Annual Report and Financial Statements For the year ended 31 March 2012

Transcription

1 Annual Report and Financial Statements For the year ended 31 March 2012

2 Following on from the successful launch of our next generation platform in 2010 we are starting to see some real traction within the business. Value of trades last year increased by 63%, with volume of trades increasing by 45%.

3 Message from the Chairman Following on from the successful launch of our next generation platform in 2010 we are starting to see some real traction within the business. Value of trades last year increased by 63%, with volume of trades increasing by 45%. Both these areas provided a record year for the business. However, the year was not all about technology. Last year we led the industry in reduced spreads and commissions underpinned by our marketing campaign of driving down the cost of trading. The last three years have seen turbulent times in the financial markets and we have weathered the storm very well. The year has seen us return to statutory profit representing a significant improvement from the previous year. All of this was achieved on the back of huge investment in our next generation trading platform and spread and commission reductions. However, there is so much more to do as we expand our business and roll out our next generation platform around the world. Of course business is really about people and I would like to thank all of our employees around the world for their continued support and hard work. The results speak for themselves but results can only be achieved with a strong team and we have a team in which I have enormous pride.

4 Contents At a glance 5 Business review 14 Strategy 14 CEO review 16 Operating and financial review 18 Principle risks and uncertainties 29 Governance 34 Directors report 34 Corporate governance report 37 Financial statements 41 Independent auditors report 42 Financial statements 43 Notes to the financial statements 47 Corporate information 86 Global offices 86 Corporate information 87

5 Highlights CMC Markets PLC Annual Report 2012 At a glance Business review Governance Financial statements Corporate information Var Var % Revenue 164.0m 161.7m + 2.3m +1.4% Net operating income* 143.6m 136.9m + 6.7m +4.9% EBITDA 22.5m 18.7m + 3.8m +20.3% EBITDA margin 15.7% 13.7% +2.0% Profit after tax 2.5m m m Active clients** 75,627 75, % Number of trades 33.2m 22.9m +10.3m +45.0% Value of trades*** 1,221bn 749bn +472bn +63.0% *Net operating income represents revenue net of rebates payable to introducing partners who are not themselves trading counterparties less spread betting levies **Active clients represent those individual clients who have traded with or held positions with CMC Markets on at least one occasion during the financial year *** Value of client trades represents the notional value of trades > Next generation platform successfully rolled out into our 4 core markets > Significant increase in trade activity with trade numbers up to 33.2m and value of trades up to 1,221bn > Continued progress in all key financial measures including return to overall statutory profit > Healthy balance sheet, regulatory capital surplus of 32m, own cash of 85m and little external borrowings > Full segregation of retail client money in all jurisdictions Financials at a glance (year on year) +4.9% +20.3% +45.0% +63.0% Net operating income EBITDA Number of trades Value of trades

6 6 What we do CMC Markets is an online retail financial services business which enables our clients to trade foreign exchange, contracts for difference (CFD) and financial spread betting on a range of shares, indices, foreign currencies, commodities and treasuries. The Group also provides stockbroking services in Australia. CMC Markets creates prices on over 5,000 instruments in which clients can trade. Revenues are generated predominantly through transactional spreads, financing and commissions which arise on our clients trading activities. Our risk management strategy is based on highly automated flow management which dynamically hedges client exposures and risk. The level of revenues is influenced by the number of clients actively trading, the amount of trading each client transacts and the amount of revenue earned from each transaction. Our products CFD CFD provides economic benefits similar to an investment in an underlying asset without the costs and limitations associated with physical ownership. A CFD is a cash-settled investment in products which are based on currencies, commodities, indices and companies. A CFD tracks the price movement of the chosen product, including dividend on stocks, interest on positive carry currency positions, and coupon on interest bearing instruments. A CFD is a leveraged product which has the potential to magnify profits as well as losses. However CMC Markets next generation CFD platform also offers a unique variable financing feature which means that clients can choose to deposit as much or as little (subject to minimum margin requirements) of the overall value of the trade. Spread bet Spread betting allows clients to trade on the price movements of financial markets, including currencies, commodities, indices and companies. Spread betting with CMC Markets provides similar economic benefits to those experienced when investing in an underlying asset, but without the costs and limitations associated with physical ownership. Spread bets are cash-settled investments in financial products that offer a number of benefits, including dividend on stocks, interest on positive carry currency positions, and coupon on interest bearing instruments. Spread betting has many of the same benefits as a CFD with one important difference; you are betting a specific stake size per point movement of a product rather than trading a specific number of shares or units. Ordinarily, profits from spread betting are free from capital gains tax and stamp duty in the UK and Ireland, although tax laws are subject to change. Stockbroking CMC Markets also offers Australian clients the ability to buy and sell ASX-listed equities as well as listed funds, with clients having access to live market data and research from some of Australia s most respected stock market analysts. Our geographical reach CMC Markets is a global business with a significant presence in its main hubs in UK, Germany, Australia and Singapore but also operating across 4 continents with clients located in over 100 countries around the globe.

7 How we do it CMC Markets PLC Annual Report 2012 At a glance Business review Governance Financial statements Corporate information 7 Client Service > Client Managers supporting clients to be the best traders they can be > Global Research services through our Market Analysts > Exclusive Traders events and education including access to industry experts Security > Over 20 years experience in the industry > Global experts and leaders in SB and CFDs > Full segregation of retail client funds > Significant capital and liquidity surpluses Product Innovation > Award winning platform > Competitive pricing > Reliable systems > Charting tools > Premium content, news and features

8 8 CMC Markets PLC Annual Report 2012 Client Service

9 At a glance Business review Governance Financial statements Corporate information 9 This year has seen a huge effort in ensuring the transformation of our client experience and the realignment of our client proposition to meet the requirements of the active trader community. Our client programme has allowed us to focus on forming stronger, real connections with our clients, driving quality interactions and building trust in our brand. Our objective continues to be to provide our clients with a superior trading experience and help them to be the best traders they can. Our aim is for CMC Markets to become the home of the active trader. We believe that it is important to listen to our clients needs, be consistent, collaborate, keep our pricing competitive and deliver through a reliable and exceptional service. We will ensure that our clients receive the service they expect whilst cementing our position as the brand of choice for trust, security and expertise. CMC Markets is recognised as a market leader in Spread betting and CFDs in all of the global regions in which we operate as measured through the numerous industry awards we have received year after year. However, we are not complacent as we know that this is not enough to sustain a true market leadership position in the future given the need to continually raise the standards of our service setting new benchmarks for the industry. As well as offering great products and trading capabilities that our clients have requested, we will continue to ensure that our clients see us as a trusted and recommended provider in the industry through excellence in client services. Our 2012 Global Client Survey has indicated that we are making significant progress in our service proposition with the following key indicators: 71% of respondents indicated that they are satisfied/very satisfied with the next generation trading platform. 69% of respondents indicated that they are likely/very likely to recommend CMC Markets to a friend or colleague. Client management CMC Markets clients have access to a dedicated Client Manager who is responsible for ensuring that we provide each client with an account management service to meet all of their requirements including personalised trading support, client service, event and education management and tailored content, news and market insights. The Client Managers are trained in our in-house CMC Academy which provides all managers with a structured development programme covering all aspects of trading, products and services. We like to think that our Client Managers are second to none in the industry as the Academy trains them to understand advanced trading support and to put client service at the heart of everything they do. Global research services CMC Markets provides access to a comprehensive research portal whereby our experienced market analysts across the globe provide 24 hour, five days per week content including market updates, commentary, webinars and special event presentations. These are provided through all forms of media including web and social media channels such as twitter and facebook. Traders events and education CMC Markets has pioneered education within Spread betting and CFDs and we are recognised as a leader in the industry through innovation in this area as we believe this support is fundamental to sustainable trading and long term client relationships. We ask all of our clients for feedback on the types of events and education that would be of most benefit to their individual circumstances. Our Client Managers then tailor relevant programmes for our clients based on their needs. These are wide ranging including networking events with other traders, special interest trading sessions, Trader Master Classes with well known analysts and one-toone tuition. These are all provided through our education and product development teams as well as industry experts in specialised fields (for instance FX or commodities trading). Our objective continues to be to provide our clients with a superior trading experience and help them to be the best traders they can.

10 10 Product innovation Award winning platform Our multi-award winning trading platform continues to transform the market place and will help CMC Markets to become the home of the active trader. Now available in all of our core markets; the UK, Germany, Singapore and Australia, our next generation trading platform remains as innovative as ever and pushes the boundaries of what is possible in the retail trading market. As we re constantly adapting our platform to our clients requirements we have made a number of significant advancements this year, from advanced order execution functions and technical pattern recognition, to interactive economic calendar tools and the full customisation of our trading dashboard. Competitive pricing The launch of our next generation platform in our core markets enabled us to provide significantly improved spreads to our clients across all of our major products. Not only are our headline spreads extremely competitive compared to our main competitors, our automated execution and an advanced pricing engine allows us to keep spreads tighter, even during fast-moving volatile markets. Reliable systems CMC Markets next generation platform is built on the latest technologies incorporating high availability and disaster recovery across multiple datacentres globally. We take the best of breed frameworks and practices and apply them to the systems and their component parts whilst driving service improvement projects to produce a high level of availability and stability. Our continued investment in infrastructure including enterprise class storage and scalable technologies coupled with a clear IT strategy means we will continue to enhance the stability of the platform and build scalability as the organisation continues to expand its product offering. Our confidence in this technology and our platform is demonstrated by our transparency in all key aspects of reliability, keeping our clients informed of our performance via our client dashboard. Charting tools and Advanced content Our next generation charting package, developed in-house by our team of experienced traders and programmers, has gone through years of research and development to bring our clients an unrivalled array of technical trading tools and analysis functions. With major enhancements added almost every quarter, we will continue to innovate in the fields of charting and technical signal generation, to provide our clients with the ultimate trading edge. This summer we will see the launch of significant new updates to our platform. Price Depth Ladders will give our clients unrivalled pricing and execution capability, even with large trade sizes. Our Pattern Recognition Scanner will automatically alert our clients to technical trading opportunities every 5 minutes, and has full backtesting functionality. We will continue to develop innovative, effective trading tools that cater for active traders with a passion for the world s financial markets.

11 At a glance Business review Governance Financial statements Corporate information 11

12 CMC Markets PLC Annual Report 2012 Security

13 At a glance Business review Governance Financial statements Corporate information 13 CMC Markets has been an established player in the Spread betting, CFD and FX market for 22 years. Our history and experience has enabled us to build a market leading position, providing our clients with the best products and support. Our geographical reach and next generation trading platform has enabled us to build a global brand. We have received a number of awards throughout the year, such as Best Spread Betting Service and Financial Provider of the Year (Shares Magazine) and Best Spread Betting and CFD Broker (Trade 2 Win). As a result, we are instantly recognised as a leading industry player in many of our markets, where we continue to build upon this leadership by providing the best products and services to our clients. The significant size and scale of our business has enabled us to compete on a global scale, whilst maintaining a local and personalised service. With over 700 staff centred mainly in our core hubs we are able to provide access to clients in over 100 countries. With over 33m trades and value of trades of 1,221bn, our business continues to grow in all of our key regions, whilst maintaining our active client base above 75,000. Our financial performance has improved significantly this year. Our robust underlying profitability is represented by EBITDA of 22.5m and statutory profit after tax of 2.5m. With net assets of more than 100m and little debt, the strength of our balance sheet positions us for a successful future. Healthy cash levels and surplus consolidated regulatory capital of more than 150% of UK Financial Services Authority (FSA) capital resource requirements enables CMC Markets to maintain our objective of a very secure capital and liquidity structure, which is appropriate for the success and future growth of our business. We believe this to be a significant buffer to withstand the fluctuations within the financial markets and take advantage of growth opportunities which exist in the future. We also place significant emphasis on full segregation of retail client money from our own funds. Retail client money is not required to be segregated in all jurisdictions in which we operate. However during 2011, the group increased its levels of retail client money segregation and now, retail client money is fully segregated in all jurisdictions. As a business regulated in all the markets that we operate, the Board has maintained a governance structure which it believes is appropriate to the operations of an online financial services trading group and reflects the size and nature of the business. We have independent Non- Executive Directors who ensure that appropriate governance principles are applied and independence maintained. They are supported by an internal audit function that follows a programme of work under the supervision of the Audit and Risk Committee Healthy cash levels and surplus consolidated regulatory capital of more than 150% of UK Financial Services Authority (FSA) capital resource requirements.

14 14 Strategy Vision To be a market leader in global online multi asset trading. Strategic objectives Our aim is to provide superior shareholder returns through: Objective Measures Performance Consistent and sustainable delivery of growth in revenues by increasing our share of global flow and liquidity both from our existing client base and through the acquisition of new clients in current and new markets. Net operating income Active clients 143.6m 75, m 75, m 75,737 Continued steady growth of net operating income. Active clients maintained as a result of our focus on retention. The next Number of trades 33.2m 22.9m 26.2m generation platform enables the business to drive down the Value of trades 1,221bn 749bn 770bn cost of trading and significantly increase the number and value of trades. Improvement to operating margins through operational excellence. Creating a secure capital and liquidity structure that will be appropriate for the future growth and success of the business. EBITDA 22.5m 18.7m 17.1m EBITDA Margin 15.7% 13.7% 13.2% Profit (Loss) after tax 2.5m (19.4)m (9.2)m EPS 0.9p (6.9)p (3.4)p Surplus regulatory capital 62% 56% Surplus liquidity 88.6m 35.1m Continued growth in underlying profitability and margin, and a return to statutory profit. Significant surpluses maintained in regulatory capital and liquidity Strategic enablers CMC Markets has identified six core strategic enablers that are fundamental to the achievement of our strategic objectives. These enablers will be the core factors that differentiate us in the future and which will create long term sustainable competitive advantage in our chosen markets: Client championship Product innovation Trading risk management Technology and operations Financial strength People

15 At a glance Business review Governance Financial statements Corporate information 15 Client championship Our ambition is to be the client champion through delivering an unparalleled client experience to the active trader. This will help maintain a loyal trading community, provide optimal returns for our shareholders and increase long-term value for the business. As well as offering great pricing, products and trading capabilities that we know our clients want, we will continue to strive to ensure that our clients see us as the most trusted and recommended provider in the industry through excellence in client service. CMC Markets continues to place the utmost importance on client championship and the continuous delivery of fair outcomes to our clients through our behaviour, image, product innovation and internal culture. With this client-centric vision at the core of our business we are confident that CMC Markets will become the undisputed brand of choice in all of our key global markets. Product innovation Innovation is at the centre of everything we do. We constantly change, challenge and innovate. We aim to provide our active trading clients with global access to investment opportunities anywhere, anytime to create a self-directed investment community that manages markets on its own terms. We constantly seek to innovate to provide better pricing, unique features, content and tools and present real time trading options. We will continue to redefine realtime for clients not just in terms of trading execution but also up to the second market intelligence. We are constantly innovating to make our content, services and products stand out from the rest. Trading risk management At the heart of CMC Markets is our global trading risk management capability, dealing with the most sophisticated retail flow at multi asset trading turnover levels in excess of 10bn per day. We aspire to be a global leader in providing pricing, execution and liquidity to retail clients and this is enabled through fully automated execution and dynamic risk management which is scalable far beyond our current levels of trading activity. We have significant expertise in retail flow and risk management across multi asset classes and will continue to lead and innovate as we expand our products and services into the future. Our risk management strategy is based on highly automated flow management which dynamically hedges the client risk in order to benefit from transactional spreads. Our strategic risk appetite is to retain a proportion of client portfolio risk, transferring the remaining risk through external counterparty hedges. Risk appetite is controlled via strong governance, oversight and sophisticated controls at all times, within tightly defined risk parameters approved by the Board. We will continue to optimise our returns using the latest risk management techniques. Technology and operations Technology and operations have always been key to the success of CMC Markets and this has won us outstanding recognition as the leader in our industry for innovation and service. Our aim is to provide our clients with the ability to take ownership of their personal financial investments. Our platform has been built to provide complete control and flexibility. We are investing in technology and operational processes which will allow us to expand with ease in the future, providing scalability, combined with exceptional dependability and speed, while driving down marginal costs as volumes grow. Financial strength We aim to maintain a very secure capital and liquidity structure that will be appropriate for the future growth and success of the business. This includes a long term level of capital to withstand the demands of the financial fluctuations in the markets and access to a healthy level of surplus liquid resources commensurate with the size of our business and the growth opportunities which exist in the future. People CMC Markets is committed to recruiting, developing and motivating exceptional people who are smart, innovative and determined to deliver on our promise to our clients. We have a programme of continued development through our CMC Academy which aims to maximise potential and enhance the experience we provide to our clients. Our team has the passion and determination to make this happen.

16 16 CEO Review To our clients Thank you! We don t take your business for granted your interests in being successful traders are aligned with the long-term interests of our shareholders. This is why: 1. Your long term success relies on sustainable trading and risk management techniques. Our business wholly relies on you being successful and sustaining this into the long term. Your loyalty allows us to continue to focus our investment to serve the clients we have today rather than the clients we may have in the future. The launch of our next generation platform enabled us to dramatically lower our prices, driving down the cost of trading. This resulted in many of you recommending us. Word of mouth remains the most powerful client acquisition tool we have and we are grateful for the trust you have placed in us. 2. Your success and our reputation are one and the same. Our reputation and your trust in our brand relies on us getting it right first time, every time, real time. This year we have listened harder than ever to our clients on what you want us to improve on and we are working even harder to not just meet your expectations but hopefully to exceed them. This includes our service promise to you. We know that relying on great products and platforms is not enough; we have to earn the right to your business through service excellence delivered consistently and in real time. We want you to recognise and trust our brand as the service leader in the industry. This will only happen if we continue our focus on making you successful and being transparent about how well we are doing in the provision of best in class service to our clients. The art of successful trading is not one that can be learned overnight. Even as one of the leaders in the market for over 20 years in Spreadbet, CFD and FX we are still learning how to improve and provide you with the best support to help you be more successful. We feel good about what we have done over the last few years in building the next generation of trading tools and technology and are even more excited about what you want us to do in the future. We wish you all the best for successful trading in the coming year!

17 At a glance Business review Governance Financial statements Corporate information 17 To our shareholders and other stakeholders This year was indeed an incredible year for CMC. When we started this transformation in 2009 we envisaged that it would be a five year programme to strengthen our market position in our target global markets which would in turn translate directly to higher revenue, higher profitability and greater returns on invested capital. Our decisions during the year have consistently reflected this focus. We continue to measure ourselves in terms of key metrics: revenue growth, the degree to which our clients continue to actively trade with us on a repeat basis (in an increasingly crowded market), and the strength of our brand. We have invested and will continue to invest aggressively to support our client base, brand, and infrastructure as we move to establish an enduring franchise in our target regions. In last year s annual report, I highlighted that the transformation of the business entering its most important phase whereby our growth strategy would start to deliver shareholder returns directly attributable to our significant investments and relentless focus on new products and services for our clients. I am very pleased to say that we have achieved many of these objectives with growth in activity in many of our regions, and improved overall financial performance. Our financial results reflect a significant improvement over the prior year. Net operating income increased 4.9% to 143.6m and EBITDA (our main profitability measure) increased by 20.3% to 22.5m. For the first time in three years, following significant investment in technology and client service, we have returned a statutory profit after tax totalling 2.5m. Against many measures, CMC Markets made significant progress during the last year. Our focus on attracting and retaining active multi asset traders has seen us shift up a gear in addressing the key gaps in our products and service proposition to ensure that we are regarded as a trusted and credible brand for these clients. This increased focus has also seen a shift in our target global footprint as we are increasingly focusing our retail investment towards Europe, South East Asia and ANZ, as this reflects the greater depth and experience of active trading clients in these markets. Our goal is to move quickly during the coming years to position ourselves as the home of the active trader. Given the substantial opportunity in the large active trader markets we are targeting, it will continue to require investment and smart execution compared to our competitors. We will continue to measure the effectiveness of our investments in order to ensure that they are focused in those areas that work best and in doing so constantly learn and therefore ensure continual improvement across the business. We continue to be at the forefront of the industry in working with regulators to raise standards in all areas including higher regulatory capital requirements, capped leverage standards, full segregation of retail client margin in all regions and enhanced standards on money laundering controls, disclosure and client appropriateness in all regions. We are in great shape for the future but we aren t finished yet. We will continue to improve our business and set even higher standards of quality in the future. None of this would have been possible without the continuing strong support and encouragement of our major shareholders, Peter Cruddas and Goldman Sachs, who have worked closely in partnership with the executive management team to continue the growth strategy and plan for the substantial opportunities ahead of us. I would also like to thank two Board members who left us this year Kerem Ozelli, Executive Director of Trading and David Bennett, Non-Executive Director for their significant contribution to the business. We know that our success is hugely dependent on our ability to continue to attract and retain talented people who will continue to work hard at building what matters to our clients. Thank you to all our employees for your hard work and support - you represent the best team in online trading. I take great pride in being a part of this team.

18 18 Operating and financial review Environmental factors Competitive environment CMC Markets is a global organisation operating across 4 continents and with clients located in over 100 countries around the globe. Competition in our core markets of the UK, Germany, Australia and Singapore has continued to intensify over the last year. These regions account for 68% of our active client base and CMC Markets remains a leading player in each of these markets. The launch of our next generation trading platform and the increased focus on client service to the active trader community will enable us to demonstrate to our existing and potential clients that we will become the home of the active trader. Macroeconomic environment Volatility is a key influencing factor driving the propensity for new and existing clients to trade. The shorter term level of volatility increased on average by 7% during the year following years of declining volatility post the credit crunch. This was mainly driven by higher volatility in August and September, which positively impacted the Group s number and value of trades. There continued to be short term shocks that influenced certain asset classes but the level of volatility at year end remained below the long term (five year) average. VIX* APR OCT APR OCT APR VIX VIX ANNUAL AVERAGE VIX VIX * VIX: The Chicago Board of Options Exchange Market Volatility Index measure of the implied volatility of the S&P 500

19 At a glance Business review Governance Financial statements Corporate information 19 Regulatory environment CMC Markets is regulated on a consolidated supervision basis by the Financial Services Authority (FSA) in the UK. The Group takes regulation in all of our jurisdictions very seriously and has the appropriate regulatory authorisation to conduct business in all the locations in which it operates. In addition to its global and local regulatory requirements, the Group invests significant resources in a programme of active monitoring and works closely with all regulators to ensure that we remain fully compliant. The Group offers its retail client base the ability to actively trade CFD, FX and Spreadbet products. For the retail market these represent high risk products; they are leveraged derivatives, not listed on any exchange and not tradable with any third parties. Retail client protection will therefore continue to be the primary focus for all regulators in all of the jurisdictions in which CMC Markets operates, including focus on increased product transparency, better investor protection, increased regulatory supervision and proactive regulatory intervention. Recent developments and the outlook in our major regions are summarised below: United Kingdom During the year the Group implemented the new requirements introduced following the amendments to the Capital Requirements Directive ( CRD3 ), with key areas of focus being on remuneration, disclosure and sufficiency of capital. The Financial Services Compensation Scheme (FSCS) again issued an interim levy related to the continued costs from the failure of Keydata Investment Services Ltd and other investment intermediary firms. As CMC Markets falls under the investment intermediary category, we are required to contribute towards these costs. The Group continues to have issue with the transparency and communication of these charges across our sector but, with the failure of MF Global and Worldspreads, the Group has provided for the maximum potential impact of the levy for 2012/13, which is reflected in this year s financial statements. The coming year will see the restructure of the FSA in the UK, with supervision of the business being transferred to a new regulator, the Financial Conduct Authority (FCA). Europe During 2011, restrictions on short positions were temporarily introduced in several European locations and this was replicated across all of the Groups product offerings. Moving forward, the regulatory agenda in Europe, including the UK, will be driven by new legislation relating to the trading of all standardised derivatives on a regulated market, a multilateral trading facility, or an organised trading facility as well as the potential mandatory clearing of eligible derivatives via a central counterparty clearing house. The Group will continue to monitor these developments and assess their impact on the business as more detail becomes available. Australia and New Zealand Aligned with the UK, regulatory focus in Australia and New Zealand has been on improving disclosure for retail investors, the segregation of client money and improving advertising standards. In 2012, the Group will work towards compliance with the Future of Financial Advice and Financial Markets Conduct bills and enhanced requirements in relation to the identification of clients. Within Australia in particular, there are likely to be more stringent financial reporting requirements for all regulated firms. Singapore The regulatory focus in Singapore has been on the processes for accepting new clients and enhanced authentication requirements for clients in order to protect them against the risk of financial crime. Moving forward, the central clearing of over the counter (OTC) derivatives is also being considered. The key objectives of regulators in 2012 will be to ensure firms maintain strong competencies, in order to re-establish trust in the sector following the global financial crisis and to maintain high standards of financial integrity based on stringent and robust anti-money laundering controls and client authentication.

20 20 Operating and financial review Operating review Global overview The investment that we have made in technology over the last three years has enabled us to reduce the cost of trading for our clients. The lowering of spreads and commissions during summer 2011 combined with the roll out of the next generation trading platform in our four key markets during the year and a slight increase in average volatility had a positive impact on our trading levels with the volume and value of trades increasing by 45% and 63% respectively over prior year. Active client numbers were maintained above the 75,000 level, remaining broadly flat against prior year at 75,627. Clients Trades (m) Value of trades ( bn) 75,627 75,627 75,922 75, ,221 1, EUROPE ANZ ASIA CANADA EUROPE ANZ ASIA CANADA Europe Europe represents the largest market segment for CMC Markets accounting for 75% of total trades, 72% of total value of trades and 66% of total active clients during the year, with significant market presence in the UK, Germany and Scandinavia, along with a growing presence in Southern Europe. The roll out of our next generation CFD trading platform in the UK, Germany and Austria early in the financial year helped us develop our position in these key markets.

21 At a glance Clients Trades (m) Business review Governance Financial statements Value Corporate of trades information( bn) 21 7, Clients 18,655 Trades (m) 8.9 Value of trades ( bn) 5,517 Clients 2012: Trades 2012: (m) 2012: Value of trades ( bn) 50, m 884bn 476 7, ,322 18, , : 2012: 2012: 50, m 884bn 476 UK & IRELAND GERMANY & AUSTRIA SCANDINAVIA SOUTHERN EUROPE ,322 5,517 5,409 15,443 18, : 21, : 46, m UK & IRELAND GERMANY & AUSTRIA SCANDINAVIA SOUTHERN EUROPE UK & IRELAND GERMANY & AUSTRIA SCANDINAVIA SOUTHERN EUROPE 15, UK and Ireland Clients Clients UK & IRELAND GERMANY & AUSTRIA SCANDINAVIA SOUTHERN EUROPE 7,782 3,958 5,409 18, : 2011: 50,276 46,030 3,958 Clients Clients 21,220 Trades Trades (m) (m) 2012: 2011: 25.0m 15.7m 1.6 Germany and Austria Trades (m) The UK and Ireland, as one of our core The successful launch of our next generation markets, has UK & seen IRELAND the benefits GERMANY not & only AUSTRIA of the SCANDINAVIA CFD platform SOUTHERN across Germany EUROPEand Austria launch of our next generation trading platform, reaffirmed our position as the market leader, but also of 3,958 the increased focus on our active resulting in 1.6 active clients, volume and value of trading clients. Despite total client numbers trades in this core market increasing by 19%, 5, falling by 12%, the focus on active traders 84% and 74% respectively during the year. resulted in the volume and value of trades We have set up our main German office in the 2011: 2011: 6.6 increasing by 35% and 82% 21,220 respectively financial capital, Frankfurt to bring us closer to due to the positive 46,030 impact of the new next the German trading 15.7m community, the benefits generation trading platform, improved pricing of which should be evident in and increased 15,443 volatility. At the end of year, the 6.2 Group announced the closure of the Ireland Southern Europe office, with its operations being transitioned over to the UK. This will bring significant Our Southern Europe business (Spain, Italy efficiencies to the business, creating a centre and France) has produced some exceptional of excellence in London where new and growth during the year, exceeding our UK & IRELAND GERMANY & AUSTRIA SCANDINAVIA SOUTHERN EUROPE existing clients in Ireland will be able to enjoy expectations. Active client numbers almost even higher levels of client service. doubled resulting in substantial growth in the Trades (m) Value Value of trades of trades ( bn) ( bn) Value of trades ( bn) 2012: 2011: 884bn 492bn : 492bn region, with Spain being the driving force. The volume and value of trades increased by 94% and 98% respectively. Southern Europe Value of trades ( bn) was the highest growth region for CMC Markets, despite the fragile economic climate in these regions Scandinavia 2011: During a period of intense competition, CMC Markets has 492bn 262 maintained its position as the market 148 leader in Scandinavia with active client numbers remaining stable against prior year and the volume and value of trades increasing by 23% and 65% respectively.

22 22 Operating and financial review ANZ The next generation trading platform was launched in Australia in August Despite going through a major platform migration and reducing client spread and commission trading costs significantly, the region increased the volume and value of trades by 13% and 32% respectively. The next generation trading platform was well received by the industry, with independent financial research institute Canstar giving the new platform positive reviews, praising its adjustable leverage features, accessible education and low cost trading for Australian investors. CMC Markets was also a founding member of a new CFD industry body, promoting greater investor protection, and improving the understanding and perception of CFDs. The new body will raise the standards of the Australian CFD industry and bring many opportunities in the region. Our stockbroking business increased profitability via significant focus on cost reduction through efficiency and adding additional revenue streams from derivatives trading. However we experienced a reduction in the value of trades by 14% over the prior year due to difficult market conditions although the volume of trades increased by 2%, and we doubled our frequent trader market share (source - Investment Trends 2011 Second Half Online Broking Report) while many of our competitors remained static or lost ground. During the year, the CMC Markets stockbroking business was awarded the best value online share trading platform and the 2012 best of the best award for having the best online value for money trading platform in the market. Clients Trades (m) Value of trades ( bn) Clients Trades (m) Clients 2,286 Trades (m) Value of trades ( bn) Value of trades ( bn) 2, : : : 13, m 249bn 2012: 13,90111, : 5.2m : 249bn 207 AUSTRALIA 11,615 NEW ZEALAND AUSTRALIA Clients Clients NEW ZEALAND Trades Trades (m) (m) Value Value of trades of trades ( bn) ( bn) 2,286 2,451 Clients 0.9 Trades 0.7 (m) Value of trades ( bn) 2012: 2, : 13,901 15, : m 2011: 4.6m 2012: : 249bn 189bn 2011: 11,615 15,48613, : m : bn162 13,035 AUSTRALIA NEW ZEALAND AUSTRALIA NEW ZEALAND Clients AUSTRALIA NEW ZEALAND Trades (m) Value of trades ( bn)

23 At a glance Business review Governance Financial statements Corporate information 23 Asia Despite the difficult market conditions in Japan, the Asia region continued to grow with the volume and value of trades increasing by 15% and 21% respectively. Singapore The launch of our next generation trading platform in Singapore in August 2011 and more competitive pricing resulted in significant benefits for CMC Markets as the volume and value of trades increased by 20% and 19% respectively. Due to increased regulatory restrictions there was a significant reduction in activity from our Chinese client base such that, when you exclude its Chinese business, Singapore would have experienced an increase in the volume and value of trades by 70% and 71% respectively over the prior year. Active clients remained in excess of 7,000 as Singapore continued to provide significant prospects in the retail market despite the increased competition in the sector. Our next generation platform helped by a strong award-winning education proposition means that this continues to be an area of future potential growth for the business. Japan The unique and ever increasing regulatory restrictions in this market meant that the business suffered from a drop in active clients by 53%. However trading levels were maintained and the value of trades increased by 30%. We anticipate trading conditions to continue to be difficult in this region and we plan to focus our investment towards partners rather than direct retail operations. Clients Clients Trades (m) (m) Trades (m) (m) Clients Trades (m) Value of trades ( bn) ,636 2,636 2,636 Value of of of trades ( bn) Value of of of trades ( bn) 2012: 2012: 2,636 2,636 9,790 9, : 2012: 7,154 7,154 7,154 9,790 9, : : 2.3m 2.3m 2.3m 2012: 2012: m m : 64bn 64bn 2012: 2012: 64bn 64bn ,154 7,154 SINGAPORE SINGAPORE JAPAN JAPAN Clients Clients SINGAPORE SINGAPORE JAPAN JAPAN Trades Trades (m) (m) (m) Value Value of of trades of of trades ( bn) ( bn) 2,636 Clients Trades (m) (m) Value of 10 of of trades ( bn) 5,625 5, : 2011: 2011: 9,790 12,680 12,680 7,055 7,055 7, : 2011: 2011: m2.0m 2.0m 2.0m : : 64bn 53bn 53bn 5,625 5, : 2011: 7,154 12,680 12,680 7,055 7, : 2011: m 2.0m 2011: 2011: 53bn 51 53bn SINGAPORE SINGAPORE SINGAPORE JAPAN JAPAN JAPAN Clients SINGAPORE SINGAPORE JAPAN JAPAN Trades (m) Value of trades ( bn)

24 CANADA CMC Markets PLC Annual Report Operating and financial review Canada CMC Markets has continued to pioneer CFDs in the Canadian market where it remains the only retail CFD provider in the main provinces. Retail trades have remained buoyant resulting in significant growth in value of trades by 60%. Active client and trade numbers have remained stable as we continue to reinforce our position as market leader and educate Canadian investors on the advantages and benefits Clients of CFDs. Trades (m) Value of trades ( bn) Clients Trades (m) Clients Trades (m) Value of trades ( bn) Value of trades ( bn) 2012: 1, : 1, : 0.7m 2012: 0.7m 2012: 24bn 2012: 24bn CANADA Clients Clients CANADA Clients Trades Trades (m) (m) Trades (m) Value Value of trades of trades ( bn) ( bn) Value of trades ( bn) 2012: 2011: 1,660 1, : 0.7m 2011: 0.6m 2012: 2011: 24bn 15bn 2011: 2011: 2011: 1, m 15bn CANADA CANADA Clients CANADA Trades (m) Value of trades ( bn) 2011: 1, : 0.6m 2011: 15bn