INVESTING IN ICAP Michael Spencer INTRODUCTION The worlds largest - - PowerPoint PPT Presentation

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INVESTING IN ICAP Michael Spencer INTRODUCTION The worlds largest - - PowerPoint PPT Presentation

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INVESTING IN ICAP Michael Spencer INTRODUCTION The worlds largest voice and electronic interdealer broker Daily average transaction volume in excess of $550 billion, 40% of which is electronic 2800 staff operating from 21

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INVESTING IN ICAP

Michael Spencer

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INTRODUCTION

  • The world’s largest voice and electronic

interdealer broker

  • Daily average transaction volume in excess
  • f $550 billion, 40% of which is electronic
  • 2800 staff operating from 21 offices

worldwide

  • One of the UK’s 130 largest quoted
  • companies. A FTSE 250 company with a

market capitalisation of circa £1.4bn (US$2.3bn)

  • The Total Shareholder Return since the

merger (Sept 99) up to the close on 23 Sept 03 has been 463%

INTRODUCTION

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IDB SERVICE

  • Wholesale intermediary
  • Anonymity/execution/liquidity/information
  • No principal trading
  • Where settlement systems are

established, operates as “matched principal”

  • In markets where credit risk exists

between counter parties, “name give up”

  • Similar to an exchange

INTRODUCTION

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HYBRID CLARIFICATION

  • Many different definitions
  • ICAP is committed to a truly hybrid

model based on

  • Combined voice and electronic liquidity
  • Customers choice of either voice or

electronic deal execution

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INDUSTRY DEVELOPMENTS

  • Rapid consolidation of previously fragmented

industry driven by:

  • Impact of the Euro
  • Merger of customers
  • Increasing impact of technology
  • The emergence of e-broking
  • Weakness of some balance sheets
  • Operational leverage and economies of scale
  • Continued belief that further consolidation will result

in the emergence of 2 or 3 global interdealer brokers with a small number of niche players

INTRODUCTION

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MARKET SIZE ESTIMATE*

GLOBAL INTERDEALER BROKING 2002 - $4.3 billion

ICAP plus BrokerTec Collins Stewart Tullett Tradition Other Voice brokers Prebon Cantor/Espeed GFI Other Electronic brokers Other Energy brokers

* Total revenues not including equities. Where no public information is available, estimates have been used.

THE INDUSTRY

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MARKET SIZE ESTIMATE*

GLOBAL INTERDEALER BROKING 2002 - $4.3 billion

Electronic Broking - FX &

  • ther

5% Electronic Broking - Securities 7% Voice Broking 88%

*Total revenues not including equities. Where no public information is available, estimates have been used.

THE INDUSTRY

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INTERNATIONAL BONDS AND NOTES

AMOUNTS OUTSTANDING (US$ billions)

1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: BIS

DRIVERS FOR GROWTH

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MARKET GROWTH

INTEREST RATE SWAPS OUTSTANDING (US$ trillions)

10 20 30 40 50 60 70 80 D e c

  • 9

D e c

  • 9

1 D e c

  • 9

2 D e c

  • 9

3 D e c

  • 9

4 D e c

  • 9

5 D e c

  • 9

6 D e c

  • 9

7 D e c

  • 9

8 D e c

  • 9

9 D e c

  • D

e c

  • 1

D e c

  • 2

Source: BIS

DRIVERS FOR GROWTH

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ELECTRONIC BROKING VOLUMES

ALL PRODUCTS (average $ billion/day)

50 100 150 200 250 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 ICAP/ETC MTS Group BrokerTec eSpeed

Sources: BrokerTec, ICAP, estimates from eSpeed and MTS websites - counting

  • nly trades executed electronically

ELECTRONIC BROKING

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INVESTING IN ICAP

Steve McDermott

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AMERICAS

  • American operations
  • 35+% of ICAP’s global profit
  • 116% profit growth for the region

between 2002 and 2003

  • Growth has been both organic and

through acquisitions

  • The larger ICAP acquisitions have

been in North America.

BUSINESS ANALYSIS

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AMERICAS

  • The merger between Garban and the

Intercapital Group.

  • Garban brought a leading American

presence

  • Intercapital a leading European

presence

  • The combination created the world’s

largest interdealer broker.

BACKGROUND

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AMERICAS

  • 9/11 was another key—albeit tragic—event

in our evolution

  • We were based in the World Trade Center
  • Had market leading positions in a number of

products

  • And, in the midst of developing and rolling out

E-initiatives

  • Suddenly we were dispersed, and conducting

business with nothing more than pads, pencils and outside phone lines

BACKGROUND

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AMERICAS

  • Background
  • We survived and succeeded.
  • In the two years since the attacks on

the Trade Center we have achieved growth in every measurable way.

BACKGROUND

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AMERICAS

  • Background
  • In the past 18 months, we have completed

three major acquisitions

  • First Brokers in April 2002 expanded
  • APB (now ICAP Energy) in October 2002
  • BrokerTec in May 2003
  • Headcount in all US operations is 1170
  • New North American headquarters is a state
  • f the art facility, which can be expanded.

BACKGROUND

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AMERICAN MANAGEMENT

  • Ron Purpora is CEO of our Securities

business in North America. This includes products such as:

  • US Treasury products
  • U.S. Repo agreements
  • U.S Mortgages
  • U.S. Agencies
  • U.S. Corporates
  • Credit Derivatives
  • Equity NYSE floor business

INTRODUCTIONS

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AMERICAN MANAGEMENT

  • Doug Rhoten, CEO, Garban Capital
  • Markets. Doug is responsible for
  • Money Markets
  • Spot and Forward Foreign Exchange
  • Emerging Market Derivatives
  • Derivatives, including options and

Interest Rate Swaps

  • Energy

INTRODUCTIONS

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AMERICAN MANAGEMENT

  • Hal Hinkle, Global CEO, ICAP

Electronic Broking Division and Former CEO of BrokerTec

  • Hal joined as part of the acquisition
  • In addition to the BrokerTec system,

Hal is responsible for our ETC product and several other system and electronic initiatives.

INTRODUCTIONS

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INVESTING IN ICAP

Ron Purpora

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AMERICAN SECURITIES MARKETS

  • Core Divisions
  • Treasury Products
  • Mortgage Securities
  • Federal Agency Issues
  • Corporate Products including

– Corporate Bonds – Emerging Markets – Credit Derivatives – Equity and related

INTRODUCTION

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AMERICAN SECURITIES MARKETS

  • 350 Brokers servicing
  • Voice and Electronic Capabilities
  • Market leading positions in all core

divisions

  • 67% revenue increase from fiscal 2001

to fiscal 2003

INTRODUCTION

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OVERVIEW – RECENT EVENTS

  • Cemented dominance in Corporate

Bonds with First Brokers purchase

  • Expanded Credit Derivatives group
  • Rolled out new technologies to exploit

STP capabilities across products

  • Historically strong performances

related to overall growth in Fixed Income arena

OVERVIEW

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TREASURIES - HYBRID BROKING

41% 44% 11% 1% 3%

ICAP-BTEC E-Speed TTL Maxcor Hill

Source: Federal Reserve Bank of New York Data, ICAP estimates

MARKETS Estimated Market Share – US Treasury Trading

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TREASURIES — ACTIVE ISSUES

Estimated Market Share - Active Issues

33% 67%

ICAP-BTEC E-Speed

  • Trading of Bench-

mark Issues

  • 70% of all trading
  • Commodotized,

Highly Liquid

  • Virtually all

brokered electronically

Source: Federal Reserve Bank of New York data, ICAP estimates

MARKETS

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TREASURIES — OFF-THE-RUN’S

Estimated Market Share - Off-the-run's

55% 32% 9% 4%

ICAP-BTEC TTL Hill Farber Maxcor

  • Off-the-run’s, swaps,

strips, Bills, Basis

  • “value added”

component to service

  • Less commodotized
  • Higher commission

structure accepted

  • ICAP accounts for all

electronic trading

  • Critical core liquidity to

build from

Source: Federal Reserve Bank of New York data, ICAP estimates

MARKETS

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Average Daily Volume US Treasury Securities

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

source: Federal Reserve Bank of New York

TREASURIES - PERFORMANCE

MARKETS

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MORTGAGE SECURITIES

  • ICAP has strongest presence across

product base

  • TBA Collateral market
  • Specified Pools
  • Collateralized Mortgage Obligations
  • ARM’s, ABS and Commercials
  • 36 Brokers servicing these products
  • Strong operating margin

MARKETS

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MORTGAGE SECURITIES

Mortgage Related Federal Agency Corporate Treasury

source: Bond Market Association

First half 2002 First half 2003

MARKETS Long Term Issuance - US Bond Markets

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MORTGAGE SECURITIES

34% 25% 33% 3% 5%

ICAP-BTEC TTL Hill Farber Chapdelaine Tradition

Source: ICAP estimates

MARKETS Estimated Market Share - Trading All Products

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MORTGAGE SECURITIES

  • Electronic participation
  • Trading volumes up strongly
  • Explosion in refinancing activity
  • Unprecedented market volatility
  • Offer full suite of mortgage products

MARKETS

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AGENCY ISSUES

  • Government Sponsored Enterprises –

FNMA and FHLMC

  • Notes and bonds
  • Callables
  • Staff of 30 brokers offering screen-

based voice execution

  • ICAP is by far the leading broker
  • Voice capabilities
  • Electronic capabilities

MARKETS

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AGENCY ISSUES

71% 23% 5% 1%

ICAP-BTEC TTL Maxcor Tradition

Source: Federal Reserve Bank of New York data, ICAP estimates

MARKETS Estimated Market Share – Agency Trading

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CORPORATE PRODUCTS

  • With Acquisition of First Brokers

established dominance in this sector

  • Traded in a voice environment
  • Staff of 176 Brokers
  • High technology deployment
  • Straight Through Processing Initiatives
  • Regulatory Requirements
  • Market data dissemination

MARKETS

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CORPORATE PRODUCTS –

CORPORATE BONDS

Estimated Market Share - Corporate Bonds

40% 16% 18% 3% 17% 6%

ICAP-BTEC TTL Chapdelaine Murphy SGCowen Others

  • Corporate Bonds

primary component

  • Growth through

acquisition

  • Market growth
  • Characterized by

lower level of liquidity

  • No electronic

players in IDB Market

Source: ICAP estimates

MARKETS

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CORPORATE PRODUCTS

MARKET EXTENSION

  • Developments
  • Credit Derivatives
  • High growth area +275% year on year
  • Rapidly attained a top position
  • Strong Margins
  • Equities
  • Direct Access Unit
  • NYSE seat holder
  • Equity Derivatives
  • Institutional Equity Brokerage

MARKETS

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MARKET BREADTH

  • Treasury Products
  • A Market leader - +40% share
  • Hybrid brokerage
  • Agency Issues
  • Dominant share in voice and electronic brokerage
  • 70% market share
  • Mortgage Securities
  • Market leader - +30% share
  • Full suite of mortgage products
  • Corporate Products
  • Dominant broker of corporate bonds
  • 40% market share

SUMMARY

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INVESTING IN ICAP

Doug Rhoten

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CAPITAL MARKETS INTRODUCTION

  • Money Market
  • Foreign Exchange
  • Spot
  • Forwards
  • NDF’s
  • Derivatives
  • Canadian Products
  • Emerging Market Derivatives
  • Repurchase Agreements
  • Energy
  • Latin America

INTRODUCTION

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VOTED TOP BROKER IN…

Source: Risk Magazine; Global Derivatives Rankings, September 2003

Short-Dated IRS Exotic Interest Rate Products US Dollar Volatility/Variance Swaps Japanese Yen Constant Maturity - US Dollar Euro Bermudan/American - Euro Sterling (jointly with Prebon) Bermudan/American - US Dollar Quantos IRS 2-10 years Inflation Swaps - Eurozone US Dollar Inflation Swaps - North America Japanese Yen Euro Cross Currency Swaps Sterling Euro/US Dollar (jointly with Tullett) Euro/Japense Yen IRS 10 years + Sterling/US Dollar US Dollar Euro/Sterling Euro US Dollar/Swiss France (jointly with Tullett) Sterling Dollar/Norwegian Krone (jointly with Tullett) Canadian Dollar Australian Dollar Overnight Index Swaps US Dollar Interest Rate Caps/Floors Euro US Dollar Danish Krone Euro Sterling Repo Canadian Dollar US Dollar Australian Dollar Euro Sterling Interest Rate Swaptions Canadian Dollar Euro Sterling FRA's Canadian Dollar Euro Australian Dollar Japanese Yen Norwegian Krone Danish Krone

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Source: Risk Magazine; Global Derivatives Rankings, September 2003

ICAP:

Credit Derivatives Currency Forwards Vanilla Default Swaps US Dollar/Canadian Dollar Investment Grade Asia US Dollar/Danish Krone High Yield Asia Emerging Markets - East Europe

TFS-ICAP:

Vanilla Currency Options Exotic Currency Options Euro/US Dollar Euro/US Dollar Barrier Euro/Japanese Yen US Dollar/Yen Barrier US Dollar/Swiss Franc Sterling/US Dollar Barrier US Dollar/Canadian Dollar (jointly with GFI) Other Barrier US Dollar/Australian Dollar Binary/Digital US Dollar/Swedish Krona Hybrids US Dollar/Danish Krone Long-dated US Dollar/Emerging Mkts Europe Average Rate US Dollar/Emerging Mkts Americas

VOTED TOP BROKER IN…

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QUARTERLY GROWTH – 4 Year Summary

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03

Desk Operating Profit Net Brokerage

  • Operating Profit Increased by 430%
  • Net Brokerage Increases by 140%
  • Profit Margin Increased from 17% to 25%

POST MERGER GROWTH

Source: ICAP estimates

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OTC BUSINESS MODEL

  • Premiere Brokers
  • Production Management
  • Build and Consolidate Voice Liquidity
  • Integrate Technology
  • Create Indices and Distribute Data
  • Pursue Partnerships With Industry

Leaders

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MANAGEMENT

  • Flat Management Structure
  • Unmatched Product Knowledge
  • Long Term Tenure
  • Broker Loyalty
  • Customer-centric Approach

OTC BUSINESS MODEL

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BUILD VERBAL LIQUIDITY

  • Market Share Goal: 35%
  • Product Specialization
  • Continued Expansion
  • Customers Help Drive Process

OTC BUSINESS MODEL

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COMPLEMENTARY TECHNOLOGY

  • Pre-trade pricing and analytics
  • Straight Through Processing
  • Electronic trading capabilities

OTC BUSINESS MODEL

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CREATING INDICES

  • 19900 Telerate
  • ISDA Swapfix
  • Fed Funds (Telerate page 5)
  • SwapPX
  • GovPX

OTC BUSINESS MODEL

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PARTNERSHIPS

  • STP
  • Swapswire
  • Financial Oxygen
  • Expansion
  • Mexican, Chilean, Peruvian & Columbian

Stock Exchanges

  • GovPX
  • Shorcan
  • Market Practices
  • ISDA Swapfix

OTC BUSINESS MODEL

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OTC BUSINESS MODEL

  • Production Management
  • Build and Consolidate Voice Liquidity
  • Integrate Technology
  • Create Indices and Distribute Data
  • Pursue Partnerships With Industry

Leaders

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$ INTEREST RATE DERIVATIVES

  • Market Share – 40%
  • Rank #1
  • Benchmark Index
  • Telerate 19900
  • SwapPX
  • ISDA Swapfix
  • Technology
  • FRACross
  • Swapswire STP
  • CAS
  • Datatec
  • I-Swap
  • Partnership
  • Swapswire
  • ISDA
  • NumeriX
  • Tri-Optima
  • GovPX

Prebon 15% Tullett 25% ICAP 40% Others 20%

MARKET SHARE & OVERVIEW

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MONEY MARKET

  • Market Share – 35%
  • Rank #1
  • Technology
  • Bank Oxygen
  • Benchmark Index
  • Telerate page 5
  • Partnership
  • Financial Oxygen

(Chase & BOA)

MARKET SHARE & OVERVIEW

Eurobrokers 15% Prebon 20%

Tradition 22%

ICAP 35% Tullett 8%

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REPURCHASE AGREEMENTS

  • Market Share – 54%
  • Rank #1
  • $750+ Billion per day

turnover

  • Technology
  • BrokerTec/ETC
  • “Franchise” approach
  • Extend capital and

technology infrastructure

  • 3 Voice Brokerage

Desks

MARKET SHARE & OVERVIEW

TTL 7% Tradition 7% Maxcor 7% Prebon 25% ICAP- BTEC 54%

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FOREIGN EXCHANGE – VOICE MARKET

ICAP 32% Prebon 32% Tullett 16% Tradition 20%

ICAP 45% Prebon 30% GFI 20% Other 5% Tullett 30% ICAP 70%

MARKET SHARE & OVERVIEW Forwards NDF’s Spot

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MEXICO JOINT VENTURE

  • Merger
  • SIF/Garban
  • Technology
  • Datatec
  • Sipo
  • Bursatec
  • Latin American Expansion
  • Chile
  • Columbia
  • Dominican Republic
  • Peru
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ENERGY

Prebon 13% Others 31% ICAP 21% Amerex 24% GFI 11% Prebon 16% Amerex 20% Others 35% ICAP 16% ICE 13%

MARKET SHARE & OVERVIEW

  • APB Energy Acquisition
  • October 2002
  • Technology
  • Datatec/ETC
  • Benchmark Index
  • Under NDA
  • Partnership
  • TBD

Natural Gas Electricity

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EMERGING MARKET DERIVATIVES

ICAP 30% GFI 23% Prebon 23% Local Brokers 24%

  • Market Share – 30%
  • Rank #1
  • Technology
  • Datatec
  • CAS
  • Kalahari
  • Mavis
  • Partnership
  • TBD

MARKET SHARE & OVERVIEW

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OTC CANADIAN PRODUCTS

  • Market Share – 40%
  • Rank #1
  • Technology
  • Datatec
  • CAS
  • BrokerTec/ETC
  • Benchmark Index
  • Telerate 19900
  • Partnership
  • Shorcan

Prebon 15% Tradition 22% ICAP 40% Other 5% Tullett 18%

MARKET SHARE & OVERVIEW

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OTHER INITIATIVES

  • Wembley Asset Management
  • Wrightson
  • Pari-mutual Derivatives
  • Mortgage Prepayments
  • Whole Loan Broking
  • Broader Energy Market

INITIATIVES

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CLOSING What differentiates us from our competitors

  • Highest Quality Brokers
  • Production Management
  • Specialized Structure
  • Constant Customer Contact
  • Leverage Complimentary Technologies
  • Customer Responsiveness
  • Commitment to Growth
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INVESTING IN ICAP ICAP E-Broking / E-Markets

Hal Hinkle

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OVERVIEW

  • Overview
  • BrokerTec
  • ICAP E-Broking
  • Product Comparison
  • Cross Connect
  • Revenue Commitment Agreements
  • Hybrid Brokering
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SLIDE 62
  • 3 year old global platform
  • 184 Customers worldwide
  • Executed 6.8 million sides
  • Executed $94.1 trillion in single count volume
  • 99+% STP

WHAT IS BROKERTEC? -SNAPSHOT

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+

WHAT IS ICAP E-BROKING? – BEFORE MERGER

  • 3.
  • E-Markets
  • Platform

Provider

  • 2.
  • Voice

Support + Development

  • 1.
  • Hybrid

Customer Broker

  • Pure Customer
  • E-Broking
  • 99+ % Central Clearing
  • (fully electronic)

ETC BTEC US / EU

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SLIDE 64
  • Third Party

Provisions

  • Voice

Support and Development Voice - Third Party

WHAT IS ICAP E-BROKING? – AFTER MERGER

Customer E-Broking US EU and Asia

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PRIMARY ELECTRONIC COMPETITORS

EU Wholesale US / EU Retail Global Wholesale and Retail Global Wholesale Footprint Request For Quote UST Money Markets TradeWeb MTS ESPD BTEC Matching Matching Matching Platform Euro-Govs Italian Repo UST UST US Repo US Agencies US Repo Principal Product

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WHO IS THE ELECTRONIC COMPETITION?

400 connections 1,400+ 700+ 184 Customers 8 $28.2 trillion US: 14.5 hours Europe: 8.5 hours TradeWeb MTS ESPD BTEC 100+ 319 115 Total Employees $94.4 million $76.8 million Total Expenses (2002) $60 million – est. $126 million $97.3 million Total Revenue (2002) 2 13 systems 12 26 Total Products 40 trillion $47.8 trillion (fully electronic) $77.8 trillion (total electronic) $81.7 trillion (fully electronic) Total Volume 1 Cash: 10 hours Repo: 11.5 hours 23 hours 23 hours Operating Hours

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North America Europe Asia/Other Global

PRODUCT COMPARISON

US Treasuries US Repo US Agencies US Corporates/HY US Mortgages Bradys US Munis Canadian GB's Euro-Govts/EU Basis UK Gilts EU Repo Other Eurobonds Pfandbriefe Emerging Markets JGBs Australia GBs Malaysia GBs South Africa GB's IRS Swaps/Derivatives Credit Derivatives FX/Forwards FX Options FX Spot Cash Markets Energy & Commodities Equity Market Data

ICAP / BrokerTec

x

Tullett Liberty

x

Tradition / Viel

x

Prebon Yamane

x

Cantor / eSpeed

x

GFI Net

x

Euro-MTS

x

EBS

x

Reuters

x

Electronic Only Voice / Electronic BTec presence ETC presence Off Screen Not Available Screen Price Source: Company estimates
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PRODUCT COMPARISON – NORTH AMERICA

North America

U S T U S R e p

  • U

S A g e n c i e s U S C

  • r

p s / H Y U S M

  • r

t g a g e s B r a d y s U S M u n i s C a n a d i a n G B ' s ICAP / BrokerTec Cantor / eSpeed Euro-MTS

Electronic Only Voice / Electronic BTec presence ETC presence Off Screen Not Available Screen Price Source: Company estimates

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PRODUCT COMPARISON – EUROPE

Europe

Euro-Govs/EU Basis

UK Gilts EU Repo Other Eurobonds Pfandbriefe Emerging Markets

ICAP / BrokerTec Cantor / eSpeed Euro-MTS

Electronic Only Voice / Electronic BTec presence ETC presence Off Screen Not Available Screen Price Source: Company estimates

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PRODUCT COMPARISON – ASIA / OTHER / GLOBAL

Asia/Other Global

JGBs Australia GBs Malaysia GBs South Africa GB's

IRS Swaps/Derivatives

Credit Derivatives FX/Forwards FX Options FX Spot Cash Markets

Energy / Commodities

Equity Market Data

ICAP / BrokerTec

x

Cantor / eSpeed

x

Euro-MTS

x

Electronic Only Voice / Electronic BTec presence ETC presence Off Screen Not Available Screen Price Source: Company estimates

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PRE CROSS CONNECT Customers / Traders Customers / Traders

BTec Front-End BTec Front-End BTec Matching Engine BTec Matching Engine ETC Front End ETC Front End

Clearing Houses / Clearing Banks

Voice Brokers Voice Brokers ETC Matching Engine ETC Matching Engine

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CROSS CONNECT

Customers / Traders Customers / Traders

BTec Front-End BTec Front-End BTec Matching Engine BTec Matching Engine ETC Front End ETC Front End

Clearing Houses / Clearing Banks Clearing Houses / Clearing Banks

Voice Brokers Voice Brokers ETC Matching Engine ETC Matching Engine

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SLIDE 73
  • 13 RCA Customers
  • 8 Customers at $4 million floor / $5.5 million

cap

  • Started June 2003
  • Expect to Use “Cumulative” Accounting

REVENUE COMMISSION AGREEMENTS

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SLIDE 74

HYBRID BROKING

  • Voice and/or electronic access to a common pool of

liquidity

  • Give customers choice between
  • Value-added voice support
  • Efficient and economical electronic option
  • Provide incentives to existing voice desks to build

balance between voice and electronic support

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HYBRID BUSINESS APPROACH

  • Team Manage Construction of Hybrid Business –

Product Specific

  • Use Flexible Broker Incentives/Transfers
  • Balance Customer – Broker Transparency Needs
  • Build Relationship Team from Best Voice and

Electronic Coverage

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CURRENT AGENDA

  • Continue Implementing Cross Connect Technology
  • Extend Hybrid Business Model
  • Rationalize Technology and Operations
  • Relocate Offices – July to December 2003
  • Consolidate Corporate Administration and

Infrastructure

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INVESTING IN ICAP

Jim Pettigrew

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79

REVENUE GROWTH

200 400 600 800 2001 2002 2003

Headline CAGR 19% Ex-acquisitions CAGR 10%

£m

FINANCE

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INCREASING OPERATING MARGINS

10 12 14 16 18 20 2001 2002 2003 %

14% 15% 17%

FINANCE

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MARGINS BY SEGMENTS

Year ended Year ended 31/03/03 31/03/02 Activity Securities broking 14% 11% Derivatives and money broking 18% 20% Geographic region Americas 12% 8% Europe 20% 19% Asia Pacific 6% 11%

Note: Operating profit margin is profit before interest and exceptional items but after goodwill amortisation for the Group’s continuing operations.

FINANCE

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82

COST CONTROL DISCIPLINE

Broker Rem. T&E Telecoms Other Overheads Profit*

10 20 30 40 50 60 70 80 90 100 2002 2003

Fixed Variable

Classification as a % of turnover Broker remuneration variable/fixed

* Group operating profit.

%of total broker remuneration %

54 4 6 4 15 17

FINANCE

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EPS AND DIVIDEND GROWTH

20 40 60 80 100 2001 2002 2003

Pence Per Share

EPS adjusted (excludes goodwill and exceptionals). Dividend per share.

49.4p 77.3p 30p 20p 58.0p 24p

FINANCE

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SLIDE 83

84

EFFICIENT PROFIT/CASH CONVERSION

20 40 60 80 100 120 140 2002 2003

* Before goodwill amortisation and exceptional items.

£m 103% 125%

Group operating profit*. Cash inflow from operating activities.

FINANCE

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85

CASHFLOW

Year ended 31/03/03 £’m Operating Profit 113 Depreciation 16 Working Capital 13 142 Net Capex (16) Associates, JVs, interest and Other 6 Taxation (36) 96 Dividends (27) Acquisitions/Investments (36) Exceptional Items (14) Change in Net Cas h and Investments 19

FINANCE

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86

BALANCE SHEET (EXTRACT)

Year ended Year ended 31/03/03 £’m 31/03/02 £’m Net Assets 263 196 Net Cash & Investments 185 166

FINANCE

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87

THE 2003/2004 FINANCIAL YEAR “The financial priorities for the forthcoming year are to integrate satisfactorily the BrokerTec acquisition and to increase our profit margins through a combination of growth in market share and effective cost control. We plan to achieve this against a continuing background of strong cash management disciplines.”

CFO report in ICAP’s 2003 Annual Report

FINANCE

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SLIDE 87

INVESTING IN ICAP

Michael Spencer

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89

STRATEGY

  • Consolidation in the interdealer broking industry

continues in both the voice and electronic markets.

  • Growth from building market share organically and,

where appropriate, through selective acquisition

  • Developing and delivering technology to make

cross market trading possible. ICAP’s liquidity in a broad range of benchmark derivative and cash markets provide a significant competitive advantage

  • Enlarging ICAP’s available market making it more

economic for banks to trade through us than direct

  • Integration between ICAP’s networks and systems

and our customers’ networks and systems creates a pipeline for our products and services. Other brokers will find this is difficult and slow to replicate

OUTLOOK

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90

  • A unique combination: the world’s leading voice

and electronic broker

  • Continue growing market share (both voice and

electronic) organically and through selective acquisition

  • Further integration of BrokerTec with roll out of

Cross Connect

  • Uncertainty in the global financial markets is likely

to continue and trading can be expected to remain active.

OUTLOOK

OUTLOOK