TP ICAP Group Annual Report 2011

FY2011 Annual Report · TP ICAP Group
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Annual Report
2011

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 
electronic platforms, which complement and support 
the voice broking capability.

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 Risk Management Services business, 
which provides clients with post-trade, multi-product 
matching services, associated market data and 
independent valuation services.

Tullett Prebon electronic platforms:

Americas

Trading
• tpAGENCY

• TPCREDITDEAL

• tpENERGYTRADE

• tpREPO

• tpTRADEBLADE

Europe

Trading
• tpCREDITDEAL

• tpENERGY

• tpENERGYTRADE

• tpREPO

• tpSWAPDEAL

• tpTRADEBLADE

Asia Paciﬁ c

Trading
• tpENERGYTRADE

• tpREPO

• tpTRADEBLADE

Algorithmic Matching
• tpMATCH

• tpMATCH NDF

Auction/Volume Matching
• tpQUICKDEAL

Auction/Volume Matching
• tpQUICKDEAL

Auction/Volume Matching
• tpQUICKDEAL

www

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

Contents
02  Chairman’s Statement
Business Review
05  Objectives, Strategy, Business Model and Risk Proﬁ le
06  Overview 
08  Operating Review
10  Restructuring Costs
10  Litigation
11  Financial Review
15  OTC Market Regulation
15  Risk Management
20  Corporate Social Responsibility 
Governance
27  Board of Directors
28  Directors’ Report
30  Corporate Governance Report
36  Report on Directors’ Remuneration
43  Statement of Directors’ Responsibilities

Financial highlights

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

Financial Statements
Group
45 
46  Consolidated Income Statement
47  Consolidated Statement of Comprehensive Income
48  Consolidated Balance Sheet
49  Consolidated Statement of Changes in Equity
50  Consolidated Cash Flow Statement
51  Notes to the Consolidated Financial Statements
Company
89  Independent Auditor’s Report to the Members of Tullett Prebon plc
90  Company Balance Sheet
91  Notes to the Financial Statements
Shareholder Information
96  Shareholder Information

Revenue

Underlying Operating proﬁ t

£910.2m

2010: £908.5m

£148.4m

2010: £160.1m

Underlying Operating margin

Underlying Proﬁ t before tax

16.3%

2010: 17.6%

Basic Underlying EPS

46.1p

2010: 50.1p

£136.1m

2010: £149.0m

Dividend

16.5p

2010: 15.75p

Underlying ﬁ gures are stated before the net charge in each year related to 
the major legal actions between the Company and BGC, the restructuring 
charge in 2011, tax credits related to those items, and for 2010 the tax 
credit on capital related items. A table showing Underlying and Reported 
ﬁ gures for each year is included in the Financial Review.

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Tullett Prebon plc  Annual Report 2011

01

 
 
 
 
 
 
Chairman’s 
Statement

The Company has taken a realistic and open approach to the 
challenges arising since the start of the world’s ﬁ nancial and 
economic problems in 2008. It has maintained its objective of 
maximising returns to shareholders over the medium to long term, 
at an acceptable level of risk. Its strategy is to focus on providing 
valuable services as an intermediary in wholesale over-the-counter 
markets and it has continued to invest and develop where it can 
achieve good returns. It is well run and conservatively ﬁ nanced. 

Results
The results are explained in detail in the Business Review. The 
ﬁ nancial results for 2011 demonstrate the strength of the business 
in challenging market and competitive conditions.

Revenue for the year of £910.2m was in line with that reported for 
2010. Revenue was 2% higher using constant exchange rates, and 
adjusting for Convenção which was acquired in August 2011, and 
for the satellite ofﬁ ces in the Americas which were closed or exited 
during the second half of 2010. As market activity in 2011 was 
lower overall than in 2010, this was a good performance reﬂ ecting 
the beneﬁ t of continued investment.

Underlying operating proﬁ t of £148.4m was 7% lower than for 
2010 with the underlying operating margin at 16.3% compared 
to 17.6% for 2010. The reduction in operating margin is primarily 
driven by the increase in broker compensation costs as a 
percentage of broking revenue to 59.6% due to the increased costs 
of employment, reﬂ ecting the highly competitive market for 
brokers and the signiﬁ cant investment that has been made in 
rebuilding the business in the Americas.

Financing costs were slightly higher in 2011 than in 2010, and the 
underlying proﬁ t before tax of £136.1m compares with £149.0m 
in 2010. With a reduction in the effective tax rate on underlying 
proﬁ t before tax to 27.1%, underlying basic earnings per share 
were 8% lower than last year at 46.1p.

The business has again generated a strong cash ﬂ ow. Operating 
cash ﬂ ow for the year was £136.8m, representing 92% of 
underlying operating proﬁ t, and at the end of the year net funds 
amounted to £107.1m, an increase in the year of £39.3m.

Exceptional items
In order to give clarity to the operating performance of the 
business, the results are presented showing charges relating to 
exceptional items separately from the underlying results. There are 
two areas in which the Company has incurred exceptional items 
during the year.

The ﬁ rst exceptional item with a net charge of £6.6m relates to 
major legal actions that the Company is engaged in with BGC, 
one of the business’s competitors. The legal actions that the 
Company has brought against BGC relate to the raids by BGC on 
the Company’s operations in London and North America in 2009. 
The Company has a duty to shareholders to seek to enforce its 
contractual rights, and although legal action can be protracted 
and expensive it is appropriate to take action in order to do so. 
The action in the UK has concluded satisfactorily and the actions 
in North America are continuing. The charge also includes the costs 
of defending, and provision for the estimated cost of resolution of, 
a claim brought by BGC Market Data against the Company.

02

Tullett Prebon plc  Annual Report 2011

The second exceptional item of £11.5m relates to the restructuring 
actions that the Company has taken, in the light of the market and 
competitive conditions, to reduce costs and to maintain ﬂ exibility 
in the cost base. Further actions will be taken in the ﬁ rst half of 
2012. The Company has a good record on cost management, and 
on addressing the cost base to support future proﬁ tability when 
circumstances require it.

Dividends and shareholder returns
The Company’s overall objective is to maximise returns to 
shareholders over the medium to long term through managing and 
developing the business. 

After a good performance in 2010, total shareholder return for 
2011 was 27% negative which is in line with the return from the 
General Financials sector index, but worse than the return from the 
FTSE 250 index of 10% negative. This reﬂ ected an increased level of 
uncertainty around the prospects for ﬁ nancial services businesses 
in the current environment. We will continue to focus on the 
fundamentals of the business rather than the short term share 
price, although the Board recognises that the earnings multiple 
currently applied to the Company remains relatively low. 

The Board recognises that dividends are an important element of 
shareholder return and is recommending a ﬁ nal dividend of 11.25p 
per share, making the total dividend for the year 16.5p per share, an 
increase of 5% on the 15.75p per share paid for 2010. The ﬁ nal 
dividend will be payable on 17 May 2012 to shareholders on the 
register on 27 April 2012.

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

Over the last few years investment has been made to build and 
develop the business and to respond to the various regulatory 
changes affecting our markets. As a result the level of capital 
employed in the business has increased, although this has been 
well managed and amounts to only £40m since 2007. We will 
continue to invest 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. These 
investments will focus on those areas of business in which we have 
a strong advantage and the opportunity to make good returns. 
They will be assessed on the basis of cash generation and cash 
return on investment.

The return on capital employed in 2011 was 37%.

Business model and risk
The Company’s business model is based on generating a return 
from providing a facilitation service to clients, enabling them to 
trade efﬁ ciently and effectively. This service can be provided, and 
good returns can be generated, without actively taking credit and 
market risk.

The business acts only as an intermediary in the ﬁ nancial markets, 
which means that the risk inherent in its activities is low. We are 
willing to accept an unavoidable limited amount of risk as a 
consequence of our broking activities, but the business does not 
take any trading risk and does not hold principal trading positions. 
The majority of broking activities are on a Name Give-Up basis 
where the business is not at any time a counterparty to the trade. 
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 through settlement agents 
who deliver the instruments against payment. The business does 
not retain any contingent risks.

The Board and the Audit Committee have again thoroughly 
analysed the risks faced by the business and the controls in 
place to mitigate and manage them. This work is supported by a 
programme of Internal Audit activities. Our risk management 

governance, principles and policies, and risk proﬁ le, are discussed 
in detail in the Business Review. An area of focus this year has been 
the heightened exposure to potential counterparty credit risk, 
particularly due to events in the Eurozone, and we have reviewed 
and monitored the processes and procedures to mitigate risk in this 
area. We have also reviewed the strategic and business risks arising 
both from regulatory changes that directly impact the business, 
and the indirect impact that regulatory developments and 
deteriorating market conditions could have on our customers.

Regulatory developments
Progress has been made 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.

We agree with the objectives and support the direction of these 
reforms. We believe that their introduction will be positive for our 
business as the proposals formalise the role of the intermediary in 
the OTC markets.

Financing
The Company is conservatively ﬁ nanced. The Company’s total gross 
cash balances at the end of the year were £373m, compared to the 
£270m of gross debt outstanding. The Company’s bank facilities at 
the end of the year comprised an amortising term loan of £120m 
and a £115m committed revolving credit facility that remained 
undrawn throughout the year. These facilities mature in February 
2014. The Company’s only other signiﬁ cant borrowing is through a 
£141m bond that matures in 2016. The Company has an attractive 
debt maturity proﬁ le and signiﬁ cant ﬁ nancial ﬂ exibility. 

The beneﬁ t of the Company’s conservative approach to the 
ﬁ nancing and investment strategy of its two closed deﬁ ned beneﬁ t 
pension schemes in the UK has been demonstrated by an increase 
in the accounting surplus in the schemes since last year end, 
despite the reduction in the discount rate used in the valuation of 
the liabilities. The triennial actuarial valuations of the schemes 
which were completed in early 2011 show signiﬁ cant funding 
surpluses, and the Company is now only making contributions to 
meet the expenses of the schemes.

Remuneration
The Remuneration Report is set out on pages 38 to 43. The 
Remuneration Committee is chaired by my colleague 
Rupert Robson.

The inter-dealer broking sector has high levels of remuneration 
and the retention and recruitment of broking staff has remained 
subject to strong competitive pressure. In North America it has 
also been necessary to rebuild the business through recruitment.

The FSA’s Remuneration Code came into effect for the Company 
on 1 January 2011. 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. As a listed company with 
an existing governance structure exercising strong oversight of 
remuneration within the business, no major changes were required 
to our remuneration policies or governance arrangements in order 
for us to comply with the Code. 

The management has to overcome challenges in this area because 
most of our major competitors are not EU headquartered and are 
therefore not subject to the requirements of the Code.

The Remuneration Committee approves the remuneration for 
the senior management of the business and determines the 
remuneration for the executive directors. The arrangements 
relating to executive directors are on a basis on which the main 
shareholders have been consulted over a number of years. In 
exercising its responsibility the Remuneration Committee works 
to the principle of being sensitive to returns to shareholders in 
reviewing and determining levels of remuneration.

Board composition and governance
The Company beneﬁ ts from having a strong and experienced 
Board of directors who work well together. Following review of the 
composition of the Board, the Nominations Committee speciﬁ ed 
the qualities it sought for two additional non-executive directors 
to reinforce the Board, and as part of its succession planning.

Angela Knight and Stephen Pull joined the Board as independent 
non-executive directors with effect from 1 September 2011. As 
planned, Angela Knight took over as Senior Independent Director 
in February 2012. I am delighted that we have been able to attract 
non-executive directors of their quality and experience to 
the Company.

Richard Kilsby retired from the Board at the end of 2011 having 
served as a non-executive director of the Company and 
Chairman of the Audit Committee since the Company became 
an independent PLC in 2006. On behalf of the Board, I would 
like to thank Richard for his contribution. David Clark, who has 
considerable knowledge of the activities of the sector, agreed to 
take over the role of Chairman of the Audit Committee.

We are currently in the process of recruiting a further non-
executive director with the expertise to chair the Audit Committee. 
David Clark has kindly agreed to the Board’s request to defer his 
planned retirement until we have completed that recruitment and 
an effective handover.

The Company is subject to the UK Corporate Governance Code, 
which includes the provision that all directors of FTSE 350 
companies should be subject to annual re-election by shareholders. 
All the directors are therefore standing for election or re-election at 
the AGM this year, and we are also seeking shareholder approval to 
amend the Articles of Association to include the requirement that 
directors seek annual re-election.

Outlook
Market and competitive conditions are expected to continue to 
be challenging. The world’s ﬁ nancial markets remain unsettled, 
however, and it seems reasonable to expect that there will be 
some periods of market volatility and heightened activity during 
2012, as well as periods of more subdued activity.

The business has made a reasonable start to the year. Revenue 
in the ﬁ rst two months of 2012, at constant exchange rates and 
excluding the recent acquisitions of Convenção and Chapdelaine, 
is 1% lower than in the same period last year. Actions have been 
taken to reduce costs and to maintain ﬂ exibility in the cost base, 
although the business does face increased costs relating to 
electronic platform developments and impending 
regulatory changes. 

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 agree with the objectives and support 
the direction of the reforms designed to strengthen the ﬁ nancial 
system and to improve the operation of the ﬁ nancial markets. 
We consider that the introduction of these reforms will be positive 
for our business as the proposals formalise the role of the 
intermediary in the OTC markets. 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 various new OTC 
market regulations that will be introduced.

Keith Hamill
Chairman
6 March 2012

Tullett Prebon plc  Annual Report 2011

03

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Business Review

In this section:

05  Objectives, Strategy, Business Model and Risk Proﬁ le
06  Overview
08  Operating Review
10  Restructuring Costs
10  Litigation
11  Financial Review
15  OTC Market Regulation
15  Risk Management
20  Corporate Social Responsibility 

04

Tullett Prebon plc  Annual Report 2011

 
OBJECTIVES, STRATEGY, BUSINESS MODEL AND RISK PROFILE 

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

Strategy
The strategy to achieve the Company’s 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 and ensure compliance with anticipated 
regulatory reforms;

–  development of the Company’s information sales business;

–  development of value added post-trade services;

–  focus on maintaining contribution rates; and

–  focus on maintaining an appropriately sized support cost base.

Business model and risk proﬁ le
The Company’s business model is based on generating a return 
from providing a facilitation service to clients, enabling them to 
trade efﬁ ciently and effectively. This service can be provided, and 
good returns can be generated, without actively taking credit and 
market risk. 

The Board has set a low risk appetite, in accordance with which the 
Group does not actively seek risk in order to generate a return but is 
willing to accept a limited amount of risk as a consequence of its 
broking activities, principally counterparty credit risk and 
operational risk. This is reﬂ ected in the business model adopted by 
the Group whereby it acts only as an intermediary in the ﬁ nancial 
markets. The Board has explicitly prohibited any active taking of 
trading risk and the business does not trade for its own account. 
However, whilst the Company does not actively seek to assume 
risk as part of its business model, the Company is exposed to 
certain risks as a consequence of its broking activity, primarily 
to operational risk but also to a limited amount of credit and 
market risk.

The business of the Group is conducted through three distinct 
broking models: the Name Give-Up model (also known as the 
Name Passing model); the Matched Principal model; and the 
Executing Broker model.

Around three-quarters of the revenue is derived from Name 
Give-Up activities, where the business is not a counterparty to the 
trade, and where its exposure to a client is limited to outstanding 
invoices for commission. 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.

The balance of the revenue is mainly derived from Matched 
Principal activities, where the Group is the counterparty to both 
sides of a matching trade and consequently bears counterparty 
credit risk during the period between execution and settlement of 
the trade. Once a Matched Principal transaction has settled (usually 
1-3 days after trade date), there is no ongoing risk for the business. 
To mitigate settlement risk the business undertakes transactions 
on a strict Delivery versus Payment basis. In the event that a client 
defaults prior to settlement 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 the Group’s 
exposure becomes a market risk. This risk is mitigated by the use of 
central counterparty services and other default risk transfer 
agreements, where appropriate, and by taking swift action to close 
out any position that arises as a result of a client default. In addition 
to credit risk, the Group’s Matched Principal activity also gives rise 
to limited market risk as a result of the infrequent residual balances 
which result from the Group’s inability to match client orders 
precisely.

The Group also brokers certain transactions as an Executing Broker, 
under an International Uniform Brokerage Execution Give-up 
agreement (or equivalent), whereby the Group executes 
transactions on certain regulated exchanges as per client orders, 
and then ‘gives-up’ the trade to the relevant client (or its clearing 
member). The Group is exposed to short term pre-settlement risk 
during the period between the execution of the trade and the 
client claiming the trade. This exposure is minimal, as under the 
terms of the ‘give-up’ agreements the Group has in place with its 
clients, trades must be claimed by the end of trade day. Once the 
trade has been claimed, the Group’s only exposure to the client is 
for the invoiced receivables.

The Group’s broking activity gives rise to various operational risks. 
These include the risk of business disruption, employee error and 
the failure of a business process or IT system, as well as the risk of 
litigation being brought against the Group. 

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

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Tullett Prebon plc  Annual Report 2011

05

 
 
 
 
Business Review
continued

OVERVIEW

The ﬁ nancial results for 2011 demonstrate the strength of the 
business in challenging market and competitive conditions, and the 
value of the service the business provides to participants in the 
world’s OTC ﬁ nancial markets.

The business beneﬁ ts from the increased volumes in the ﬁ nancial 
markets that occur during periods of market turbulence, but levels 
of activity tend to reduce sharply when volatility is overshadowed 
by structural uncertainty. Although the world’s ﬁ nancial markets 
remained unsettled throughout the year, yield curves in the world’s 
major developed economies ﬂ attened further, dampening activity 
in certain asset classes. Whilst there were periods of signiﬁ cant 
market volatility which resulted in heightened levels of activity, 
most notably in the ﬁ rst two weeks of August and the second two 
weeks of November, there were also some relatively prolonged 
periods of more subdued activity. 

Revenue in 2011 was in line with that reported for 2010. Using 
constant exchange rates, and adjusting for Convenção which 
was acquired in August 2011, and for the satellite ofﬁ ces in the 
Americas which were closed or exited during the second half of 
2010, revenue was 2% higher. As market activity in 2011 was lower 
overall than in 2010, which is reﬂ ected in a 3% reduction in average 
revenue per broker, the increase in revenue reﬂ ects the beneﬁ t of 
continued investment in the business.

The business in Europe continued to perform strongly, beneﬁ ting 
from the more favourable market conditions in the second half of 
the year, and from the investments made to strengthen market 
positions in Credit and Energy in London, and in broadening the 
base of the business in Continental Europe. The quality of the 
business in Europe and the value of the service it provides to clients 
were recognised by a number of awards during the year, including 
best broker for Forward FX and currency options in the FX Week 
awards, top broker in currencies in the Risk annual inter-dealer 
rankings, and top broker for cash bonds in the Credit inter-dealer 
broker rankings.

Signiﬁ cant progress has been made in the development of the 
business in the Americas region. We have re-established our 
presence in those product areas affected by the raid on the 
business in 2009, and with the twenty-six strong credit broking 
team who joined the business in New York in early January, 
headcount on the affected desks is largely back to the levels before 
the defections. New senior management for the Americas region 
started in June, increasing our regional management capability as 
we entered a phase of further investment in the region. The 
acquisition of Convenção, an inter-dealer broker based in São Paulo, 
Brazil, completed on 9 August 2011. This business provides the 
base for further expansion in both Brazil and other countries in 
Latin America. The acquisition of Chapdelaine & Co., a leading 
municipal bonds broker based in New York, completed in early 
January 2012.

The business in Asia has performed well despite the reduction in 
the level of market activity in Tokyo since the earthquake in March, 
beneﬁ ting from the investment in Hong Kong to support onshore 
and offshore activity in the ﬁ nancial markets for instruments 
denominated in Renminbi.

We have continued to develop our electronic broking capabilities, 
and we are developing platforms to provide clients with the 
ﬂ exibility to transact either entirely electronically or via the 
business’s comprehensive voice execution broker network. This 
hybrid model is consistent with the nature and operation of the 
majority of the OTC product markets which depend upon the 
intervention and support of voice brokers for their liquidity and 
effective operation.

In the last quarter of the year we launched tpSWAPDEAL, our hybrid 
interest rate swap trading platform. The platform has streaming 
price support in Euro denominated interest rate swaps from our 
main liquidity providing banks and has been installed on the 
desktops of the interest rate swap client base in Europe. Trades 
have been successfully executed through the platform, although 
the inter-dealer market for interest rate swaps continues to be 
executed predominantly through voice brokers. tpSWAPDEAL runs 
on exchange-grade technology and can be deployed quickly for 
other currencies and derivative products. In addition to standard 
electronic platform functionality, tpSWAPDEAL has a number of 
features designed to replicate and enhance the advantages of the 
current voice market. We intend to launch similar platforms for a 
number of other products, which are designed to be effective 
within both the current trading landscape and under all currently 
anticipated regional regulatory environments.

We are well positioned to respond to and beneﬁ t from changes in 
the way in which OTC product markets operate as a result of the 
regulatory reforms of these markets in both the USA and Europe. 
Our view of the current status of the regulatory developments is 
set out below. We continue to believe that the direction of the 
regulatory reforms reinforces the role of the intermediary in the 
OTC markets, and that the introduction of electronic platforms 
reﬂ ects an evolution of the facilitation service that the business 
provides, rather than fundamentally changing the way in which 
OTC markets operate.

The Information Sales business has continued to perform strongly, 
beneﬁ ting from the investment that has been made to increase 
the breadth of the data the business offers to customers, and the 
increasing customer awareness of the value of independent pricing 
data, most notably from the risk management and compliance 
functions of banks and other ﬁ nancial institutions who are driving 
this demand in response to increased regulatory oversight. The 
business was named Best Data Provider (Broker) at the Inside 
Market Data Awards in May, a clear endorsement of our position as 
the leading provider of OTC price information and data to market 
participants. In the post-trade Risk Management Services business, 
the tpMATCH platform, which assists clients in the management of 
interest rate risk, has been extended to cover an increased number 
of currencies, and towards the end of the year the business 
launched a platform to assist clients in their management of 
non-deliverable forwards date mismatches. 

06

Tullett Prebon plc  Annual Report 2011

Revenue from products supported by electronic platforms, 
together with Information Sales and Risk Management Services 
revenue, has increased by 14% to £171m, accounting for nearly 
one-ﬁ fth of total revenue in 2011. The proportion of that revenue 
that is derived from voice-only execution has reduced to one-third, 
compared to 39% in 2010 and 55% in 2009, reﬂ ecting the increased 
proportion derived from trades conducted through the platforms.

In order to give clarity to the operating performance of the 
business, the results are presented showing charges relating to 
exceptional items separately from the underlying results. There 
are two areas in which the Company has incurred exceptional 
items during the year: the major legal actions that the Company 
is engaged in, and the restructuring actions that the Company 
has taken to reduce costs and to maintain ﬂ exibility in the cost 
base. The charges related to these items are discussed below.

Our key ﬁ nancial and performance indicators for 2011 compared 
with those for 2010 are summarised in the table below.

Underlying operating proﬁ t of £148.4m is 7% lower than for 2010 
with the underlying operating margin at 16.3% compared to 17.6% 
for 2010. The reduction in underlying operating margin is primarily 
driven by the increase in broker compensation costs as a 
percentage of broking revenue.

The 1.1% points increase in broker compensation costs as a 
percentage of broking revenue to 59.6% is due to the increased 
costs of employment in the Americas and to a lesser extent in 
Europe, reﬂ ecting the highly competitive market for brokers and 
the signiﬁ cant investment that has been made in rebuilding the 
business in the Americas.

The year end broker headcount of 1,667 includes the 43 brokers 
who joined the business through the acquisition of Convenção 
and the 26 credit brokers who joined the business in New York in 
January 2011. The business also made a number of individual 
broker hires during the year, but this was offset by the impact on 
broker headcount of the actions taken prior to the end of the year 
to reduce costs and increase ﬂ exibility, as discussed below.

The increase in broking support headcount reﬂ ects the 34 heads 
who joined the business through the acquisition of Convenção, 
and the increase in the second half of the year in the headcount 
supporting the development and administration of electronic 
platforms and related developments. 

Revenue 
Underlying Operating proﬁ t 
Underlying Operating margin 
Broker headcount (year end) 
Average broker headcount* 
Average revenue per broker* (£’000) 
Broker employment costs: broking revenue 
Broking support headcount (year end) 

*  Excluding Convenção and satellite ofﬁ ces.

2011 
£910.2m 
£148.4m 
16.3% 
1,667 
1,652 
524 
59.6% 
750 

2010 
£908.5m 
£160.1m 
17.6% 
1,601 
1,588 
540 

Change
+0%
-7%
-1.3% points
+4%
+4%
-3%
58.5%  +1.1% points
+10%

679 

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Tullett Prebon plc  Annual Report 2011

07

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Review
continued

OPERATING REVIEW

The tables below analyse revenue by product group and by 
region, and underlying operating proﬁ t by region, for 2011 
compared with 2010.

The 2% decline in revenue from Interest Rate Derivatives reﬂ ects 
revenue growth in emerging market interest rate derivatives and in 
interest rate options, offset by lower activity in the traditional 
major currency interest rate swaps markets, reﬂ ecting the low level 
of interest rates in the world’s major economies throughout the 
period.

In order to give a more meaningful analysis of revenue 
performance, the tables show the revenue from Convenção, which 
was acquired in August 2011, and from the satellite ofﬁ ces in the 
Americas, which were closed or exited during the second half of 
2010, separately. A signiﬁ cant proportion of the Group’s activity is 
conducted outside the UK and the reported revenue is therefore 
impacted by the movement in the foreign exchange rates used 
to translate the revenue from non-UK operations. The tables 
therefore show revenue for 2010 translated at the same exchange 
rates as those used for 2011, with growth rates calculated on the 
same basis. The revenue ﬁ gures as reported are shown in Note 3 
to the Consolidated Financial Statements.

The 4% growth in revenue in Fixed Income reﬂ ects a strong 
performance in credit products in both Europe and the Americas, 
partly offset by lower revenue in mortgage backed securities in the 
Americas. The credit business in the Americas has beneﬁ ted from 
the investments that have been made in rebuilding our presence in 
that area, including the twenty-six strong credit broking team who 
started with the business in early January 2011. The decline in 
revenue in mortgage backed securities reﬂ ects the reduction in the 
number of brokers and the lower level of market activity in those 
products. The traditional ‘ﬂ ow’ European government bond 
business beneﬁ ted from the periods of market volatility and 
heightened activity in the second half of the year.

The underlying operating proﬁ t and operating margin by region 
shown below are as reported.

At constant exchange rates, and adjusting for Convenção and the 
satellite ofﬁ ces, revenue was 2% higher in 2011 than 2010.

Revenue from Treasury Products was 2% higher, reﬂ ecting good 
growth in forward FX, particularly in the Americas which beneﬁ ted 
from higher levels of activity in emerging markets products, and in 
FX options in all three regions, which offset a decline in revenue 
from cash and deposits broking.

Revenue in Equities is derived predominantly from the broking of 
equity derivatives, and the decline in revenue reﬂ ects the lower 
level of market activity in those products.

Although oil markets were fairly steady in 2011, revenue in Energy 
increased, reﬂ ecting higher activity in natural gas, and the beneﬁ t 
from an increase in headcount in the Americas in gas and oil 
products, to complement the region’s traditional strength in power 
products.

More than half of the growth in revenue from Information Sales 
was generated from new customers, with the balance coming from 
existing customers subscribing for additional data. In Risk 
Management Services the revenue from the tpMATCH platform 
has increased signiﬁ cantly as clients continue to be attracted to the 
product ﬂ exibility and tailored service offered.

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

Convenção 
Satellite ofﬁ ces 
At constant exchange rates 
Exchange translation 
Reported 

08

Tullett Prebon plc  Annual Report 2011

2011 
£m 
254.3 
200.9 
256.3 
48.3 
106.0 
39.0 
904.8 
5.4 

910.2 

910.2 

2010
£m 
248.8 
205.3 
245.3 
51.4 
103.2 
32.9 
886.9 

18.4 
905.3 
3.2 
908.5 

Change
+2%
-2%
+4%
-6%
+3%
+19%
+2%

+1%

+0%

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2011 
£m 
548.3 
237.1 
119.4 
904.8 
5.4 

910.2 

910.2 

2010
£m 
538.2 
230.8 
117.9 
886.9 

18.4 
905.3 
3.2 
908.5 

Change
+2%
+3%
+1%
+2%

+1%

+0%

Asia Paciﬁ c
Revenue in Asia Paciﬁ c has increased by 1%. The average broker 
headcount in the region was 2% higher, largely offsetting the 
reduction in average revenue per broker, with the increase in 
revenue reﬂ ecting the growth of the Risk Management Services 
business, much of which is operated from Singapore. The rate of 
growth of revenue in Asia Paciﬁ c was held back by the performance 
in Japan where the level of market activity has not fully recovered 
since the earthquake in March. Excluding Japan, revenue in Asia 
was 8% higher than in 2010.

Much of the business in Asia Paciﬁ c is focused on Treasury Products 
and Interest Rate Derivatives, and the underlying revenue growth 
reﬂ ects higher levels of activity in both cash and non-deliverable 
Renminbi and Taiwanese dollar denominated products in these 
areas, as well as the continued development of the breadth of 
products brokered in the region.

Revenue by region 
Europe 
Americas 
Asia Paciﬁ c 

Convenção 
Satellite ofﬁ ces 
At constant exchange rates 
Exchange translation 
Reported 

Europe
Revenue in Europe in 2011 was 2% higher than in 2010. Average 
broker headcount in Europe was 4% higher than in the prior year 
which offset a 2% decline in average revenue per broker reﬂ ecting 
the generally more subdued market, particularly in the ﬁ rst half of 
the year. Revenue in Europe in the second half of the year beneﬁ ted 
from more favourable market conditions, and was 12% higher than 
in 2010.

Revenue in both Treasury Products and Interest Rate Derivatives 
was unchanged from the previous year, with growth in emerging 
markets products and the volatility products of FX options and 
interest rate options offsetting lower volumes in cash deposits, and 
in the traditional major currency interest rate swap markets.

In Fixed Income, revenue from government bonds, including repos 
and futures and options, was slightly higher than in the previous 
year after a strong second half. Revenue from corporate bonds and 
credit derivatives was up strongly, reﬂ ecting the investment in that 
area and favourable market conditions in the second half. The 
Equities business, which is the smallest product group in Europe, 
reported lower revenue for the year as the lower activity in equity 
derivatives in the ﬁ rst half more than offset the beneﬁ t of more 
favourable market conditions in the second half. The Energy 
business has continued to perform well beneﬁ ting from active 
markets, particularly in natural gas.

Americas
Revenue in the Americas in 2011 was 3% higher than in 2010. 
Average broker headcount in the region was 6% higher than in 2010 
which offset a decline in the average revenue per broker reﬂ ecting 
the reduction in market activity.

The business delivered good growth in revenue in Treasury 
Products, particularly in emerging markets currencies and FX 
options. Revenue in Interest Rate Derivatives was lower as the 
growth in emerging markets products was more than offset by the 
lower activity in the US dollar market. Within Fixed Income, 
revenue from corporate bonds was substantially higher reﬂ ecting 
the investment made in that area, but this was partly offset by 
lower activity and reductions in the number of brokers in mortgage 
backed securities. Within Energy, revenue from natural gas and oil 
products was higher.

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Tullett Prebon plc  Annual Report 2011

09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Review
continued

Underlying operating proﬁ t by region 
Europe 
Americas 
Asia Paciﬁ c 
Reported 

Underlying operating margin by region 
Europe 
Americas 
Asia Paciﬁ c 

Underlying operating proﬁ t in Europe was down 2% and with 
revenue in the region 2% higher, the underlying operating margin 
has reduced slightly to 22.7%. The main driver of the reduction in 
margin is the increase in broker employment costs as a percentage 
of revenue, and an increase in support costs reﬂ ecting the 
investments being made in new ofﬁ ces in Continental Europe and 
to support higher headcount in London.

Underlying operating proﬁ t in the Americas has more than halved 
and the underlying operating margin has fallen to 3.8%. The main 
driver of the reduction in proﬁ tability is the increase in broker 
employment costs as a percentage of revenue reﬂ ecting the 
competitive environment for brokers in the region and the costs of 
investment in rebuilding the scale of the business.

In Asia Paciﬁ c underlying operating proﬁ t has increased by 60%, 
with the underlying operating margin increasing to 12.3%. Broker 
employment costs as a percentage of broking revenue are lower 
than last year reﬂ ecting the beneﬁ t of the swift action taken to 
respond to the lower level of revenue in Tokyo. The increase in 
margin also reﬂ ects the tight control of other costs in the region 
and the beneﬁ t of the growth in Risk Management Services which 
has a higher operating margin than broking.

RESTRUCTURING COSTS

Market and competitive conditions are expected to continue to be 
challenging, and in the light of this and the increased costs faced by 
the business relating to electronic platform developments and 
other costs related to impending regulatory changes, a number of 
actions were taken prior to the end of the year to reduce costs and 
to maintain ﬂ exibility in the cost base.

The actions taken prior to the year end will result in a reduction in 
headcount of 80, primarily in the front ofﬁ ce, with a cost of £11.5m 
and an annual reduction in ﬁ xed costs of approximately the 
same amount.

Most of the actions taken involve the exit, or restructuring of 
contracts, of individual brokers in order to ensure that the business 
is well positioned to respond to potentially less favourable market 
conditions, by increasing the ﬂ exibility of front ofﬁ ce costs. As part 
of this exercise the equity derivatives desk in Tokyo has been 
closed, with that business in Asia now serviced from Hong Kong, 
and the small OTC Valuations business which was part of Risk 
Management Services has also been closed.

10

Tullett Prebon plc  Annual Report 2011

Change
-2%
-62%
+60%
-7%

2011 
£m 
124.6 
9.1 
14.7 
148.4 

2011 
22.7% 
3.8% 
12.3% 
16.3% 

2010
£m 
126.7 
24.2 
9.2 
160.1 

2010
23.6%
9.3%
8.1%
17.6%

Further actions are being taken in the ﬁ rst half of 2012 which are 
expected to reduce headcount by around another 80, covering a 
number of support staff including those affected as a result of the 
integration of Chapdelaine & Co., as well as some further front 
ofﬁ ce headcount reductions. A charge of around £7m reﬂ ecting the 
cost of these actions will be included in the 2012 accounts with an 
annual reduction in ﬁ xed costs as a result of these actions of 
approximately the same amount.

LITIGATION

The legal action that the Company had taken in London against 
BGC, two of BGC’s senior directors and ten former Company 
brokers, in response to a raid by BGC in early 2009 on the London 
business, was settled in the ﬁ rst half of the year. As part of the 
settlement it was agreed that no further statement would be 
made by either side about the settlement or the dispute.

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 on the business by BGC 
in the second half of 2009 have brought a claim against BGC in 
arbitration pursuant to the rules of the Financial Industry 
Regulatory Authority (‘FINRA’). The FINRA arbitration is scheduled 
to be heard during 2012 and 2013. A separate action has also been 
brought by the Company in the New Jersey Superior Court, alleging, 
among other causes of action, violations under the Racketeer 
Inﬂ uenced and Corrupt Organizations (‘RICO’) Act.

The claim by BGC Market Data and certain of its afﬁ liates, alleging 
that the Company misappropriated data supplied to its information 
sales subsidiary in violation of a redistribution agreement, has been 
heard in arbitration under the rules of the American Arbitration 
Association, and the outcome of the arbitration is expected to be 
known imminently. A provision for the estimated cost of the 
resolution of this claim has been included in the 2011 results.

The £6.6m (2010: £7.7m) net charge reﬂ ects the costs incurred in 
bringing and defending these actions and the provision for the 
estimated cost of the resolution of the claim against the 
Company, net of the settlement received from the legal action 
taken in London.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL REVIEW

The results for 2011 compared with those for 2010 are shown in the tables below:

2011

Proﬁ t and Loss 
£m 
Revenue  
Operating proﬁ t  
Charge relating to major legal actions 
Restructuring costs 
Operating proﬁ t 
Finance income/(expense) 
Other gains and losses 
Proﬁ t before tax 
Tax 
Associates 
Minorities 
Earnings 
Average number of shares 
Basic EPS 

2010

Proﬁ t and Loss  
£m 
Revenue  
Operating proﬁ t  
Charge relating to major legal actions 
Operating proﬁ t 
Finance income/(expense) 
Proﬁ t before tax 
Tax 
Associates 
Minorities 
Earnings 
Average number of shares 
Basic EPS 

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Exceptional
Items 

(6.6) 
(11.5) 
(18.1) 

1.2 
(16.9) 
6.6 

(10.3) 

Exceptional
Items 

(7.7) 
(7.7) 

(7.7) 
8.5 

0.8 

Underlying 
910.2 
148.4 

148.4 
(12.3) 

136.1 
(36.9) 
1.2 
(0.7) 
99.7 
216.5m 
46.1p 

Underlying 
908.5 
160.1 

160.1 
(11.1) 
149.0 
(42.2) 
1.5 
(0.6) 
107.7 
214.9m 
50.1p 

Reported
910.2
148.4
(6.6)
(11.5)
130.3
(12.3)
1.2
119.2
(30.3)
1.2
(0.7)
89.4
216.5m
41.3p

Reported
908.5
160.1
(7.7)
152.4
(11.1)
141.3
(33.7)
1.5
(0.6)
108.5
214.9m
50.5p

Tullett Prebon plc  Annual Report 2011

11

 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Review
continued

Finance income/(expense)
An analysis of the net ﬁ nance expense is shown in the table below:

Receivable on cash balances 
Payable on Eurobonds 
Payable on bank facilities, including commitment fee 
Amortisation of debt issue costs 
Other interest 
Non-cash ﬁ nance income/expense 

2011 
£m 
2.3 
(10.5) 
(5.1) 
(1.4) 
(0.3) 
2.7 
(12.3) 

2010
£m
1.6
(10.5)
(2.6)
(1.2)
–
1.6
(11.1)

The increase in the net ﬁ nance expense reﬂ ects the higher interest 
and commitment fees payable on the new bank facilities entered 
into in February 2011, partly offset by an increase in the interest 
income on cash deposits and higher net non-cash ﬁ nance income. 

The net non-cash ﬁ nance income comprises the net of the 
expected return and interest on pension scheme assets and 
liabilities of £2.9m (2010: £1.6m) partly offset by the amortisation 
of the discount on deferred consideration of £0.2m (2010: nil).

Basic EPS
The average number of shares used for the basic EPS calculation of 
216.5m (2010: 214.9m) reﬂ ects the 215.3m (2010: 215.3m) shares 
in issue throughout the year, plus the 1.4m (2010: nil) shares that 
were certain to be issued to the vendors of Primex Energy Brokers 
Limited as part of the ﬁ nal deferred consideration payment, less 
the 0.2m (2010: 0.4m) shares held on average during the year by 
the Employee Beneﬁ t Trust and Employee Share Ownership Trust 
as these Trusts have waived their rights to dividends. 

Other gains and losses
The £1.2m of other gains and losses comprises the £0.9m gain from 
the release of the deferred consideration related to OTC Valuations 
which will not be paid, and a £0.3m fair value gain arising from the 
consolidation of Tullett Liberty (Bahrain) which was previously 
accounted for as an associate.

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.

Tax
The effective rate of tax on underlying PBT is 27.1% (2010: 28.3%). 
The reduction in the effective rate compared with 2010 results 
primarily from the reduction in the corporate tax rate in the UK by 
1.5% points to 26.5%, and from the increase in the proportion of 
taxable proﬁ ts generated in the UK and Asia relative to the US.

The tax credit on exceptional items reﬂ ects the net tax relief on 
those items at the relevant rate for the jurisdiction in which the 
charges are borne. In 2010 the tax credit on exceptional items 
includes the tax beneﬁ t arising in the US from the write down of 
goodwill under US GAAP in the local accounts. 

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 Company’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 

12

Tullett Prebon plc  Annual Report 2011

Average 

Year End

2011 
$1.61 
€1.15 
S$2.02 
¥129 

2010 
$1.55 
€1.17 
S$2.12 
¥136 

2011 
$1.55 
€1.20 
S$2.02 
¥120 

2010
$1.57
€1.17
S$2.01
¥127

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

Underlying Operating proﬁ t 
Share-based compensation 
Depreciation and amortisation 
EBITDA 
Capital expenditure (net of disposals) 
Increase in initial contract prepayments 
Other working capital 
Operating cash ﬂ ow 
Exceptional items – restructuring cash payments 
Exceptional items – major legal actions net cash payments 
Interest 
Taxation 
Dividends received from associates/(paid) to minorities 
Deﬁ ned beneﬁ t pension scheme funding 
ESOT transactions 
Acquisitions 
Investments 
Cash ﬂ ow 

2011 
£m 
148.4 
1.4 
8.8 
158.6 
(12.4) 
(14.1) 
4.7 
136.8 
(2.9) 
(0.5) 
(13.4) 
(34.2) 
0.5 
(0.8) 
– 
(12.6) 
(3.5) 
69.4 

2010
£m
160.1
(0.9)
9.4
168.6
(12.4)
(7.6)
(8.9)
139.7
–
(7.7)
(11.5)
(27.5)
1.1
(8.8)
1.7
(2.4)
1.7
86.3

In 2011 the business has again delivered a substantial 
operating cash ﬂ ow, representing 92% (2010: 87%) of 
underlying operating proﬁ t.

Interest payments in 2011 were in line with the proﬁ t and loss 
charge for net cash ﬁ nance expenses adjusted for the amortisation 
of debt issue costs.

Around three-quarters of the net capital expenditure of 
£12.4m relates to investment in the development of electronic 
platforms and associated infrastructure, with the balance related 
to improvements to various leasehold ofﬁ ces.

The initial contract prepayments balance has increased as 
payments in the year, including the amounts paid to the credit 
brokers who joined the business in early January 2011 in the 
Americas, were higher than the amortisation. 

The other working capital inﬂ ow in 2011 primarily reﬂ ects the 
reduction in invoiced receivables balances at the end of the year 
compared to the previous year end due to good cash collections.

The exceptional items restructuring cash payments of £2.9m in 
2011 are signiﬁ cantly lower than the £11.5m proﬁ t and loss charge. 
Of the total charge £2.4m is non-cash, reﬂ ecting the write down of 
unamortised initial contract payments and a small amount of 
accelerated depreciation on ﬁ xed assets. The remainder of the cash 
element of the charge will be paid during 2012. The exceptional 
items major legal actions net cash payments of £0.5m reﬂ ects the 
proﬁ t and loss charge less amounts which were provided in the 
year but not paid.

Tax payments in 2011 were slightly higher than in 2010 reﬂ ecting 
higher tax payments in Asia due to the higher level of proﬁ t, and in 
the UK reﬂ ecting the timing of payments.

Following the triennial actuarial valuations of both of the UK 
deﬁ ned beneﬁ t pension schemes which concluded that each 
scheme had a signiﬁ cant funding surplus, 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. During 2010 the Group 
made regular contributions to match the beneﬁ ts paid and the 
administration expenses of each scheme, and in addition made 
contributions of £4.5m under agreements with the trustees of the 
schemes aimed at eliminating the actuarial deﬁ cits.

Expenditure on acquisitions in 2011 includes the payment of 
consideration to the former employer of the credit broking 
team who joined the business in the Americas in January 2011, 
a deferred consideration payment relating to the acquisition 
of Aspen, and the initial consideration for Convenção. The 
expenditure on investments includes membership of the LME.

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13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business Review
continued

The movement in cash and debt is summarised below:

£m 
At 31 December 2010 
Cash ﬂ ow 
Dividends 
Debt repayments 
Debt issue costs 
Amortisation of debt issue costs 
Cash acquired with subsidiaries 
Effect of movement in exchange rates 
At 31 December 2011 

Cash 
425.7 
69.4 
(33.9) 
(90.2) 
(3.4) 
– 
5.0 
0.2 
372.8 

Debt 
(357.9) 
– 
– 
90.2 
3.4 
(1.4) 
– 
– 
(265.7) 

Net
67.8
69.4
(33.9)
–
–
(1.4)
5.0
0.2
107.1

At 31 December 2011 the Group held cash, cash equivalents and 
other ﬁ nancial assets of £372.8m which exceeded the debt 
outstanding by £107.1m.

At 31 December 2011 the Group’s outstanding debt comprised 
£141.1m Eurobonds due July 2016, £8.5m Eurobonds due August 
2014, £120m drawn under an amortising bank term loan facility, 
and a small amount of ﬁ nance leases. The term loan is subject to 
repayments of £30m in each of February 2012 and February 2013 
with £60m maturing in February 2014. The Group has a committed 
£115m revolving credit facility that has remained undrawn 
throughout the year, which will also mature in February 2014.

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 2011 the market value of the schemes’ assets has increased 
from £169.5m to £183.9m reﬂ ecting strong investment returns. 
Under IAS19 the value of the schemes’ liabilities has increased 
slightly, from £145.9m to £148.4m, with the impact of a reduction 
in the discount rate offset by a reduction in the inﬂ ation 
assumption and the beneﬁ t of the change to CPI from RPI as the 
basis for the statutory increases in deferred pensions and pensions 
in payment. Under IAS19 the schemes show a net surplus at 
31 December 2011 of £35.5m (2010: £23.6m).

Triennial actuarial valuations of both schemes were undertaken 
during 2010. These actuarial valuations concluded that each 
scheme has a signiﬁ cant funding surplus.

Return on capital employed
The return on capital employed (‘ROCE’) in 2011 was 37% 
(2010: 42%). ROCE is calculated as underlying operating proﬁ t 
divided by the average capital employed in the business. Capital 
employed is deﬁ ned as shareholders’ funds less net funds and the 
net pension surplus, adding back cumulative amortised goodwill 
and post-tax reorganisation costs related to the integration of the 
Tullett and Prebon businesses.

Regulatory capital
The Group’s lead regulator is the Financial Services Authority 
(‘FSA’). The Group’s application for a renewal of its waiver from 
consolidated capital resources requirements was approved by the 
FSA on 8 June 2011. The renewed investment ﬁ rm consolidation 
waiver runs for ﬁ ve years and will expire on 6 June 2016. The terms 
of the renewed waiver are the same as those under the previous 
waiver. Each investment ﬁ rm within the Group must be either a 
limited activity or limited licence ﬁ rm and must comply with its 
individual regulatory capital resources requirements.

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 solo notional 
capital resources requirements for each relevant ﬁ rm within 
the Group. 

The Group’s regulatory capital headroom under the ﬁ nancial 
holding company test calculated in accordance Pillar 1 at 
31 December 2011 was £625m (2010: £461m).

The Board is responsible for approving the Group’s Internal Capital 
Adequacy Assessment Process (‘ICAAP’) required by the FSA. The 
ICAAP documents the ﬁ ndings of the ongoing Pillar 2 review which 
seeks to identify the funding requirements and risks faced by the 
Group, and to calculate how much capital and liquidity resources it 
is necessary to hold against such risks and requirements. 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 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTC MARKET REGULATION

RISK MANAGEMENT

Progress continues to be made 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 CFTC and SEC continue to make progress 
in the drafting of the detailed rules and regulations to implement 
the principles of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act governing the regulation and operation of OTC 
derivatives markets, and most of the ﬁ nal rules relating to Swap 
Execution Facilities (‘SEF’) are expected to be issued by the middle 
of 2012. Implementation of these regulatory reforms including the 
mandatory clearing requirement for swaps and the requirement 
that such instruments are traded through a SEF is therefore likely 
to be phased in during the second half of the year.

In October 2011 the European Commission tabled proposals to 
revise the Markets in Financial Instruments Directive (‘MiFID’). 
These proposals, which consist of a regulation (MiFIR) and a 
directive (MiFID II) complement and build on the proposals tabled 
in September 2010 on the regulation of OTC markets commonly 
known as the European Markets Infrastructure Regulation (‘EMIR’). 
These various proposals are aimed at making ﬁ nancial markets in 
Europe more efﬁ cient, resilient and transparent. They contain 
provisions, amongst others, on mandatory clearing requirements 
for OTC derivatives, trade reporting, permissible trade execution 
venues for ﬁ nancial instruments including the proposed new 
category of an Organised Trading Facility, and governance and 
conduct of business requirements for all trading venues. The 
proposals are at various stages of the legislative process. EMIR is 
expected to be ﬁ nalised during the ﬁ rst half of the year, with 
subsequent implementation measures due before the end of 2012, 
in line with the G20 timetable. MiFIR and MiFID II have passed to 
the European Parliament and the Council for negotiation and 
adoption, and the detailed technical rules are being developed by 
the European Securities and Markets Authority. It is envisaged that 
MiFIR and MiFID II will come into force during 2015.

As we have previously commented, we agree with the objectives 
and support the direction of these reforms. We believe that their 
introduction will be positive for our business as the proposals 
formalise the role of the intermediary in the OTC markets.

Risk management governance 
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 governance 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. The Board is also responsible for ensuring that the Group 
maintains sufﬁ cient capital and liquidity resources, both to meet 
its regulatory capital and liquidity requirements and to support its 
growth and strategic objectives.

The Board is responsible for approving the Group Risk Assessment 
Framework, which the Group uses to identify and assess the risks 
to which the Group is exposed, and the Group Risk Management 
Principles and Policies document which sets outs the principles and 
policies adopted by the Board to manage the risks identiﬁ ed. The 
Board is also responsible for approving the Group’s ICAAP in which 
the Group documents its assessment of the adequacy of its capital 
and liquidity resources, in accordance with FSA requirements. 

Group Treasury and Risk Committee
The Group Treasury and Risk Committee monitors the Group’s risk 
exposure against the agreed risk appetite. 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.

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.

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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 risk appetite set by the Board and 
for maintaining the Group Risk Management Principles and Policies 
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. 

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).

Internal audit work during 2011 covered the full ‘audit universe’ 
within the Group at different levels of intensity based upon the 
internal audit plan agreed with the Audit Committee in December 
2010. The plan was developed reﬂ ecting the results of a risk 
assessment exercise.

The ﬁ ndings of all internal audits undertaken are reported to the 
Audit Committee, and actions taken by management in response 
to the ﬁ ndings are tracked and reported to the Audit Committee. 
The Audit Committee approved the internal audit plan for 2012 at 
its December 2011 meeting.

Risk Management Principles and Policies
Risk appetite 
Risk appetite is deﬁ ned as the level of risk the Group is prepared to 
accept. The Group’s risk appetite is set by the Board as part of its 
determination of the business strategy. 

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.

The Board has set a low risk appetite, in accordance with which 
the Group does not actively seek risk in order to generate a return 
but is willing to accept a limited amount of risk as a consequence 
of its broking activities, principally counterparty credit risk and 
operational risk. This is reﬂ ected in the business model adopted by 
the Group whereby it acts only as an intermediary in the ﬁ nancial 
markets and does not trade for its own account.

Credit risk management
The Group’s Credit departments are responsible for monitoring 
the creditworthiness of the Group’s counterparties and for the 
proactive monitoring of counterparty credit exposure against 
pre-determined limits set by the relevant regional Credit 
Committee, as well as for providing senior management and the 
other control functions with timely and accurate reporting of the 
Group’s credit exposure. 

Finance 
The Group’s regional Finance departments are responsible for 
implementing and monitoring the relevant ﬁ nancial controls, and 
for providing management with timely and accurate reporting of 
ﬁ nancial performance against budget and other measures. 

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.

Risk Assessment Framework
The Group identiﬁ es and assesses risk through the Group’s 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 Group’s 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 designated members of senior 
management.

16

Tullett Prebon plc  Annual Report 2011

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.

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 to 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.

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 Financial 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 trading 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.

The Group’s Risk Management Principles and Policies 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 and 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 
prior to settlement date. In the event of default, 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 original 
trade price.

Counterparty exposures are kept under constant review and the 
Group takes steps to reduce counterparty risk where market 
conditions require. Particular attention is paid to more illiquid 
markets where the price movement is more volatile, such as 
broking in GDR, ADR and emerging markets instruments.

The Group is also exposed to short term pre-settlement risk where 
it acts as an executing broker on an exchange, during the period 
between the execution of the trade and the client claiming the 
trade. This exposure is minimal as under the terms of the ‘give-up’ 
agreements the Group has in place with its clients, trades must be 
claimed by the end of trade day. Once the trade has been claimed, 
the Group’s only exposure to the client is for the invoiced 
receivables.

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 basis. 
Free of payment deliveries (where an immediate exposure arises 
due to the Group’s settling its side of the transaction without 
simultaneous receipt of the countervalue) occur very infrequently 
and only under the application of stringent controls.

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Cash deposits – The Group is exposed to counterparty Credit 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 27 to the Accounts). 

As with trading counterparties, cash deposit counterparty 
exposures and limits are kept under review and steps are 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. 
Receivables 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). 

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 to proactively 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;

– 

– 

– 

– 

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

–  broker errors.

Operational Risk is managed through a combination of effective, 
relevant and proportionate controls. The policy of devolved 
responsibility within the Group places the emphasis for the 
management of operational risks on the senior management 
of each business unit. 

18

Tullett Prebon plc  Annual Report 2011

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 has identiﬁ ed three principal categories of Strategic 
and Business Risk:

–  direct regulatory risk;

–  commercial risk; and

–  technology risk.

Direct regulatory risk – This is the risk of new regulations, such as 
those currently being drafted in the EU and US in respect of OTC 
derivative market reforms, imposing a fundamental change to the 
structure or activity of ﬁ nancial markets, resulting in a reduced role 
for IDBs. 

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

Commercial risk – The Group is exposed to the risk of a 
fundamental change to the commercial environment, whether 
market driven or due to the impact on clients of changes to the 
regulatory environment. 

Speciﬁ c issues could include a potential reduction in trading 
volumes resulting from regulatory reforms, such as the proposed 
restriction on proprietary trading to be imposed on certain 
ﬁ nancial institutions under the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (through the so called ‘Volcker Rule’) or 
the increased capital requirements to be imposed under the Basel 
III Accord. Alternatively, a signiﬁ cant deterioration in the economic 
conditions of a country or region, such as that currently faced in the 
Eurozone, could also lead to a reduction in trading activity and 
consequential reduction in the Group’s revenue.

Technology risk – This is the risk that the Group is unable to 
respond to market demand for electronic broking solutions and 
loses market share as a result. The Group seeks to address this risk 
through continued development and enhancement of its electronic 
broking capability, to ensure that it can offer a competitive solution 
for all major asset classes. 

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. 

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

The Group’s strategies for managing and mitigating its commercial 
risk include geographic and product diversiﬁ cation. 

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.

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.

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 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. This includes 
undertaking a detailed assessment of the potential margin call 
exposure for all new business activity which will be cleared through 
a clearing house, such as that undertaken for the Group’s new LME 
business which commenced in January 2011. 

As a normal part of its operations, the Group faces 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, 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 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 
funding. This facility remained undrawn throughout 2011.

Further details of the Group’s borrowings and cash are provided in 
Notes 23, 27 and 33.

Interest rate risk – The Group is exposed to interest rate risk on its 
cash deposits and on its borrowings under bank facilities. The 
Eurobond debt pays ﬁ xed sterling interest. Cash deposits are 
typically held at maturities of less than three months, and the 
sterling interest rate exposure is partially hedged by rolling sterling 
term loans under the bank facility for similar short term periods.

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 27.

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. The 
Group continues to monitor its currency exposure, particularly in 
relation to current developments within the Eurozone.

Analysis of the Group’s sensitivity to movements in foreign 
currency exchange rates is set out in Note 27.

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.

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Business Review
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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 achieve their own business objectives, and to meet 
expectations of their own shareholders and their other 
stakeholders.

The role of interdealer brokers, such as Tullett Prebon, in 
successfully ensuring liquidity in the capital markets, especially at 
time of market stress, has been increasingly recognised by 
organisations involved in the public policy response to the ﬁ nancial 
crisis. This has provided the opportunity for the Company, both 
through its professional bodies in the United Kingdom and the 
United States, and where appropriate directly, to engage with law 
makers and ofﬁ cial bodies to seek to ensure new regulations will 
not harm the efﬁ cient functioning of the capital markets which are 
in some measure dependent on intermediation provided by 
companies such as Tullett Prebon.

By successfully remaining a critical part 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 continue making 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 
further the CSR activities of the Company in 2011. 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.

20

Tullett Prebon plc  Annual Report 2011

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.

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 
provides for:

– 

– 

– 

– 

– 

 maintaining high standards of compliance and risk 
management – ultimately the responsibility of 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 
FSA’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.

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 business line management assisted by the Human 
Resources department. This is supplemented by an Employee 
Assistance Programme which provides counselling and advice 
to staff and their families, and the use of an occupational health 
specialist if required. The Company’s policies on health and safety 
provide a formal framework and inform line management in the 
discharge of their responsibilities in this area.

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 2011 the average revenue generated by each broker was 
£524,000 (2010: £540,000);

 The Company employed 2,550 full time equivalent employees 
and directors worldwide in 2011 (48% in Europe, 30% in the 
Americas and 22% in Asia Paciﬁ c) compared to 2,461 staff in 
2010 (48% in Europe, 30% in North America and 22% in Asia 
Paciﬁ c). Total remuneration for all staff in 2011 was £570m 
(2010: £555m);

 Claims for compensation for work-related accidents and 
illnesses remained minimal in 2011 with three claims for 
Worker’s Compensation in the US which resulted in 260 work 
days’ total absence. There was one such claim in Asia Paciﬁ c in 
December but no such claims in the UK. In 2010 there were only 
two claims in the US with none in the UK or Asia Paciﬁ c;

 In 2011 there was a further reduction in absence due to short 
term employee sickness in the UK, in terms of both total days 
taken and average time off work. In the UK the Company lost 
1,452 sick days (2010: 1,679 sick days) and the average time off 
work due to short term sickness was 1.41 days per employee 
(2010: 1.70 days). In Asia Paciﬁ c 1,213 days were lost due to 
short term sickness (2010: 1,175 days), an average of 1.60 days 
per employee (2010: 2.13 days). The US does 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 
0.45 workdays per employee compared to 1.77 days per 
employee in 2010; and

– 

 2011 saw no minor reported staff accidents in the UK, 
compared to 2 in 2010. Again, no visitors suffered injury on 
Company premises during 2011.

Employees
Attracting and retaining the best brokers, professional and other 
support staff, and management, remains crucial to the Company’s 
ongoing success. Management recognises 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, and following on from the 
middle management career development programme run across 
its European businesses in 2010, which saw some 50 directors and 
desk heads complete a career development and business skills 
training programme, senior regional management from the 
Company’s European business undertook further ﬁ nancial analysis 
training in 2011. This programme has increased general 
management capability across the Company’s European business 
and has assisted in the continued process of succession planning.

In 2011 the Company’s new regional Chief Executive Ofﬁ cer for the 
Americas, having completed the reorganisation of his management 
team, initiated a development programme for the region’s senior 
management and also for all desk heads and directors. To support 
the integration of the new Americas’ management organisation, 
and to assist in regional succession planning, an initial career 
development programme was undertaken during the reporting 
period involving 70 key desk heads and directors. Building on this, in 
the subsequent reporting period, the region’s senior management 
team will be offered a ﬁ nancial analysis training programme 
similar to the programme run for the senior management team 
in Europe and conducted by staff from the same leading business 
management college in the United Kingdom who were responsible 
for the training of the European management team. This will 
ensure the Company’s key managers in its two principal regions will 
all have received consistent and professional training appropriate 
for the management positions that they occupy. 

The productivity and welfare of employees in a business so 
dependent on people, such as Tullett Prebon, continued to attract 
considerable senior management attention throughout the 
reporting period, and management at all levels undertook active 
engagement programmes with employees, a process monitored by 
regional Chief Executive Ofﬁ cers.

To assist with employee engagement, 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, organisational changes, key hires, and ﬁ nancial and 
regulatory announcements. Information is provided to employees 
regularly through integrated and complementary 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, 
reviewed in 2010, continued into 2011 and is further reinforced 
by a quarterly-produced Company-wide staff e-newsletter which 
provides for an enhanced communications channel.

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21

 
 
 
 
Business Review
continued

As the Company is highly dependent on its employees, retention 
of key personnel remains one of management’s core tasks. 
2011 has continued to present challenges in this regard, but 
management believes 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 continues to monitor 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.

Accordingly, the Company records by region percentages of staff 
that have ﬁ ve and 10 years’ or more service. In the US 58.9% 
(2010: 55.4%) of employees have ﬁ ve plus years’ service, and 
39.4% (2010: 38.6%) have 10 plus years’ service. In the UK the 
percentages are 54.3% (2010: 55.9%) and 32.2% (2010: 32.9%), 
and in Asia Paciﬁ c the percentages are 34.8% (2010: 41.0%) and 
13.1% (2010: 15.8%) respectively.

5 years’ + service 
10 years’ + service 

US 

2011 
58.9% 
39.4% 

UK 

Asia Paciﬁ c 

2010 
55.4% 
38.6% 

2011 
54.3% 
32.2% 

2010 
55.9% 
32.9% 

2011 
34.8% 
13.1% 

2010
41.0%
15.8%

The continued enthusiasm for the UK government’s Cycle to Work 
scheme further evidences the interest in sport and general ﬁ tness 
across the UK workforce. A further 70 staff purchased cycles under 
this scheme in the reporting period, on top of the 226 who had 
previously taken advantage of this scheme in 2009 and 2010. 

Across Tullett Prebon some 340 staff were actively engaged in 
Company assisted sporting and ﬁ tness activities in 2011, and 
management hopes that the Company’s support in this area will 
continue to improve staff welfare and general health, and thereby 
contribute to an improved work/life balance, and in turn contribute 
to the success of the Company.

The pastoral care programme has also provided support to 
employees in the UK with access to childcare provision and in 
charitable giving, by the Company running schemes under the 
UK government’s salary sacriﬁ ce programme. In 2011, an increase 
was seen in the number of employees (67) opting for Company 
Childcare Vouchers (compared with 37 in 2010). Following internal 
promotion of the Give as You Earn scheme donations by staff saw 
an increase of almost four-fold in 2011 with total donations to 
charity increasing from £1,959 to £7,383. The Company believes 
that there remains unrealised support for this scheme and it 
intends to allocate further resources to its promotion in the 
subsequent reporting period.

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 Company recognises the importance 
of redressing some of the associated negative effects of the 
relatively physically inactive desk-based business on its employees. 
To this end the Company continued to offer its workforce a range 
of exercise and general sporting activities. In addition to the 
personal beneﬁ ts that accrue to the individual, the business 
beneﬁ ts of this policy 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 broad physical ﬁ tness 
programme, especially as the demand for this continues to come 
from employees themselves.

Throughout the reporting period the Company provided British 
Military Fitness circuit training for staff in London and, as in each 
year since its implementation in 2009, classes remained at full 
capacity. Again in response to staff demand, in 2011 the Company 
initiated a programme of recreational and competitive bike rides 
over spring and summer weekends which were open to employees, 
their families and clients, and these rides provided for all ages 
and abilities. In addition to circuit training and bike events the 
Company continued to support participation in a range of 
externally-organised sporting activities including the Bloomberg 
Square Mile Relay, Vertical Rush (racing up the stairwell in one of 
the City’s tallest buildings), and the JPMorgan Chase Corporate 
Challenge (in London, New York and Singapore) which have become 
annual ﬁ xtures in the Company’s sporting calendar. In addition, 
throughout 2011, the Company continued the scheme, ﬁ rst 
introduced in 2009, to provide team clothing to staff taking part 
in other team and sporting activities.

22

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
Community investment
Tullett Prebon’s approach to community investment is informed by 
the Company’s limited impact on the communities in which it 
operates and by the resources and expertise at its disposal. There 
are several strands to the Company’s community investment 
programme:

Social and community issues
Service in the Volunteer Reserve Forces
The Company recognises that members of the Volunteer Reserve 
Forces in 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’s direct engagement in the public policy response 
to the ﬁ nancial crisis has sought to make a balanced and factual 
contribution to a process hitherto often ill informed and not 
unconstrained by political dogma;

 Engagement with the local community in London where the 
Company is headquartered and where it has its biggest 
concentration of personnel and therefore where it has its 
biggest impact on a local community, has been to become 
actively involved with the Corporation of London which 
provides the local authority services for London’s ﬁ nancial 
district, and which has an extensive community and charitable 
programme, by fully supporting the City’s unique business 
electoral franchise;

In line with its commitment to support members of the Volunteer 
Reserve Forces, which forms part of the terms of employment in 
the Staff Handbook, and its membership of the UK Ministry of 
Defence’s employers organisation SaBRE which seeks to foster a 
good relationship between employers, employees and the Armed 
Forces, the Company supported the return to work of one of its 
employees who had been mobilised for service with a front line 
infantry regiment in a combat role in Afghanistan. In particular 
the Company’s Chief Executive Ofﬁ cer hosted a reception for him, 
which was attended by some 100 of his colleagues, to welcome 
him back to work. This reception presented a set-piece opportunity 
for the individual to present to his colleagues on his tour of duty 
and for his colleagues to learn about his experiences in the British 
Army at ﬁ rst-hand.

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 six years since HMRC started to publish the names of 
those companies achieving this important status.

The Board continues 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 2011 of 
£290m (2010: £267m, and 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.

 The Corporation of London has in addition an effective public 
policy programme in connection with its husbandry of London’s 
ﬁ nancial services industry and the Company continues to 
support the Corporation’s efforts in this regard, in particular in 
coordination with its professional body the Wholesale Markets 
Brokers Association (‘WMBA’);

 In place of any formal regular survey of staff opinion the 
Company’s senior management team led by the Chief Executive 
Ofﬁ cer has an active programme of engagement with 
employees, and for example the Chief Executive Ofﬁ cer, 
together with his senior managers, participates in many of the 
staff-led sports and exercise opportunities provided by the 
Company – this it is felt provides for very direct and qualitative 
opinion sharing which is all the more effective because of the 
nature of honest debate found in a company where people are 
not slow in coming forward with their views; and

 Continued support for the wider UK economy is evidenced by 
the Company’s involvement with the British Marine Industry 
and speciﬁ cally by the support it provides to the British Marine 
Federation’s (‘BMF’) annual London Boat Show. The show at 
ExCel in Docklands, an area of London where Tullett Prebon’s 
clients and associated business are heavily concentrated, allows 
the Company to assist the BMF in showcasing a successful and 
largely manufacturing sector of the UK economy responsible for 
employing 33,000 people and exporting goods and services in 
2011 in excess of £1 billion. The support the Company provides 
to this large national event enables Tullett Prebon to support 
British industry as part of a wider public policy agenda and at 
the same time to build on client and staff engagement and 
support an industry important to the wider UK economy 
outside the narrow conﬁ nes of ﬁ nancial services. All clients and 
employees with their families are invited to attend the event, 
which has further merit in the context of the Company’s staff 
sport and ﬁ tness programme as the Boat Show is co-located 
with the Outdoors Show and the London Bike Show. 2011 was 
the third year the Company has supported the Boat Show as 
part of a four-year commitment.

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Tullett Prebon plc  Annual Report 2011

23

 
 
 
 
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 2011:

– 

– 

– 

 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 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 geographies in which it operates. 
Focusing the Company’s representation in the key trade bodies 
in one member of the Company’s Executive Committee has 
continued to ensure coordinated, focused and effective 
advocacy throughout the reporting period;

 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 in particular dialogue was opened with all mainstream 
political parties in the UK regarding policy development around 
economic and ﬁ nancial services issues; 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 the public policy arena, was again active, publishing 
papers addressing the principal economic themes of 2011. 
The two research products developed in 2010 continued to be 
published during the reporting period: Strategy Insights, larger 
and in-depth papers of which three were published in 2011; and 
Strategy Notes, shorter than Strategy Insights and quicker to 
write, and designed to respond to ‘issues of the moment’, of 
which 10 were published in the reporting period. Two additional 
products were developed in 2011: Occasional Papers, of which 
one was published during 2011; and the UK Economic and Fiscal 
Database. Considerable traction was achieved with these 
products and the Company’s visibility in serious political 
commentary continued to increase 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 be in force and 
this minimises business travel in favour of video and 
telephone conferencing.

The Group-wide environmental policy, developed with the 
assistance of specialist external consultants in 2010, was updated 
in 2011 to reﬂ ect new organisational structures, as was the 
environmental policy speciﬁ cally for the UK. The Company’s 
procurement policy continues to contain a strong statement in 
support of the environmental policy and makes clear that the 
Company’s ‘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. In respect of the Climate Change Act 2008, as 
in 2010, during the reporting period the Company undertook 
preparations to meet the expected new reporting requirements by 
continuing the necessary monitoring of its GHG emissions. With 
the reporting obligations of these two new pieces of legislation in 
mind, the Company completed a third carbon footprint and GHG 
audit in its key geographies in 2011. This will allow it to compare 
its emissions with its benchmark year of 2008, and, in respect of 
the Climate Change Act 2008, to comply with the new reporting 
requirements expected to come into force in 2012.

24

Tullett Prebon plc  Annual Report 2011

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 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 23.

Terry Smith
Chief Executive
6 March 2012

Over the last three reporting periods the Company’s environmental 
management system (‘EMS’) has been successful in achieving 
overall savings in energy use at the Company’s two largest 
properties in the UK. However, energy consumption across the 
London estate increased by 0.1% during 2011 (equivalent to £688) 
reﬂ ecting the increased evening and weekend working which had 
become necessary to support improvements to the Company’s 
IT and BCM infrastructure, and also in the development and 
deployment of the new Electronic Broking platforms required by the 
Company’s clients in anticipation of new regulatory requirements 
in Europe and the US. Overall, the savings in annual energy 
consumption between 2009 and 2011 remain at over £59,000.

For the ﬁ rst time the Company is able to report on recycling for 
paper and Waste Electronic Electrical Equipment (‘WEEE’). During 
the reporting period the Company, with the assistance of a 
specialist contractor, recycled 66,840kg of paper which is an 
estimated saving of 53,323kg of CO2 emissions. Also, during this 
period 4,887kg of WEEE was recycled, a 36.8% increase from the 
Company’s 2010 WEEE recycling ﬁ gure. It is intended to use both 
these recycling ﬁ gures as reference data for future reporting.

Contractual or other arrangements essential to the business 
of the Group
The success of the Company relies on maintaining certain 
contractual and other arrangements within individual entities and 
across the Group relating to revenue generation, operational 
performance and 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 78% of the Group’s administration expenses in 2011. 
The Company seeks to put in place contractual arrangements 
with its personnel, including in certain circumstances ﬁ xed term 
contracts, non-compete arrangements and performance-related 
compensation which is 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 is reliant upon a number 
of ﬁ nancial institutions for the clearing and settlement of its 
transactions, most notably the DTCC, Euroclear, Clearstream, 
and certain key banking relationships.

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Tullett Prebon plc  Annual Report 2011

25

 
 
 
 
Governance

In this section:
27  Board of Directors
28  Directors’ Report
30  Corporate Governance Report
36  Report on Directors’ Remuneration
43  Statement of Directors’ Responsibilities

26

Tullett Prebon plc  Annual Report 2011

 
Board of Directors

KEITH HAMILL (59)

DAVID CLARK (64)

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 Chairman of Travelodge and a 
Non-executive Director of easyJet plc and Samsonite International SA. 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.

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 Chairman of the Audit Committee and a member of the 
Remuneration and Nominations Committees.

TERRY SMITH MNZM (58)

Chief Executive
Terry Smith started his career with Barclays Bank and became a stockbroker 
in 1984 with W Greenwell & Co. He was the 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, and then Chief Executive in 2000. When Collins Stewart 
and Tullett Prebon demerged in December 2006 he became Chief Executive 
of Tullett Prebon plc. At the same time he also became Executive Chairman 
of Collins Stewart, a position he held until 2009 when he became Deputy 
Chairman, ﬁ nally resigning from the Board in October 2010. 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. In 
November 2010 Terry Smith launched Fundsmith, a fund management 
company, of which he is Chief Executive and Chief Investment Ofﬁ cer. In 
the New Zealand 2012 New Year’s Honours list Terry Smith was appointed a 
Member of the New Zealand Order of Merit for services to New Zealand-
United Kingdom relations.

PAUL MAINWARING (48)

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.

ANGELA KNIGHT (61)

Senior Independent Non-executive Director
Angela Knight was appointed as a Non-executive Director of Tullett Prebon 
plc in September 2011. She is a member of the Audit, Remuneration and 
Nominations Committees. Angela Knight is the Chief Executive of the 
British Bankers’ Association and was previously Chief Executive of the 
Association of Private Client Investment Managers and Stockbrokers from 
1997 to 2006. She was formerly the Member of Parliament for Erewash 
from 1992 to 1997, serving as a Treasury Minister from 1995 to 1997. 
She is also a Non-executive director of Brewin Dolphin Holdings plc and 
the Financial Skills Partnership. Her previous Non-executive director 
appointments include Lloyds TSB plc, Scottish Widows and LogicaCMG plc.

MICHAEL FALLON MP (59)

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 to 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.

RUPERT ROBSON (51)

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 a 
Non-executive Director of OJSC Nomos-Bank.

STEPHEN PULL (55)

Independent Non-executive Director
Stephen Pull was appointed as a Non-executive Director of Tullett Prebon 
plc in September 2011. He is a member of the Audit, Remuneration and 
Nominations Committees. Stephen Pull was Chairman of Corporate Broking 
at Nomura between 2008 and 2011 following their acquisition of Lehman 
Brothers Europe for whom Stephen worked since 2002 as Head of 
Corporate Broking, and then as Chairman of Corporate Broking. He has also 
held a number of other senior roles in the City, including Managing Director 
of Corporate Broking at Merrill Lynch and Head of UK Equity Sales at 
Barclays de Zoete Wedd.

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Tullett Prebon plc  Annual Report 2011

27

 
 
 
 
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 2011.

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

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 39 to the consolidated ﬁ nancial statements.

Results and dividends
The results for the year are set out in the Consolidated Income 
Statement on page 46.

The Directors recommend a ﬁ nal dividend for the year of 11.25p 
per ordinary share. The ﬁ nal dividend, if approved, will be paid on 
17 May 2012 to ordinary shareholders whose names are on the 
register at close of business on 27 April 2012.

Tullett Prebon plc paid a ﬁ nal dividend for 2010 of 10.5p per 
ordinary share and an interim dividend for 2011 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 25. 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, 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.

A separate Corporate Governance Report is included within this 
Annual Report on pages 30 to 35 and which is, where relevant, 
incorporated into this Directors’ Report by reference. 

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.

28

Tullett Prebon plc  Annual Report 2011

Keith Hamill 
(Non-executive Chairman)

Terry Smith 
(Chief Executive)

Paul Mainwaring
(Finance Director)

David Clark
(Independent Non-executive Director)
(Senior Independent Director until February 2012)

Michael Fallon
(Independent Non-executive Director)

Richard Kilsby
(Independent Non-executive Director)

Angela Knight
(Independent Non-executive Director – appointed 1 September 2011)
(Senior Independent Director from February 2012)

Stephen Pull
(Independent Non-executive Director – appointed 1 September 2011)

Rupert Robson
(Independent Non-executive Director)

Biographical details of the Directors are set out on page 27.

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 
Angela Knight 
Stephen Pull 
Rupert Robson 

2011 
Number 
80,299 
9,645,510 
221,339 
– 
2,000 
– 
– 
– 
7,000 

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

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.

  
  
The Tullett Prebon plc Employee Beneﬁ t Trust 2007 held 202,029 
shares (2010: 200,833). The beneﬁ ciaries of the trust 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. The Tullett Prebon plc 
Employee Share Ownership Trust sold the 1,196 shares it held at 
31 December 2010 during the year at market value to the Tullett 
Prebon plc Employee Beneﬁ t Trust 2007.

Substantial interests
As at the end of the period under review, and as at 5 March 2012, 
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 in accordance with DTR 5 that they were 
interested in the following voting rights of the issued ordinary share 
capital of the Company:

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 issued share capital, together with details of the 
movements in the Company’s issued share capital during the year 
are shown in Note 28 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 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 30 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, the Companies Act 2006 and related legislation.

The Articles may be amended by special resolution of the 
shareholders. This year shareholders will be asked to approve an 
amendment to the Articles that will require directors to seek 
annual re-election.

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 
2012, 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 30 to 35.

Lloyds Banking Group plc 
Jupiter Asset Management Limited 
Henderson Global Investors 
Legal & General Group Plc 
OppenheimerFunds, Inc;
Barings Asset Management Limited 

%

31 Dec 2011 
13.02  
5.09 
5.04 
3.94 

5 March 2012
13.02 
5.09
6.78
3.94

3.01 

3.01

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 10 May 2012. 
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 2011 no political donations were made by the Group (2010: 
£nil). No charitable donations were made during 2011 (2010: £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
6 March 2012

Tullett Prebon plc  Annual Report 2011

29

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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 in the UK Corporate 
Governance Code (the ‘Code’).

Independence of Directors
The Board has determined that all ﬁ ve of the Non-executive 
Directors are independent. 

The Senior Independent Non-executive Director 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 an induction to the Company 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, 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 (the ‘Articles’) 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.

Throughout the year ended 31 December 2011 the Board believes it 
has complied with the principles and provisions recommended by 
the Code except as regards the re-election of Directors. The manner 
in which the Company has applied the principles of good 
governance set out in the Code is outlined below. The UK Corporate 
Governance Code is publicly available at www.frc.org.uk.

DIRECTORS

Composition of the Board
The Board currently comprises two Executive Directors, ﬁ ve 
independent Non-executive Directors and a Non-executive 
Chairman. Angela Knight and Stephen Pull were appointed as 
Directors with effect from 1 September 2011. David Clark will be 
retiring from the Board when the process to recruit a further 
non-executive director with the expertise to chair the Audit 
Committee has been completed. As planned, Angela Knight took 
over as Senior Independent Non-executive Director with effect 
from February 2012. The Directors’ biographies are shown on 
page 27 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. Five of the Directors (and four of the 
Non-executive Directors) have extensive previous experience 
at a senior level in the ﬁ nancial services sector and two of the 
Directors are chartered accountants (one was an audit partner in a 
major ﬁ rm of accountants), one of the Non-executive Directors was 
a Senior Adviser to the Financial Services Authority (‘FSA’), and both 
the Chairman and the Finance Director were previously Finance 
Directors of a number of other companies. The average length of 
service of the Non-executive Directors excluding the Chairman is 
four years and six months.

The Chairman, Keith Hamill was, at appointment, independent of 
the Company and the management, but, as Chairman, is not 
classiﬁ ed as independent under the Code. His other signiﬁ cant 
commitments are noted in his biography on page 27.

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.

The terms of the Directors’ service agreements and letters of 
appointment are summarised in the Report on Directors’ 
Remuneration set out on pages 36 to 42. 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, and at the AGM 
from ﬁ fteen minutes prior to the meeting until its conclusion.

30

Tullett Prebon plc  Annual Report 2011

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;

–  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. 

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 2011 and March 2012, the Chairman formally met 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 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 all Directors are subject to election 
by shareholders at the ﬁ rst AGM after their appointment. 
Thereafter, any director for whom it is the third AGM following 
that at which he or she was elected is required to retire at the 
AGM but is entitled to seek re-election. The Code recommends that 
all directors of FTSE 350 companies should be subject to annual 
re-election. At the AGM held in 2011 the Company followed the 
procedures for director re-election speciﬁ ed in its Articles. In order 
to comply with the Code, at the AGM in 2012 those Directors 
who are not required under the Articles to seek re-election will 
do so voluntarily, and the Company will seek approval to amend 
its Articles to require all Directors to seek annual re-election. 

Angela Knight and Stephen Pull are subject to election by 
shareholders at the AGM in May 2012 as they were appointed since 
the last AGM. Angela Knight has extensive experience in industry; 
as chief executive of the British Bankers’ Association and as a 
non-executive director of major ﬁ nancial services companies. 
Stephen Pull has extensive experience in the ﬁ nancial services 
industry. The Board considers that both bring great value and 
recommends their election. 

Keith Hamill and Terry Smith retire in accordance with the Articles 
and will seek re-election at the AGM. 

In order to comply with the Code, Paul Mainwaring, David Clark, 
Michael Fallon and Rupert Robson are voluntarily offering 
themselves for re-election.

The Board is satisﬁ ed that, following formal performance 
evaluation, the performance of each of the Directors offering 
themselves for re-election continues to be effective, and that each 
demonstrates commitment to the role.

Biographies of all Directors are set out on page 27.

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31

 
 
 
 
Corporate Governance Report
continued

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:

Board*  Committee 

Audit  Remuneration  Nominations
Committee

Committee 

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

8/8 
8/8 

8/8 
8/8 
8/8 
8/8 
3/3 
3/3 
8/8 

– 
– 

– 
4/4 
4/4 
4/4 
– 
– 
4/4 

– 
– 

– 
3/4 
4/4 
4/4 
– 
– 
4/4 

–
–

2/2
2/2
2/2
2/2
–
–
2/2

* 

** 

 Excludes meetings of committees of the Board appointed to complete 
routine business or business previously approved by the Board.
 Appointed to the Board on 1 September 2011.

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.

32

Tullett Prebon plc  Annual Report 2011

AUDIT COMMITTEE

Composition
The Audit Committee was chaired by Richard Kilsby, who has recent 
and relevant ﬁ nancial experience, until July 2011, and from that 
date has been chaired by David Clark who is fulﬁ lling the role while 
a successor to Richard Kilsby is recruited. David Clark has recent and 
relevant ﬁ nancial experience, and has been a Senior Adviser to the 
FSA. Richard Kilsby continued to serve as a member until he retired 
from the Board on 31 December 2011. The other members of the 
Committee during the year were Michael Fallon and Rupert Robson. 
Angela Knight and Stephen Pull were appointed members of the 
Committee in December 2011. All members of the Committee are 
independent Non-executive Directors.

The Nominations Committee has instructed search consultants to 
assist in the selection of an additional Board member with recent 
and relevant ﬁ nancial experience who will take over the role of 
Chairman of the Committee.

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 the Executive Directors being 
present, to ensure that there are no unresolved issues of concern.

Terms of Reference
Throughout 2011 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;

– 

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

–  monitoring the integrity of the ﬁ nancial statements;

–  review of the results of the audit;

– 

– 

– 

 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 Terms of Reference of the Audit Committee are available on 
the Company’s website.

  
 
  
Work of the Audit Committee during 2011
The Audit Committee reviewed the cost effectiveness, objectivity 
and independence of the external auditor. The Audit Committee 
considered the professional and regulatory guidance on auditor 
independence and was satisﬁ ed with the auditor’s representations. 
The Audit Committee reviewed the level of fees paid to the auditor 
in respect of the various services provided by them in addition 
to the audit during 2011. 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 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 reviewed the integrity of the ﬁ nancial 
statements included in 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 considered the continuing appropriateness of 
the accounting policies, key accounting judgements, and the 
adequacy and appropriateness of disclosures.

The Audit Committee 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 FSA.

The Audit Committee reviewed the work and reports of Internal 
Audit and monitored progress against the internal audit plan for 
2011. The Audit Committee reviewed and approved the internal 
audit plan for 2012.

The Audit Committee reviewed and approved the Risk Assessment 
Framework maintained by the Group Risk Control function.

REMUNERATION COMMITTEE

The Remuneration Committee is chaired by Rupert Robson. 
The other members of the Committee throughout the year were 
David Clark, Michael Fallon and Richard Kilsby. Angela Knight 
and Stephen Pull became members of the Committee in 
December 2011. All members of the Committee 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 the 
Remuneration Committee by invitation. The Chairman and the 
Executive Directors are not permitted to be in attendance when 
any matter relating to their own remuneration is being discussed.

During 2011 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 36 to 42.

The Terms of Reference of the Remuneration Committee are 
available on the Company’s website.

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Tullett Prebon plc  Annual Report 2011

33

 
 
 
 
Corporate Governance Report
continued

NOMINATIONS COMMITTEE

RISK MANAGEMENT AND INTERNAL CONTROL

The Nominations Committee is chaired by Keith Hamill. The other 
members throughout the year were David Clark, Michael Fallon, 
Richard Kilsby and Rupert Robson. Angela Knight and Stephen Pull 
became members of the Committee in December 2011. All 
members of the Committee 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.

During 2011 the Nominations Committee, as part of its succession 
planning and to reinforce the Board, speciﬁ ed the qualities it sought 
for two additional non-executive directors to join the Board. 
Appropriate candidates who met those speciﬁ cations were 
identiﬁ ed and the Nominations Committee was able to 
recommend the new appointments to the Board.

In the search to recruit a non-executive director who will chair the 
Audit Committee, the Nominations Committee has prepared a 
speciﬁ cation setting out the skills, knowledge and experience 
required, and has instructed search consultants to identify 
suitable candidates.

In considering the appointment of new non-executive directors the 
Nominations 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 are 
available on the Company’s website.

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, 
policies and procedures, and 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. The system is designed 
to manage rather than eliminate the risk of failure to achieve 
business objectives, and can only provide reasonable and not 
absolute assurance against misstatement or loss. 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. The Audit Committee conducted a formal review of the 
effectiveness of the Group’s internal control systems for 2011, 
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.

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.

34

Tullett Prebon plc  Annual Report 2011

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 43 and the independent 
auditor’s report regarding their reporting responsibility is on 
page 45.

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 19. 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 23 to 27.

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 ﬁ nancial statements 
continue to be prepared on the going concern basis.

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Tullett Prebon plc  Annual Report 2011

35

 
 
 
 
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 2011. 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 UK Corporate 
Governance Code, and will be put to shareholders for approval at 
the AGM on 10 May 2012.

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. 
Except where indicated, all sections of this report 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;

‘Broker’ means front ofﬁ ce revenue generators; and

‘Control Functions’ means those employees engaged in functions 
such as Compliance, Legal, HR, Finance, Operations and Risk Control.

REMUNERATION COMMITTEE

Composition and Responsibility
The Remuneration Committee is chaired by Rupert Robson. The 
other members of the Committee throughout the year were David 
Clark, Michael Fallon and Richard Kilsby. Angela Knight and Stephen 
Pull became members of the Committee in December 2011. All 
members of the Committee are independent 
Non-executive Directors.

The Remuneration Committee is responsible on behalf of the Board 
for developing and maintaining formal and transparent policies on 
remuneration for the Company’s employees, the framework in 
which that policy is applied, and its cost. In addition the Committee 
will periodically review remuneration policies to ensure that they 
continue to be compliant with the relevant corporate governance 
and regulatory requirements, including the FSA 
Remuneration Code. 

Amongst its other duties, 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.

Work of the Remuneration Committee during 2011
Activity during the year included the benchmarking of the ﬁ xed 
remuneration of the two Executive Directors; the review and 
determination of the remuneration of the Chairman and of the 
Executive Directors; the review and approval of the remuneration 
of Senior Management; the making of awards under the LTIP 
scheme; and the determination of the performance conditions 
attached to those awards.

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.

The FSA’s remuneration code (the ‘Remuneration Code’) came into 
effect on 1 January 2011, bringing the Company within its scope 
for the ﬁ rst time. The Company is a Tier Four ﬁ rm for the purpose of 
the application of proportionality under the Remuneration Code. 
The Remuneration Committee was satisﬁ ed that the Company’s 
remuneration policies, processes and governance were in 
compliance with principles 1 to 11 of the Remuneration Code at the 
end of 2010 as required. The Company was able to utilise a 
transitional provision allowing it until 1 July 2011 to be fully 
compliant with those aspects of Principle 12 of the Remuneration 
Code that apply to the Company as a Tier Four ﬁ rm.

The Remuneration Committee reviewed the Company’s 
Remuneration Policy Statement including details of the Company’s 
policies and procedures with respect to compliance with 
Principle 12 of the Remuneration Code in June 2011, and concluded 
that the Company was in full compliance with the Remuneration 
Code at that date.

The Remuneration Policy Statement, including the list of Code Staff, 
was reviewed again in December 2011, and the disclosures 
required to be made under the Remuneration Code were approved. 
These disclosures were ﬁ rst made available on the Company’s 
website in December 2011 and will be updated annually following 
publication of the Annual Report.

36

Tullett Prebon plc  Annual Report 2011

Professional advice
During 2011 and subsequently the Remuneration Committee 
received advice from PricewaterhouseCoopers executive 
compensation consultants (‘PwC’) on regulatory developments 
affecting remuneration, and on aspects of the remuneration of the 
Executive Directors. PwC were appointed by the 
Remuneration Committee.

During 2011 and subsequently PricewaterhouseCoopers LLP have 
also provided outsourced internal audit services, tax advice, and 
other associated services.

REMUNERATION POLICIES

Background
In reviewing and approving the general principles of the Company’s 
remuneration policies, the Remuneration Committee takes into 
account the Company’s objective to maximise returns to 
shareholders over the medium to long term, at an acceptable level 
of risk. The Remuneration Committee also considers the Company’s 
strategy to achieve that objective by building a business which 
operates 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 Remuneration Committee takes into account general practices 
in the parts of the ﬁ nancial services sector in which the Company 
operates, and the fact that the majority of the Company’s 
competitors are not UK listed companies. These practices are 
characterised by high levels of variable remuneration. The 
Remuneration Committee has concluded that it is in the best 
interests of the Company and shareholders to pay remuneration in 
line with market practice in the sectors in which the 
Company operates.

The Company’s remuneration policies, which are set out below, 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.

Risk
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 this 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 generally 
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 has concluded 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.

The implementation of the remuneration policies set out below is 
subject to annual independent internal review, as required by the 
Remuneration Code. The ﬁ rst review is planned to take place in the 
ﬁ rst half of 2012.

Remuneration policies for Executive Directors and 
Senior Management
1.  Fixed remuneration
Salaries are paid monthly and are set at a level to provide a 
reasonable level of ﬁ xed remuneration which would be appropriate 
in circumstances where variable remuneration is not paid due to 
weak performance. Salaries are reviewed periodically and are only 
increased if they are found to be signiﬁ cantly out of line with 
the market.

2.  Variable remuneration
A high level of remuneration is variable and is dependent on 
performance. It is offered to motivate and retain staff and to 
achieve superior returns for shareholders.

Variable remuneration for an individual, and in aggregate for the 
Executive Director and Senior Management population, is 
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 variable remuneration to reﬂ ect an adjustment 
for risk in reviewing ﬁ nancial performance.

While the decision to pay variable remuneration 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 a 
signiﬁ cant payment. This approach is balanced by the Company’s 
principle that the cost of staff should be sensitive to returns to 
shareholders, and the Remuneration Committee reviews the 
remuneration of the Executive Directors and the Senior 
Management population in the context of the operating proﬁ t for 
the year.

Payment of variable remuneration is discretionary and not 
contractual, with the level determined on the basis of judgements 
on performance relative to the trading conditions and other 
circumstances, and the achievement of objectives. 

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Tullett Prebon plc  Annual Report 2011

37

 
 
 
 
Report on Directors’ Remuneration
continued

Variable remuneration is paid to the Executive Director and Senior 
Management population 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 payments are made.

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

3.  Caps on remuneration
The variable remuneration for Executive Directors is effectively 
capped through the application of a formula that establishes the 
maximum amount of variable remuneration that will be paid.

The Remuneration Committee does not believe that the formal 
capping of variable remuneration for Senior Management and 
Brokers 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 variable 
remuneration given the policy of paying ﬁ xed remuneration of a 
relatively low proportion of overall remuneration.

4.  Deferral and claw-backs
Payments of variable remuneration to the Executive Directors are 
subject to deferral through the requirement for an element of the 
payments 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 low risk proﬁ le, as discussed above, it is not 
considered necessary for the variable remuneration paid to Senior 
Management to be subject to deferral, or to attach claw-back 
conditions to variable remuneration paid either to Executive 
Directors or to Senior Management.

5.  Long term incentive plans
Long term equity-based incentive plans are utilised where 
appropriate to motivate the Company’s Executive Directors and 
Senior Management. Recent awards have been structured to 
reward growth in relative and absolute 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, except in 
speciﬁ c individual circumstances, is not consistent with market 
practice in the Company’s key competitor organisations and 
consequently no further awards will be made routinely to Senior 
Management under the Long Term Incentive Plan for the 
foreseeable future.

6.  Pensions
The Company provides deﬁ ned contribution pension arrangements 
only and does not pay discretionary pension beneﬁ ts.

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

Remuneration policies for brokers
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 variable remuneration payments are therefore 
based on the proﬁ ts that the Brokers generate for the business. 
Initial contract payments 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.

Remuneration policies for control functions
The Company’s remuneration policy for Control Function 
employees 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.

38

Tullett Prebon plc  Annual Report 2011

DETAILS OF DIRECTORS’ REMUNERATION (audited except where stated)

Total emoluments received by directors during the year ended 31 December 2011 were as follows:

Salaries and fees 

Beneﬁ ts 

2011 
£000 

2010 
£000 

2011 
£000 

2010 
£000 

Variable remuneration

Cash 

2011 
£000 

Subject to
investment requirement 

2010 
£000 

2011 
£000 

2010 
£000 

Total

2011 
£000 

2010
£000

650 
275 

650 
275 

158 
51 
51 
51 
19 
18 
51 
1,324 

150 
50 
33 
50 
– 
– 
50 
1,258 

2 
1 

– 
– 
– 
– 
– 
– 
– 
3 

2 
1 

– 
– 
– 
– 
– 
– 
– 
3 

1,690 
423 

1,846 
462 

1,690 
422 

1,846 
461 

4,032 
1,121 

4,344
1,199

– 
– 
– 
– 
– 
– 
– 
2,113 

– 
– 
– 
– 
– 
– 
– 
2,308 

– 
– 
– 
– 
– 
– 
– 
2,112 

– 
– 
– 
– 
– 
– 
– 
2,307 

158 
51 
51 
51 
19 
18 
51 
5,552 

150
50
33
50
–
–
50
5,876

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

*  Retired 31 December 2011.
**   Appointed 1 September 2011.

Executive Directors
The Remuneration Committee took into account the pay and 
employment conditions of other employees in the Company in 
determining the Executive Directors’ remuneration. 

The relative importance of the ﬁ xed and variable elements of 
remuneration for the Executive Directors was 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 2011 the proportion of remuneration that 
is related to performance for Terry Smith was 89% (2010: 90%) and 
for Paul Mainwaring was 83% (2010: 84%).

The total remuneration of the Executive Directors was as follows:

1.  Fixed remuneration
The ﬁ xed remuneration of the Chief Executive, Terry Smith, is 
£650,000 and has not been changed since 2005. The ﬁ xed 
remuneration of the Finance Director, Paul Mainwaring, is £275,000 
and has not changed since his appointment in 2006.

2.  Variable remuneration
The Remuneration Committee establishes the total amount of 
variable remuneration to be paid to the Executive Directors and 
then allocates it between them taking into consideration their 
personal contribution and internal relativities. It is the policy of the 
Remuneration Committee not to pay variable remuneration to a 
director if it is not satisﬁ ed with personal performance.

As set out in the Report on Directors’ Remuneration in last year’s 
Annual Report, in order to determine the total variable 
remuneration for the Executive Directors, the Remuneration 
Committee applies a formula of 4.0% – 4.5% of the surplus of 
operating proﬁ t over the threshold operating proﬁ t which is 
calculated as the weighted average cost of capital (‘WACC’) 
multiplied by capital employed. The determination of the total 
variable remuneration within the range takes account of additional 
factors, such as the achievement of the Company’s and individuals’ 
objectives and corporate performance relative to market 
circumstances. 

For 2011 the Remuneration Committee determined that the 
operating proﬁ t to be used in the formula should be before the 
charge for restructuring costs. The amount of variable 

remuneration available for 2011 for the Executive Directors, using 
the formula above and a WACC of 11.5%, was determined to be 
£4.225m (2010 variable remuneration: £4.615m). The allocation of 
the total variable remuneration to each of the Executive Directors is 
shown above.

Consistent with the approach taken in recent years, one-half of the 
2011 variable remuneration 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.

2011 is the fourth successive year for which the Remuneration 
Committee has determined that 50% of the variable remuneration 
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 variable remuneration 
awarded for 2009 can now be divested, and the Remuneration 
Committee has determined that the investment condition for the 
50% of the variable remuneration awarded for 2011 will be met by 
the Executive Directors being required to hold the requisite number 
of shares purchased with the 2009 payment of variable 
remuneration for a further period of two years. The interests of the 
Directors in the Company’s shares are set out in the Directors’ 
Report on page 28.

The Remuneration Committee intends to apply the formula set out 
above to determine the total amount of variable remuneration for 
the Executive Directors for 2012.

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. The Remuneration Committee will 
record and explain any such change in the Report on Directors’ 
Remuneration.

Tullett Prebon plc  Annual Report 2011

39

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Report on Directors’ Remuneration
continued

3.  Long-term incentives
The outstanding share options awarded to each of the Executive Directors is set out in the table below:

Director 
Terry Smith 

Terry Smith 

Terry Smith 

Shares 
under 
option at 
1 Jan 
2011 
22 June  671,441 

Date of 
grant 

Exercised 
during 
the year 

Shares 
under 
Lapsed 
option at 
during the 
1 Jan 
year 
2012 
–  369,293   302,148 

Granted 
during 
the year 
– 

2009 
21 May 
2010 
18 April 
2011 

634,559  

– 

–  446,001 

–  

– 

–   634,559 

–  446,001 

Paul Mainwaring 

22 June  284,071 

Paul Mainwaring 

Paul Mainwaring 

2009 
21 May 
2010 
18 April 
2011 

–  

– 

162,707  

–   111,500  

–  156,239 

127,832 

–  

–  

–   162,707 

–   111,500 

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 
22 June 
2012 
21 May 
2013 
18 April 
2014 
22 June 
2012 
21 May 
2013 
18 April 
2014 

Date of
expiry of
option
22 June
2019
21 May
2020
18 April
2021
22 June
2019
21 May
2020
18 April
2021

Performance conditions
The vesting of all awards is subject to the achievement of 
performance conditions, based on relative or absolute total 
shareholder return (‘TSR’), subject to the achievement of return 
on capital employed (‘ROCE’) of not less than 25% in the ﬁ nal 
year of each performance period (‘the ROCE Hurdle’).

The determination of the extent of vesting with respect to 
TSR is made by PwC on behalf of the Remuneration Committee 
and the determination of ROCE is made by the Board.

companies comprising the FTSE 250 (excluding investment trusts) 
at 1 January 2010 is 50th and with maximum vesting of 100% if 
the ranking percentile is 25th or better.

The vesting of one-third of the awards made in 2010 is subject to 
absolute TSR over the three years to 31 December 2012, with 
minimum vesting of 25% of the awards if the Company’s 
annualised TSR over that period is equal to RPI + 4.5% and with 
maximum vesting of 100% if annualised TSR is equal to RPI + 9.5% 
or above. 

The Remuneration Committee considers that the use of 
relative and absolute TSR meets investors’ expectations of 
outperformance, and the ROCE measure provides an appropriate 
ﬁ nancial performance hurdle.

2011 Awards
The value of the share options granted during the period to Terry 
Smith was £1,846,000 (2010: £1,950,000) and to Paul Mainwaring 
was £461,500 (2010: £500,000). 

2009 Awards
The vesting of the awards made in 2009 was subject to relative TSR 
over the three years to 31 December 2011, with minimum vesting 
of 25% of the awards 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 was 50th and with 
maximum vesting of 100% if the ranking percentile was 25th or 
better, subject in both cases to achieving the ROCE Hurdle. At the 
end of the three year period 45% of the awards vested and 
55% lapsed.

The Company’s actual TSR ranking percentile over that period has 
been calculated by PwC as 43.3% and, as the Remuneration 
Committee has determined that the ROCE Hurdle has been met, 
45% of the awards made in 2009 have vested (Terry Smith 302,148 
shares; Paul Mainwaring 127,832 shares) and are ﬁ rst exercisable 
from 22 June 2012.

2010 Awards
The vesting of two-thirds of the awards made in 2010 is subject 
to relative TSR over the three years to 31 December 2012, with 
minimum vesting of 25% of the awards if the ranking percentile of 
the Company’s TSR over that period relative to the TSR of all other 

40

Tullett Prebon plc  Annual Report 2011

The vesting of half of the awards made in 2011 is subject to relative 
TSR over the three years to 31 December 2013, with minimum 
vesting of 25% of the awards if the ranking percentile of the 
Company’s TSR over that period relative to the TSR of all other 
companies comprising the FTSE 250 (excluding investment trusts) 
at 1 January 2011 is 50th and with maximum vesting of 100% if 
the ranking percentile is 25th or better.

The vesting of half of the awards made in 2011 is subject to 
absolute TSR over the three years to 31 December 2013, with 
minimum vesting of 25% of the awards if the Company’s 
annualised TSR over that period is equal to RPI + 4.5% and with 
maximum vesting of 100% if annualised TSR is equal to RPI + 9.5% 
or above.

Share price during the year
The lowest closing price of Tullett Prebon plc ordinary shares during 
the year to 31 December 2011 was 266.3p and the highest closing 
price was 428.6p. At 31 December 2011 the closing share price 
was 270p.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.  Beneﬁ ts
No pension contributions were made in respect of Terry Smith 
during 2011 (2010: £nil). Paul Mainwaring received pension 
contributions during 2011 of £6,336 (2010: £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 £2,370 and £878 respectively during 2011.

5.  Outside directorships (unaudited)
Neither Terry Smith nor Paul Mainwaring has any outside 
directorships. 

6.  Service contracts (unaudited)
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 variable remuneration. 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

Non-executive Directors
1.  Fees
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 September 2011 the 
Non-executive Directors would receive fees of £54,000 per annum 
(from £50,000) with the exception of Angela Knight who receives a 
fee of £58,000 per annum in recognition of her position as the 
Senior Independent Director, and the Chairman whose fee was 
increased to £175,000 per annum (from £150,000). The 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. 

2.  Appointment Letters (unaudited)
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 
Angela Knight 
Stephen Pull 
Rupert Robson 

Date of letter of appointment
22 September 2000
10 March 2003
28 September 2010
3 June 2005
1 September 2011
1 September 2011
4 January 2007

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Tullett Prebon plc  Annual Report 2011

41

 
 
 
 
Report on Directors’ Remuneration
continued

Total shareholder returns 
A graph depicting the Company’s total shareholder return in comparison to other companies in the FTSE 250 index and the 
FTSE 350 Financial Services index in the ﬁ ve years to 31 December 2011 is shown below:

180

160

140

120

100

80

60

40

20

Tullett Prebon plc
FTSE250
FTSE350 Financial Services

2007

2008

2009

2010

2011

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
6 March 2012

42

Tullett Prebon plc  Annual Report 2011

Statement of Directors’ Responsibilities

The directors are responsible for keeping adequate accounting 
records that are sufﬁ cient to show and explain the Company’s 
transactions and 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 corporate and ﬁ nancial information included on the Company’s 
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.

By order of the Board

Terry Smith
Chief Executive
6 March 2012

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

– 

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

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 2011

43

 
 
 
 
Financial Statements

In this section:

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

  Group
45 
46  Consolidated Income Statement
47  Consolidated Statement of Comprehensive Income
48  Consolidated Balance Sheet
49  Consolidated Statement of Changes in Equity
50  Consolidated Cash Flow Statement
51  Notes to the Consolidated Financial Statements

Company

89  Independent Auditor’s Report to the Members of Tullett Prebon plc
90  Company Balance Sheet
91  Notes to the Financial Statements

44

Tullett Prebon plc  Annual Report 2011

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

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.

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 Corporate 
Governance Report, in relation to going concern;

 the part of the Corporate Governance Report relating to the 
Company’s compliance with the nine provisions of the UK 
Corporate Governance 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 
2011 and on the information in the Report on Directors’ 
Remuneration that is described as having been audited.

Manbhinder Rana F.C.A. (Senior Statutory Auditor)
for and on behalf of

Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom
6 March 2012

We have audited the Group Financial Statements of Tullett Prebon 
plc for the year ended 31 December 2011 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 40. 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. In addition, we read all the ﬁ nancial and 
non–ﬁ nancial information in the annual report to identify material 
inconsistencies with the audited ﬁ nancial statements. If we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report.

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 2011 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.

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Tullett Prebon plc  Annual Report 2011

45

 
 
 
 
Governance
Consolidated Income Statement
for the year ended 31 December 2011

Revenue 
Administrative expenses 
Other operating income 
Operating proﬁ t 
Finance income 
Finance costs 
Other gains and losses 
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 
Underlying earnings per share is disclosed in Note 12

Notes 
4 

5 

8 
9 
10 

11 

6 

2011 
£m 
910.2 
(803.5) 
23.6 
130.3 
12.8 
(25.1) 
1.2 
119.2 
(30.3) 
88.9 
1.2 
90.1 

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

89.4 
0.7 
90.1 

108.5
0.6
109.1

12 
12 

41.3p 
41.1p 

50.5p
50.3p

46

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2011

Proﬁ t for the year 
Other comprehensive income: 
Revaluation of investments 
Effect of changes in exchange rates on translation of foreign operations 
Actuarial gains 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 

36 
11 

2011 
£m 
90.1 

(0.7) 
0.2 
8.2 
(3.2) 
4.5 
94.6 

93.8 
0.8 
94.6 

2010
£m
109.1

0.3
9.1
14.5
(6.8)
17.1
126.2

125.3
0.9
126.2

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Tullett Prebon plc  Annual Report 2011

47

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheet
as at 31 December 2011

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

Current assets
Trade and other receivables 
Financial 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 
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 

2011 
£m 

2010
£m

14 
15 
16 
17 
18 
20 
36 

21 
19 
32(b) 

22 
23 

25 

23 
20 
25 
26 

28 
29(a) 
29(a) 
29(b) 
29(c) 
29(c) 
29(c) 

396.6 
18.3 
22.1 
3.4 
7.4 
4.9 
35.5 
488.2 

5,255.9 
30.8 
342.0 
5,628.7 
6,116.9 

(5,298.3) 
(30.1) 
(36.7) 
(12.4) 
(5,377.5) 
251.2 

(235.6) 
(14.1) 
(6.4) 
(7.8) 
(263.9) 
(5,641.4) 
475.5 

53.8 
9.9 
(1,182.3) 
148.4 
1,442.6 
472.4 
3.1 
475.5 

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

The consolidated ﬁ nancial statements of Tullett Prebon plc (registered number 5807599) were approved by the Board of directors and 
authorised for issue on 6 March 2012 and are signed on its behalf by:

Terry Smith
Chief Executive

48

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Changes in Equity
for the year ended 31 December 2011

Balance at 1 January 2011 
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 
Increase in minority 
equity interests 
Credit arising on 
share-based payment awards 
Taxation arising on 
share-based payment awards 
Balance at 31 December 2011 

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 

Equity attr ibutable to equity holders of the parent

Share 
Share  premium  
account 
capi tal 
£m 
£m 
9.9 
53.8 
– 
– 

Reverse 
acquisition 
reserve 
£m 
(1,182.3) 
– 

Equity 
reserve 
£m 
5.3 
– 

Re- 
valuation 
reserve 
£m 
2.6 
– 

Merger 
reserve 
£m 
121.5 
– 

Hedging 
and 
 translation 
  £m 
17.4 
– 

Own 
shares 
£m 

Retained 
earnings 
£m 

Total 
£m 
(0.1)  1,380.9  409.0 
89.4 

89.4 

– 

  Minority 
Total
interests 
equity
£m 
£m
2.8  411.8
0.7  90.1

– 

– 

– 
– 

– 

– 

– 

– 

– 
– 

– 

– 

– 

– 

– 
– 

– 

– 

– 

– 

2.4 
– 

– 

– 

(0.7) 

(0.7) 

– 
– 

– 

– 

– 

– 

– 
– 

– 

– 

– 

– 

– 
– 

– 

– 

– 

– 

– 
– 

– 

– 

5.1 

4.4 

0.1 

4.5

94.5 

93.8 

0.8  94.6

– 
(33.9) 

2.4 
(33.9) 

– 

2.4
(0.7)  (34.6)

– 

– 

0.2 

0.2

1.4 

1.4 

– 

1.4

– 
53.8 

– 
9.9 

– 
(1,182.3) 

– 
7.7 

– 
1.9 

– 
121.5 

– 
17.4 

– 

(0.3) 
(0.1)  1,442.6  472.4 

(0.3) 

– 

(0.3)
3.1  475.5

53.8 
– 

9.9 
– 

(1,182.3) 
– 

– 

– 

– 
– 
– 

– 

– 

– 

– 
– 
– 

– 

– 

– 

– 
– 
– 

– 

– 
53.8 

– 
9.9 

– 
(1,182.3) 

– 
– 

– 

– 

5.3 
– 
– 

– 

– 
5.3 

2.3 
– 

0.3 

0.3 

– 
– 
– 

– 

121.5 
– 

– 

– 

– 
– 
– 

– 

7.6 
– 

9.8 

9.8 

– 
– 
– 

– 

(2.8) 
– 

1,300.3  310.3 
108.5  108.5 

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 

– 

5.3
(0.3)  (33.0)
1.7

– 

(0.4) 

– 

– 

–

– 
2.6 

– 
121.5 

– 
17.4 

– 
(0.1) 

(0.9) 

(0.9) 
1,380.9  409.0 

– 

(0.9)
2.8  411.8

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Consolidated Cash Flow Statement
for the year ended 31 December 2011

Net cash from operating activities 

Investing activities
Sale/(purchase) of ﬁ nancial assets 
Interest received 
Dividends from associates 
(Purchase)/sale of investments 
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 
Funds received from debt issue 
Debt issue costs 
Repayment of obligations under ﬁ nance leases 
Net cash used in ﬁ nancing activities 

Net (decrease)/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 
32(a) 

13 

2011 
£m 
95.2 

7.8 
2.2 
1.2 
(3.5) 
(9.4) 
(3.0) 
– 
(11.0) 
(15.7) 

(33.9) 
(0.7) 
– 
(210.0) 
120.0 
(3.4) 
(0.2) 
(128.2) 

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)

(48.7) 

18.0

390.1 
0.6 
342.0 

366.1
6.0
390.1

32(b) 

50

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Notes to the Consolidated Financial Statements
for the year ended 31 December 2011

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 96. The nature of the Group’s operations and its 
principal activities are set out in the Directors’ Report on pages 28 
to 29 and in the Business Review on pages 05 to 25.

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 35 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. Those interests of non-controlling shareholders that are 
present ownership interests entitling their holders to a 
proportionate share of net assets upon liquidation may initially be 
measured at fair value or at the non-controlling interests’ 
proportionate share of the fair value of the acquiree’s identiﬁ able 
net assets. Other non-controlling interests are initially measured at 
fair value. 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
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:

–  Revised IAS 24 ‘Related Party Disclosures’;

– 

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

–  Improvements to IFRSs (2010);

– 

– 

 IFRIC 19 ‘Extinguishing Financial Liabilities with Equity 
Instruments’; and

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

At the date of authorisation of these ﬁ nancial statements, the 
following EU endorsed Standard was in issue but not yet effective. 
The Group has not applied this Standard in the preparation of these 
ﬁ nancial statements:

– 

 Amendments to IFRS 7 ‘Financial Instruments: Disclosures’ 
relating to transfers of ﬁ nancial assets.

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’ and subsequent amendments to 
IFRS 9 and IFRS 7;

–  IFRS 10 ‘Consolidated Financial Statements’;

–  IFRS 11 ‘Joint Arrangements’;

–  IFRS 12 ‘Disclosures of Interests in Other Entities’;

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

2. Basis of preparation continued
–  IFRS 13 ‘Fair Value Measurement’;

–  IAS 27 ‘Separate Financial Statements’;

–  IAS 28 ‘Investments in Associates and Joint Ventures’;

– 

 Amendments to IAS 1 ‘Presentation of Financial Statements’ 
regarding the presentation of items of other 
comprehensive income;

–  Amendments to IAS 19 ‘Employee Beneﬁ ts’;

– 

– 

– 

 Amendments to IFRS 7 ‘Financial Instruments: Disclosures’ 
regarding disclosures relating to offsetting ﬁ nancial assets and 
ﬁ nancial liabilities;

 Amendments to IAS 32 ‘Financial Instruments: Presentation’ 
regarding offsetting ﬁ nancial assets and ﬁ nancial liabilities; and

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

The directors do not expect that the adoption of the standards 
listed above will have a material impact on the ﬁ nancial statements 
of the Group in future periods, except as follows:

– 

– 

– 

– 

 IFRS 9 will impact both the measurement and disclosures of 
ﬁ nancial instruments;

 IFRS 12 will impact the disclosure of interests Tullett Prebon plc 
has in other entities;

 IFRS 13 will impact the measurement of fair value for certain 
assets and liabilities as well as the associated disclosures; and

 Amended IAS 19 will impact the measurement of the various 
components representing movements in the deﬁ ned beneﬁ t 
pension asset and associated disclosures, but not the Group’s 
total asset. The replacement of expected returns on plan assets 
and interest cost on plan liabilities with a single net ﬁ nance 
income amount based on the discount rate would result in the 
proﬁ t for the period being reduced in the income statement 
with a corresponding increase in other comprehensive income.

It is not practicable to provide a complete estimate of the effect of 
these standards until a detailed review has been completed prior to 
implementation.

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;

52

Tullett Prebon plc  Annual Report 2011

(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

 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.

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

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

3. Summary of signiﬁ cant accounting policies continued
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.

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 payments
Payments made to brokers under employment contracts which are 
in advance of the expected economic beneﬁ t due to the Group are 
accounted for as prepayments and included within trade and other 
receivables. Payments made in advance are subject to repayment 
conditions during the contract period and the prepayment is 
amortised over the shorter of the contract term and the period the 
payment remains recoverable. Amounts that are irrecoverable, or 
become irrecoverable, are written off immediately. These 
prepayments are subject to annual review.

Payments made in arrears are accrued and are included within 
trade and other payables.

(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’.

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.

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. 

54

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
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.

(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, except where a netting agreement, which is legally 
enforceable at all times, exists and the asset and liability are either 
settled net or simultaneously.

(n) 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.

(o) 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.

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

3. Summary of signiﬁ cant accounting policies continued
 (p) 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.

(q) 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.

(r) 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.

(s) 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.

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 or equity, in which case the deferred tax is 
also dealt with in other comprehensive income or equity.

(t) 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.

(u) 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.

56

Tullett Prebon plc  Annual Report 2011

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 for the cash-generating unit, 
the selection of suitable discount rates and the estimation of 
future growth rates.

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.

Provisions
Provisions are established by the Group based on management’s 
assessment of relevant information and advice available at the 
time of preparing the ﬁ nancial statements. Outcomes are 
uncertain and dependent on future events. Where outcomes differ 
from management’s expectations, differences from the amount 
initially provided will impact proﬁ t or loss in the period the 
outcome is determined.

Contingent consideration payable on acquisitions
Acquisition consideration that is contingent on future events is 
recorded at its acquisition date fair value, based on management’s 
assessment of achieving the required targets. Subsequent changes 
in the fair value of contingent consideration are reﬂ ected in proﬁ t 
or loss in the period in which the re-measurement occurs.

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.

(v) 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.

(w) 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.

(x) 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.

(y) 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.

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57

 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

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

Revenue:
Europe 
Americas 
Asia Paciﬁ c 

Operating proﬁ t:
Europe 
Americas 
Asia Paciﬁ c 
Underlying operating proﬁ t 
Charge relating to major legal actions (1) 
Restructuring costs (2) 
Reported operating proﬁ t 
Finance income 
Finance costs 
Other gains and losses 
Proﬁ t before tax 
Taxation 
Proﬁ t of consolidated companies 
Share of results of associates 
Proﬁ t for the year 

2011 
£m 

548.3 
242.5 
119.4 
910.2 

124.6 
9.1 
14.7 
148.4 
(6.6) 
(11.5) 
130.3 
12.8 
(25.1) 
1.2 
119.2 
(30.3) 
88.9 
1.2 
90.1 

2010
£m

536.1
259.0
113.4
908.5

126.7
24.2
9.2
160.1
(7.7)
–
152.4
11.3
(22.4)
–
141.3
(33.7)
107.6
1.5
109.1

(1)  The charge relating to major legal actions is the net of amounts included in other income and in administrative expenses.
(2)  Restructuring costs are included in administrative expenses.

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

Tullett Prebon plc is domiciled in the UK. Revenue attributable to the UK amounted to £498.8m (2010: £489.3m) and the total revenue 
from other countries was £411.4m (2010: £419.2m).

Other segmental information

Capital additions
Europe – UK 
Europe – Other 
Americas 
Asia Paciﬁ c 

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Tullett Prebon plc  Annual Report 2011

2011  
£m 

9.2 
0.1 
2.1 
1.0 
12.4 

2010
£m

6.9
0.2
3.9
1.6
12.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortisation
Europe – UK 
Europe – Other 
Americas 
Asia Paciﬁ c 

Share-based compensation
Europe – UK 
Europe – Other 
Americas 
Asia Paciﬁ c 

Segment assets
Europe – UK 
Europe – Other 
Americas 
Asia Paciﬁ c 

Segment liabilities
Europe – UK 
Europe – Other 
Americas 
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   

2011  
£m 

4.5 
0.1 
3.0 
1.2 
8.8 

2011  
£m 

1.4 
– 
– 
– 
1.4 

2011  
£m 

2010
£m

4.9
0.1
3.5
0.9
9.4

2010
£m

(0.9)
–
–
–
(0.9)

2010
£m

2,909.0 
26.8 
3,107.8 
73.3 
6,116.9 

1,800.5
33.6
3,155.0
80.7
5,069.8

2011  
£m 

2010
£m

2,668.4 
23.3 
2,902.0 
47.7 
5,641.4 

1,586.3
31.6
2,981.5
58.6
4,658.0

2011 
£m 

255.7 
204.1 
257.0 
48.4 
106.0 
39.0 
910.2 

2010
£m

248.4
205.0
249.3
67.2
105.8
32.8
908.5

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.

Tullett Prebon plc  Annual Report 2011

59

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

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

Depreciation of property, plant and equipment (Note 16) 
Amortisation of intangible assets (Note 15) 
Staff costs (Note 7) 
(Gain)/loss recognised on available-for-sale unlisted investments (Note 27(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 and associates pursuant to legislation 
Total audit fees 

Audit-related assurance services 
Taxation compliance services 
Other taxation advisory services 
Other assurance services 
Corporate ﬁ nance services 
Other services 
Total non-audit fees 

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

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

Europe 
Americas 
Asia Paciﬁ c 

The aggregate employment costs of staff and directors were:

Wages, salaries, bonuses and incentive payments   
Social security costs 
Deﬁ ned contribution pension costs (Note 36(b)) 
Share-based compensation expense/(credit) 

60

Tullett Prebon plc  Annual Report 2011

2011  
£m 
5.5 
3.3 
626.4 
– 
2.0 

2011 
£000 
426 
1,535 
1,961 

34 
130 
20 
7 
– 
20 
211 

9 

2011 
No. 
1,224 
754 
572 
2,550 

2011 
£m 
569.7 
49.0 
6.3 
1.4 
626.4 

2010
£m
6.4
3.0
605.8
(1.0)
1.9

2010
£000
401
1,499
1,900

14
134
32
–
19
10
209

9

2010
No.
1,170
739
552
2,461

2010
£m
555.2
45.9
5.6
(0.9)
605.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8. Finance income

Interest receivable and similar income 
Expected return on pension schemes’ assets 

9. Finance costs

Interest and fees payable on bank facilities  
Interest payable on Eurobonds 
Other interest payable 
Amortisation of debt issue costs 
Total borrowing costs 
Amortisation of discount on deferred consideration 
Interest cost on pension schemes’ liabilities 

10. Other gains and losses

Fair value gain on the acquisition of controlling interests (Note 31) 
Credit arising on adjustments to deferred consideration (Note 31) 

11. Taxation

Current tax:
UK corporation tax  
Double tax relief 

Overseas tax 
Prior year UK corporation tax  
Prior year overseas tax 

Deferred tax: (Note 20)
Current year 
Prior year  

Tax charge for the year 

2011 
£m 
2.3 
10.5 
12.8 

2011 
£m 
5.1 
10.5 
0.3 
1.4 
17.3 
0.2 
7.6 
25.1 

2011 
£m 
0.3 
0.9 
1.2 

 2011 
£m 

31.0 
(0.3) 
30.7 
1.2 
(0.9) 
(0.2) 
30.8 

0.7 
(1.2) 
(0.5) 

2010
£m
1.9
9.4
11.3

2010
£m
2.6
10.5
0.3
1.2
14.6
–
7.8
22.4

201 0
£m
–
–
–

 2010
 £m

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

4.7
(0.1)
4.6

30.3 

33.7

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61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

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

Proﬁ t before tax: 
Tax based on the UK corporation tax rate of 26.5% (2010: 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 losses 
Prior year adjustments 
Tax on capital related items 
Other 
Tax charge and effective tax rate for the year 

2011 

2010

£m 
119.2 
31.6 
5.9 
(3.1) 
0.4 
(1.1) 
0.1 
(2.3) 
– 
(1.2) 
30.3 

%  

26.5 
5.0 
(2.5) 
0.1 
(0.9) 
– 
(1.8) 
– 
(1.0) 
25.4 

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

%

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

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

Recognised 
in other 
comprehensive 
income 
 2011 
 £m 

Recognised
 in equity 
 2011 
 £m 

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

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 and equity 

– 
0.1 
0.1 

3.1 
– 
– 
3.1 
3.2 

– 
– 
– 

– 
0.3 
– 
0.3 
0.3 

12. Earnings per share

Basic – underlying 
Basic 
Diluted – underlying 
Diluted – basic 

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

Basic weighted average shares 
Contingently issuable shares 
Issuable on exercise of options 
Diluted weighted average shares 

62

Tullett Prebon plc  Annual Report 2011

Total 
 2011 
 £m 

– 
0.1 
0.1 

3.1 
0.3 
– 
3.4 
3.5 

 2011 
46.1p 
41.3p 
45.8p 
41.1p 

2011 
 No.(m) 
216.5 
0.9 
0.3 
217.7 

Total
 2010
 £m

(0.1)
(1.0)
(1.1)

8.1
(0.3)
0.1
7.9
6.8

2010
50.1p
50.5p
49.9p
50.3p

2010
No.(m)
214.9
0.2
0.6
215.7

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

Proﬁ t for the year  
Mi nority interests 
Earnings 
Net charge relating to major legal actions 
Restructuring costs 
Other gains and losses 
Tax on above items 
Tax on capital related items 
Underlying Earnings  

13. Dividends

Amounts recognised as distributions to equity holders in the year:
Interim dividend for the year ended 31 December 2011 of 5.25p per share 
Final dividend for the year ended 31 December 2010 of 10.5p per share 
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 

2011 
£m 
90.1 
(0.7) 
89.4 
6.6 
11.5 
(1.2) 
(6.6) 
– 
99.7 

2011 
£m 

11.3 
22.6 
– 
– 
33.9 

2010
£m
109.1
(0.6)
108.5
7.7
–
–
(2.5)
(6.0)
107.7

2010
£m

–
–
11.3
21.4
32.7

In respect of the current year, the directors propose that the ﬁ nal dividend of 11.25p per share amounting to £24.5m will be paid on 
17 May 2012 to all shareholders on the Register of Members on 27 April 2012. 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 Beneﬁ t Trust 2007 have waived their rights to dividends.

14. 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 

2011 
£m 

383.7 
20.3 
1.4 
(1.6) 
403.8 

(7.2) 
396.6 

2010
£m

380.7
1.3
0.3
1.4
383.7

(7.2)
376.5

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

Europe 
Americas 
Asia Paciﬁ c 

2011 
£m 
195.1 
182.2 
19.3 
396.6 

2010
£m
193.8
163.4
19.3
376.5

Tullett Prebon plc  Annual Report 2011

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

14. Goodwill continued
The recoverable amount of each of the CGUs is based on value in use calculations. The key assumptions for the value in use calculations 
are those regarding expected cash ﬂ ows arising in future periods, regional growth rates and the discount rates. Future cash ﬂ ow 
projections are based on the most recent Board approved ﬁ nancial budgets for 2012 which are used to project cash ﬂ ows for the next ﬁ ve 
years. After this period a  steady state cash ﬂ ow is used to derive a terminal value for the CGU. Allocated goodwill has an indeﬁ nite life and 
this is reﬂ ected in the calculation of the CGU’s terminal value. Estimated average growth rates, based on the regions’ constituent country 
growth rates as published by the World Bank, are used to estimate cash ﬂ ows after the budgeted period. The growth rates used were 
2.16% for Europe, 2.93% for Americas and 3.93% for Asia. Resultant cash ﬂ ows have been discounted at a pre-tax discount rate of 11.5% 
(2010: 11.5%).

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.

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

2011 
Cost 
Amortisation 
Carrying amount 

2010
Cost 
Amortisation 
Carrying amount 

At 
1 January 
£m 
23.8 
(11.7) 
12.1 

Additions 
£m 
9.4 
– 
9.4 

Recognised 
with 
acquisitions 
£m 
0.2 
– 
0.2 

Amounts 
written 
down 
£m 
(0.1) 
0.1 
– 

Charge 
for the 
year 
£m 
– 
(3.3) 
(3.3) 

Effect of 
exchange 
movements 
£m 
(0.1) 
– 
(0.1) 

At
31 December
£m
33.2
(14.9)
18.3

16.4 
(9.0) 
7.4 

7.5 
– 
7.5 

– 
– 
– 

(0.7) 
0.7 
– 

– 
(3.0) 
(3.0) 

0.6 
(0.4) 
0.2 

23.8
(11.7)
12.1

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16. Property, plant and equipment

Cost
At 1 January 2011 
Additions 
Recognised with acquisitions 
Effect of movements in exchange rates 
At 31 December 2011 

Accumulated depreciation
At 1 January 2011 
Charge for the year 
Effect of movements in exchange rates 
At 31 December 2011 

Carrying amount
At 31 December 2011 

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 

Land, 
buildings, 
and leasehold 
improvements 
£m 

Furniture,
ﬁ xtures,
equipment
and motor
vehicles 
£m 

27.9 
1.0 
– 
– 
28.9 

(12.7) 
(2.1) 
– 
(14.8) 

38.0 
2.0 
0.3 
– 
40.3 

(28.9) 
(3.4) 
– 
(32.3) 

 Total
£m

65.9
3.0
0.3
–
69.2

(41.6)
(5.5)
–
(47.1)

14.1 

8.0 

22.1

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) 

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

The carrying amount of the Group’s property, plant and equipment includes an amount of £0.1m (2010: £0.3m) in respect of assets held 
under ﬁ nance leases.

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

17. 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 

2011 
£m 
3.4 

15.0 
(5.5) 
9.5 

16.0 
2.9 

2010
£m
3.6

15.0
(5.6)
9.4

15.2
2.6

A list of the signiﬁ cant investments in associates, including the name, country of incorporation and proportion of ownership interest is 
given in Note 39.

18. Investments

Available-for-sale assets carried at fair value
– unlisted 
– listed 

2011 
£m 

6.0 
1.4 
7.4 

2010
£m

2.0
2.1
4.1

The fair values of unlisted available-for-sale assets are based on derived valuations as disclosed in Note 27(g).

Listed investments 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. Fair values are derived from quoted market prices.

19. Financial assets

Short term government securities 
Term deposits 

Financial assets are liquid funds held on deposit with banks and clearing organisations.

2011 
£m 
7.6 
23.2 
30.8 

2010
£m
4.5
31.1
35.6

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20. 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 
Credit/(charge) to income for the year 
Charge to other comprehensive income for the year 
Charge to equity in the year 
Effect of movements in exchange rates 
At 31 December 

Deferred tax balances and mov ements thereon are analysed as:

2011 
£ m 
4.9 
(14.1) 
(9.2) 

2011 
£m 
(6.5) 
0.5 
(3.1) 
(0.3) 
0.2 
(9.2) 

2010
£m
13.0
(19.5)
(6.5)

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£m
5.6
(4.6)
(7.9)
–
0.4
(6.5)

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

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

At 
1 January 
2011 
£m 
0.7 
(7.3) 
1.3 
(1.2) 
(6.5) 

At 
1 January 
2010 
£m 
0.9 
1.8 
– 
2.9 
5.6 

Recognised 
in proﬁ t 
or loss 
£m 
(0.1) 
(1.6) 
6.7 
(4.5) 
0.5 

Recognised 
in other 
comprehensive 
income 
£m 
– 
(3.1) 
– 
– 
(3.1) 

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) 

Recognised 
in equity 
£m 
(0.3) 
– 
– 
– 
(0.3) 

Recognised 
in equity 
£m 
– 
– 
– 
– 
– 

Effect of 
movements 
in exchange 
rates 
£m 
– 
– 
0.5 
(0.3) 
0.2 

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

At 
31 December 
2011
£m
0.3
(12.0)
8.5
(6.0)
(9.2)

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

At the balance sheet date, the Group has an unrecognised deferred tax asset from tax losses of £5.5m (2010: £7.2m) available for offset 
against future proﬁ ts. A deferred tax asset of £8.5m in respect of tax losses has been recognised in 2011 (2010: £1.3m).

The 31 December 2011 deferred tax liability relating to deﬁ ned beneﬁ t retirement schemes includes a liability of £12.4m (2010: £8.3m) in 
respect of the surplus on the Group’s UK schemes.

No deferred tax has been recognised on temporary differences associated with unremitted 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. As at the balance sheet date, the Group had unrecognised deferred tax liabilities of £0.5m (2010:£0.5m) in respect of 
withholding tax on unremitted earnings.

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67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

21. 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 

2011 
£m 
76.0 
5,102.1 
5,178.1 
8.8 
63.5 
5.4 
0.1 
5,255.9 

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

2011 
£m 
55.0 

10.9 
4.2 
5.9 
21.0 

76.0 

2010
£m
59.5

11.7
4.2
4.4
20.3

79.8

Trade receivables are shown net of a provision of £1.4m (2010: £1.5m) 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 
Greater than 90 days 
Total past due 

Settlement balances 

2011 
£m 
4,964.5 

2010
£m
4,008.4

97.8 
12.5 
15.8 
11.5 
137.6 

20.2
9.3
–
–
29.5

5,102.1 

4,037.9

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 22 ‘Trade and other payables’.

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Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22. 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 

2011 
£m 
5,101.7 
5.5 
5,107.2 
33.0 
2.9 
155.2 
– 
5,298.3 

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

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

23. Interest bearing loans and borrowings

2011 
Obligations under ﬁ nance leases 
Eurobond due 2014 
Eurobond due 2016 
Bank loan 

2010
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 
– 
8.5 
139.5 
87.6 
235.6 

0.1 
– 
– 
30.0 
30.1 

0.2 
8.5 
139.1 
180.0 
327.8 

Total
£m
0.1
8.5
139.5
117.6
265.7

0.3
8.5
139.1
210.0
357.9

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 27.

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 2011, the carrying value of the Eurobond due 2016, together with unamortised transaction costs, amounted to £139.5m 
and its fair value was £140.8m (2010: £139.7m).

Eurobond: Due 12 August 2014
As at 31 December 2011, £8,470,000 (2010: £8,470,000) 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.

At 31 December 2011, 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 £8.4m (2010: £7.0m).

Bank loan and credit facility
On 8 February 2011, the Group entered into a £235m credit agreement consisting of a £120m amortising term loan facility and a £115m 
committed revolving credit facility. 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 during the year, will also mature in 
February 2014. As at 31 December 2011 the carrying value of the loan approximated to the fair value. These facilities replaced a £210m 
amortising term loan and a £50m committed revolving credit facility.

The average effective interest rate on the bank debt was 3.9% (2010: 1.6%).

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

23. Interest bearing loans and borrowings continued
Finance leases
The Group leases certain items of property, plant and equipment under ﬁ nance leases. The average remaining lease term is 1-2 years 
(2010: 2-3 years). For 2011 the average effective borrowing rate was 7.5% (2010: 7.1%). 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.

24. Derivative ﬁ nancial instruments
As at 31 December 2011 and 2010 the Group held no derivative ﬁ nancial instruments.

25. Provisions

At 1 January 2011 
Charged to income statement 
Recognised on acquisitions 
Utilisation of provision 
Effect of movements in exchange rates 
At 31 December 2011 

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

Included in current liabilities 
Included in non-current liabilities 

Property 
£m 
3.0 
0.1 
– 
(0.2) 
– 
2.9 

Restructuring 
£m 
– 
7.9 
– 
(1.6) 
– 
6.3 

3.5 
0.7 
(1.3) 
0.1 
3.0 

– 
– 
– 
– 
– 

Legal and
Other 
£m 
1.4 
6.0 
2.7 
(0.2) 
(0.3) 
9.6 

5.8 
(4.8) 
– 
0.4 
1.4 

2011 
£m 
12.4 
6.4 
18.8 

Total
£m
4.4
14.0
2.7
(2.0)
(0.3)
18.8

9.3
(4.1)
(1.3)
0.5
4.4

2010
£m
0.5
3.9
4.4

Property provisions outstanding as at 31 December 2011 relate to provisions in respect of onerous leases and building dilapidations. The 
onerous lease provision represents the net present value of the future rental cost net of expected sub-lease income. These leases expire in 
one to two years. The building dilapidations provision represents the estimated cost of making good dilapidations and disrepair on various 
leasehold buildings. The leases expire in one to eight years.

Restructuring provisions outstanding as at 31 December 2011 relate to termination and other employee related costs which are expected 
to be discharged during 2012.

Legal and other provisions include provisions for legal claims brought against subsidiaries of the Group together with provisions against 
obligations for certain employee related costs and non property related onerous contracts. At present the timing of any payments are 
uncertain and provisions are subject to regular review. It is expected that the obligations will be discharged over the next three years.

The claim by BGC Market Data and certain of its afﬁ liates, alleging that the Company misappropriated data supplied to its information 
sales subsidiary in violation of a redistribution agreement, was heard in arbitration under the rules of the American Arbitration Association 
during August 2011. A provision for the estimated cost of the resolution of this claim has been included in the 2011 results. The amount 
claimed against the Company is signiﬁ cantly higher than the amount provided. The outcome remains uncertain and is dependent upon 
the conclusion of the arbitration process.

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26. Other long term payables

Accruals and deferred income 
Deferred consideration 

2011 
£m 
3.0 
4.8 
7.8 

2010
£m
3.6
2.9
6.5

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Deferred consideration as at 31 December 2011 relates to the acquisition of Convenção and is held at the discounted value of estimated 
future obligations.

27. Financial instruments
The following analysis should be read in conjunction with the information on risk management, capital employed and regulatory capital 
included in the Business Review on pages 15 to 19 and 14.

(a) Capital 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 23, cash and cash equivalents, ﬁ nancial assets and equity attributable to equity holders of the parent, comprising 
issued capital, reserves and retained earnings as disclosed in Notes 28 and 29.

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 Company’s subsidiaries. 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

Financial assets 
2011 
Investments 
Financial assets 
Cash and cash equivalents 
Trade receivables  
Settlement balances 

2010
Investments 
Financial assets 
Cash and cash equivalents 
Trade receivables 
Settlement balances 

Available-for-  
sale assets 
£m  
7.4 
7.6 
– 
– 
– 
15.0 

4.1 
4.5 
– 
– 
– 
8.6 

Loans and 
receivables 
£m 
– 
23.2 
342.0 
76.0 
5,102.1 
5,543.3 

– 
31.1 
390.1 
79.8 
4,037.9 
4,538.9 

Total
£m
7.4
30.8
342.0
76.0
5,102.1
5,558.3

4.1
35.6
390.1
79.8
4,037.9
4,547.5

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

27. Financial instruments continued

Financial liabilities 
2011 
Eurobonds 
Bank loan 
Finance leases 
Trade payables 
Settlement balances 

2010
Eurobonds 
Bank loan 
Finance leases 
Trade payables 
Settlement balances 

Financial
liabilities at 
amortised cost 
£m 
148.0 
117.6 
0.1 
5.5 
5,101.7 
5,372.9 

147.6 
210.0 
0.3 
6.5 
4,037.5 
4,401.9 

Total
£m
148.0
117.6
0.1
5.5
5,101.7
5,372.9

147.6
210.0
0.3
6.5
4,037.5
4,401.9

(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 
Total 
Provision for doubtful debts 

Cash and cash 
equivalents and 
ﬁ nancial assets 

Trade 
receivables 

Settlement 
balances

2011 
£m 
28.5 
338.7 
4.7 
– 
0.9 
372.8 
– 
372.8 

2010 
£m 
34.2 
382.0 
7.9 
0.5 
1.1 
425.7 
– 
425.7 

2011 
£m 
1.5 
54.2 
5.1 
0.7 
15.9 
77.4 
(1.4) 
76.0 

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

2011 
£m 
191.3 
2,745.5 
809.7 
915.0 
440.6 
5,102.1 
– 
5,102.1 

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

In addition to the above, £1.4m (2010: £1.5m) of investments are rated AAA to AA+ , £1.4m are rated BBB+ (2 010: £nil) and £4.6m 
(2010: £2.6m) are unrated.

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.

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(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:

2011 
Settlement balances 
Trade payables 
Obligations under ﬁ nance leases 
Eurobonds 
Bank loan 

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

Due 
within 
3 months 
£m 
5,101.7 
5.5 
0.1 
– 
31.0 
5,138.3 

Due between 
3 months 
and 12 months 
£m 
– 
– 
– 
10.5 
3.1 
13.6 

Due between
1 year 
and 5 years 
£m 
– 
– 
– 
190.5 
92.8 
283.3 

4,037.5 
6.5 
– 
– 
30.7 
4,074.7 

– 
– 
0.1 
10.5 
1.9 
12.5 

– 
– 
0.2 
49.9 
180.2 
230.3 

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

– 
– 
– 
151.1 
– 
151.1 

Total
£m
5,101.7
5.5
0.1
201.0
126.9
5,435.2

4,037.5
6.5
0.3
211.5
212.8
4,468.6

(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 

 2011 

USD 
£m 
(1.5) 

EUR 
£m 
(1.4) 

 2010

USD 
£m 
(1.4) 

EUR
£m
(1.0)

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 

 2011 

 2010

+100pts 
£m 

-100pts 
£m 

+100pts 
£m 

-100pts
£m

3.2 
(1.3) 
1.9 

(2.3) 
0.9 
(1.4) 

 3.6 
(2.1) 
 1.5 

 (1.6)
 1.3
 (0.3)

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73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

27. Financial instruments continued
(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).

2011 
Investments
– unlisted 
– listed 
Financial assets
– short term government securities 

2010
Investments
– unlisted 
– listed 
Financial 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 2011 
Additions 
Acquired on acquisitions 
Balance as at 31 December 2011 

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 

– 
1.4 

7.6 
9.0 

– 
2.1 

4.5 
6.6 

– 
– 

– 
– 

– 
– 

– 
– 

6.0 
– 

– 
6.0 

2.0 
– 

– 
2.0 

Total
£m

6.0
1.4

7.6
15.0

2.0
2.1

4.5
8.6

 Available-for-sale 
Investments
– Unlisted
£m
2.0
3.5
0.5
6.0

3.1
1.0
(2.0)
(0.1)
2.0

There were no ﬁ nancial liabilities subsequently remeasured at fair value on Level 3 fair value measurement bases.

The £1.0m gain in 2010 included in proﬁ t or loss in the period relates to the sale of unlisted available-for-sale assets and was included in 
‘administrative expenses’. Of the disposal proceeds received in 2010, £1.7m was received in cash with £0.3m deferred.

There were no gains or losses in the period related to the revaluation of unlisted available-for-sale investments held at the balance sheet 
date. The loss of £0.1m in 2010 was included within the ‘Revaluation reserve’.

74

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28. Share capital

Allotted, issued and fully paid
Ordinary shares of 25p 

Allotted, issued and fully paid
Ordinary shares of 25p 

2011 
No. 

2010
No.

 215,313,584 

  215,313,584

2011 
£m 

53.8 

2010
£m

53.8

Subsequent to the year end 2,298,288 ordinary shares were issued to the former owners of Primex Energy Brokers Limited following the 
completion of acquisition related performance conditions (Note 29(b)). These shares were issued on 5 January 2012.

29. Reconciliation of shareholders’ funds
(a) Share capital, Share premium account, Reverse acquisition reserve

As at 31 December 2011 

As at 31 December 2010 

Share 
capital 
£m 

53.8 

53.8 

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)

Reverse acquisition reserve
The acquisition of Collins Stewart Tullett plc by Tullett Prebon plc in 2006 was accounted for as a reverse acquisition. Under IFRS the 
consolidated accounts of Tullett Prebon plc were prepared as if they were a continuation of the consolidated accounts of Collins Stewart 
Tullett plc. The reverse acquisition reserve represents the difference between the reserves of the two companies at the time of the 
acquisition. This resulted in the consolidated net assets before and after the acquisition remaining unchanged.

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75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

29. Reconciliation of shareholders’ funds continued
(b) Other reserves

As at 1 January 2011 
Revaluation of available-for-sale assets 
Exchange differences on translation of 
foreign operations 
Taxation charge 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 2011 

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 

Equity  
reserve 
£m 
5.3 
– 

Revaluation 
reserve 
£m 
2.6 
(0.7) 

Merger 
reserve 
£m 
121.5 
– 

Hedging
and 
translation 
£m 
17.4 
– 

Own 
shares 
£m 
(0.1) 
– 

Other 
reserves
£m
146.7
(0.7)

– 

– 
– 
2.4 
– 
– 
7.7 

– 
– 

– 

– 
– 
5.3 
– 
– 
5.3 

– 

– 
(0.7) 
– 
– 
– 
1.9 

2.3 
0.3 

– 

– 
0.3 
– 
– 
– 
2.6 

– 

0.1 

– 

0.1

– 
– 
– 
– 
– 
121.5 

121.5 
– 

– 

– 
– 
– 
– 
– 
121.5 

(0.1) 
– 
– 
– 
– 
17.4 

7.6 
– 

8.8 

1.0 
9.8 
– 
– 
– 
17.4 

– 
– 
– 
– 
– 
(0.1) 

(2.8) 
– 

(0.1)
(0.7)
2.4
–
–
148.4

128.6
0.3

– 

8.8

– 
– 
– 
2.3 
0.4 
(0.1) 

1.0
10.1
5.3
2.3
0.4
146.7

Equity reserve
The reserve of £7.7m (2010: £5.3m) as at 31 December 2011 represents the aggregate fair value of 2,298,288 ordinary shares 
(2010: 1,420,212 ordinary shares) issuable to the former owners of Primex Energy Brokers Limited following the completion of acquisition 
related performance conditions. The shares were issued on 5 January 2012.

Revaluation reserve
The revaluation reserve represents the remeasurement of assets in accordance with IFRS that have been recorded in other 
comprehensive income.

Merger reserve
The merger reserve arose in Collins Stewart Tullett plc prior to the reverse acquisition by Tullett Prebon plc in 2006. The reserve related to 
prior share based acquisitions and represented the difference between the value of those acquisitions and the amount required to be 
recorded in share premium. On the acquisition by Tullett Prebon plc, this reserve was retained as the consolidated accounts of Tullett 
Prebon plc were prepared as if they were a continuation of the consolidated accounts of Collins Stewart Tullett plc.

Hedging and translation
The hedging and translation reserve records revaluation gains and losses arising on net investment hedges and the effect of changes in 
exchange rates on translation of foreign operations recorded in other comprehensive income.

Own shares
As at 31 December 2011, the Tullett Prebon plc Employee Beneﬁ t Trust 2007 held 202,029 ordinary shares (2010: 200,833 ordinary shares).

During the year, the Tullett Prebon plc Employee Share Ownership Trust transferred its holding of 1,196 ordinary shares to the Tullett 
Prebon plc Employee Beneﬁ t Trust 2007 following which the Tullett Prebon plc Employee Share Ownership Trust was wound up.

76

Tullett Prebon plc  Annual Report 2011

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c) Total equity

As at 1 January 2011 
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 charge on components of other 
comprehensive income 
Total comprehensive income 
Equity component of deferred consideration 
Dividends paid in the year 
Increase in minority equity interests 
Credit arising on share-based payment awards 
Taxation arising on share-based payment awards 
As at 31 December 2011 

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 

Equity attributable to equity holders of the parent

Total from 
Note 29(a) 
£m 
(1,118.6) 
– 
– 

Total from 
Note 29(b) 
£m 
146.7 
– 
(0.7) 

– 
– 

– 
– 
– 
– 
– 
– 
– 
(1,118.6) 

(1,118.6) 
– 
– 

– 
– 

– 
– 
– 
– 
– 
– 
– 
(1,118.6) 

0.1 
– 

(0.1) 
(0.7) 
2.4 
– 
– 
– 
– 
148.4 

128.6 
– 
0.3 

8.8 
– 

1.0 
10.1 
5.3 
– 
2.3 
0.4 
– 
146.7 

Retained 
earnings 
£m 
1,380 .9 
89.4 
– 

– 
8.2 

(3.1) 
94.5 
– 
(33.9) 
– 
1.4 
(0.3) 
1,442.6 

1,300.3 
108.5 
– 

– 
14.5 

(7.8) 
115.2 
– 
(32.7) 
(0.6) 
(0.4) 
(0.9) 
1,380.9 

Total 
£m 
409.0 
89.4 
(0.7) 

0.1 
8.2 

(3.2) 
93.8 
2.4 
(33.9) 
– 
1.4 
(0.3) 
472.4 

310.3 
108.5 
0.3 

8.8 
14.5 

(6.8) 
125.3 
5.3 
(32.7) 
1.7 
– 
(0.9) 
409.0 

Minority 
interests 
£m 
2.8 
0.7 
– 

0.1 
– 

– 
0.8 
– 
(0.7) 
0.2 
– 
– 
3.1 

2.2 
0.6 
– 

0.3 
– 

– 
0.9 
– 
(0.3) 
– 
– 
– 
2.8 

Total
equity
£m
411.8
90.1
(0.7)

0.2
8.2

(3.2)
94.6
2.4
(34.6)
0.2
1.4
(0.3)
475.5

312.5
109.1
0.3

9.1
14.5

(6.8)
126.2
5.3
(33.0)
1.7
–
(0.9)
411.8

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Tullett Prebon plc  Annual Report 2011

77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

30. Share-based payments
As at 31 December 2011 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 2011 and their estimated fair values when granted are set out below:

Awards
Long term incentive award (2009) (1) 
Long term incentive award (2010) (1) 
Long term incentive award (2011) (1) 
Long term incentive award (2011) (2) 

Notes:
(1)  Subject to total shareholder return and return on capital conditions.
(2)  Subject to revenue performance conditions.

The following table shows the number of share awards outstanding during 2011 and 2010:

2011 
Outstanding at start of the year 
Granted during the year 
Lapsed during the year 
Outstanding at end of year 

Exercisable at end of year 

2010 
Outstanding at start of the year 
Exercised during the year 
Lapsed during the year  
Granted during the year 
Outstanding at end of year 

Exercisable at end of year 

Estimated
fair
value at
grant date

199p
169p
246p
309p

Awards 
outstanding 
2011 

429,980 
797,266 
557,501 
44,761 
1,829,508

Number of
Awards
Shares 
1,752,778
– 
602,262
– 
– 
(525,532)
–  1,829,508

Shares 
406,964 
(406,964) 
– 
– 
– 

Number of
Awards
3,640,185
(463,743)
(2,220,930)
797,266
1,752,778

Share options 
1,752,778 
602,262 
(525,532) 
  1,829,508 

–

Share options 
3,233,221 
(56,779) 
(2,220,930) 
797,266 
1,752,778 

–

The weighted average exercise price for all awards is £nil (2010: £nil).

No share options were exercised in 2011. The weighted average share price of exercises in 2010 was 353p.

The estimated fair value of each option granted under the long term incentive awards (2009), (2010) and (2011) 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 and 2011 awards are also subject to TSR comparison relative to 
the UK Retail Price Index.

78

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The estimated fair value of each option granted under the long term incentive award (2011) which are subject to revenue performance 
conditions, 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 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 2011 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 (1) 
(2011) 
410 
nil 
59% 
3 
1.5% 
3.8% 
47% 
24% 
3.0% 
100% 

Long term 
incentive 
award (2) 
(2011) 
354 
nil 
59% 
3 
1.5% 
4.3% 
n/a 
n/a 
n/a 
100% 

Long term 
incentive 
award (1) 
(2010) 
298 
nil 
62% 
3 
1.3% 
5.0% 
52% 
27% 
2.5% 
100% 

Long term
incentive
award (1)
(2009)
284
nil
58%
3
2.2%
4.5%
49%
27%
n/a
100%

Notes:
(1)  Subject to total shareholder return and return on capital conditions.
(2)  Subject to revenue performance conditions.

The weighted average contractual life for the share-based awards outstanding as at 31 December 2011 is 8.5 years (2010: 9.2 years).

Charge/(credit) arising from share-based awards 

2011 
£m 
1.4 

2010
£m
(0.9)

31. Acquisitions
(a) Subsidiaries acquired during the year
Convenção S/A Corretora de Valores e Câmbio (‘Convenção’)
On 9 August 2011 the Group acquired 100% of the share capital of Convenção, an inter-dealer broker based in Brazil. The consideration 
paid on completion was R$20.0m (£7.8m). Further deferred and performance related consideration is payable over the next three years, 
the acquisition fair value of which was estimated to be R$12.1m (£4.8m) and R$11.6m (£4.5m) respectively. The undiscounted maximum 
payable for deferred and performance related consideration is R$35.5m (£13.9m). Goodwill arising on the acquisition was R$41.3m 
(£16.2m) attributable to the expected business synergies within Americas and obtaining a pre-existing, well-respected business in the 
Latin American market. None of the goodwill is expected to be deductible for tax purposes.

The business combination has been accounted for using the acquisition method.

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Tullett Prebon plc  Annual Report 2011

79

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

31. Acquisitions continued
The amounts recognised in respect of the identiﬁ able assets acquired and liabilities assumed are as set out in the table below:

Identiﬁ able assets and liabilities acquired:
Fixed and intangible assets 
Trade and other receivables 
Other ﬁ nancial assets 
Cash and cash equivalents 
Trade and other payables 
Taxation 
Provisions 
Total identiﬁ able assets 

Goodwill 
Total consideration 

Satisﬁ ed by:
Cash consideration 
Fair value of deferred consideration 
Fair value of contingent consideration 

Net cash (outﬂ ow) arising on acquisition
Cash consideration  
Cash and cash equivalents acquired 

Goodwill arising on acquisition  
Effect of changes in exchange rates 
Included in goodwill as at 31 December 2011 

£m

0.5
2.4
3.4
1.3
(1.5)
(2.6)
(2.6)
0.9

16.2
17.1

7.8
4.8
4.5
17.1

(7.8)
1.3
(6.5)

16.2
(1.9)
14.3

Costs relating to the acquisition of Convenção have been recognised in administrative expenses as incurred. Costs incurred in 2011 
amounted to £0.2m with £1.4m having been expensed in prior periods.

Convenção’s revenue in the period since acquisition was £5.4m with earnings of £0.3m. The Group’s revenue for the year, had Convenção 
been acquired on 1 January 2011, would have been £7.7m higher and earnings £0.4m higher.

Other acquisitions during the year
Newedge USA LLC (‘Newedge’)
On 3 January 2011 one of the Group’s US subsidiaries hired a team of brokers which formed Newedge USA LLC’s credit products 
inter-dealer brokering business. As part of that arrangement a cash payment of US$6.5m (£4.1m) was made representing the goodwill 
associated with that business’s activities. No further consideration is payable. The fair value of the identiﬁ able assets and liabilities 
acquired were negligible, resulting in the recognition of goodwill of US$6.5m (£4.1m), attributable to the highly skilled workforce and the 
business’s reputation. The Newedge business has been fully integrated into the Group’s operations, and it is therefore considered 
impracticable to show the revenue and earnings for the period after the date of acquisition or for the full year as if acquired from the 
beginning of the year.

80

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tullett Liberty (Bahrain) Co. W.L.L. (‘Tullett Liberty (Bahrain)’)
For a number of years the Group has been entitled to 85% of Tullett Liberty (Bahrain)’s trading results, and due to not having control over 
the ﬁ nancial and operating policies the entity was accounted for as an associate of the Group. Following shareholder agreement the Group 
obtained control over the ﬁ nancial and operating policies and has accounted for the entity as a subsidiary as of 1 July 2011. The acquisition 
date fair value of Group’s previous interest was £0.4m resulting in a gain of £0.3m being recognised in other gains and losses. The interests 
of the non-controlling shareholders, measured at their share of the fair value of the identiﬁ able net assets, amounted to £0.2m which is 
included as an increase to minority equity interests in reserves. No additional consideration was transferred. The fair value of the 
identiﬁ able assets and liabilities acquired amounted to £0.6m, resulting in no goodwill being recognised in the period. On 3 January 2012 
the Group’s shareholding was increased to 85% of the issued ordinary voting shares aligning the shareholding with the 85% entitlement to 
the trading results.

Tullett Liberty (Bahrain) earned revenue of £1.6m and earnings of £0.4m in the period since acquisition. The Group’s revenue for the year, 
had Tullett Liberty (Bahrain) been acquired on 1 January 2011 would have been £1.8m higher with earnings unchanged.

Acquisitions after 31 December 2011
Chapdelaine & Co.
On 3 January 2012, the Group acquired 100% of the membership interests of Chapdelaine & Co., this entity being the owner of 
Chapdelaine Municipal Brokers Inc. and Chapdelaine & Co. Municipal Securities Inc. The initial consideration paid was US$10.2m (£6.6m) in 
cash. The initial fair value of the net assets acquired is estimated to be US$2.7m (£1.7m), which would result in the recognition of US$7.5m 
(£4.9m) to be allocated between goodwill and identiﬁ able intangible assets.

(b) 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 for acquisitions prior to 1 January 2010, 
and to proﬁ t or loss for acquisitions after that date.

At 1 January 
Acquisitions during the year 
Increase to goodwill during the year 
Unwind of discount 
Cash paid 
Equity component transferred to reserves 
Credit taken to the income statement 
Effect of movements in exchange rates 
At 31 December 

Amounts falling due within one year 
Amounts falling due after one year 
At 31 December 

2011 
£m 
4.2 
9.3 
1.4 
0.2 
(0.6) 
(2.4) 
(0.9) 
(1.2) 
10.0 

5.2 
4.8 
10.0 

2010
£m
10.3
1.0
0.3
–
(2.1)
(5.3)
–
–
4.2

1.3
2.9
4.2

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

32. 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 investments 
  Loss on sale of property, plant and equipment 
  Depreciation of property, plant and equipment 
  Amortisation of intangible assets 
Increase/(decrease) in provisions for liabilities and charges 
Outﬂ ow from retirement beneﬁ t obligations 
Decrease in non-current liabilities 
Operating cash ﬂ ows before movement in working capital 
Increase in trade and other receivables 
Decrease in net settlement balances 
Decrease/(increase) in trade and other payables 
Cash generated from operations 
Income taxes paid 
Interest paid 
Net cash from operating activities 

 2011 
£m 
130.3 

1.4 
– 
– 
5.5 
3.3 
12.0 
(0.8) 
(0.7) 
151.0 
(4.7) 
– 
(1.3) 
145.0 
(34.2) 
(15.6) 
95.2 

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

(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 2011 cash and cash equivalents amounted to £342.0m (2010: £390.1m). 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 three months 
depending on the immediate cash requirements of the Group, and earn interest at the respective short term deposit rates.

At 
1 January 
2011 
£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 

Cash 
ﬂ ow 
£m 
(2.9) 
(45.2) 
(0.6) 
(48.7) 
(7.8) 
(56.5) 
– 
93.4 
– 
0.2 
93.6 
37.1 

Acquired 
with 
subsidiaries 
£m 
– 
– 
– 
– 
3.4 
3.4 
– 
– 
– 
– 
– 
3.4 

Non cash 
items 
£m 
– 
– 
– 
– 
– 
– 
– 
(1.0) 
(0.4) 
– 
(1.4) 
(1.4) 

Exchange 
differences 
£m 
0.7 
(0.1) 
– 
0.6 
(0.4) 
0.2 
– 
– 
– 
– 
– 
0.2 

At
31 December
2011
£m
240.2
100.0
1.8
342.0
30.8
372.8
(30.0)
(87.6)
(148.0)
(0.1)
(265.7)
107.1

33. Analysis of net funds

201 1 
Cash 
Cash equivalents 
Client settlement money 
Cash and cash equivalents 
Financial assets 
Total funds 
Bank loans within one year 
Bank loans after one year 
Loans due after one year 
Finance leases 

Total net funds 

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201 0 
Cash 
Cash equivalents 
Client settlement money 
Cash and cash equivalents 
Financial assets 
Total funds 
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) 
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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 

Non cash 
items 
£m 
– 
– 
– 
– 
– 
– 
(30.0) 
29.1 
(0.3) 
(0.2) 
(1.4) 
(1.4) 

Exchange 
differences 
£m 
3.5 
2.5 
– 
6.0 
0.3 
6.3 
– 
– 
– 
0.1 
0.1 
6.4 

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

Financial assets comprise short term government securities and term deposits held with banks and clearing organisations.

34. Contingent  liabilities
In respect of legal matters or disputes for which a provision has not been made, 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.

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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.

35. Operating lease commitments

Minimum operating lease payments recognised in the income statement  

2011 
£m 
14.9 

2010
£m
13.1

At 31 December 2011 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 

2011 

2010

Buildings 
£m 
10.7 
30.1 
27.6 
68.4 

Other 
£m 
2.0 
0.6 
– 
2.6 

Buildings 
£m 
11.5 
30.3 
28.4 
70.2 

Other
£m
1.3
0.4
–
1.7

36. Retirement beneﬁ t obligations
(a) Deﬁ ned beneﬁ t schemes
The Group operates two deﬁ ned beneﬁ t pension 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.

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

36. Retirement beneﬁ t obligations continued
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 2012 is £0.6m. 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 (1) 
Inﬂ ation assumption (2) 

2011 
% 

4.70 
6.77 
4.55 
2.40 
2.40 

2010
%

5.30
6.64
4.95
3.50
3.70

(1)  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%.
(2)  In 2011 the basis for the inﬂ ation assumption was changed to CPI from RPI.

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 (2010: 28 years) after retirement if they are male and for a further 31 years 
(2010: 31 years) after retirement if they are female. For the Prebon Yamane (Ex K-W) Pension Scheme the equivalent assumptions are 
28 years (2010: 30 years) for males and 31 years (2010: 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 (1) 
Total fair value of schemes’ assets 

Expected 
return in 
2012 on 
31 December 
2011 scheme 
assets 
% 
7.00 
4.70 
1.00 
6.77 

Expected  
return in 
2011 on 
31 December 
2010 scheme 
assets 
% 
7.01 
5.30 
0.80 
6.64 

2011 
Assets 
£m 
170.9 
9.8 
3.2 

183.9 

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 

2009
Assets
£m
123.5
9.7
4.5

137.7

(1)   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 2011 was £16.5m (2010: gain on schemes’ assets £27.7m).

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 in schemes 

2011 
£m 
(148.4) 
183.9 
35.5 

2010
£m
(145.9)
169.5
23.6

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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 gains/(losses) 
Beneﬁ ts paid/transfers out 
At 31 December 

Movements in the fair value of schemes’ assets in the current period were as follows:

At 1 January 
Expected return on schemes’ assets 
Actuarial gains 
Employer contributions 
Beneﬁ ts paid/transfers out 
At 31 December 

Historical information:

2011 
£m 
(7.6) 
10.5 
2.9 

2011 
£m 
(145.9) 
(7.6) 
2.2 
2.9 
(148.4) 

2011 
£m 
169.5 
10.5 
6.0 
0.8 
(2.9) 
183.9 

2010
£m
(7.8)
9.4
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£m
(139.0)
(7.8)
(3.8)
4.7
(145.9)

2010
£m
137.7
9.4
18.3
8.8
(4.7)
169.5

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  

2011 
£m 
(148.4) 
183.9 
35.5 
0.9 
0.6% 
5.9 
3.2% 

2010 
£m 
(145.9) 
169.5 
23.6 
5.1 
3.5% 

18.3 
10.8% 

2009 
£m 
(139.0) 
137.7 
(1.3) 
(0.6) 
(0.4)% 
19.8 
14.4% 

2008 
£m 
(115.4) 
106.9 
(8.5) 
(2.1) 
(1.8)% 

(21.2) 
 (19.8)% 

2007
£m
(123.4)
119.5
(3.9)
(0.3)
(0.2)%
4.2
3.5%

(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 £6.3m (2010: £5.6m), of which £1.9m 
(2010: £1.6m) related to overseas schemes.

As at 31 December 2011, contributions of £0.1m (2010: £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.

37. Client money
Client money held was £1.8m (2010: £2.4m). This represents balances held by the Group received as a result of corporate actions relating 
to securities transactions.

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

38. 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 2011 was £0.1m (2010: £0.6m). The total amount 
owed by the Group to related parties and associates at 31 December 2011 was £nil (2010: £0.6m).

Collins Stewart Employee Share Ownership Trust 
Associates 

Amounts owed by 
related parties 

Amounts owed to
related parties

2011 
£m 
– 
0.1 
0.1 

2010 
£m 
– 
0.6 
0.6 

2011 
£m 
– 
– 
– 

2010
£m
0.6
–
 0.6

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.

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.

Directors
Costs in respect of the directors who were the k ey 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 39 to 41.

Short term beneﬁ ts 
Share-based awards 
Social security costs 

2011 
£m 
5.6 
1.4 
0.8 
7.8 

2010
£m
5.9
(1.3)
0.8
5.4

The credit arising on share-based awards in 2010 reﬂ ects the  lapse of the long term incentive award (2008) during the year (Note 30).

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39. Principal subsidiaries and undertakings
At 31 December 2011, 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) W.L.L. (1) 
Tullett Liberty (Bahrain) Co. W.L.L. (2) 
Tullett Prebon Holdings do Brasil Ltda. 
Convenção S/A Corretora de Valores e Câmbio  
Tullett Prebon Canada Limited 
Tullett Prebon Group Holdings plc 
TP Holdings Limited 
Tullett Prebon Group Limited  
Tullett Prebon Investment Holdings Limited 
Tullett Prebon (Europe) Limited  
Tullett Prebon (Securities) Limited 
Tullett Prebon (Equities) Limited 
Prebon Limited 
Prebon Yamane International Limited 
Tullett Prebon (No. 1)  
Tullett Prebon Latin America Holdings Limited 
Tullett Liberty (European Holdings) Limited 
Prebon Group Limited 
M.W. Marshall (Overseas) Limited  
Tullett Prebon Information Limited  
Tullett Prebon (Hong Kong) Limited  
PT. Inti Tullett Prebon Indonesia  
Tullett Prebon (Japan) Limited  
Yamane Tullett Prebon (Japan) Limited (3) 
Tullett Prebon Money Brokerage (Korea) Limited 
Tullett Liberty B.V. 
Prebon Holdings B.V. 
Tullett Prebon (Philippines) Inc.  
Tullett Prebon (Polska) SA 
Tullett Prebon Energy (Singapore) Pte. Ltd.  
Tullett Prebon (Singapore) Limited  
Prebon Technology Services (Singapore) Pte. Ltd. 
Cosmorex A.G. 
Tullett Prebon (Americas) Holdings Inc. 
Tullett Prebon Americas Corp 
Tullett Prebon Financial Services LLC  
Tullett Prebon Information Inc. 

Country of 
incorporation 
  Australia 
  Bahrain 
  Bahrain 
  Brazil 
  Brazil 
  Canada 
  England 
  England 
  England 
  England 
  England 
  England 
  England 
  England  
  England 
  England 
  England 
  England 
  England 
Jersey 
  Guernsey 
  Hong Kong 
Indonesia 
Japan  
Japan 
  Korea 
  Netherlands 
  Netherlands 
  Philippines 
  Poland 
  Singapore 
  Singapore 
  Singapore 
  Switzerland 
  USA 
  USA 
  USA 
  USA 

Principal 
Activities 
Broking 
Broking 
Broking 
Holding company 
Broking 
Broking 
Holding company 
Holding company 
Service company 
Holding company 
Broking 
Broking 
Broking 
Holding company 
Holding company 
Holding company 
Holding company 
Holding company 
Holding company 
Holding company 
Information sales 
Broking 
Broking 
Broking 
Broking 
Broking 
Holding company 
Holding company 
Broking 
Broking 
Broking 
Broking 
IT support services 
Broking 
Holding company 
Holding company 
Broking 
Information sales 

Issued 
  ordinary shares,
all voting
100%
70%
49%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
57.52%
100%
50%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%

(1)  The Group’s interest in the trading results is 90%.
(2)   The Group’s interest in the trading results is 85%. The company is consolidated as the Group, under a shareholder agreement, has control to govern the 

ﬁ nancial and operating policies of the company.

(3)   The Group’s interest in the trading results is 60%. The company is consolidated as the Group, under a shareholder agreement, governs the ﬁ nancial and 

operating policies of the company.

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Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2011

39. Principal subsidiaries and undertakings continued
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 Yamane Tullett Prebon (Japan) Limited, which has a 31 March 
year end.

Associates 
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 

  China 
India  
India 
  Thailand 
   Thailand 

Principal 
Activities 
Broking 
Broking 
Broking 
Broking 
Broking 

Issued 
  ordinary shares,
all voting
33%
26%
48%
49%
49%

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.

40. Events after the balance sheet date
Subsequent to the 31 December the Group acquired 100% of the membership interests of Chapdelaine & Co. details of which are set out 
in Note 31.

On the 5 January 2012, 2,298,288 ordinary shares were issued to the former owners of Primex Energy Brokers Limited following the 
completion of acquisition related performance conditions.

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

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 2011.

Manbhinder Rana F.C.A. (Senior Statutory Auditor)
for and on behalf of

Deloitte LLP
Chartered Accountants and Statutory Auditor
London
United Kingdom
6 March 2012

 We have audited the Parent Company Financial Statements of Tullett 
Prebon plc for the year ended 31 December 2011 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. In addition, we read all 
the ﬁ nancial and non-ﬁ nancial information in the annual report 
to identify material inconsistencies with the audited ﬁ nancial 
statements. If we become aware of any apparent material 
misstatements or inconsistencies we consider the implications 
for our report.

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 2011;

 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.

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89

 
 
 
 
Governance
Company Balance Sheet
as at 31 December 2011

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  
Net assets 

Capital and reserves
Called-up share capital 
Share premium 
Equity reserve 
Own shares 
Proﬁ t and loss account 
Shareholders’ funds 

Notes 

2011 
£m 

2010
£m

4 

5 

6 

7 
8 
8 
8 
8 

831.2 

697.7

2.2 
26.7 
28.9 

– 
28.9 
860.1 
860.1 

53.8 
9.9 
7.7 
(0.1) 
788.8 
860.1 

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

The ﬁ nancial statements of Tullett Prebon plc (registered number 5807599) were approved by the Board of directors and authorised for 
issue on 6 March 2012 and are signed on its behalf by:

Terry Smith
Chief Executive

90

Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Financial Statements
for the year ended 31 December 2011

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. As discussed on page 35 of the Corporate Governance Report the directors have a reasonable expectation that the Company 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.

(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.

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Tullett Prebon plc  Annual Report 2011

91

 
 
 
 
Notes to the Financial Statements continued
for the year ended 31 December 2011

2. Signiﬁ cant accounting policies continued
(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.

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 
year. Tullett Prebon plc reported a proﬁ t for the ﬁ nancial year ended 31 December 2011 of £169.0m (2010: proﬁ t £28.4m).

The auditor’s remuneration for audit services to the Company was £0.4m (2010: £0.4m).

92

Tullett Prebon plc  Annual Report 2011

4. Investments in subsidiary undertakings

Cost
At 1 January 
Capital contribution/(reduction) arising on share-based awards   
Increase in investment in subsidiary undertaking 
Recharges relating to share-based awards 
Repurchase of shares by subsidiary undertaking 
Increase in deferred consideration payable 
At 31 December 

2011 
£m 

2010
£m

697.7 
1.4 
130.5 
– 
– 
1.6 
831.2 

1,188.1
(0.9)
–
(1.6)
(488.2)
0.3
697.7

In 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 

6. Creditors

Amounts falling due within one year:
Deferred consideration payable 

The Company has no borrowings as at 31 December 2011 (2010: £nil).

2011 
£m 

2.2 

2011 
£m 

– 
– 

2010
£m

3.2

2010
£m

0.8
0.8

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Tullett Prebon plc  Annual Report 2011

93

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the Financial Statements continued
for the year ended 31 December 2011

7. Called-up share capital

Allotted, issued and fully paid
Ordinary shares of 25p 

Allotted, issued and fully paid
Ordinary shares of 25p 

2011 
No. 

2010
No.

 215,313,584 

  215,313,584

2011 
£m 

53.8 

2010
£m

53.8

Subsequent to the year end 2,298,288 ordinary shares were issued to the former owners of Primex Energy Brokers Limited following the 
completion of acquisition related performance conditions. These shares were issued on 5 January 2012.

8. Reconciliation of shareholders’ funds

Balance at 1 January 2011 
Proﬁ t for the year 
Dividends paid 
Credit arising on share-based awards  
Equity component of deferred consideration 
Balance at 31 December 2011 

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 

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 
– 
– 
– 
2.4 
7.7 

– 
– 
– 
– 
– 
5.3 
– 
5.3 

Own 
shares 
£m 
(0.1) 
– 
– 
– 
– 
(0.1) 

(0.2) 
– 
– 
– 
– 
– 
0.1 
(0.1) 

Proﬁ t and 
loss 
account 
£m 
652.3 
169.0 
(33.9) 
1.4 
– 
788.8 

Total 
shareholders’ 
funds 
£m
721.2
169.0
(33.9)
1.4
2.4
860.1

657.4 
28.4 
(32.7) 
(0.9) 
0.2 
– 
(0.1) 
652.3 

720.9
28.4
(32.7)
(0.9)
0.2
5.3
–
721.2

At 31 December 2011 the Company’s distributable reserves amounted to £788.8m (2010: £652.3m).

Equity reserve
The reserve of £7.7m (2010: £5.3m) as at 31 December 2011 represents the value of 2,298,288 ordinary shares (2010: 1,420,212 ordinary 
shares) issuable to the former owners of Primex Energy Brokers Limited following the completion of acquisition related performance 
conditions. The shares were issued on 5 January 2012.

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Tullett Prebon plc  Annual Report 2011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholder Information

In this section:

96  Shareholder Information

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Tullett Prebon plc  Annual Report 2011
Tullett Prebon plc  Annual Report 2011

95
95

 
 
 
 
 
Shareholder Information

Financial calendar for 2012
25 April
Ex-dividend Date

27 April
Dividend Record Date

10 May (2.30pm)
Annual General Meeting

17 May
Dividend payment date

Dividend mandate
Shareholders who wish their dividends to be paid directly into a bank or building society account should contact Capita Registrars for a 
dividend mandate form. This method of payment removes the risk of delay or loss of dividend cheques in the post and ensures that 
shareholders’ accounts are credited on the dividend payment date.

Shareholder information on the internet
The Company maintains an investor relations page on its website (www.tullettprebon.com) which allows access to share price 
information, directors’ biographies, copies of Company reports, selected press releases and other useful investor information.

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

Auditor
Deloitte LLP
Chartered Accountants and Statutory Auditor
Hill House
1 Little New Street
London
EC4A 3TR
United Kingdom
www.deloitte.com

Tullett Prebon plc is a company incorporated and registered in England and Wales with number 5807599.

96

Tullett Prebon plc  Annual Report 2011

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 Tullett Prebon plc
Tower 42 Level 37
25 Old Broad Street
London EC2N 1HQ
United Kingdom

www.tullettprebon.com