax amounts in the 
period the outcome is determined.

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

4. Segmental analysis
Products and services from which reportable segments derive their revenues
The Group is organised by geographic reporting segments which are used for the purposes of resource allocation and assessment 
of segmental performance by Group management. These are the Group’s reportable segments under IFRS 8 ‘Operating Segments’.

Each geographic reportable segment derives revenue from Treasury Products, Interest Rate Derivatives, Fixed Income, Equities, Energy and 
Information Sales and Risk Management Services.

Information regarding the Group’s operating segments is reported below:

Analysis by geographical segment

2010 
£m 

536.1 
259.0 
113.4 
908.5 

120.7 
22.5 
9.2 
152.4 

11.3 
(22.4) 
141.3 
(33.7) 
107.6 
1.5 
109.1 

2009
£m

542.6
318.0
87.1
947.7

123.2
44.4
3.2
170.8

20.2
(34.5)
156.5
(46.9)
109.6
1.8
111.4

Revenue 
Europe 
North America 
Asia Paciﬁ c 

Operating proﬁ t 
Europe 
North America 
Asia Paciﬁ c 

Finance income 
Finance costs 
Proﬁ t before tax 
Taxation 
Proﬁ t of consolidated companies 
Share of results of associates 
Proﬁ t for the year 

There are no inter-segment sales included in segment revenue. 

54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Other segmental information 

Capital additions 
Europe 
North America 
Asia Paciﬁ c 

Depreciation and amortisation
Europe 
North America 
Asia Paciﬁ c 

Share-based compensation 
Europe 
North America 
Asia Paciﬁ c 

Segment assets 
Europe 
North America 
Asia Paciﬁ c 

Segment liabilities 
Europe 
North America 
Asia Paciﬁ c 

Segment assets and liabilities exclude all inter-segment balances.

Analysis by product group

Revenue
Treasury Products 
Interest Rate Derivatives 
Fixed Income 
Equities 
Energy 
Information Sales and Risk Management Services   

2010 
£m 

7.1 
3.9 
1.6 
12.6 

5.0 
3.5 
0.9 
9.4 

(0.9) 
– 
– 
(0.9) 

1,834.1 
3,155.0 
80.7 
5,069.8 

1,617.9 
2,981.5 
58.6 
4,658.0 

2010 
£m 

248.4 
205.0 
249.3 
67.2 
105.8 
32.8 
908.5 

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2009
£m

3.9
5.1
0.6
9.6

4.4
2.8
1.0
8.2

(0.2)
(0.2)
–
(0.4)

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2,090.7
4,437.0
62.0
6,589.7

1,934.6
4,296.0
46.6
6,277.2

2009
£m

238.9
192.0
317.1
74.0
100.6
25.1
947.7

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

5. Other operating income
Other operating income represents receipts such as rental income, royalties, insurance proceeds, settlements from competitors 
and business relocation grants. Costs associated with such items are included in administrative expenses.

6. Administrative expenses
Proﬁ t for the year has been arrived at after charging:

Depreciation of property, plant and equipment (note 15) 
Amortisation of intangible assets (note 14) 
Staff costs (note 7) 
(Gain)/loss recognised on available-for-sale unlisted investments (note 25(g))  
Auditor’s remuneration for audit services (see below) 

The analysis of auditor’s remuneration is as follows:

Audit of the Group’s annual accounts 
Audit of the Company’s subsidiaries pursuant to legislation 
Total audit fees 

Other services pursuant to legislation 
Tax services 
Corporate ﬁ nance services 
Information technology services 
Recruitment and remuneration services 
Other services 
Total non-audit fees 

Audit fees payable to the Company’s auditor and its associates in respect of associated pension schemes 

2010 
£m 
6.4 
3.0 
605.8 
(1.0) 
1.9 

2010 
£000 
310 
1,590 
1,900 

14 
166 
19 
3 
– 
7 
209 

9 

2009
£m
6.1 
2.1
617.9 
0.7
1.9

2009 
£000
310
1,590
1,900

18
131
5
–
5
–
159

9

56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7. Staff costs
The average monthly number of full time equivalent employees and directors of the Group was:

Europe 
North America 
Asia Paciﬁ c 

The aggregate employment costs of staff and directors were:

Wages, salaries, bonuses and incentive payments   
Social security costs 
Pension costs (note 34) 
Share-based compensation credit 

8. Finance income

Interest receivable and similar income 
Expected return on pension schemes’ assets 
Fair value gain on derivative instruments (note 22)  
Amortisation of discount on deferred consideration 

Tullett Prebon plc 
Annual Report 2010

2010 
No. 
1,170 
739 
552 
2,461 

2010 
£m 
555.2 
45.9 
5.6 
(0.9) 
605.8 

2010 
£m 
1.9 
9.4 
– 
– 
11.3 

2009
No.
1,131
812
536
2,479

2009
£m
566.3
46.9
5.1
(0.4)
617.9

2009
£m
3.4
6.5
9.0
1.3
20.2

57

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M
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A
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I

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E
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A
N
R
E
V
O
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S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F

I

N
O
I
T
A
M
R
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N

I

R
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D
L
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A
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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

9. Finance costs

Interest payable on bank loans 
Interest payable on Eurobonds 
Other interest payable 
Amortisation of debt issue costs 
Total borrowing costs 
Fair value loss on derivative instruments (note 22)   
Interest cost on pension schemes’ liabilities 

10. Taxation

Current tax: 
UK corporation tax 
Double tax relief 

Overseas tax 
Prior year UK corporation tax 
Prior year overseas tax 

Deferred tax: (note 18)
Current year 
Prior year 

Tax charge for the year 

The charge for the year can be reconciled to the proﬁ t per the income statement as follows:

£m 
141.3 
39.6 
5.8 
(4.7) 
(0.2) 
(0.2) 
0.7 
(1.6) 
(6.0) 
0.3 
33.7 

2010 

% 

28.0 
4.0 
(3.3) 
(0.1) 
(0.1) 
0.5 
(1.1) 
(4.3) 
0.2 
23.8 

Proﬁ t before tax: 
Tax based on the UK corporation tax rate of 28.0%  
Tax effect of expenses that are not deductible 
Less: Tax effect of non-taxable income 
Less: Tax effect of stock options 
Effect of non-UK tax rates 
Unrecognised/(relieved) losses 
Prior year tax 
Tax on capital related items 
Other 
Tax charge and effective tax rate for the year 

58

2010 
£m 
2.5 
10.5 
0.4 
1.2 
14.6 
– 
7.8 
22.4 

2010 
£m 

32.3 
(0.3) 
32.0 
(1.4) 
(2.0) 
0.5 
29.1 

4.7 
(0.1) 
4.6 

2009
£m
4.6
11.5
0.2
0.9
17.2
10.3
7.0
34.5

2009
£m

33.4
(1.2)
32.2
9.8
(0.4)
(6.2)
35.4

10.8
0.7
11.5

33.7 

46.9

2009

£m 
156.5 
43.8 
8.4 
(4.9) 
(0.5) 
6.3 
(0.2) 
(5.9) 
– 
(0.1) 
46.9 

%

28.0
5.4
(3.2)
(0.3)
4.0
(0.1)
(3.8)
–
–
30.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

In addition to the income statement, the following current and deferred tax items have been included in other comprehensive income:

Current tax (credit)/charge relating to: 
Exercise/award of share-based payments 
Exchange movement on net investment loans 
Net investment hedge 

Deferred tax charge/(credit) relating to: 
Deﬁ ned beneﬁ t pension schemes 
Share-based awards 
Other 

Tax charge on items taken directly to other comprehensive income 

11. Earnings per share

Adjusted basic 
Basic 
Diluted 

The calculation of basic and diluted earnings per share is based on the following number of shares in issue:

Weighted average shares in issue used for 
calculating basic and adjusted basic earnings per share 
Contingently issuable shares 
Issuable on exercise of options 
Diluted weighted average shares in issue 

The earnings used in the calculation of adjusted, basic and diluted earnings per share, are set out below:

Proﬁ t for the year 
Minority interests 
Earnings for calculating basic and diluted earnings per share 
Expected return on pension schemes’ assets 
Interest cost on pension schemes’ liabilities 
Amortisation of discount on deferred consideration 
Fair value movement on derivative ﬁ nancial instruments 
Tax on above items 
Tax on capital related items 
Prior year tax 
Adjusted Earnings for calculating adjusted basic earnings per share 

2010 
£m 

(0.1) 
(1.0) 
– 
(1.1) 

8.1 
(0.3) 
0.1 
7.9 

6.8 

2009
£m

0.2
1.2
0.7
2.1

(0.2)
–
–
(0.2)

1.9

2010 
46.4p 
50.5p 
50.3p 

2009
49.2p
51.8p
51.2p

2010 
No.(m) 

2009
No.(m)

214.9 
0.2 
0.6 
215.7 

2010 
£m 
109.1 
(0.6) 
108.5 
(9.4) 
7.8 
– 
– 
0.5 
(6.0) 
(1.6) 
99.8 

213.9
1.8
0.7
216.4

2009
£m
111.4
(0.6)
110.8
(6.5)
7.0
(1.3)
1.3
(0.2)
–
(5.9)
105.2

59

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M
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A
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S
S
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A
M
R
A
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C

I

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E
C
N
A
N
R
E
V
O
G

S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F

I

N
O
I
T
A
M
R
O
F
N

I

R
E
D
L
O
H
E
R
A
H
S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

12. Dividends

Amounts recognised as distributions to equity holders in the year: 
Interim dividend for the year ended 31 December 2010 of 5.25p per share 
Final dividend for the year ended 31 December 2009 of 10.0p per share 
Interim dividend for the year ended 31 December 2009 of 5.0p per share 
Final dividend for the year ended 31 December 2008 of 8.0p per share 

2010 
£m 

11.3 
21.4 
– 
– 
32.7 

2009
£m

–
–
10.7
17.1
27.8

In respect of the current year, the directors propose that the ﬁ nal dividend of 10.5p per share amounting to £22.6m will be paid on 19 May 
2011 to all shareholders on the Register of Members on 26 April 2011. This dividend is subject to approval by shareholders at the AGM and 
has not been included as a liability in these ﬁ nancial statements. 

The trustees of the Tullett Prebon plc Employee Share Ownership Trust and the trustees of the Tullett Prebon plc Employee Beneﬁ t Trust 
2007 have waived their rights to dividends. 

13. Goodwill 

Cost 
At 1 January 
Recognised on acquisition 
Adjustments relating to deferred consideration 
Effect of movements in exchange rates 
At 31 December 
Accumulated amortisation 
At 1 January and 31 December 
Carrying amount at 31 December 

2010 
£m 

2009
£m

380.7 
1.3 
0.3 
1.4 
383.7 

(7.2) 
376.5 

394.9
–
(8.3)
(5.9)
380.7

(7.2)
373.5

60

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Goodwill arising through business combinations has been allocated to individual cash-generating units (‘CGUs’) for impairment testing 
as follows:

Europe 
North America 
Asia Paciﬁ c 

2010 
£m 
193.8 
163.4 
19.3 
376.5 

2009
£m
193.4
160.8
19.3
373.5

The recoverable amount of goodwill allocated to each of the CGUs is based on value in use calculations, using cash ﬂ ow projections 
discounted at a pre-tax discount rate of 11.5% (2009: 11.5%). The future cash ﬂ ow projections are based on Board approved ﬁ nancial 
budgets. Average growth rates used to estimate cash ﬂ ows after the budgeted period are limited to the expected growth rates of each 
region. Expected regional growth rates are based on the regions’ constituent country growth rates as published by the World Bank, 
averaged over a 30 year period. 

The calculations of value in use have been subject to stress tests demonstrating that the impairment test results are tolerant to reasonably 
possible changes in assumptions as to discount rate and future cash ﬂ ows.

14. Other intangible assets
Intangible assets arising from software development expenditure:

2010 
Cost 
Amortisation 
Carrying amount 

2009 
Cost 
Amortisation 
Carrying amount 

At 1 
January 
£m 
16.4 
(9.0) 
7.4 

13.7 
(7.9) 
5.8 

Additions 
£m 
7.5 
– 

Disposals 
£m 
(0.7) 
0.7 

Charge 
for the 
year 
£m 
– 
(3.0) 

Effect of
exchange 
movements 
£m 
0.6 
(0.4) 

4.1 
– 

(0.1) 
0.1 

– 
(2.1) 

(1.3) 
0.9 

At 31
December
£m
23.8
(11.7)
12.1

16.4
(9.0)
7.4

61

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A
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I

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E
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A
N
R
E
V
O
G

S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F

I

N
O
I
T
A
M
R
O
F
N

I

R
E
D
L
O
H
E
R
A
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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

15. Property, plant and equipment

Cost 
At 1 January 2010 
Additions 
Disposals 
Effect of movements in exchange rates 
At 31 December 2010 

Accumulated depreciation 
At 1 January 2010 
Charge for the year 
Disposals 
Effect of movements in exchange rates 
At 31 December 2010 

Carrying amount 
At 31 December 2010 

Cost 
At 1 January 2009 
Additions 
Disposals 
Effect of movements in exchange rates 
At 31 December 2009 

Accumulated depreciation 
At 1 January 2009 
Charge for the year 
Disposals 
Effect of movements in exchange rates 
At 31 December 2009 

Carrying amount 
At 31 December 2009 

Land, 
buildings, 
and leasehold 
improvements 
£m 

Furniture,
ﬁ xtures,
equipment
and motor
vehicles 
£m 

27.3 
1.4 
(1.2) 
0.4 
27.9 

(11.1) 
(2.3) 
1.0 
(0.3) 
(12.7) 

32.4 
3.7 
(0.2) 
2.1 
38.0 

(23.0) 
(4.1) 
– 
(1.8) 
(28.9) 

Total
£m

59.7
5.1
(1.4)
2.5
65.9

(34.1)
(6.4)
1.0
(2.1)
(41.6)

15.2 

9.1 

24.3

26.4 
2.4 
– 
(1.5) 
27.3 

(9.9) 
(1.9) 
– 
0.7 
(11.1) 

32.9 
3.1 
(0.9) 
(2.7) 
32.4 

(21.8) 
(4.2) 
0.7 
2.3 
(23.0) 

59.3
5.5
(0.9)
(4.2)
59.7

(31.7)
(6.1)
0.7
3.0
(34.1)

16.2 

9.4 

25.6

The carrying amount of the Group’s property, plant and equipment includes an amount of £0.3m (2009: £0.5m) in respect of assets held 
under ﬁ nance leases.

62

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16. Interest in associates

Carrying amount of investment in associates 

Aggregated amounts relating to associates: 
Total assets 
Total liabilities 
Net assets 

Revenue 
Proﬁ t for the year 

Tullett Prebon plc 
Annual Report 2010

2010 
£m 
3.6 

15.0 
(5.6) 
9.4 

15.2 
2.6 

2009
£m
3.5

10.0
(2.2)
7.8

13.0
3.1

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E
N
I
S
U
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&
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M
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A
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S
S
N
A
M
R
A
H
C

I

’

A list of the signiﬁ cant investments in associates, including the name, country of incorporation and proportion of ownership interest is 
given in Note 37.

17. Other ﬁ nancial assets

Non-current
Available-for-sale assets 
– unlisted 
– listed 

2010 
£m 

2009
£m

2.0 
2.1 
4.1 

3.1
1.7
4.8

Non-current available-for-sale assets principally comprise equity securities that present the Group with opportunity for return through 
dividend income and capital gains. They have no ﬁ xed maturity or coupon rate. The fair value of unlisted securities is based on cost less 
any provision for impairment.

Current 
Short term government securities 
Term deposits 

Current other ﬁ nancial assets are liquid funds held on deposit with banks and clearing organisations.

2010 
£m 

4.5 
31.1 
35.6 

2009
£m

1.5
28.6
30.1

E
C
N
A
N
R
E
V
O
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S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F

I

N
O
I
T
A
M
R
O
F
N

I

R
E
D
L
O
H
E
R
A
H
S

63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

18. Deferred tax

Deferred tax assets 
Deferred tax liabilities 

The movement for the year in the Group’s net deferred tax position was as follows:

At 1 January 
Charge to income for the year 
(Charge)/credit to other comprehensive income for the year 
Effect of movements in exchange rates 
At 31 December 

Deferred tax balances and movements thereon are analysed as: 

2010 
£m 
13.0 
(19.5) 
(6.5) 

2010 
£m 
5.6 
(4.6) 
(7.9) 
0.4 
(6.5) 

2009
£m
13.7
(8.1)
5.6

2009
£m
17.4
(11.5)
0.2
(0.5)
5.6

Share-based awards 
Deﬁ ned beneﬁ t retirement schemes 
Tax losses 
Other timing differences 

At 
1 January 
2010 
£m 
0.9 
1.8 
– 
2.9 
5.6 

Recognised 
in proﬁ t 
or loss 
£m 
(0.5) 
(1.0) 
1.3 
(4.4) 
(4.6) 

Recognised in 
other 
comprehensive 
income 
£m 
0.3 
(8.1) 
– 
(0.1) 
(7.9) 

Effect of
movements 
in exchange 
rates 
£m 
– 
– 
– 
0.4 
0.4 

At
31 December
2010
£m
0.7
(7.3)
1.3
(1.2)
(6.5)

At the balance sheet date, the Group has a total potential tax beneﬁ t from unused tax losses of £7.2m (2009: £6.5m) in net terms available 
for offset against future proﬁ ts. A deferred tax asset of £1.3m in respect of tax losses has been recognised in 2010 (2009: £nil).

The 31 December 2010 deferred tax liability relating to deﬁ ned beneﬁ t retirement schemes includes a liability of £8.3m (2009: £nil) in 
respect of the surplus on the Group schemes.

No deferred tax has been recognised on temporary differences associated with undistributed earnings of subsidiaries as the Group is able 
to control the timing of distributions. Additionally, changes to UK tax regulation largely exempt overseas dividends received after 1 July 
2009 from UK tax.

64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

2010 
£m 
79.8 
4,037.9 
4,117.7 
12.4 
49.2 
7.0 
0.6 
4,186.9 

2009
£m
73.8
5,638.0
5,711.8
8.8
39.9
4.4
0.1
5,765.0

2010 
£m 
59.5 

11.7 
4.2 
4.4 
20.3 

79.8 

2009
£m
54.9

11.2
4.5
3.2
18.9

73.8

19. Trade and other receivables

Trade receivables 
Settlement balances 
Financial assets 
Other debtors 
Prepayments and accrued income 
Corporation tax 
Owed by associates and related parties 

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

The table below shows the ageing of trade receivables:

Less than 30 days (not yet due) 

Between 30 and 60 days 
Between 60 and 90 days 
Greater than 90 days 
Total past due 

Trade receivables 

Trade receivables are shown net of a provision of £1.5m (2009: £1.6m) against certain trade receivables due after 90 days.

The table below shows the ageing of settlement balances:

Amounts not yet due 

Less than 30 days 
Between 30 and 60 days 
Between 60 and 90 days 
Total past due 

Settlement balances 

2010 
£m 
4,008.4 

2009
£m
5,522.0

20.2 
9.3 
– 
29.5 

113.6
0.6
1.8
116.0

4,037.9 

5,638.0

Settlement balances arise on Matched Principal brokerage whereby securities are bought from one counterparty and simultaneously sold 
to another counterparty. The above analysis reﬂ ects only the receivable side of such transactions. Corresponding payable amounts are 
shown in Note 20 ‘Trade and other payables’.

65

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M
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A
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S
S
N
A
M
R
A
H
C

I

’

E
C
N
A
N
R
E
V
O
G

S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
I
F

I

N
O
I
T
A
M
R
O
F
N

I

R
E
D
L
O
H
E
R
A
H
S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

20. Trade and other payables

Settlement balances 
Trade payables 
Financial liabilities 
Tax and social security 
Other creditors 
Accruals and deferred income 
Owed to associates and related parties 

2010 
£m 
4,037.5 
6.5 
4,044.0 
30.5 
4.1 
150.2 
0.6 
4,229.4 

2009
£m
5,637.6
5.3
5,642.9
28.2
6.2
147.1
1.1
5,825.5

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

21. Interest bearing loans and borrowings 

2010 
Obligations under ﬁ nance leases 
Eurobond due 2014 
Eurobond due 2016 
Bank loan 

2009 
Obligations under ﬁ nance leases 
Eurobond due 2014 
Eurobond due 2016 
Bank loan 

Less than 
one year 
£m 
0.1 
– 
– 
30.0 
30.1 

Greater than
one year 
£m 
0.2 
8.5 
139.1 
180.0 
327.8 

0.2 
– 
– 
30.0 
30.2 

0.3 
8.8 
138.8 
209.1 
357.0 

Total
£m
0.3
8.5
139.1
210.0
357.9

0.5
8.8
138.8
239.1
387.2

All amounts are denominated in sterling with the exception of the obligations under ﬁ nance leases which are denominated in Euros.

An analysis of borrowings by maturity has been disclosed in Note 25.

66

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Eurobond: Due 6 July 2016
In July 2009 £141,144,000 of 7.04% Guaranteed Notes due 6 July 2016 were issued.

At 31 December 2010, the carrying value of the Eurobond due 2016, together with unamortised transaction costs, amounted to £139.1m 
and its fair value was £139.7m (2009: £129.2m).

Eurobond: Due 12 August 2014
As at 31 December 2010, £8,470,000 (2009: £8,770,000) of the 8.25% Step-up Coupon Subordinated Notes due 12 August 2014 remain 
outstanding. These notes are callable by Tullett Prebon Group Holdings plc at any time. The coupon was reset to 6.52% in August 2009. 
During the year bonds with a nominal value of £300,000 were repurchased. 

At 31 December 2010, the carrying value of the Eurobond due 2014, together with unamortised transaction costs and fair value 
adjustments, amounted to £8.5m and its fair value was £7.0m (2009: £6.6m).

Bank loan and credit facility
As at the year end the Group had banking facilities consisting of a £210m amortising term loan and a £50m committed revolving credit 
facility. The term loan is subject to a repayment of £30m in January 2011 with the remaining £180m repayable in January 2012 when the 
committed revolving credit facility will also mature. As at 31 December 2010 the carrying value of the loan approximated to the fair value. 
The revolving credit facility was undrawn as at 31 December 2010. The average effective interest rate on the bank loan was 1.6% during 
2010 (2009: 2.1%).

On 8 February 2011, the Group entered into a new £235m credit agreement consisting of a £120m amortising term loan facility and a 
£115m committed revolving credit facility. These facilities replace the facilities discussed above. The term loan is subject to repayments of 
£30m in each of February 2012 and February 2013 with £60m maturing in February 2014. The committed revolving credit facility, which 
has not been drawn, will also mature in February 2014. 

Finance leases
The Group leases certain items of property, plant and equipment under ﬁ nance leases. The average lease term is 2-3 years (2009: 3-4 
years). For 2010 the average effective borrowing rate was 7.1% (2009: 7.7%). Interest rates are ﬁ xed at the contract date. All leases are on a 
ﬁ xed repayment basis and no arrangements have been entered into for contingent rental payments.

The fair value of the Group’s lease obligations approximates to the carrying amount. Group obligations under ﬁ nance leases are secured by 
a lessor’s charge over the leased assets.

22. Derivative ﬁ nancial instruments
As at 31 December 2010 the Group held no derivative ﬁ nancial instruments. 

In 2009 a £9.0m fair value gain was recognised on a £64.2m/US$117m cross currency swap which matured in August 2009, and a fair 
value loss of £10.3m was recognised on a US$117m forward foreign exchange contract.

In March 2009 the Group entered into forward foreign exchange contracts amounting to US$50m which were designated as net 
investment hedges of US$50m of dollar denominated net assets. The forward exchange contracts matured in September 2009, resulting 
in a gain of £2.5m being recorded in other comprehensive income.

67

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S

 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

23. Provisions

At 1 January 2010 
Charged/(credited) to income statement 
Utilisation of provision 
Effect of movements in exchange rates 
At 31 December 2010 

At 1 January 2009 
Charged to income statement 
Utilisation of provision 
Effect of movements in exchange rates 
At 31 December 2009 

Included in current liabilities 
Included in non-current liabilities 

Onerous 
leases 
£m 
1.4 
– 
(1.3) 
– 
0.1 

Building
dilapidations 
£m 
2.1 
0.7 
– 
0.1 
2.9 

3.6 
– 
(2.0) 
(0.2) 
1.4 

1.9 
0.2 
– 
– 
2.1 

Other 
£m 
5.8 
(4.8) 
– 
0.4 
1.4 

6.4 
0.1 
(0.1) 
(0.6) 
5.8 

2010 
£m 
0.5 
3.9 
4.4 

Total
£m
9.3
(4.1)
(1.3)
0.5
4.4

11.9
0.3
(2.1)
(0.8)
9.3

2009
£m
1.5
7.8
9.3

Onerous leases
The onerous lease provision represents the net present value of the future rental cost net of expected sub-lease income. The leases expire 
in one to three years.

Building dilapidations
The building dilapidations provision represents the estimated cost of making good the dilapidations and disrepair on various leasehold 
buildings. The leases expire in one to nine years.

24. Other long term payables

Other creditors 
Deferred consideration 

2010 
£m 
3.6 
2.9 
6.5 

2009
£m
4.4
4.7
9.1

Other creditors are held at cost which approximates to fair value. Deferred consideration as at 31 December 2010 relates to the 
acquisitions of OTC Valuations Ltd and Aspen and is held at the discounted value of estimated future obligations.

68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

25. Financial instruments
The following analysis should be read in conjunction with the information on risk management included in the Business Review on pages 
15 to 19.

(a) Capital risk management
The Group’s policy is to maintain a capital base and funding structure that maintains creditor, regulator and market conﬁ dence and 
provides ﬂ exibility for business development whilst also optimising returns to shareholders. The capital structure of the Group consists 
of debt, as set out in Note 21, cash and cash equivalents, other current ﬁ nancial assets and equity attributable to equity holders of the 
parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 26 and 27.

The Group has an investment ﬁ rm consolidation waiver under which it is required to monitor its compliance with a ﬁ nancial holding 
company test which takes into account the Company’s shareholders’ funds and the aggregated credit risk, market risk and ﬁ xed overhead 
requirements of the Group. A number of the Company’s subsidiaries are individually regulated and are required to maintain capital that is 
appropriate to the risks entailed in their businesses according to deﬁ nitions that vary according to each jurisdiction.

(b) Categorisation of ﬁ nancial assets and liabilities

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Financial assets 
2010 
Other ﬁ nancial assets (non-current) 
Other ﬁ nancial assets (current) 
Cash and cash equivalents 
Trade receivables 
Settlement balances 

2009 
Other ﬁ nancial assets (non-current) 
Other ﬁ nancial assets (current) 
Cash and cash equivalents 
Trade receivables 
Settlement balances 

Available- 
for-sale assets 
£m 
4.1 
4.5 
– 
– 
– 
8.6 

4.8 
1.5 
– 
– 
– 
6.3 

Loans and
receivables 
£m 
– 
31.1 
390.1 
79.8 
4,037.9 
4,538.9 

– 
28.6 
366.1 
73.8 
5,638.0 
6,106.5 

Total
£m
4.1
35.6
390.1
79.8
4,037.9
4,547.5

4.8
30.1
366.1
73.8
5,638.0
6,112.8

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69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

25. Financial instruments  continued

Financial liabilities 
2010 
Eurobonds 
Bank loan 
Finance leases 
Trade payables 
Settlement balances 

2009
Eurobonds 
Bank loan 
Finance leases 
Trade payables 
Settlement balances 

Financial 
liabilities at
amortised cost 
£m 
147.6 
210.0 
0.3 
6.5 
4,037.5 
4,401.9 

147.6 
239.1 
0.5 
5.3 
5,637.6 
6,030.1 

Total
£m
147.6
210.0
0.3
6.5
4,037.5
4,401.9

147.6
239.1
0.5
5.3
5,637.6
6,030.1

(c) Credit risk analysis
The following table presents an analysis by rating agency designation of cash and cash equivalents, ﬁ nancial assets, trade receivables and 
settlement balances based on Standard & Poor’s ratings or their equivalent.

AAA to AA+ 
AA to A- 
BBB+ to BBB- 
BB+ to B- 
Unrated 

Provision for doubtful debts 

Cash and cash 
equivalents and other  
current ﬁ nancial assets 
2009 
2010 
£m 
£m 
34.2 
27.9 
382.0 
367.0 
7.9 
0.2 
0.5 
0.1 
1.1 
1.0 
425.7 
396.2 
– 
– 
425.7 
396.2 

Trade 
receivables 

Settlement
balances

2010 
£m 
1.2 
63.8 
3.9 
0.9 
11.5 
81.3 
(1.5) 
79.8 

2009 
£m 
1.1 
56.8 
6.5 
0.4 
10.6 
75.4 
(1.6) 
73.8 

2010 
£m 
685.3 
2,934.2 
185.9 
– 
232.5 
4,037.9 
– 
4,037.9 

2009
£m
687.7
4,412.0
206.6
3.5
328.2
5,638.0
–
5,638.0

In addition to the above, £1.5m (2009: £1.6m) of other non-current ﬁ nancial assets are rated AAA to AA+ and £2.6m (2009: £3.2m) 
are unrated.

70

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

The carrying value of ﬁ nancial assets recorded in the ﬁ nancial statements, which is net of impairment losses, represents the Group’s 
maximum exposure to credit risk. None of the Group’s ﬁ nancial assets are secured by collateral or other credit enhancements.

In respect of trade receivables, the Group is not exposed to signiﬁ cant credit risk to a single counterparty or any group of counterparties.

Matched Principal brokerage transactions, whereby securities are bought from one counterparty and sold to another counterparty, are 
settled on a delivery versus payment basis. The above analysis reﬂ ects only the receivable side of such transactions, the other side being 
shown in trade and other payables. Settlement of such transactions typically takes place within a few business days according to the 
relevant market rules and conventions and the credit risk is considered to be minimal.

(d) Maturity proﬁ le of ﬁ nancial liabilities
The table below reﬂ ects the contractual maturities, including future interest obligations, of the Group’s ﬁ nancial liabilities as at
31 December:

2010 
Settlement balances 
Trade payables 
Obligations under ﬁ nance leases 
Eurobonds 
Bank loan 

2009 
Settlement balances 
Trade payables 
Obligations under ﬁ nance leases 
Eurobonds 
Bank loan 

Due 
within 
3 months 
£m 
4,037.5 
6.5 
– 
– 
30.7 
4,074.7 

Due between 
3 months 
and 12 months 
£m 
– 
– 
0.1 
10.5 
1.9 
12.5 

Due between
1 year 
and 5 years 
£m 
– 
– 
0.2 
49.9 
180.2 
230.3 

5,637.6 
5.3 
– 
– 
30.7 
5,673.6 

– 
– 
0.2 
10.5 
2.5 
13.2 

– 
– 
0.4 
50.8 
216.8 
268.0 

Due after
5 years 
£m 
– 
– 
– 
151.1 
– 
151.1 

– 
– 
– 
161.0 
– 
161.0 

Total
£m
4,037.5
6.5
0.3
211.5
212.8
4,468.6

5,637.6
5.3
0.6
222.3
250.0
6,115.8

71

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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

25. Financial instruments  continued
(e) Foreign currency sensitivity analysis
The table below illustrates the sensitivity of the proﬁ t for the year with regard to currency movements on ﬁ nancial assets and liabilities 
denominated in foreign currencies as at the year end. 

Based on a 5% weakening in the US dollar and Euro exchange rates against sterling, the effect on proﬁ t for the year would be as follows:

Change in proﬁ t for the year 

2010 

2009

USD 
£m 
(1.4) 

EUR 
£m 
(1.0) 

USD 
£m 
(0.9) 

EUR
£m
(0.8)

The Group would experience an equal and opposite foreign exchange gain should the US dollar and Euro exchange rates strengthen 
against sterling. 

(f) Interest rate sensitivity analysis
Interest on ﬂ oating rate ﬁ nancial instruments is reset at intervals of less than one year. The Group’s exposure to interest rates arises on 
cash and cash equivalents, money market instruments, bank overdrafts and the bank loan. The Eurobonds and the obligations under 
ﬁ nance leases are ﬁ xed rate ﬁ nancial instruments.

A 100 basis point change in interest rates, applied to average ﬂ oating rate ﬁ nancial instrument assets and liabilities during the year, would 
result in the following impact on proﬁ t or loss:

Basis points change 

Income/(expense) arising on: 
– ﬂ oating rate assets 
– ﬂ oating rate liabilities 
Net income/(expense) for the year 

2010 

2009

+100pts 
£m 

–100pts 
£m 

+100pts 
£m 

–100pts
£m

3.6 
(2.1) 
1.5 

(1.6) 
1.3 
(0.3) 

3.5 
(2.4) 
1.1 

(2.0)
2.0
–

(g) Fair value measurements recognised in the statement of ﬁ nancial position
The following table provides an analysis of ﬁ nancial instruments that are measured subsequent to initial recognition at fair value, grouped 
into Levels 1 to 3 based on the degree to which the fair value is observable:

– 

 Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

 Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for 
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and 

 Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not 
based on observable market data (unobservable inputs).

– 

– 

72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

2010 
Available-for-sale ﬁ nancial assets 
Non-current other ﬁ nancial assets 
– unlisted 
– listed 
Current other ﬁ nancial assets 
– short term government securities 

There were no transfers between Level 1 and 2 during the year.

Reconciliation of Level 3 fair value measurements of ﬁ nancial assets:

Balance as at 1 January 2010 
Realised gain in the income statement 
Disposal proceeds 
Unrealised loss in other comprehensive income 
Balance as at 31 December 2010 

Level 1 
£m 

Level 2 
£m 

Level 3 
£m 

Total
£m

– 
2.1 

4.5 
6.6 

– 
– 

– 
– 

2.0 
– 

– 
2.0 

2.0
2.1

4.5
8.6

 Available- for-sale
Unlisted
£m
3.1
1.0
(2.0)
(0.1)
2.0

There were no ﬁ nancial liabilities subsequently measured at fair value on Level 3 fair value measurement bases.

The £1.0m gain included in proﬁ t or loss in the period relates to the sale of unlisted available-for-sale assets during the period. The gain in 
the period is included in ‘administrative expenses’. Of the disposal proceeds, £1.7m was received in cash with £0.3m deferred.

The total gains or losses in the period included in other comprehensive income relates to the revaluation of unlisted available-for-sale 
assets held at the balance sheet date. The losses of £0.1m are included within ‘Revaluation reserve’.

26. Share capital

Allotted, issued and fully paid 
Ordinary shares of 25p 

Allotted, issued and fully paid
Ordinary shares of 25p 

2010 
No. 

2009
No.

 215,313,584 

  215,313,584

2010 
£m 

53.8 

2009
£m

53.8

A resolution was passed at the 2010 Annual General Meeting adopting new Articles of Association, incorporating amongst other things, 
the removal of the authorised share capital article to bring it in line with the Companies Act 2006.

73

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A
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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

27. Reconciliation of shareholders’ funds
(a) Share capital, Share premium account, Reverse acquisition reserve

As at 31 December 2010 

As at 31 December 2009 

(b) Other reserves 

As at 1 January 2010 
Revaluation of available-for-sale assets 
Exchange differences on translation of foreign operations 
Taxation credit on components of other
comprehensive income 
Total comprehensive income 
Equity component of deferred consideration 
Sale of own shares 
Shares used to meet share award exercises 
As at 31 December 2010 

As at 1 January 2009 
Revaluation of available-for-sale assets 
Gain on net investment hedge 
Exchange differences on translation of foreign operations 
Taxation charge on components of other 
comprehensive income 
Total comprehensive income 
Sale of own shares 
Shares used to meet share award exercises 
As at 31 December 2009 

Equity 
reserve 
£m 
– 
– 
– 

Revaluation 
reserve 
£m 
2.3 
0.3 
– 

– 
– 
5.3 
– 
– 
5.3 

– 
– 
– 
– 

– 
– 
– 
– 
– 

– 
0.3 
– 
– 
– 
2.6 

1.4 
0.9 
– 
– 

– 
0.9 
– 
– 
2.3 

Share 
capital 
£m 

53.8 

53.8 

Merger 
reserve 
£m 
121.5 
– 
– 

– 
– 
– 
– 
– 
121.5 

121.5 
– 
– 
– 

– 
– 
– 
– 
121.5 

Share 
premium 
account 
£m 

Reverse
acquisition
reserve 
£m 

Total
£m

9.9 

(1,182.3) 

(1,118.6)

9.9 

(1,182.3) 

(1,118.6)

Hedging and 
translation 
£m 
7.6 
– 
8.8 

1.0 
9.8 
– 
– 
– 
17.4 

23.9 
– 
2.5 
(16.9) 

(1.9) 
(16.3) 
– 
– 
7.6 

Own 
shares 
£m 
(2.8) 
– 
– 

– 
– 
– 
2.3 
0.4 
(0.1) 

(6.9) 
– 
– 
– 

– 
– 
2.6 
1.5 
(2.8) 

Other
reserves
£m
128.6
0.3
8.8

1.0
10.1
5.3
2.3
0.4
146.7

139.9
0.9
2.5
(16.9)

(1.9)
(15.4)
2.6
1.5
128.6

Equity reserve
The reserve of £5.3m represents the fair value of 1,420,212 ordinary shares issuable on 31 December 2011, following Primex Energy 
Brokers Limited’s completion of acquisition related performance conditions.

74

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Own shares
As at 31 December 2010, the Tullett Prebon plc Employee Beneﬁ t Trust 2007 held 200,833 ordinary shares (2009: 677,797 ordinary shares). 
During the year 406,964 ordinary shares were used to satisfy share award exercises and 70,000 ordinary shares were sold.

As at 31 December 2010, the Tullett Prebon plc Employee Share Ownership Trust held 1,196 ordinary shares (2009: 555,631 ordinary 
shares). During the year 56,779 ordinary shares were used to satisfy share award exercises and 497,656 ordinary shares were sold.

(c) Total equity 

 Equity attributable to equity holders of the parent 

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As at 1 January 2010 
Proﬁ t for the year 
Revaluation of available-for-sale assets 
Exchange differences on translation of foreign operations 
Actuarial gains on deﬁ ned beneﬁ t pension schemes 
Taxation credit/(charge) on components of other 
comprehensive income 
Total comprehensive income 
Equity component of deferred consideration 
Dividends paid in the year 
Sale of own shares 
Shares used to meet share award exercises 
Debit arising on share-based payment awards 
As at 31 December 2010 

Total from 
note 27(a) 
£m 
(1,118.6) 
– 
– 
– 
– 

– 
– 
– 
– 
– 
– 
– 
(1,118.6) 

As at 1 January 2009 
Proﬁ t for the year 
Revaluation of available-for-sale assets 
Gain on net investment hedge 
Exchange differences on translation of foreign operations 
Actuarial losses on deﬁ ned beneﬁ t pension schemes 
Taxation charge on components of other 
comprehensive income 
Total comprehensive income 
Dividends paid in the year 
Sale of own shares 
Shares used to meet share award exercises 
Increase in minorities’ equity interests 
Debit arising on share-based payment awards 
As at 31 December 2009 

(1,118.6) 
– 
– 
– 
– 
– 

– 
– 
– 
– 
– 
– 
– 
(1,118.6) 

Total from 
note 27(b) 
£m 
128.6 
– 
0.3 
8.8 
– 

1.0 
10.1 
5.3 
– 
2.3 
0.4 
– 
146.7 

139.9 
– 
0.9 
2.5 
(16.9) 
– 

(1.9) 
(15.4) 
– 
2.6 
1.5 
– 
– 
128.6 

Retained 
earnings 
£m 
1,300.3 
108.5 
– 
– 
14.5 

(7.8) 
115.2 
– 
(32.7) 
(0.6) 
(0.4) 
(0.9) 
1,380.9 

1,220.8 
110.8 
– 
– 
– 
(0.5) 

– 
110.3 
(27.8) 
(1.1) 
(1.5) 
– 
(0.4) 
1,300.3 

Total 
£m 
310.3 
108.5 
0.3 
8.8 
14.5 

(6.8) 
125.3 
5.3 
(32.7) 
1.7 
– 
(0.9) 
409.0 

242.1 
110.8 
0.9 
2.5 
(16.9) 
(0.5) 

(1.9) 
94.9 
(27.8) 
1.5 
– 
– 
(0.4) 
310.3 

Minority 
interests 
£m 
2.2 
0.6 
– 
0.3 
– 

– 
0.9 
– 
(0.3) 
– 
– 
– 
2.8 

2.4 
0.6 
– 
– 
(0.3) 
– 

– 
0.3 
(0.7) 
– 
– 
0.2 
– 
2.2 

Total
equity
£m
312.5
109.1
0.3
9.1
14.5

(6.8)
126.2
5.3
(33.0)
1.7
–
(0.9)
411.8

244.5
111.4
0.9
2.5
(17.2)
(0.5)

(1.9)
95.2
(28.5)
1.5
–
0.2
(0.4)
312.5

75

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A
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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

28. Share-based payments 
As at 31 December 2010 the Group had one active equity-based long term incentive plan, the Tullett Prebon Long Term Incentive Plan, for 
the granting of non-transferable awards to certain employees and executives. 

Option awards granted under the plan typically become exercisable three years after grant date. The exercise of certain options is 
dependent on option holders meeting performance criteria. The maximum life of the options is 10 years after grant date. Options are 
settled in equity once exercised.

Share awards are granted to certain employees within the Group and are transferred to them on completion of the awards’ 
performance criteria.

Outstanding awards at 31 December 2010 and their estimated fair values when granted are set out below:

Estimated
fair
value at
grant date

389p
199p
169p
400-463p

Awards 
outstanding 
2010 

– 
955,512 
797,266 
– 
1,752,778 

Shares 

Number of 
Awards
406,964  3,640,185
(463,743)
(406,964) 
(2,220,930)
– 
797,266
– 
1,752,778
– 

Shares 
463,782 
(18,939) 
(37,879) 
– 
406,964 

Number of 
Awards
4,663,687
(345,786)
(1,633,228)
955,512
3,640,185

Share options 
3,233,221 
(56,779) 
(2,220,930) 
797,266 
1,752,778 

– 

Share options 
4,199,905 
(326,847) 
(1,595,349) 
955,512 
3,233,221 

56,779 

Awards
Long term incentive award (2008) (i) 
Long term incentive award (2009) (ii) 
Long term incentive award (2010) (ii) 
Employee share awards (iii) 

Notes:
(i)  2008 awards are subject to revenue, operating margin and return on capital conditions
(ii)  2009 and 2010 awards are subject to total shareholder return and return on capital conditions
(iii) Grants were on more than one date

The following table shows the number of share awards outstanding during 2010 and 2009:

2010 
Outstanding at start of the year 
Exercised/awarded during the year 
Lapsed during the year 
Granted during the year 
Outstanding at end of year 

Exercisable at end of year 

2009 
Outstanding at start of the year 
Exercised/awarded during the year 
Forfeited during the year 
Granted during the year 
Outstanding at end of year 

Exercisable at end of year 

The weighted average exercise price for all awards is £nil (2009: £nil).

76

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

The weighted average share price of share options exercised and shares awarded in 2010 was 353p (2009: 140p). 

The estimated fair value of each option granted under the long term incentive award (2008) was calculated by applying a Black-Scholes 
option pricing model. The model inputs were the share price at grant date, exercise price, expected volatility, expected dividends based 
on historical dividend payment, expected life of the option until exercise and a risk-free interest rate based on government securities with 
a similar maturity proﬁ le.

The estimated fair value of each option granted under the long term incentive awards (2009) and (2010), which are subject to market 
conditions, were calculated by applying a Monte Carlo simulation model. The model inputs were the share price at grant date, exercise 
price, expected volatility, expected dividends based on historical dividend payment, the expected life of the option until exercise, a risk-free 
interest rate based on government securities with a similar maturity proﬁ le and the volatility and correlation of Total Shareholder Return 
(TSR) with a comparator group of companies. The 2010 award is also subject to TSR comparison relative to the UK Retail Price Index.

The estimated fair value of each share granted to employees is calculated based on the share price at grant date, adjusted for the 
non-accumulation of dividends.

The model inputs for share option awards that existed as at 31 December 2010 are set out below:

Share price at date of grant (p) 
Exercise price (p) 
Expected volatility 
Expected life (years) 
Risk-free rate 
Expected dividend yield 
Expected volatility of comparator group 
Correlation with comparator group 
Retail Price Index 
Proportion meeting service criteria 

Long term 
incentive 
award 
(2010) 
298 
nil 
62% 
3 
1.3% 
5.0% 
52% 
27% 
2.5% 
100% 

Long term 
incentive 
award 
(2009) 
284 
nil 
58% 
3 
2.2% 
4.5% 
49% 
27% 
n/a 
100% 

Long term 
incentive
award
(2008)
430
nil
46%
3
5.0%
3.0%
n/a
n/a
n/a
100%

The weighted average contractual life for the share-based awards outstanding as at 31 December 2010 is 9.2 years (2009: 7.7 years).

Credit arising from share-based awards 

2010 
£m 
(0.9) 

2009
£m
(0.4)

77

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

29. Acquisitions
Analysis of deferred and contingent consideration in respect of acquisitions
Certain acquisitions made by the Group are satisﬁ ed in part by deferred or contingent deferred consideration. The Group has re-estimated 
the amounts due where necessary, with any corresponding adjustments being made to goodwill.

At 1 January 
Acquisitions during the year 
Additional consideration accrued 
Cash consideration paid 
Equity component transferred to reserves 
Adjustments to goodwill during the year 
Reversal of discount 
Effect of movements in exchange rates 
At 31 December 

Amounts falling due within one year 
Amounts falling due after one year 
At 31 December 

2010 
£m 
10.3 
1.0 
– 
(2.1) 
(5.3) 
0.3 
– 
– 
4.2 

1.3 
2.9 
4.2 

2009
£m
23.8
–
0.5
(3.4)
–
(8.3)
(1.3)
(1.0)
10.3

5.6
4.7
10.3

On 4 March 2010, the Group acquired 100% of the share capital in OTC Valuations Ltd. The initial consideration paid on completion was 
£0.3m in cash. Further cash consideration, estimated at £1.0m, is payable in the next two years subject to certain performance 
requirements. The initial fair value of net assets acquired amounted to less than £0.1m, resulting in the recognition of £1.3m of goodwill. 
OTC Valuations Ltd did not have a material effect on the Group’s results for the year.

30. Notes to the Consolidated Cash Flow Statement
(a) Reconciliation of operating proﬁ t to net cash from operating activities

Operating proﬁ t 
Adjustments for: 

Share-based compensation 
Proﬁ t on sale of other non-current ﬁ nancial assets 
Loss on sale of property, plant and equipment 
Depreciation of property, plant and equipment 
Amortisation of intangible assets 

Decrease in provisions for liabilities and charges 
Outﬂ ow from retirement beneﬁ t obligations 
(Decrease)/increase in non-current liabilities 
Operating cash ﬂ ows before movement in working capital 
(Increase)/decrease in trade and other receivables   
Decrease/(increase) in net settlement balances 
Increase/(decrease) in trade and other payables 
Cash generated from operations 
Income taxes paid 
Interest paid 
Net cash from operating activities 

78

2010 
£m 
152.4 

(0.9) 
(1.0) 
0.2 
6.4 
3.0 
(5.4) 
(8.8) 
(1.1) 
144.8 
(15.0) 
0.2 
5.6 
135.6 
(27.5) 
(13.4) 
94.7 

2009
£m
170.8

(0.4)
–
–
6.1
2.1
(1.8)
(8.1)
0.7
169.4
4.4
(0.2)
(41.2)
132.4
(30.4)
(16.7)
85.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

(b) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and other short term highly liquid investments with an original maturity of three 
months or less. As at 31 December 2010 cash and cash equivalents amounted to £390.1m (2009: £366.1m). Cash at bank earns interest 
at ﬂ oating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and one week 
depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.

31. Analysis of net funds

2010 
Cash 
Cash equivalents 
Client settlement money 
Cash and cash equivalents 
Other current ﬁ nancial assets 
Total funds 
Bank loans within one year 
Bank loans after one year 
Loans due after one year 
Finance leases 

Total net funds 

2009 
Cash 
Cash equivalents 
Client settlement money 
Cash and cash equivalents 
Other current ﬁ nancial assets 
Total funds 
Overdraft 
Bank loans within one year 
Bank loans after one year 
Loans due after one year 
Finance leases 

Total net funds 

At 
1 January 
2010 
£m 
189.7 
173.6 
2.8 
366.1 
30.1 
396.2 
(30.0) 
(209.1) 
(147.6) 
(0.5) 
(387.2) 
9.0 

At 
1 January 
2009 
£m 
229.6 
142.7 
2.7 
375.0 
30.2 
405.2 
(0.1) 
(30.0) 
(238.5) 
(149.8) 
(4.2) 
(422.6) 
(17.4) 

Cash 
ﬂ ow 
£m 
49.2 
(30.8) 
(0.4) 
18.0 
5.2 
23.2 
30.0 
– 
0.3 
0.3 
30.6 
53.8 

Cash 
ﬂ ow 
£m 
(27.2) 
32.5 
0.1 
5.4 
0.8 
6.2 
0.1 
30.0 
– 
2.6 
3.7 
36.4 
42.6 

Non cash 
items 
£m 
– 
– 
– 
– 
– 
– 
(30.0) 
29.1 
(0.3) 
(0.2) 
(1.4) 
(1.4) 

Non cash 
items 
£m 
– 
– 
– 
– 
– 
– 
– 
(30.0) 
29.4 
(0.4) 
(0.3) 
(1.3) 
(1.3) 

Exchange 
differences 
£m 
3.5 
2.5 
– 
6.0 
0.3 
6.3 
– 
– 
– 
0.1 
0.1 
6.4 

Exchange 
differences 
£m 
(12.7) 
(1.6) 
– 
(14.3) 
(0.9) 
(15.2) 
– 
– 
– 
– 
0.3 
0.3 
(14.9) 

At
31 December
2010
£m
242.4
145.3
2.4
390.1
35.6
425.7
(30.0)
(180.0)
(147.6)
(0.3)
(357.9)
67.8

At
31 December
2009
£m
189.7
173.6
2.8
366.1
30.1
396.2
–
(30.0)
(209.1)
(147.6)
(0.5)
(387.2)
9.0

Other current ﬁ nancial assets comprise short term government securities and term deposits held on deposit with banks and clearing 
organisations.

32. Contingent liabilities
From time to time the Group is engaged in litigation. Notwithstanding the uncertainties that are inherent in the outcome of such matters, 
there are no issues which are considered to pose a signiﬁ cant risk of material adverse ﬁ nancial impact on the Group’s results or net assets. 
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.

79

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

33. Operating lease commitments

Minimum operating lease payments recognised in the income statement 

2010 
£m 
13.1 

2009
£m
13.1

At 31 December 2010 the Group had outstanding commitments for future minimum lease payments under non-cancellable operating 
leases, which fall due as follows:

Within one year 
Within two to ﬁ ve years 
Over ﬁ ve years 

Buildings 
£m 
11.5 
30.3 
28.4 
70.2 

2010 

2009

Other 
£m 
1.3 
0.4 
– 
1.7 

Buildings 
£m 
11.2 
28.7 
34.8 
74.7 

Other
£m
1.4
0.5
–
1.9

34. Retirement beneﬁ t obligations
(a) Deﬁ ned beneﬁ t schemes
The Group operates two deﬁ ned beneﬁ t schemes in the UK which are discussed below, and a small number of schemes in other countries 
which collectively are not signiﬁ cant in the context of the Group. 

(i)   The Tullett Liberty Pension Scheme (Deﬁ ned Beneﬁ t Section) is a deﬁ ned beneﬁ t (ﬁ nal salary) funded pension scheme. The Principal 
Employer of the scheme is Tullett Prebon Group Limited. The deﬁ ned beneﬁ t section of the scheme was closed to new members in 
1991 and since May 2003 future accrual on a deﬁ ned beneﬁ t basis has ceased. Members in service in 1991 receive beneﬁ ts on the 
better of a money purchase underpin and deﬁ ned beneﬁ t basis. For deﬁ ned beneﬁ t section members in service in May 2003 there is
a continuing link between beneﬁ ts and pensionable pay. 

(ii)  The Prebon Yamane (Ex K-W) Pension Scheme is a deﬁ ned beneﬁ t (ﬁ nal salary) funded pension scheme. The Principal Employer of the 
scheme is Tullett Prebon Group Limited. The scheme was closed to new members in 1989 and since April 2006 future accrual on a 
deﬁ ned beneﬁ t basis has ceased. Members receive beneﬁ ts on the better of a money purchase underpin and deﬁ ned beneﬁ t basis.
For members in service in April 2006 there is a continuing link between beneﬁ ts and pensionable pay. 

The assets of the UK schemes are held separately from those of the Group, either in separate trustee administered funds or in
contract-based policies of insurance. 

The estimated amounts of contributions expected to be paid into the UK deﬁ ned beneﬁ t schemes during 2011 is £1.0m. The latest 
funding actuarial valuations of the Tullett Liberty Pension Scheme and of the Prebon Yamane (Ex K-W) Pension Scheme (together, the ‘UK 
deﬁ ned beneﬁ t schemes’) were carried out as at 30 April 2010 and 1 January 2010 respectively by independent qualiﬁ ed actuaries. 

The main ﬁ nancial assumptions used by the independent qualiﬁ ed actuaries of the UK deﬁ ned beneﬁ t schemes to calculate the liabilities 
under IAS 19 were:

Key assumptions used: 
Discount rate 
Expected return on schemes’ assets 
Expected rate of salary increases 
Rate of increase in LPI pensions in payment* 
Inﬂ ation assumption 

2010 
% 

5.30 
6.64 
4.95 
3.50 
3.70 

2009
%

5.70
7.05
5.05
3.60
3.80

*  This applies to pensions accrued from 6 April 1997. The majority of current and future pensions receive ﬁ xed increases in payment of 

either 0% or 2.5%.

80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

The mortality assumptions are based on standard mortality tables which allow for future mortality improvements and are the same as 
those adopted for the 2010 funding valuations. For the Tullett Liberty Pension Scheme the assumptions are that a member who retires
in future at age 60 will live on average for a further 28 years (2009: 29 years) after retirement if they are male and for a further 31 years 
(2009: 31 years) after retirement if they are female. For the Prebon Yamane (Ex K-W) Pension Scheme the equivalent assumptions are 
30 years (2009: 30 years) for males and 31 years (2009: 31 years) for females. Current pensioners are assumed to have a consistent but 
generally shorter life expectancy based on their current age. 

Equities 
Corporate bonds 
Cash and other 
Weighted average return* 
Total fair value of schemes’ assets 

Expected 
return in 
2011 on 
31 December 
2010 scheme 
assets 
% 
7.01 
5.30 
0.80 
6.64 

Expected 
return in 
2010 on 
31 December 
2009 scheme 
assets 
% 
7.40 
5.70 
0.70 
7.05 

2010 
Assets 
£m 
151.8 
10.5 
7.2 

169.5 

Expected 
return in 
2009 on 
31 December 
2008 scheme 
assets 
% 
6.70 
6.10 
2.70 
6.41 

2009 
Assets 
£m 
123.5 
9.7 
4.5 

137.7 

2008
Assets
£m
92.3
8.2
6.4

106.9

*  The overall expected rate of return on the schemes’ assets is a weighted average of the individual expected rates of return on each asset 

class. The actual gain on schemes’ assets in 2010 was £27.7m (2009: gain on schemes’ assets £26.2m). 

The amount included in the balance sheet arising from the Group’s obligations in respect of the UK deﬁ ned beneﬁ t schemes was 
as follows:

Present value of funded deﬁ ned beneﬁ t obligations 
Fair value of schemes’ assets 
Surplus/(deﬁ cit) in schemes 

The amounts recognised in proﬁ t and loss in respect of the UK deﬁ ned beneﬁ t schemes were as follows:

Interest cost on schemes’ liabilities 
Expected return on schemes’ assets 
Recognised in proﬁ t and loss 

Movements in the present value of the deﬁ ned beneﬁ t obligations in the current period were as follows:

At 1 January 
Interest cost on schemes’ liabilities 
Actuarial losses 
Beneﬁ ts paid/transfers out 
At 31 December 

2010 
£m 
(145.9) 
169.5 
23.6 

2009
£m
(139.0)
137.7
(1.3)

2010 
£m 
(7.8) 
9.4 
1.6 

2010 
£m 
(139.0) 
(7.8) 
(3.8) 
4.7 
(145.9) 

2009
£m
(7.0)
6.5
(0.5)

2009
£m
(115.4)
(7.0)
(20.2)
3.6
(139.0)

81

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

34. Retirement beneﬁ t obligations continued
Movements in the fair value of schemes’ assets in the current period were as follows:

At 1 January 
Gross expected return on schemes’ assets 
Actuarial gains 
Contributions from the sponsoring companies 
Beneﬁ ts paid/transfers out 
At 31 December 

Historical information:

Present value of funded deﬁ ned beneﬁ t obligations 
Fair value of schemes’ assets 
Schemes’ surplus/(deﬁ cits) 

Experience adjustments on schemes’ liabilities 
Percentage of schemes’ liabilities 
Experience adjustments on schemes’ assets 
Percentage of schemes’ assets 

2010 
£m 
137.7 
9.4 
18.3 
8.8 
(4.7) 
169.5 

2007 
£m 
(123.4) 
119.5 
(3.9) 

2009
£m
106.9
6.5
19.7
8.2
(3.6)
137.7

2006
£m
(133.8)
107.6
(26.2)

2009 
£m 
(139.0) 
137.7 
(1.3) 

2008 
£m 
(115.4) 
106.9 
(8.5) 

(0.6) 
(0.4)% 
19.8 
14.4% 

(2.1) 
(1.8)% 

(21.2) 
(19.8)% 

(0.3) 
(0.2)% 
4.2 
3.5% 

0.2
0.1%
4.9
4.6%

2010 
£m 
(145.9) 
169.5 
23.6 

5.1 
3.5% 

18.3 
10.8% 

(b) Deﬁ ned contribution pensions
The Group operates a number of deﬁ ned contribution schemes for qualifying employees. The assets of these schemes are held separately 
from those of the Group.

The deﬁ ned contribution pension cost for the Group charged to administrative expenses was £5.6m (2009: £5.1m), of which £1.6m 
(2009: £1.2m) related to overseas schemes. 

As at 31 December 2010, contributions of £0.1m (2009: £0.1m) due in respect of the current reporting period had not been paid over to the 
schemes, all of which related to the overseas schemes.

35. Client money
Client money held was £2.4m (2009: £2.8m). This represents balances held by the Group received as a result of corporate actions relating 
to securities transactions. 

36. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not 
disclosed in this note. 

The total amount owed to the Group by related parties and associates at 31 December 2010 was £0.6m (2009: £0.1m). The total amount 
owed by the Group to related parties and associates at 31 December 2010 was £0.6m (2009: £1.1m).

Collins Stewart Employee Share Ownership Trust 
Associates 

Amounts owed 
by related parties 

Amounts owed
to related parties

2010 
£m 
– 
0.6 
0.6 

2009 
£m 
– 
0.1 
0.1 

2010 
£m 
0.6 
– 
0.6 

2009
£m
0.7
0.4
1.1

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been 
made for doubtful debts in respect of the amounts owed by related parties.

82

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Prebon plc 
Annual Report 2010

Collins Stewart plc was a related party of the Group until Terry Smith resigned as a director of Collins Stewart plc in 2010. Collins Stewart 
plc is the ultimate controlling entity of the Collins Stewart Employee Share Ownership Trust. The balances reported above arose when 
Collins Stewart plc was a related party.

Non-executive directors’ and executives’ remuneration
Remuneration of the directors who were the key management personnel of the Group during the year is set out below in aggregate for 
each of the categories speciﬁ ed in IAS 24 ‘Related Party Disclosures’. Further information about the individual directors is provided in the 
audited part of the Report on Directors’ Remuneration on pages 36 to 38.

Short term beneﬁ ts 
Share-based awards 

2010 
£m 
5.9 
(1.3) 
4.6 

2009
£m
6.3
0.3
6.6

The credit arising on share-based awards in 2010 reﬂ ects the lapse of the long term incentive award (2008) during the year (Note 28).

37. Principal subsidiaries and undertakings 
At 31 December 2010, the following companies were the Group’s principal trading subsidiary undertakings, principal intermediate holding 
companies and associates.

Subsidiary undertakings 
Tullett Prebon (Australia) Pty. Limited 
Marshalls (Bahrain) WLL* 
Tullett Prebon Data Services Ltd. 
Tullett Prebon Technology Services Ltd. 
Tullett Prebon Canada Limited 
OTC Valuations Ltd. 
Tullett Prebon Group Holdings plc 
Fulton Prebon Group Limited 
TP Holdings Limited 
M.W. Marshall (Overseas) Limited 
Prebon Group Limited 
Prebon Limited 
Prebon Technology Holdings Limited 
Prebon Technology Limited 
Prebon Yamane International Limited 
Tullett Liberty (European Holdings) Limited 
Tullett Liberty Brokerage Ltd. 
Tullett Liberty (Oil & Energy) Holdings Limited 
Tullett Liberty (Oil & Energy) Limited 
Tullett Liberty (Overseas Holdings) Limited 
Tullett Prebon Administration Limited 
Tullett Prebon (Equities) Limited 
Tullett Prebon Group Limited 
Tullett Prebon Investment Holdings Limited 
Tullett Prebon (Securities) Limited 
Tullett Prebon (Europe) Limited 
Tullett Prebon (No. 1) 
Aspen Oil Group Limited 
Tullett Prebon Information Limited 

* The Group’s interest in the trading results is 90%.

Country of 
incorporation 
Australia 
Bahrain 
Bermuda 
Bermuda 
Canada 
Canada 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
England 
Guernsey 

Principal 
activities 
Broking 
Broking 
Information sales 
Information sales 
Broking 
Broking 
Holding company 
Holding company 
Holding company 
Holding company 
Holding company 
Holding company 
Holding company 
IT support services 
Holding company 
Holding company 
Holding company 
Holding company 
Broking 
Holding company 
Service company 
Broking 
Service company 
Holding company 
Broking 
Broking 
Holding company 
Holding company 
Information sales 

Issued ordinary
shares, all voting 
100%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

83

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Tullett Prebon plc 
Annual Report 2010

Notes to the Consolidated Financial Statements continued

for the year ended 31 December 2010

37. Principal subsidiaries and undertakings continued

Subsidiary undertakings 
Tullett Prebon Asia Group Limited 
Tullett Prebon (Hong Kong) Limited 
PT. Inti Tullett Prebon Indonesia 
Tullett Prebon (Japan) Limited 
Yamane Tullett Prebon (Japan) Limited* 
Tullett Prebon Money Brokerage (Korea) Limited 
Tullett Liberty B.V. 
Prebon Holdings B.V. 
Tullett Prebon (Philippines) Inc. 
Tullett Prebon (Polska) SA 
Tullett Liberty (Energy) Holdings Pte. Ltd. 
Tullett Prebon Energy (Singapore) Pte. Ltd. 
Prebon (Singapore) Holdings Limited 
Tullett Prebon (Singapore) Limited 
Prebon Technology Services (Singapore) Pte. Ltd. 
Tullett Prebon Information (Singapore) Pte Limited 
Aspen Oil Broking (Singapore) Pte. Ltd. 
Cosmorex A.G. 
Cosmorex Holdings A.G. 
Tullett Prebon Financial Services LLC 
Tullett Prebon (Americas) Holdings Inc. 
Tullett Prebon Americas Corp 

* The Group’s interest in the trading results is 60%.

Country of 
incorporation 
Hong Kong 
Hong Kong 
Indonesia 
Japan 
Japan 
Korea 
Netherlands 
Netherlands 
Philippines 
Poland 
Singapore 
Singapore 
Singapore 
Singapore 
Singapore 
Singapore 
Singapore 
Switzerland 
Switzerland 
USA 
USA 
USA 

Principal 
activities 
Holding company 
Broking 
Broking 
Broking 
Broking 
Broking 
Holding company 
Holding company 
Broking 
Broking 
Holding company 
Broking 
Holding company 
Broking 
IT support services 
Information sales 
Broking 
Broking 
Holding company 
Broking 
Holding company 
Holding company 

Issued ordinary
shares, all voting 
100%
100%
57.52%
100%
50%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

All the above subsidiary undertakings are owned indirectly, with the exception of Tullett Prebon Group Holdings plc, which is owned 
directly. They all have a 31 December year end with the exception of Prebon Limited and Yamane Tullett Prebon (Japan) Limited, which 
have a 31 March year end.

Associates 
Tullett Liberty (Bahrain) Company W.L.L.* 
Tullett Prebon SITICO (China) Limited 
Parekh (Forex) Private Limited 
Prebon Yamane (India) Limited 
Wall Street Tullett Prebon Limited 
Wall Street Tullett Prebon Securities Limited 

Country of 
incorporation 
Bahrain 
China 
India 
India 
Thailand 
Thailand 

Principal 
activities 
Broking 
Broking 
Broking 
Broking 
Broking 
Broking 

Issued ordinary
shares, all voting 
49%
33%
26%
48%
49%
49%

*  The Group’s interest in the trading results is 85%. The company is not consolidated as the Group does not have sufﬁ cient voting control to 

govern the ﬁ nancial and operating policies of the company.

All associates are held indirectly. They all have a 31 December year end with the exception of Parekh (Forex) Private Limited, which has 
a 31 March year end.

38. Events after the balance sheet date
On 8 February 2011, the Group entered into a new £235m credit agreement consisting of a £120m amortising term loan facility and a 
£115m committed revolving credit facility. These facilities replaced the previous facilities outstanding at that date, a £180m term loan and 
a £50m committed revolving credit facility that were due to mature in January 2012. The new term loan is subject to repayments of £30m 
in each of February 2012 and February 2013 with £60m maturing in February 2014. The committed revolving credit facility, which has not 
been drawn, will also mature in February 2014.

84

 
 
 
 
Independent Auditor’s Report 
to the Members of Tullett Prebon plc

Tullett Prebon plc 
Annual Report 2010

We have audited the Parent Company Financial Statements of 
Tullett Prebon plc for the year ended 31 December 2010 which 
comprise the Parent Company Balance Sheet and the related notes 
1 to 8. The ﬁ nancial reporting framework that has been applied in 
their preparation is applicable law and United Kingdom Accounting 
Standards (United Kingdom Generally Accepted Accounting 
Practice). 

This report is made solely to the Company’s members, as a body, in 
accordance with Chapter 3 of Part 16 of the Companies Act 2006. 
Our audit work has been undertaken so that we might state to the 
Company’s members those matters we are required to state to 
them in an auditor’s report and for no other purpose. To the fullest 
extent permitted by law, we do not accept or assume responsibility 
to anyone other than the Company and the Company’s members 
as a body, for our audit work, for this report, or for the opinions we 
have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, 
the directors are responsible for the preparation of the Parent 
Company Financial Statements and for being satisﬁ ed that they 
give a true and fair view. Our responsibility is to audit and express 
an opinion on the Parent Company 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.

Scope of the audit of the ﬁ nancial statements
An audit involves obtaining evidence about the amounts and 
disclosures in the ﬁ nancial statements sufﬁ cient to give reasonable 
assurance that the ﬁ nancial 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 Parent Company’s circumstances and have been consistently 
applied and adequately disclosed; the reasonableness of signiﬁ cant 
accounting estimates made by the directors; and the overall 
presentation of the ﬁ nancial statements.

Opinion on ﬁ nancial statements
In our opinion the Parent Company Financial Statements:

– 

– 

– 

 give a true and fair view of the state of the Company’s affairs 
as at 31 December 2010;

 have been properly prepared in accordance with United 
Kingdom Generally Accepted Accounting Practice; and

 have been prepared in accordance with the requirements of 
the Companies Act 2006.

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; and

 the information given in the Directors’ Report for the ﬁ nancial 
year for which the Parent Company Financial Statements are 
prepared is consistent with the Parent Company Financial 
Statements. 

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters 
where the Companies Act 2006 requires us to report to you if, in 
our opinion:

– 

– 

– 

– 

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

 the Parent 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 speciﬁ ed by law 
are not made; or

 we have not received all the information and explanations we 
require for our audit.

Other matter
We have reported separately on the Group Financial Statements 
of Tullett Prebon plc for the year ended 31 December 2010.

Manbhinder Rana (Senior Statutory Auditor)
for and on behalf of

Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom
8 March 2011

85

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Tullett Prebon plc 
Annual Report 2010

Company Balance Sheet

as at 31 December 2010

Fixed assets 
Investment in subsidiary undertakings 

Current assets 
Receivables due within one year 
Cash and cash equivalents 

Creditors: amounts falling due within one year 
Net current assets 
Total assets less current liabilities 

Creditors: amounts falling due after one year 
Net assets 

Capital and reserves 
Called-up share capital 
Share premium 
Equity reserve 
Own shares 
Proﬁ t and loss account 
Shareholders’ funds 

Notes 

2010 
£m 

2009
£m

4 

5 

6 

6 

7 
8 
8 
8 
8 

697.7 

1,188.1

3.2 
21.1 
24.3 

(0.8) 
23.5 
721.2 

– 
721.2 

53.8 
9.9 
5.3 
(0.1) 
652.3 
721.2 

–
17.0
17.0

(8.0)
9.0
1,197.1

(476.2)
720.9

53.8
9.9
–
(0.2)
657.4
720.9

The ﬁ nancial statements of Tullett Prebon plc (registered number 5807599) were approved by the Board of directors and authorised for 
issue on 8 March 2011 and are signed on its behalf by:

Terry Smith
Chief Executive

86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Financial Statements

for the year ended 31 December 2010

Tullett Prebon plc 
Annual Report 2010

1. Basis of preparation
(a) Basis of accounting
The separate ﬁ nancial statements of the Company are presented as required by the Companies Act. They have been prepared under the 
historical cost convention and in accordance with applicable United Kingdom law and United Kingdom Generally Accepted Accounting 
Practice.

(b) Cash ﬂ ow statement
The results, assets and liabilities of the Company are included in the consolidated ﬁ nancial statements of Tullett Prebon plc.
Consequently, the Company has taken advantage of the exemption available from preparing a cash ﬂ ow statement under the terms
of FRS 1 (revised) ‘Cash ﬂ ow statements’.

(c) Financial instruments
As disclosures equivalent to that required under FRS 29 ‘Financial Instruments: Disclosures’ are given in the publicly available consolidated 
ﬁ nancial statements of Tullett Prebon plc the Company is exempt from the disclosures required by FRS 29 in its own accounts.

2. Signiﬁ cant accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year.

(a) Investments
Fixed asset investments in subsidiary undertakings are shown at cost less provision for impairment.

At acquisition, the cost of investment in a subsidiary is measured at the fair value of the consideration payable, except for subsidiaries 
acquired through the issue of shares qualifying for merger relief where cost is measured by reference to the nominal value of the shares 
issued. 

(b) Taxation
Current taxation is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or 
substantively enacted by the balance sheet date.

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where 
transactions or events that result in an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred at the 
balance sheet date. Timing differences are differences between the Company’s taxable proﬁ ts and its results as stated in the ﬁ nancial 
statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are 
recognised in the ﬁ nancial statements.

Deferred tax assets are recognised to the extent that it is regarded as more likely than not they will be recovered. Deferred tax assets and 
liabilities are not discounted.

(c) Share-based payments
The Company has applied the requirements of FRS 20 (IFRS 2) ‘Share-based payment’ and UITF Abstract 44 (IFRIC Interpretation 11) ‘FRS 20 
(IFRS 2) – Group and Treasury Share Transactions’.

The Company has share-based payment arrangements involving employees of its subsidiaries. The cost of these arrangements is 
measured by reference to the fair value of equity instruments on the date they are granted. Cost is recognised in ‘investment in subsidiary 
undertakings’ and credited to the ‘proﬁ t and loss account’ reserves on a straight-line basis over the vesting period. Where the cost is 
subsequently recharged to the subsidiary, it is recognised as a reduction in ‘investment in subsidiary undertakings’. 

(d) Financial assets and ﬁ nancial liabilities
The Company has adopted FRS 25 ‘Financial Instruments: Presentation’, FRS 26 ‘Financial Instruments: Recognition and Measurement’. 

Financial assets are classiﬁ ed on initial recognition as ‘loans and receivables’. Financial liabilities are classiﬁ ed on initial recognition as ‘other 
ﬁ nancial liabilities’.

Loans and receivables
Loans and receivables are non-derivative ﬁ nancial instruments that have ﬁ xed or determinable payments that are not listed in an active 
market. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income 
is recognised using the effective interest rate, except for short term receivables when the recognition of interest would be immaterial.

Other ﬁ nancial liabilities 
Other ﬁ nancial liabilities, including borrowings, are initially measured at fair value, net of transaction costs, and are subsequently 
measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

87

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Tullett Prebon plc 
Annual Report 2010

Notes to the Financial Statements continued

for the year ended 31 December 2010

2. Signiﬁ cant accounting policies continued
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective 
evidence that, as a result of one or more events that occurred after the initial recognition of the ﬁ nancial asset, the estimated future cash 
ﬂ ows of the investment have been impacted. Impairment is recognised in the income statement.

(e) Employee Share Ownership Plans
The assets, liabilities and results of the Tullett Prebon plc Employee Beneﬁ t Trust 2007 are included in accordance with UITF Abstract 38 
‘Accounting for ESOP trusts’.

3. Proﬁ t for the year
As permitted in section 408 of the Companies Act 2006 the Company has elected not to present its own proﬁ t and loss account for the 
period. Tullett Prebon plc reported a proﬁ t for the ﬁ nancial period ended 31 December 2010 of £28.4m (2009: proﬁ t £17.8m).

The auditor’s remuneration for audit services to the Company was £0.3m (2009: £0.3m).

4. Investments in subsidiary undertakings

Cost 
At 1 January 
Capital reduction arising on share-based awards 
Recharges relating to share-based awards 
Repurchase of shares by subsidiary undertaking 
Increase in deferred consideration payable 
At 31 December 

2010 
£m 

2009
£m

1,188.1 
(0.9) 
(1.6) 
(488.2) 
0.3 
697.7 

1,188.7
(0.4)
(0.2)
–
–
1,188.1

On 21 June 2010, as part of a reorganisation of the Group’s legal entity structure, the Company’s subsidiary, Tullett Prebon Group Holdings 
plc repurchased at cost, 87,557,603 of its own ordinary shares of 25p each for a total consideration of £488.2m. At that time the Company 
was indebted to Tullett Prebon Group Holdings plc in the amount of £488.2m and the parties agreed that the consideration for the 
repurchase would be satisﬁ ed by the extinguishment of that liability.

5. Receivables

Amounts falling due within one year: 
Amounts due from Group undertakings 

2010 
£m 

3.2 

2009
£m

–

88

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6. Creditors

Amounts falling due within one year: 
Deferred consideration payable 
Accruals and deferred income 
Amounts owed to Group undertakings 

Amounts falling due after one year: 
Deferred consideration payable 
Amounts owed to Group undertakings 

Tullett Prebon plc 
Annual Report 2010

2010 
£m 

0.8 
– 
– 
0.8 

– 
– 
– 

2009
£m

4.6
0.1
3.3
8.0

2.2
474.0
476.2

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The Company has no borrowings as at 31 December 2010 as a result of the reorganisation of the Group’s legal entity structure discussed 
above. 

As at 31 December 2009, the Company’s borrowings were as follows:

– 

 a £172.5m loan due to its subsidiary, Tullett Prebon Group Holdings plc. The effective interest rate applicable on this loan was 5.3%;

– 

 a £261.4m loan due to its subsidiary, TP Holdings Limited. The effective interest rate applicable on this loan was 5.0%; and

– 

 a £40.1m loan due to its subsidiary, Tullett Prebon Group Limited. The effective interest rate applicable on this loan was 4.0%. 

As part of the Group reorganisation, TP Holdings Limited and Tullett Prebon Group Limited transferred their receivables due from the 
Company, to Tullett Prebon Group Holdings plc. As at 21 June 2010, the Company’s debt to Tullett Prebon Group Holdings plc amounted 
to £488.2m. This liability was extinguished as part of the share repurchase discussed in Note 4.

7. Called-up share capital

Allotted, issued and fully paid 
Ordinary shares of 25p 

Allotted, issued and fully paid 
Ordinary shares of 25p 

2010 
No. 

2009
No.

 215,313,584 

  215,313,584

2010 
£m 

53.8 

2009
£m

53.8

A resolution was passed at the 2010 Annual General Meeting adopting new Articles of Association, incorporating amongst other things, 
the removal of the authorised share capital article to bring it in line with the Companies Act 2006.

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Tullett Prebon plc 
Annual Report 2010

Notes to the Financial Statements continued

for the year ended 31 December 2010

8. Reconciliation of shareholders’ funds

Balance at 1 January 2010 
Proﬁ t for the year 
Dividends paid 
Debit arising on share-based awards 
Sale of own shares 
Equity component of deferred consideration 
Shares used to meet share award exercises 
Balance at 31 December 2010 

Balance at 1 January 2009 
Proﬁ t for the year 
Dividends paid 
Debit arising on share-based awards 
Balance at 31 December 2009 

Called-up 
share 
capital 
£m 
53.8 
– 
– 
– 
– 
– 
– 
53.8 

53.8 
– 
– 
– 
53.8 

Share 
premium 
account 
£m 
9.9 
– 
– 
– 
– 
– 
– 
9.9 

9.9 
– 
– 
– 
9.9 

Equity 
reserve 
£m 
– 
– 
– 
– 
– 
5.3 
– 
5.3 

– 
– 
– 
– 
– 

Own 
shares 
£m 
(0.2) 
– 
– 
– 
– 
– 
0.1 
(0.1) 

(0.2) 
– 
– 
– 
(0.2) 

Proﬁ t 
and loss 
account 
£m 
657.4 
28.4 
(32.7) 
(0.9) 
0.2 
– 
(0.1) 
652.3 

667.8 
17.8 
(27.8) 
(0.4) 
657.4 

Total 
shareholders’ 
funds 
£m
720.9
28.4
(32.7)
(0.9)
0.2
5.3
–
721.2

731.3
17.8
(27.8)
(0.4)
720.9

At 31 December 2010 the Company’s distributable reserves amounted to £652.3m (2009: £657.4m). 

Equity reserve
The reserve of £5.3m represents the fair value of 1,420,212 ordinary shares issuable on 31 December 2011, following Primex Energy 
Brokers Limited’s completion of acquisition related performance conditions.

90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholder 
Information

In this section:

92  Shareholder Information

Tullett Prebon plc 
Annual Report 2010

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Tullett Prebon plc 
Annual Report 2010

Shareholder Information

Financial calendar for 2011
8 March
Preliminary announcement

20 April
Ex-dividend Date

26 April 
Dividend Record Date

12 May (2.30pm)
Annual General Meeting

19 May
Dividend payment date

Registered Ofﬁ ce
Tullett Prebon plc
Tower 42 Level 37
25 Old Broad Street
London EC2N 1HQ
United Kingdom
Tel: +44 (0)20 7200 7000
Fax: +44 (0)20 7200 7176

Website
www.tullettprebon.com 

Registrar
Capita Registrars 
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Tel: 0871 664 0300* 
From overseas: +44 (0)20 8639 3399

*Calls cost 10p per minute 
plus network extras.

To access and maintain 
your shareholding online: 
www.capitashareportal.com

92

 Tullett Prebon plc
Tower 42 Level 37
25 Old Broad Street
London EC2N 1HQ
United Kingdom

www.tullettprebon.com