213800VB75KAZBFH5U072021-04-012022-03-31iso4217:GBP213800VB75KAZBFH5U072020-04-012021-03-31iso4217:GBPxbrli:shares213800VB75KAZBFH5U072022-03-31213800VB75KAZBFH5U072021-03-31213800VB75KAZBFH5U072020-03-31ifrs-full:IssuedCapitalMember213800VB75KAZBFH5U072020-03-31ifrs-full:SharePremiumMember213800VB75KAZBFH5U072020-03-31ifrs-full:CapitalRedemptionReserveMember213800VB75KAZBFH5U072020-03-31ifrs-full:TreasurySharesMember213800VB75KAZBFH5U072020-03-31ifrs-full:OtherReservesMember213800VB75KAZBFH5U072020-03-31ifrs-full:RetainedEarningsMember213800VB75KAZBFH5U072020-03-31213800VB75KAZBFH5U072020-04-012021-03-31ifrs-full:IssuedCapitalMember213800VB75KAZBFH5U072020-04-012021-03-31ifrs-full:SharePremiumMember213800VB75KAZBFH5U072020-04-012021-03-31ifrs-full:CapitalRedemptionReserveMember213800VB75KAZBFH5U072020-04-012021-03-31ifrs-full:TreasurySharesMember213800VB75KAZBFH5U072020-04-012021-03-31ifrs-full:OtherReservesMember213800VB75KAZBFH5U072020-04-012021-03-31ifrs-full:RetainedEarningsMember213800VB75KAZBFH5U072021-03-31ifrs-full:IssuedCapitalMember213800VB75KAZBFH5U072021-03-31ifrs-full:SharePremiumMember213800VB75KAZBFH5U072021-03-31ifrs-full:CapitalRedemptionReserveMember213800VB75KAZBFH5U072021-03-31ifrs-full:TreasurySharesMember213800VB75KAZBFH5U072021-03-31ifrs-full:OtherReservesMember213800VB75KAZBFH5U072021-03-31ifrs-full:RetainedEarningsMember213800VB75KAZBFH5U072021-04-012022-03-31ifrs-full:IssuedCapitalMember213800VB75KAZBFH5U072021-04-012022-03-31ifrs-full:SharePremiumMember213800VB75KAZBFH5U072021-04-012022-03-31ifrs-full:CapitalRedemptionReserveMember213800VB75KAZBFH5U072021-04-012022-03-31ifrs-full:TreasurySharesMember213800VB75KAZBFH5U072021-04-012022-03-31ifrs-full:OtherReservesMember213800VB75KAZBFH5U072021-04-012022-03-31ifrs-full:RetainedEarningsMember213800VB75KAZBFH5U072022-03-31ifrs-full:IssuedCapitalMember213800VB75KAZBFH5U072022-03-31ifrs-full:SharePremiumMember213800VB75KAZBFH5U072022-03-31ifrs-full:CapitalRedemptionReserveMember213800VB75KAZBFH5U072022-03-31ifrs-full:TreasurySharesMember213800VB75KAZBFH5U072022-03-31ifrs-full:OtherReservesMember213800VB75KAZBFH5U072022-03-31ifrs-full:RetainedEarningsMember CMC Markets plc Annual Report and Financial Statements 2022 CMC Markets plc Annual Report and Financial Statements 2022 CMC is a leading global providerof online trading withacomprehensive retail, professional and institutionaloffering. Strategic report 2 CMC at a glance 6 Highlights 2022 7 Investment case 8 Chairman’s statement 10 Our business model 12 Stakeholder engagement 14 Our markets 16 Chief Executive Officer’s statement 20 Our strategy 22 Key performance indicators 25 Technology and Innovation 28 Sustainability 40 TCFD 44 Financial review 50 Risk management 51 Principal risks Corporate governance 58 Board of Directors 60 Governance report 69 Group Audit Committee report 73 Group Risk Committee report 75 Group Nomination Committee report 78 Directors’ Remuneration report 100 Directors’ report Financial Statements 105 Independent auditors’ report 113 Consolidated income statement 114 Consolidated statement of comprehensive income 115 Consolidated statement of financialposition 116 Parent company statement of financialposition 117 Consolidated and parent company statements of changes in equity 118 Consolidated and parent company statements of cash flows 119 Notes to the consolidated and parent company Financial Statements Shareholder information 159 Shareholder information 164 Appendices The business was started in 1989 withasimple ethos: to make financial markets truly accessible for investors. Thisfundamental belief remains at the heartof everything we do at CMC Markets and staying true to that has been pivotal toour success. Read more at cmcmarketsplc.com “ Our purpose istoconstantly maintain a superior and unrivalled technology experience for ourclients.” Lord Cruddas Founder and CEO 1 CMC Markets plc Annual Report and Financial Statements 2022 CMC at a glance Empowering our clients and providing first-class access to the evolving landscape of investing and trading Listening to our clients’ demands is integral to what we do. Our continued investment in technology will facilitate an ever-improving range of financial products to satisfy these demands. At CMC we continue to invest in the diversification of our product offering, in particular expanding our reach to non-leveraged products across existing and new geographies. We believe this will benefit our clients as well as support the needs of our stakeholders in driving earnings and profitability for the Group. Bespoke solutions in a dynamic world Societal shifts in technology and demographics are driving far-reaching changes in how platform providers serve the new generation of trading and investing clients. Our purpose is to constantly maintain a superior and unrivalled bespoke technology experience to our clients. Leveraged Internal risk management Trade and Risk data is stored in a high frequency tick database, where we record all stages of the risk management system. We have large Quantitative Analytics and Data Science teams which build out both the hardware and software side of the analytic environment to ensure that client order flow is managed in the most appropriate way. Data science and machine learning models are playing an ever-increasing role in our real-time and offline decision making. Our aim is to continually provide market leading access to liquidity to our clients, with best-in-class platform resilience through every part of our of offering. Improving product offering and pricingefficiency We continue to invest in the diversification of our products to enhance functionality for our clients. We already offer over 10,000 products over our leveraged platforms. Delivering this with the most efficient pricing structure is paramount. Our pricing system is continually evolving both in terms of sophistication and latency minimisation. Latency is measured in microseconds using high accuracy clock time-stamping at multiple points through the system, with real-time monitoring. Best execution internal reporting allows for the setting of high standards of execution quality. Read more on page 25 Strategic report 2 CMC Markets plc Annual Report and Financial Statements 2022 Non-leveraged Expansion in non-leveraged businesses Secular shifts in investment trends present high growth opportunities across non-leveraged investment platforms globally. Building on the successes from our Australian stockbroking business, the launch of our UK non-leveraged platform in April 2022 allows us to tap into the growth being seen in self-managed investing. This will, over time, drive a more balanced and diversified income stream for the Group. Read more on page 26 Leveraged and non-leveraged Technology-backed business to business (“B2B”) offering In addition to our retail offering we provide technology-backed solutions to mid-sized and large financial institutions. CMC already provides execution, clearing and settlement services as a service provider to a number of Australian financial service licensees. Our business to business (“B2B”) partnership directive will now be expanding across all our existing as well as new geographies over the coming 12 months. Growth from our non-leveraged operations will reposition our business to the some of the fastest growing shifts in trading and investing. Our Tomorrow - taking a positive position At CMC Markets, our vision is to unite with the global capital markets shift towards a sustainable future, by providing responsible and innovative technological solutions that protect, educate and inspire our people and clients to invest for the future. Read more on page 28 Strategic report 3 CMC Markets plc Annual Report and Financial Statements 2022 Strategic report The products we provide Contracts for difference (“CFDs”) A financial derivative product which allows clients to speculate on price changes in anunderlying financial asset, without certain costs and limitations associated with physical ownership. More information is available on www.cmcmarkets.com. Spread betting A product available exclusively to residents in the UK and Ireland which is similar in many aspects to our CFD product. More information is available onwww.cmcmarkets.com. Technology-driven liquidity solution Under our B2B arm, CMC Markets Connect acts as a non-bank liquidity provider offering access to a wide range of asset classes including Spot FX, the global institutional standard in FX trading, cash equities and ETFs. For larger institutions we are able to offer bespoke solutions to help facilitate and access multi-asset class liquidity. Outsourced trading platform technology We outsource our platform technology to clients also under the CMC Markets Connect brand, where our award winning CMC trading platform can be fully customised under a white-label partnership or alternatively under a neutrally branded platform for regulated entities looking to introduce clients or trade on their behalf. Stockbroking In our Australian stockbroking business clients are offered the opportunity to trade Australian shares and international shares from over 41 exchanges in over 15 countries. This has been supported through the launch of a fully functional native mobile application offering a variety of instruments including shares, options, managed funds, warrants and exchange traded funds (“ETFs”). Non-leveraged Building on the strength and success oftheAustralian stockbroking business, 2022will mark CMC’s first move into the non-leveraged business in the UK. Clients willhave full access to international shares, tax wrappers (ISAs and SIPPs), funds and ETFs. Our aim is to provide our clients sector-leading analytics and news content aswell as opportunities to empower them toinvest across a range of sustainable andresponsible investment opportunities. Thenew platform is based on the existing technological excellence seen across the existing leveraged business and will, in time, have the potential to deliver a significant newearnings stream for the Group. CMC at a glance continued £ Read more about our business model on page 10 Strategic report 4 CMC Markets plc Annual Report and Financial Statements 2022 Our geographical reach CMC Markets operates in 13 offices across many of the world’s leading financial centres. The Group is built on a hub-and-spoke model, with London being the Group’s headquarters, Germany being the hub for our European operations and Sydney being the secondary hub to support the Asia Pacific & Canada (“APAC”) region. This approach enables CMC to achieve the optimum balance between operational gearing and efficiency. In addition, we plan to launch a new investment platform in Singapore within a year, as well as considering two other jurisdictions for launch the following year. UK 28% Europe 16% APAC & Canada 56% Our client base CMC attracts retail and elective professional clients to its Next Generation platform and has a considerable proportion of trading activity generated from institutional clients and stockbroking clients. Our shift into additional non-leveraged markets will also bringa new wave of clients with which we hope to build long-standing partnerships. All our clients are treated with the high standards we set ourselves when it comes to protection and suitability. Leveraged B2B 2 16% Non-leveraged B2B 14% Leveraged B2C 3 67% Non-leveraged B2C 3% Read more about net trading revenue on page 44 1 CFD and spread bet gross client income net of rebates, levies and risk management gains or losses and stockbroking revenue net of rebates. 2 Business to business (“B2B”) – revenue from institutional clients. 3 Business to consumer (“B2C”) – revenue from retail and professional clients. 4 Active clients represent those individual clients which have traded with or held CFD or spread bet positions or which traded on the stockbroking platform on at least one occasion during the financial year. Continents 4 Countries 12 Offices 13 Total active clients 4 310,363 Net trading revenue 1 by region Net trading revenue by client base Strategic report 5 CMC Markets plc Annual Report and Financial Statements 2022 Highlights 2022 Net operating income 1 £281.9m 21 £409.8m £252.0m 20 22 £281.9m Statutory profit before tax £92.1m £224.0m £98.7m 22 £92.1m 21 20 Leveraged active clients 2 64,243 21 20 76,591 57,202 22 64,243 Leveraged platform uptime 99.95% 99.95 99.95 99.95 21 20 22 Non-leveraged active clients 2 246,120 232,053 181,630 246,120 21 20 22 Leveraged revenue per active client 3 £3,575 £3,750 21 20 £4,560 22 £3,575 Basic earnings per share 24.8p 30.1p 21 20 61.5p 2.0 22 24.8 Ordinary dividend per share 5 12.38p 15.03p 2.0 21 20 30.63p 2.0 22 12.38 £240.6m Gross leveraged client income 4 £288.5m 21 20 £335.3m 22 £288.5m Focusing on high value clients and diversifying the business Operational highlights • Whilst annual leveraged client numbers are down 16% from 2021, monthly active clients are up a third compared to pre-pandemic levels. • Non-leveraged active client numbers increased 6%, a new record. • Retention of CFD client income 6 of80%. • Released CMC Invest platform in the UK in April 2022, a significant development for the Group which represents a milestone in its expansion into additional non- leveraged businesses. • Operational resilience remains high, with leveraged platform uptime of99.95%. • Stockbroking business finished 2022 with record period-end Assets under Administration (“AuA”). • Leveraged revenue per active client down £985 (22%) to £3,575. • B2B represents 30% of net trading revenue at £82.5 million. Financial highlights 1 Net operating income represents total revenue net of introducing partner commissions and spread betting levies. 2 Active clients represent those individual clients who have traded with or held CFD or spread bet positions or who traded on the stockbroking platform on at least one occasion during the financial year. 3 Net trading revenue generated from CFD and spread bet active clients. A reconciliation of revenue alternative performance measures (“APMs”) to the Group’s primary statements can be found on page 164. 4 Spreads, financing and commissions on CFD client trades. 5 Ordinary dividends paid/proposed relating to the financial year. 6 The percentage of CFD gross client income retained after rebates and gains or losses from risk management activities. Read more about net trading revenue and our financial measures on page 44 Strategic report 6 CMC Markets plc Annual Report and Financial Statements 2022 Investment case CMC Markets: five reasons to invest Our diverse product offering 15% share of Australian stockbroking market 1 Launch of the UK non- leveraged business. Accessing a UK D2C market with some £320billion 2 of AuA We’re investing to diversify by offering new products and functionality across both our leveraged and non-leveraged platforms. CFD and spread bet revenue remains at the core of what we do. This is balanced with a world-class stockbroking business in Australia. Similarly, the launch of CMC Invest, the new UK investment platform, underpins our expansion into the high growth opportunities being seen across all of our geographies and meets client demands. Read more about our product offering on pages 25 to 27 Our geographical reach 56% of net trading revenue generated outside the UK andEurope regions Our global technology platforms allow access for retail, professional and institutional clients through regulated offices and branches in 12 countries, with a significant presence in the UK, Australia, Germany and Singapore. The agreement to transition Australia and New Zealand Banking Group Limited’s (“ANZ’s”) Share Investing client base to CMC for AUD$25 million was agreed during the year. The transaction involves the transition of approximately 500,000 ANZ Share Investing clients, with total assets in excess of AUD$43 billion. Read more about our geographical diversity on page 5 Our Tomorrow Read more about our sustainability framework on pages 28 to 39 We are proud to introduce our new sustainability strategy: “Our Tomorrow: taking a positive position”, that will shape the next few years of sustainability activity for the Group. “Our Tomorrow” describes how we seek to embed sustainability across the business. We have identified five core pillars that are our areas of focus which highlight how we protect, empower, innovate and adapt to be a responsible business that is committed to the needs of people and our planet. 5 core sustainability pillars Our client focus Read more about our client service on pages 25 to 27 Our clients are at the heart of what we do, and their input is intrinsic to improving our business processes across product development, marketing and client services as we tailor new developments and target improvements. We employ and train high quality client services staff to ensure best-in-class client service. Platform resilience and user experience is at the core of all developments and upgrades we deploy. 310,363 64,243 leveraged active clients and 246,120 non-leveraged active clients 1 ASX and Chi-X combined trading statistics – IRESS. 2 Platforum data February 2022. Read more about our technology on pages 25 to 27 The demands of our clients continue to evolve. Our purpose is to constantly maintain a superior and unrivalled technology experience for our clients. Continuous investment in our proprietary technology across both our leveraged and non-leveraged platforms allows us to offer a wide suite of products. Our online and mobile platforms are continuously ranked as best-in-class from our clients. 10,000+ financial instruments traded across the CFD platform and over 40,000 instruments within stockbroking Award winning platforms Strategic report 7 CMC Markets plc Annual Report and Financial Statements 2022 Strategic report Chairman’s statement Our strategic investments in technology, client service, professional andinstitutional clients and income diversification through new products, have led to a strong financial performance in 2022. This performance, along with the launch of the CMC Invest platform in the UK, providesthe Group with a strong base from whichwecan continue tofocus on innovation and agile andresponsivetechnologydevelopment. Our resilient strategy delivers a record year for the Group “ The benefits of the Group’s strategy are becoming more apparent. Through engagement with clients and the expertise of our staff, the Group is continuing to develop clear opportunities for significant growth within all of our markets.” James Richards Chairman The Board’s clear vision of the Group’s strategy of income diversification through adapting and building on our superior technology is starting to crystallise. The benefits of the Group’s strategy are becoming more apparent. Through engagement with clients and the expertise of our staff, the Group is continuing to develop clear opportunities for significant growth within all of our markets. Throughout all parts of the product development process, we engage with clients to provide input into improvements that can be made to our products and propositions. In addition, we have made significant progress on initiatives to improve staff engagement. The combination of engaged clients and employees results in a robust and agile business focusing on medium to long-term value generation, which supports our purpose, values and strategy. Results and dividend Net operating income fell 31% to £281.9 million; however, when excluding the exceptional COVID-19 affected 2021, the Group generated an increase in net operating income of 12% on 2020. This is a strong result for the Group, as it represents a record year outside of 2021. The strong net operating income performance has generated profits after tax of £72.0 million. The Board recommends a final dividend of 8.88 pence per share which results in a total dividend payment of 50% of profits after tax. Strategic report 8 CMC Markets plc Annual Report and Financial Statements 2022 Outlook Our focus on improving and building on our existing technology underpins our strategy of exploiting our existing leveraged technology with both new and improved products and expanding into new geographies in our non-leveraged business. The strengths and robustness of our technology have been demonstrated through the white-label agreement for Australia and New Zealand Banking Group Limited (“ANZ”), culminating in the announcement of the acquisition of its Share Investing clients. The strategy also forms the foundation for the launch of our new UK non-leveraged investment platform in April 2022. The new platform is being rolled out to the market over the coming year and augurs well for the Group’s future. Our clear focus on revenue diversification will continue throughout the coming year as will our assessment of how best to address the realisation of future value for the two broadly different businesses, namely leveraged and non-leveraged, bothunderpinned by our technology. James Richards Chairman 8 June 2022 Board and governance As discussed in the 2021 Annual Report and Financial Statements, the Board conducted an internal governance review in 2021, resulting in the appointment of external advisers, Independent Audit, in January 2021. This review was concluded within 2022, resulting in very positive changes to the information the Board receives, improvements in the scope of the Nomination Committee including greater involvement in people strategy, and improvements in ownership and presentation of the Group’s risk information. More information on the changes can be found on pages 66, 74 and 76. We are sorry to lose Clare Salmon, who is not putting herself up for re-election this year, but also welcome Susanne Chishti, who brings a diverse view of developments and trends in the wider consumer technology environment. We are also seeking, via agents, a further Non-Executive Director to cover the gap left by Clare’s departure, further details of which can be found on page 76 of the Nomination Committee report. People and stakeholders Our staff are our greatest asset and their work on delivering against our strategic initiatives has driven the strong performance across all business lines, along with delivering new products and features to communicated timescales. On behalf of the Board, I would like to thank them all for their considerable contribution. In addition, our staff have shown incredible resilience and flexibility when faced with travel and work restrictions caused by the COVID-19 pandemic, and have continued to do so throughout this year. No staff were furloughed and the Group did not request any government COVID–19 assistance. More details of what we have been doing are presented in the Sustainability section of the report. Financial Reporting Council During the year to 31 March 2022 the Board received correspondence from the Financial Reporting Council (“FRC”) concerning a potential unlawful dividend payment in respect of the payment of the 2021 interim dividend. On further investigation by the Company it was concluded that similar questions had arisen in some prior years. Details of this and the rectification process for addressing these issues are set out on page 101 in the Directors’ Report. The Company has made certain changes to internal processes to ensure that these irregularities do not arise again. Strategic report 9 CMC Markets plc Annual Report and Financial Statements 2022 Our business model The best trading experience Our business enablers Our client offering 1. Technology and product Technology and product has always been key to the success of CMC Markets and this has won the business recognition as the leader in our industry for innovation and service. Recognising that innovation is key to retaining this reputation, the Group has continued to invest significantly across the business to deliver new products and offerings to our clients, with a significant milestone achieved in the launch of CMC Invest in the UK in April 2022. For more information see pages 25 to 27 2. “Our Tomorrow: taking a positive position” sustainability strategy This year we are proud to launch the new sustainability strategy that will shape the next few years of sustainability activity for the Group. “OurTomorrow” describes how we seek to embed sustainability across the business. Wehave identified five core pillars that are our areas of focus which highlight how we protect, empower, innovate and adapt to be a responsible business that is committed to the needs of people and our planet. For more information see pages 28 to 39 3. Financial strength We aim to maintain our secure capital and liquidity structure, ensuring that it is appropriate for the future growth and success of the Group. This includes maintaining long-term levels of capital to withstand the demands of fluctuations in the financial markets and access to a healthy level of surplus liquid resources in line with the size of our business and the growth opportunities. For more information see pages 44 to 49 4. Risk management The Group’s business activities naturally expose it to strategic, financial and operational risks inherent in the nature of the business it undertakes and the financial, market and regulatory environments in which it operates. The Group recognises the importance of understanding and managing these risks and that it cannot place a cap or limit on all of the risks to which the Group is exposed. However, effective risk management ensures that risks are managed to an acceptable level. For more information see pages 50 to 56 Our clients are at the heart of everything that we do. For more information see page 25 Technology platforms and risk management Our superior platforms and technology, combined with our risk management, deliver a best-in-class trading experience for our clients and partners. Our trade and risk systems generate real-time pricing, automate trade execution and optimise our risk management process through better aggregation of client flows. They also bring scale and stability to our platforms, especially during volatile market conditions. This enhances theclient trading experience and lessens the risk of price quotation outages. Technology platform Who our clients are: • Sophisticated • High value • Experienced What we offer them: • Cutting-edge technology • Competitive pricing • Excellent client services Strategic report 10 CMC Markets plc Annual Report and Financial Statements 2022 Leveraged Contracts for difference Spread betting White-label solutions Multi-asset class liquidity Non-leveraged Stockbroking (UK and Australia) White-label solutions Business to business + Business to consumer Our client offering How we make money Leveraged £48.0m Net trading revenue, predominantly earned through brokerage charged for the execution of exchange traded products, options, warrants, ETFs, managed funds, interest rate securities and bonds. Further, we earn fees including FX revenue on international shares, interest on deposits, and equity capital markets (“ECM”) income. Other income – leveraged and non-leveraged £4.3m Mainly consists of interest income from client deposits, rental income and dormancy charges Non-leveraged How we add value Clients 57% gross client income generated from leveraged clients oftenure greater than two years 13 awards for service platform and technology Shareholders Dividend per share 12.38 pence down 18.25 pence from 2021 Earnings per share 24.8 pence down 36.7 pence from 2021 People 66% employee engagement 1 (2021: 61%) 24% permanent employees with us for over five years Gross leveraged client income £288.5m Spreads Revenue earned through maintaining a transactional spread (the difference between the buy and sell price) on CFD and spread betproducts. Commissions These are charged on both CFD equity trades and institutional DMA trades. Clients are either charged a minimum commission or a percentage based on the value of the trade. Financing Positions held by clients overnight may be subject to financing costs, which can be positive or negative depending on the direction of their holding and the applicable financing rate. Rebates and levies £(20.6m) Volume-based rebates paid to professional, high value retail and institutional clients and introducing brokers on selected asset classes. Risk management gains/(losses) £(38.3m) Revenue or losses from management of client positions that the Group inherits. This consists of gains or losses which accrue to the Group through client positions and, secondly, the gains or losses which accrue to the Group through the hedge positions entered into by the Group, including hedge transaction costs. Retained client income 80% The percentage of CFD gross client income retained after rebates and gains or losses from risk management activities. Read more about our non-leveraged work in our technology section on page 26 Read more about our non-leveraged strategy in our CEO’s overview on page 17 1 CultureAmp internal survey. Percentage of employees with full engagement. Strategic report 11 CMC Markets plc Annual Report and Financial Statements 2022 Client supplied Client supplied Engagement with stakeholders: ourfuture-focused culture Clients People Regulators Suppliers Shareholders Local community Why we engage Going above and beyond to care for and protect our clients is a core responsibility. This means wecontinually strive to engage with them across multiple points of contact to ensure the Group remains aware of, and therefore develops products that solve, protect and satisfy, our clients’needs. Our employees define our culture and values. Fostering an engaged workforce is central to our strategy, enabling us to deliver theexceptional service that keep us at the forefront of our markets. Providing a rewarding and safe working environment for our employees is a vital outcome we strive to achieve. Every employee needs to be given the tools to excel within a dynamic environment. Nurturing a diverse and responsible workforce will allow us to achieve our business objectives with the expected levels of integrity and focus we expect. Engagement with regulators is keyto ensuring that we are fully compliant across all jurisdictions we operate within. We’re taking steps to ensure our approach is market leading, whilst also allowing the Group to be involved in shaping future regulations within the sector. We expect all our suppliers to demonstrate the same integrity and accountability as we do to our clients. Engagement with suppliers which perform any critical or material outsourced service also ensures that we remain compliant with European Banking Authority (“EBA”) requirements. We take a zero-tolerance approach to modern slavery and human trafficking, which is reflected in our Modern Slavery Statement and our Group Anti-Slavery Policy, and are committed to acting ethically and with integrity in all our business relationships. Active engagement with current and prospective shareholders continues throughout the year. Our teamcommunicates the Group’s strategy and performance, as well as understanding the issues that are most important to them. Our shareholders’ support is paramount to our success and listening to our shareholders is a critical part of making sure our business is successful for the long term. CMC recognises that the Group has a duty to help improve the prospects and living environment of the local community. Sustainability and social awareness are part of ourcore values and culture. Engagement with the community is another way we seek to act in the best interests of all our stakeholders. How we engage CMC actively engages with clients across a range of channels such as our client service, sales and product teams, in addition to client events and our trading magazine Opto. Our digital transformation programme has also resulted infurther emphasis on user experience research with clients,which directly inputs into improvements that can be made to our product and proposition. Marketing is carried out in a responsible way, making sure investment product opportunities are evolving all the time, and a new wave of self-directed investors opens new market segments forCMC. Our future success depends onnurturing and enhancing an environment that reflects our diverse client base and where employees can reach their full potential. Our employee engagement is driven through numerous channels. This includes team meetings or one-on-ones, and formally through the designated Non-Executive Director with responsibility for employee engagement. We hold a twice- yearly global survey with follow-up focus groups to better understand the results and “town hall” style forums to enable purposeful engagement between management and employees. We engage in open and active dialogue with regulators, seeking opportunities to share the wealth ofdata we have available tohelp inform them in their decision making. We ensure our actions areat the minimum consistent with, and frequently go beyond, regulatory expectations. During the year, we have responded to a number of consultations launched by the regulator covering areas such as consumer protections. Open and frequent communication is critical in maintaining strong relationships with all our suppliers. All business partners follow a mandatory procurement process, which was refreshed during the year, to review the external market and complete a robust evaluation of all available options. Once a supplier is engaged, regular direct engagement between the business owner and supplier is maintained through our Supplier Relationship Programme. The adoption of technology continues to improve the efficiency of our engagement. We offer regular trading updates, half and full year presentations, the Annual Report and Financial Statements, our AGM, and a comprehensive Investor Relations section of the website as well as active virtual media channels. We have an active schedule of shareholder meetings and roadshows, giving our stakeholders access to the Investor Relations and Management teams. Shareholder feedback and details of any major movement in our shareholder list are embedded within our regular Board meetings and are integral to our decision making process. The Board promotes the support of local charities through our staff in all our global offices. We promote a Charity Champions scheme. Staff from around the offices volunteer to be the Charity Champion for their group. They then engage with colleagues to select charities or charitable causes to be considered for the Charity of the Year which receives a corporate donation from the Group in addition to fundraising and employee engagement opportunities throughout theyear. Outcomes 2022 marks the first move into theUK non-leveraged market with CMC Invest. This move facilitates the opportunity to offer greener and more socially orientated trading products, and to explore how to meet the needs of a more diverse cohort of investors. Throughout the year the Board received regular updates on CMCInvest and discussed target audience, customer experience expectations and platform availability, transparency and easeof use. A formal senior management communication calendar has been developed to promote diversity, wellbeing and inclusion in the workplace. The Board and the Nomination Committee discussed the outcomes from the workforce engagement activities that took place during the year and decided to incorporate oversight of the Group’s overall people strategy into the Committee’s remit. Further details can be found on page 77. Our commitment to upholding highstandards of regulatory compliance and aligning our interests with clients involves consistent dialogue with regulators across all jurisdictions. We believe we have forged strong partnerships with our regulators to responsibly benefit the operating environment for all. Our robust governance process allows the Group to select the bestsupplier for the business andultimately our clients. Our considered approach also allows us to treat vendors with respect and prioritise collaboration and value generation to mutually benefitall parties, whilst remainingcompliant with allrelevant regulations. Many of our shareholders have been with us since our initial public offering in 2016. The regular, open and constructive dialogue with investors promotes confidence in the Group’s strategy, resulting in a strong share register built on long-term relationships, whilst also ensuring our continued access to potential capital andliquidity. Thousands of young people have been supported through the charitable actions and donations from both the Group and its staff. Our employees have made use of the pound-for-pound matching scheme offered by the Group and also the opportunity to help a charity or charitable cause with an extra day of charitable annual leave. At CMC we know that our business has responsibilities towards all of our stakeholders. We take these responsibilities seriously and continuously interact with all partners with the aim of providing responsible and sustainable solutions for all. Stakeholder engagement Strategic report 12 CMC Markets plc Annual Report and Financial Statements 2022 Clients People Regulators Suppliers Shareholders Local community Why we engage Going above and beyond to care for and protect our clients is a core responsibility. This means wecontinually strive to engage with them across multiple points of contact to ensure the Group remains aware of, and therefore develops products that solve, protect and satisfy, our clients’needs. Our employees define our culture and values. Fostering an engaged workforce is central to our strategy, enabling us to deliver theexceptional service that keep us at the forefront of our markets. Providing a rewarding and safe working environment for our employees is a vital outcome we strive to achieve. Every employee needs to be given the tools to excel within a dynamic environment. Nurturing a diverse and responsible workforce will allow us to achieve our business objectives with the expected levels of integrity and focus we expect. Engagement with regulators is keyto ensuring that we are fully compliant across all jurisdictions we operate within. We’re taking steps to ensure our approach is market leading, whilst also allowing the Group to be involved in shaping future regulations within the sector. We expect all our suppliers to demonstrate the same integrity and accountability as we do to our clients. Engagement with suppliers which perform any critical or material outsourced service also ensures that we remain compliant with European Banking Authority (“EBA”) requirements. We take a zero-tolerance approach to modern slavery and human trafficking, which is reflected in our Modern Slavery Statement and our Group Anti-Slavery Policy, and are committed to acting ethically and with integrity in all our business relationships. Active engagement with current and prospective shareholders continues throughout the year. Our teamcommunicates the Group’s strategy and performance, as well as understanding the issues that are most important to them. Our shareholders’ support is paramount to our success and listening to our shareholders is a critical part of making sure our business is successful for the long term. CMC recognises that the Group has a duty to help improve the prospects and living environment of the local community. Sustainability and social awareness are part of ourcore values and culture. Engagement with the community is another way we seek to act in the best interests of all our stakeholders. How we engage CMC actively engages with clients across a range of channels such as our client service, sales and product teams, in addition to client events and our trading magazine Opto. Our digital transformation programme has also resulted infurther emphasis on user experience research with clients,which directly inputs into improvements that can be made to our product and proposition. Marketing is carried out in a responsible way, making sure investment product opportunities are evolving all the time, and a new wave of self-directed investors opens new market segments forCMC. Our future success depends onnurturing and enhancing an environment that reflects our diverse client base and where employees can reach their full potential. Our employee engagement is driven through numerous channels. This includes team meetings or one-on-ones, and formally through the designated Non-Executive Director with responsibility for employee engagement. We hold a twice- yearly global survey with follow-up focus groups to better understand the results and “town hall” style forums to enable purposeful engagement between management and employees. We engage in open and active dialogue with regulators, seeking opportunities to share the wealth ofdata we have available tohelp inform them in their decision making. We ensure our actions areat the minimum consistent with, and frequently go beyond, regulatory expectations. During the year, we have responded to a number of consultations launched by the regulator covering areas such as consumer protections. Open and frequent communication is critical in maintaining strong relationships with all our suppliers. All business partners follow a mandatory procurement process, which was refreshed during the year, to review the external market and complete a robust evaluation of all available options. Once a supplier is engaged, regular direct engagement between the business owner and supplier is maintained through our Supplier Relationship Programme. The adoption of technology continues to improve the efficiency of our engagement. We offer regular trading updates, half and full year presentations, the Annual Report and Financial Statements, our AGM, and a comprehensive Investor Relations section of the website as well as active virtual media channels. We have an active schedule of shareholder meetings and roadshows, giving our stakeholders access to the Investor Relations and Management teams. Shareholder feedback and details of any major movement in our shareholder list are embedded within our regular Board meetings and are integral to our decision making process. The Board promotes the support of local charities through our staff in all our global offices. We promote a Charity Champions scheme. Staff from around the offices volunteer to be the Charity Champion for their group. They then engage with colleagues to select charities or charitable causes to be considered for the Charity of the Year which receives a corporate donation from the Group in addition to fundraising and employee engagement opportunities throughout theyear. Outcomes 2022 marks the first move into theUK non-leveraged market with CMC Invest. This move facilitates the opportunity to offer greener and more socially orientated trading products, and to explore how to meet the needs of a more diverse cohort of investors. Throughout the year the Board received regular updates on CMCInvest and discussed target audience, customer experience expectations and platform availability, transparency and easeof use. A formal senior management communication calendar has been developed to promote diversity, wellbeing and inclusion in the workplace. The Board and the Nomination Committee discussed the outcomes from the workforce engagement activities that took place during the year and decided to incorporate oversight of the Group’s overall people strategy into the Committee’s remit. Further details can be found on page 77. Our commitment to upholding highstandards of regulatory compliance and aligning our interests with clients involves consistent dialogue with regulators across all jurisdictions. We believe we have forged strong partnerships with our regulators to responsibly benefit the operating environment for all. Our robust governance process allows the Group to select the bestsupplier for the business andultimately our clients. Our considered approach also allows us to treat vendors with respect and prioritise collaboration and value generation to mutually benefitall parties, whilst remainingcompliant with allrelevant regulations. Many of our shareholders have been with us since our initial public offering in 2016. The regular, open and constructive dialogue with investors promotes confidence in the Group’s strategy, resulting in a strong share register built on long-term relationships, whilst also ensuring our continued access to potential capital andliquidity. Thousands of young people have been supported through the charitable actions and donations from both the Group and its staff. Our employees have made use of the pound-for-pound matching scheme offered by the Group and also the opportunity to help a charity or charitable cause with an extra day of charitable annual leave. Section 172 Engaging with our stakeholders The Board considers the interests of the Group’s employees and other stakeholders, including the impact of its activities on the local community, environment, suppliers and clients, when making decisions. The Board, acting fairly between members and acting in good faith, considers what is most likely to promote the success of the Group for its shareholders in the long term. Read more about: • the Group’s goals, strategy and business model in the Strategic report on pages 2 to 56; • how we manage risks on pages 50 to 56; • our impact on the environment on pages 28 to 43; and • corporate governance on pages 58 to 104. Strategic report 13 CMC Markets plc Annual Report and Financial Statements 2022 Leading the market through technology and diversification Whilst the Group currently generates the majority of its revenue from leveraged products, our revenue is continuing to diversify, with the non-leveraged business growing year on year and set for further growth following the launch of the CMC Invest non-leveraged platform in the UK in April 2022. Group revenues are split between our three regions, the UK, Europe and APAC & Canada. Key market driver Our response Group COVID-19 COVID-19 continued to cause significant disruption to people’s lives and markets across the globe, albeit to a lesser extent to that seen in the prior financial year. The Group’s infrastructure continued to allow employees to work from home during the pandemic, whilst maintaining the trading platform’s consistently high availability rate and low trade execution times. Significant investment was made to ensure all ofthe Group’s offices were COVID-19 secure. This continues to work well, with individual offices adopting a tailored approach according to local regulations. Russia/Ukraine war The significant escalation of tensions between Russia and Ukraine, culminating in a Russian invasion in February 2022, continues to result in sanctions from governments in many markets and volatility across multiple asset classes. The Group has immaterial exposures to the Russian market both from a currency and stock/index basis. The Group is compliant with all governmental sanctions, has no employees operating within Russia or Ukraine, has acted to close any Russia- based accounts and has also assessed our suppliers to ensure any critical services provided to the Group were not adversely impacted. Leveraged: CFD and spread bet Volatility Volatility in the financial markets undoubtedly acts as a call toaction for the Group’s leveraged and non-leveraged target market. The continuation of the COVID-19 pandemic, albeit ata reduced level compared to the prior year, resulted in periods of volatility across all asset classes. The Russia/ Ukraine war also resulted in volatility in late February and March 2022. Higher volatility results in increased trading activity from both existing clients trading more frequently and new or previously inactive clients starting to trade. However, short bursts of market activity which result in high velocity movements in the products that we offer are not necessarily beneficial to our clients or the Group. Aside from notifying clients of changing levels of market activity in a timely manner through a flexible marketing strategy, the Group can have little influence on capitalising more or less than competitors during short-term periods of raised market volatility. ASIC The Australian regulator, ASIC, implemented new regulatory measures from 29 March 2021. The measures are broadly similar to those implemented by ESMA in August 2018 andinclude: • prohibition of the issue and distribution of OTC binary options to retail clients; • implementation of CFD leverage ratio limits; • protection against negative balances; • standardised approach to the automatic close-out of retail client positions; • enhanced transparency of CFD pricing, execution, costs and risks; and • prohibition on firms offering monetary and non-monetary benefits to retail investors. In April 2022 ASIC extended its product intervention order, imposing conditions on the issue and distribution of CFDs fora further five years to 23 May 2027. The Group continues to be supportive of regulatory change that moves towards aglobally consistent regulatory environment. Given that CMC was already compliant with several of the proposed measures as aGroup standard, it was well prepared for the changes and was able to draw from experience gained during the ESMA measures implemented in 2018. The Group engaged with selected clients in advance of the proposed changes, withsome electing to opt up to ensure that their leverage limits are not affected. The impact of the change was broadly in line with Group expectations, with retailclient numbers down 18% and turnover per retail client at ~18% of the pre-intervention levels. Our markets Strategic report 14 CMC Markets plc Annual Report and Financial Statements 2022 Key market driver Our response Non-leveraged: stockbroking Volatility The elevated trading activity seen during 2021 induced by the volatility seen around COVID-19 and social media-driven interest moderated during the year. However, the business saw increased volatility-driven trading activity in the fourth quarter of the year, particularly around the geopolitical uncertainty caused by the Russia/Ukraine war. While clients enjoy the trading opportunities that volatility can present, excessive volatility can be seen as not conducive for investors and a certain proportion will likely therefore be passive. In these uncertain times, CMC stockbroking will continue to assist clients to identify investment opportunities through leading tools including our award winning mobile app, algorithmic trading and enhanced educational content. Low cash interest rate The historically low rate environment persisted through the period and continues to drive investors towards higher yield asset classes including equities. This is forecast to change over the coming period with interest rate increases seen for the first time in many years. This, combined with a high inflationary environment, will likely see a rotation of assets. We stand ready to support our clients by offering them the opportunity to invest in a wide range of sectors across both local and international equities via our leading offering which, as the most comprehensive in Australian retail broking, includes access to ASX, Chi-X and 41 exchanges in 15 international markets. Market size and share An independent report suggests that the Australian online investment market continued to grow during 2022 and CMC, in combination with the ANZ Bank white-label partnership, has a combined retail market share in the region of 15%. As a result, we continue to maintain our position as the second largest retail broker in Australia with over 245,000 active clients (approximately one-third above pre-pandemic levels) and are the largest provider of white-label broking services in the country with record AuA of c. $80 billion. Towards the end of the year, we strategically positioned our offering for the future through a targeted retail pricing strategy, further enhancements to our mobile offering and the rollout of extended hours trading on the US market to cater to the fastest growing segment in the market, namely millennials. Additionally, we plan to finish the transition of ANZ Bank clients to our core retail offering in H2 2023 which will see us have the ability to offer more products and to better control the end-to-end client journey, elevate our brand and consolidate our position as number two in Australia with approximately another 500,000 customers under the CMC Invest brand. Seasonality Earnings season is a major driver of activity and as a result strong months are generally seen in both August and February. Market conditions The clients we onboarded during the COVID-19 and social trading periods have remained more actively engaged against historical trends and more likely to engage with our higher margin international shares product. With the expectation of somewhat moderated markets compared to that seen during COVID-19, we offer attractive pricing in over 40,000 instruments to allow clients to capitalise on any market conditions. 1 Source: ASX and Chi-X Combined Trading Statistics – IRESS. Strategic report 15 CMC Markets plc Annual Report and Financial Statements 2022 Chief Executive Officer’s statement Investing for the future Over the last year we have taken steps to define the strategic direction and diversification of the Group, building on our existing technology to launch new investment platforms that will unlock significant shareholder value and challenge the existing client transaction fee cost structures. There is significant opportunity and growth potential in the self-directed investment platform space, especially in the UK, not just for improved technology and client experience but also transaction costs and fees. We believe commissions, execution spreads and custodial fees are too high and too expensive for retail investors. We will utilise our platform technology, including pricing and execution, to drive down thetransaction costs of investments for retail clients, just like we did in Australia, where we are the number two investment platform for retailinvestors. CMC is a pioneer of platform technology and boasts over 25 years of experience in providing technology-backed solutions for B2C and B2B clients and partners. This gives us scale, leverage and the ability to drive down transaction costs, as well as the ability to launch new platforms and enter new markets quickly. For example, our new UK investment platform, CMC Invest, was launched ahead of time and on budget. It was launched to our UK staff in April 2022 and will be available to the broader market over thecoming summer months. It will include physical shares, multi-currency accounts, tax wrapper products and third-party funds, cryptocurrencies and, in due course, afull B2B offering. In addition, we continue to look at expanding our non-leveraged geographical diversification and we have recently announced we plan to launch a new investment platform in Singapore within the next year, as well as considering two other jurisdictions for launch in 2024. “We continue to expand and diversify the business into new asset classes including the launch of a new investment platform in the UK and the development of a new investment platform in Singapore. This follows the success of our investment platform in Australia with the migration of over 500,000 investing client accounts through partnerships (B2B) and the acquisition of the ANZ Bank investing business. We have ambitious plans to continue this expansion in various other countries and I look forward to updating investors as the strategy expands over the short and long term.” A new record year for CMC Group outside of the pandemic period “ I am delighted to report another year of strong performance from both a strategic and financial standpoint.Outside of the COVID-19 impacted prior year, this is a record net operating income result for the Group. The performance reflects the ongoing success of our technology and partnerships (B2B) andour continued investment in leveraged andnon-leveraged platforms.” Lord Cruddas Chief Executive Officer Strategic report 16 CMC Markets plc Annual Report and Financial Statements 2022 As part of CMC’s strategy, we announced the acquisition of Australia and New Zealand Banking Group Limited’s (“ANZ’s”) Share Investing client base during the year. The transaction involved the acquisition of approximately 500,000 ANZ Share Investing clients, withtotal assets in excess of AUD$43 billion. The CMC platform will offer ANZ clients a wide range of additional benefits; these include access to enhanced market-leading mobile apps and complementary education tools and resources, as well as lower brokerage commissions across four major international markets and the local Australian market. The Group continues to progress the transition of clients, which is expected to complete in the next 12 months. Because of the growing diversification of the Group the Board has begun an evaluation of the merits of a managed separation of its leveraged and non-leveraged divisions to unlock further shareholder value. This process is being led by the Chairman and the Board and they will update investors later in the year. Financial performance As expected, against an extremely strong prior period, revenues across our leveraged retail (B2C) businesses declined, compared to the COVID-19 period. In our non-leveraged business, revenues remained less volatile. Client income retention remained strong, and the stockbroking business continued to see growth in active clients and contributed a material level of revenue and profitability for the Group. Overall, Group net operating income decreased 31% versus the prior period, to £281.9 million, but increased 12% versus 2020 (£252.0 million). The Group’s cost base excluding variable remuneration increased by 3% to £173.1 million during the year, mainly as a result of the significant investments in people and technology and increased marketing spend to attract new clients. Variable remuneration decreased by £1.7 million to £14.5 million following the record performance and associated remuneration last year. Overall, total costs increased by 2% to £189.8 million. Against an exceptional prior year comparator, profit before tax at £92.1 million was £131.9 million lower than the previous year, and £6.6 million lower than 2020. Our dividend policy remains unchanged, at 50% of profit after tax, therefore resulting in a proposed final dividend per share of 8.88 pence. The underlying fundamentals of the business remain well supported; we continue to target and retain higher value, sophisticated clients and we have seen levels of client money, which are an indicator of future trading potential, remain close to the record levels seen in the prior year. Stockbroking active clients increased 6% to 246,120. Of this increase, stockbroking B2C clients increased 21% to 56,205, with B2B increasing by 2% to 189,915. The balance sheet continues to reflect the strong financial position of the Group. At the end of the year, the Group’s net available liquidity was £245.9 million and the regulatory OFR ratio was 489%. Q&A: The evolution of investment platforms Q What are the biggest challenges and opportunities faced by CMC in respect of the evolution of investing trends? A Investment markets are becoming increasingly competitive with various client acquisition strategies being employed. A fintech revolution, combined with structural social and demographic shifts, is changing the way people invest for good. This dramatic shift poses a significant opportunity for CMC to utilise its technological strength to lead and expand into these new high growth markets. Q What are the major changes being seen in how investors are looking to access global capital markets? A Mobile digital delivery will dominate the next generation of investment platforms, providing safe and secure access to capital markets. Over time, digital delivery will steadily replace face-to-face consultation. The future lies with cloud- based services and personalisation. We also believe the existing platform suite in the market isn’t fully servicing the growing population of tech-savvy individuals that demand frictionless onboarding, transferring and cost-effective management of their wealth. Q One of the core strategies for CMC is the diversification into non-leveraged businesses. Why is this important? A Frictionless investing and the rise of a wealthier population are driving the structural growth in self-managed wealth. The biggest change being seen is the shift away from institutional to retail participation: the “democratisation” of investing. In the UK the trends are some of the strongest – UK direct platform AuA has increased by over 16% p.a. since 2008 and is now standing at some £320 billion. This is a significant growth opportunity for CMC Invest to capture. Q How do CMC’s platforms differentiate themselves in what is a very competitive marketplace? A CMC has a 30-year history of building and owning all of its technology. This has been shown in our ability to deliver award winning platforms across both our leveraged and non-leveraged businesses. This, combined with our long-standing prime broking relationships and risk management systems, allows us to evolve and move faster relative to our competition. A recent example of this has been the launch of our new UK non-leveraged platform that was delivered ahead of schedule and on budget. Looking forward, this technological edge will also allow us to expand geographically – we will be launching a new investment platform in Singapore within a year, as well as consideringtwo other jurisdictions for launch next year as we continue to diversify and expand our geographic footprint throughtechnology. Strategic report 17 CMC Markets plc Annual Report and Financial Statements 2022 Regulatory change The Australian Securities and Investments Commission (“ASIC”) implemented measures relating to CFDs on 29 March 2021. After the introduction of these new measures, regulatory conditions are now more harmonised globally and we can continue to focus on growing our business in an industry where regulatory arbitrage is reduced. Asanticipated, the changes reduced the notional value of retail client trading in Australia and, combined with lower market volatility, resulted in less active client trading than in the prior period. In April 2022, ASIC extended its product intervention order, imposing conditions on the issue and distribution of CFDs for a further five years to 23 May 2027, thereby improving regulatory visibility. People and sustainability Our people are crucial to our success, and I continue to be impressed by their hard work and dedication. We have a very strong team across all our business units and on behalf of the Board I would like tothank all of our people for their commitment, especially through theCOVID-19pandemic. How we as a business and our people interact with each other, the environment and society is important. CMC recognises that the Group has a duty to help improve the prospects and living environment of the local community. Sustainability and social awareness are part of our core values and culture. I’m proud of the launch of our “Our Tomorrow: taking a positive position” strategy, detailing the five core pillars of what we stand for at CMC from a sustainability perspective. Chief Executive Officer’s statement continued “ The underlying fundamentals of the business remain well supported; we continue to target and retain higher value, sophisticated clients.” Lord Cruddas Chief Executive Officer Strategic report 18 CMC Markets plc Annual Report and Financial Statements 2022 Clients Our clients are at the heart of everything we do as we continue to develop our platforms, innovate and invest to ensure that our user experience is industry leading as we drive client retention and lifetime value. On top of our continued focus on our leveraged clients, I am pleased to welcome approximately 500,000 new clients to our Australian stockbroking business as they transition from ANZ Share Invest and look forward to offering them new functionality and an enhanced experience. I also look forward to welcoming new clients to our UK non-leveraged wealth platform, where we will strive to partner with new investors over the longer term to help them achieve prosperity at every stage of their lives. Share buyback programme On 15 March 2022, the Company commenced a share buyback programme of up to £30 million. The Board’s decision to undertake the buyback was underpinned by the Company’s robust capital position and having considered the capital and liquidity requirements for ongoing investment in the business. This buyback programme forms part of a normal balanced approach to shareholder returns alongside the current dividend policy. The share buyback programme is progressing well and remains on track to be completed no later than 30 June 2023. Dividend The Board recommends a final dividend payment of £25.8 million. This is 8.88 pence per share (2021: 21.43 pence), resulting in a total dividend payment for the year of 12.38 pence per share (2021: 30.63 pence). This represents a payment of 50% of profit after tax, in line with policy. The Board believes that this is an appropriate payment for the year after considering both the Group’s capital and liquidity position and forecast requirements in the year ahead to support business growth. Outlook We continue to see a lot of uncertainty, not just in the financial markets, but across all sectors and industries. If recent years have taught us anything it is that we must be prepared for the unexpected and the extraordinary. Our platforms have demonstrated that in periods of extreme volatility, they are able to continue servicing clients robustly, enabling us to gain trust and a reputation of stability. The investments made in our infrastructure have served us well and will continue to do so, providing a solid foundation upon which we can look to take advantage of futureopportunities. This year’s performance reflects the ongoing success of our B2B technology partnerships and focus across our leveraged and non-leveraged businesses. With a large addressable market, in terms of both client numbers and AuA, there is a huge opportunity for us to grow with a more predictable and stable revenue stream. This business continues to change as we look to utilise our technology to enter new markets and new geographies and expand ournon-leveraged offering. I look forward to updating investors asthestrategy expands over both the short and long term. Lord Cruddas Chief Executive Officer 8 June 2022 CMC transitioning approximately 500,000 Share Investing clients from ANZ Bank • In September 2021 CMC announced the transition of Australia and New Zealand Banking Group Limited’s (“ANZ’s”) Share Invest client base to CMC for a sum of AUD$25 million. • The transaction involves the transition of approximately 500,000 Share Investing clients, with total assets in excess of AUD$43 billion. The transaction is another significant step in the ongoing diversification of the Group’s global business and in the Australian market at a time when we are seeing elevated demand for retail stockbroking services. • With this transaction, the existing white-label technology partnership, which has seen CMC’s trading technology power ANZ’s Share Invest business since 2018, will come to an end. The existing white-label partnership generated £24.8million in net trading revenue for CMC in 2022. • The CMC platform will offer clients a wide range of additional benefits currently unavailable with ANZ. These include access to enhanced, market-leading mobile apps and complementary education tools and resources. • Following the transition, ANZ Share Invest clients will benefit from lower brokerage charges across four major international markets and the local Australian market and will give CMC the opportunity to drive greater value from its enlarged client base. The transaction further establishes CMC as a financial technology leader in the Australian market and removes the uncertainty around the finite term of the existing ANZ white-label partnership. Strategic report 19 CMC Markets plc Annual Report and Financial Statements 2022 Our focus for 2023 The significant achievements made with the initiatives during 2022 place us in an excellent position to continue to deliver throughout 2023, thereby deriving future value for, and accelerating the diversification of,the Group. For the year ahead, we are reinvigorating the focus on ourthree core initiatives of established markets, client journey optimisation and institutional offering. 2023 bringswith it a new business linefollowing the launch of our UK non-leveraged platform. Thiswill augment the sustained delivery of expansion in our established markets, aswell as ultimately bring opportunities to our institutional business and further potential partnerships. In addition, we will be launching anew investment platform in Singapore within a year, as wellas considering two other jurisdictions for launch as we continue to diversify and expand our geographic footprint through technology, our leveraged institutional offering, and our non-leveraged platforms. Our strategy 1 Established markets Opportunity The established markets of the UK, Australia and Germany generate a significant part of the Group’s revenue and, given the size and development ofthe markets, they also offer the greatest absolute growth opportunities. Thismeans that we continue to focus on developing brand and product awareness with the aim of becoming the choice provider to new clients acrossour high growth markets. We also continue to invest to make sure weoffer the premium proposition with the financial strength required to attract clients from competitors. Priorities for 2022/23 • UK: Growth in net trading revenue generated from active professional clients and high value retail clients. Significant opportunities exist to improve our product offering to attract profitable partnerships across our retail and institutional client base. • Australia: Deliver on the transition of ANZ’s Share Investing client base. The transaction announced in September 2021 involves the transition of approximately 500,000 ANZ Share Investing clients, with total assets in excess of AUD$43 billion. • Non-leveraged expansion: The Group is focused on the rollout of its non- leveraged platform which will offer trading and investment products in the UK with an ambition to rollout across other geographies. Significant additional features are expected to be rolled out over the coming 12 months to attract clients across the generational shift to self-managed investment platforms. This diversification will reposition CMC’s focus over time to drive profitability and accelerated growth. Technological evolution in 2022/23 • Proprietary technology investment will meet clients’ new demands and regulatory requirements. CMC’s differentiated focus on self-owned and developed technology brings with it significant opportunities for future expansion. Thiscontinues to define CMC’s unique growth strategies in both our leveraged and non-leveraged businesses. • Continue to develop new products in response to client demand across leveraged, stockbroking and UK non-leveraged platforms. These include global equities, funds, options, cryptocurrencies, foreign exchange and tax wrappers as well as opportunities for our clients to invest in a responsible and sustainable way. • High platform availability maintained and continual reductions to latency implemented, improving our clients’ overall experience. Progress against 2021/22 objectives • Monthly client numbers in our leveraged business continue to remain close to record highs and importantly are still up 33% versus pre-pandemic levels. • Non-leveraged underlying active client numbers are up c 36% versus pre-pandemic levels. Client non-leveraged AuA reached a new record highat AUD$80.2 billion during the year, up 72% versus pre-pandemic levels. • The Group continued to win numerous awards for client service and products throughout the year. Strategic report 20 CMC Markets plc Annual Report and Financial Statements 2022 2 3 Priorities for 2022/23 • Continue to invest in a responsive, insight-driven platform that is optimised for incremental client learning and growth. • Iterate delivery on new services that better support our clients to manage their performance and harness market opportunities. • Build out our product range across our platforms to better support clients’ investment portfolio and grow share of customer wallet. Priorities for 2022/23 • Deliver an infrastructure upgrade that will elevate CMC Connect asatechnical innovator and institutional contender for price and liquidity construction. • Evolve the current product offering to operate with larger institutions resulting in greater revenue returns. • Enhance our ECN connectivity, providing access to a vast electronic market to further cement ourselves in the B2B space as the go-to non-bank liquidity provider. • Develop a physical asset class solution allowing access to new products and functionality, offering best-in-class technology to a marketlooking for an increasing range of investment products. • Expand the range of instruments on offer to meet all market liquidity needs, including cash equities, ETFs and other financial instruments. • Continue to elevate the CMC Connect brand throughout the financial sector, utilising our award winning product suite to gain recognition as the industry benchmark. Technological evolution in 2022/23 • Building core multi asset capability that will enable us to deliver a more diverse and peerless trading experience to our expanding target market across leveraged and non-leveraged platforms, including B2B capabilities across all platforms. • Continue to invest in people and technology. Our main offices in London and Australia focus on the development of all new platform features orientated around the value proposition we offer across our technology offering. This will soon be bolstered with the opening of our Manchester office in the UK. • Establishing new ways of working across both our traditional leveraged and growing non-leveraged businesses to increase the velocity of product delivery, organisational learning, and incremental value we deliver to our clients. Technological evolution in 2022/23 • Position CMC Connect as a full service fintech solution and non-bank liquidity provider. • New products; FX give ups and ECN connectivity (Electronic Communication Network) enhancements. • Drive brand and product awareness across all channels and distributionchannels. Progress against 2021/22 objectives • Continued to deliver numerous user experience and technological improvements to our customer onboarding processes across our global retail, institutional and non-leveraged businesses. • Developed new services and data capabilities that better support ourclients to manage their performance. Progress against 2021/22 objectives • Exceeded revenue targets and expectations for 2022. • Accelerated growth in the FX market with marketing strategy to build client groups across increasing geographies. • Successfully continued advancements as a non-bank liquidity provider in the spot market. Client journey optimisation Opportunity We continue to lead the way in providing a best-in-class client trading experience and generating high levels of customer satisfaction with our products and service. We believe there is a sizeable opportunity to build on this strength and drive greater longevity and advocacy from our client base. We are focused on solving our clients’ problems and supporting them on their trading journey. This will enable the Group to further improve its capability to attract, build and retain a high quality client base. Institutional offering Opportunity CMC Connect, the institutional offering from CMC Markets, looks to accelerate functionality over the next year following major technical advances to its connectivity and current product offering. Steep growth trajectory is predicted across trading volumes and the client base resulting in major elevation of the CMC Connect brand. Strategic report 21 CMC Markets plc Annual Report and Financial Statements 2022 Key performance indicators Group KPIs Tracking our progress Our Group KPIs monitor the delivery of long-term value through a focus on client quality and operating effectiveness. In the 2021 report, the Group unveiled its plans to develop a non-leveraged platform in the UK. As a result, we have reviewed the most appropriate metrics to illustrate the performance of the business and feel it is the right time to provide Group-level metrics but also a split of performance of both the leveraged and non-leveraged businesses as a whole. KPI definition This is a statutory measure, which represents total revenue net of introducing partner commissions and spread betting levies. Why we measure Key operating metric. Net operating income £281.9m £252.0m 21 20 £409.8m 22 £281.9m Link to strategy 1 2 3 KPI definition This is a statutory measure, which comprises net operating income less operating expenses and interest expense. Why we measure Key operating metric. Statutory profit before tax £92.1m 21 20 £224.0m £98.7m 22 £92.1m Link to strategy 1 2 3 Profit after tax £72.0m £178.1m £86.9m £72.0m 21 20 22 KPI definition This is a statutory measure, which comprises statutory profit before tax less taxexpense. Why we measure Largest driver of shareholder equity and Board-approved metric for calculating dividend payable. Link to strategy 1 2 3 KPI definition This is a statutory measure, which is calculated as earnings attributed to Ordinary Shareholders divided by weighted average number of shares. Why we measure Key shareholder valuemetric. Basic earnings per share 24.8p 30.1p 2.0 21 20 61.5p 2.0 22 24.8p Link to strategy 1 2 3 KPI definition Any dividend declared, proposed or paid relating to the financial year. Why we measure Key shareholder valuemetric. Ordinary dividend per share relating to the financial year 12.38p 15.03p 2.0 21 20 30.63p 2.0 22 12.38p Link to strategy 1 2 3 Strategic report 22 CMC Markets plc Annual Report and Financial Statements 2022 Leveraged KPIs KPI definition Spread, financing and commission fees charged to CFD and spread bet clients. CFD net trading revenue is the product of gross CFD client income, multiplied by client income retained. A reconciliation of gross client income to the Primary Statements is provided on page 164. Why we measure Used to measure the total income generated from CFD client transaction charges. Gross client income £288.5m 21 £335.3m £240.6m 20 22 £288.5m Link to strategy 1 2 3 Strategy key 1 Established markets 2 Client journey optimisation • 3 Institutional offering KPI definition Individual clients who have traded or held CFD or spread bet positions with CMC Markets on at least one occasion during the financial year. Why we measure Representative of the continuing success of the business in acquiring and retaining clients which trade on a regular basis. Link to strategy 1 2 3 Active clients 64,243 76,591 57,202 22 64,243 21 20 KPI definition Percentage of gross CFD clientincome retained after rebates and gains and losses from risk management. Why we measure Used to measure the success ofthe risk management strategyof converting client spread, financing and commissions charges to CFDnet trading revenue. Link to strategy 1 2 3 Client income retained 80% 104% 89% 22 80% 21 20 Revenue per active client £3,575 £4,560 £3,750 22 £3,575 21 20 Link to strategy 1 2 3 KPI definition Net trading revenue generated from CFD and spread bet active clients, divided by the number of active clients during the year. Why we measure High value clients are central to the Group’s strategy and the growth in this figure is indicative of the success in attracting and retaining these clients. Platform uptime 99.95% 99.95% 99.95% 22 99.95% 21 20 Link to strategy 1 2 3 KPI definition The percentage of trading hours that clients are able to trade on the CFD platform. Why we measure The CFD platform is at the core of our business – if clients are unable to trade, the Group will be unable to earn revenue. Maintaining a very high uptime is key to the continued success of the Group. Strategic report 23 CMC Markets plc Annual Report and Financial Statements 2022 Non-leveraged KPIs KPI definition Income received from brokerage and FX spread on client trades, less rebates. Why we measure Revenue diversification and high value clients are central to the Group’s strategy and the growth in this figure is indicative of the success in growing the stockbroking business and attracting and retaining high value clients. Link to strategy 1 2 3 Net trading revenue £48.0m £31.8m £54.8m21 20 22 £48.0m KPI definition Individual clients who have traded on the stockbroking platform on at least one occasion during the financial year. Why we measure Representative of the continuing success of the business in acquiring and retaining clients which trade on a regular basis. Link to strategy 1 2 3 Active clients 246,120 20 181,630 21 232,053 22 246,120 KPI definition The percentage of trading hours that clients are able to trade on the stockbroking platform. Why we measure The stockbroking platform is at the core of our business – if clients are unable to trade, the Group will be unable to earn revenue. Maintaining a very high uptime is key to the continued success of the Group. Link to strategy 1 2 3 Platform uptime 99.91% 21 20 99.80% 99.95% 22 99.91% Key performance indicators continued Strategic report 24 CMC Markets plc Annual Report and Financial Statements 2022 New technologies and new ways of working borne out of our digital transformation programme have been the main contributing factor in accelerating the delivery of our new UK investment platform. The build is a highly complex work programme requiring strong collaboration across IT and every business unit, meaning the programme impacts almost every team in the UK in some way. Technology and innovation Digital transformation accelerates building our new UK investment platform The delivery of the platform on time and on budget is particularly pleasing given projects of this scale are notorious for overrunning due to friction in the delivery process, delays caused by poor decision making and disjointed technical design decisions. At the heart of these issues is often the use of unsuitable and outdated working practices. Our digital transformation programme has allowed us to combine new skills and ways of working with new technology capabilities to allow us to tackle a programme of this size and complexity and execute at pace, delivering a great product outcome for our clients. Cross-functional product-led teams Strong collaboration alongside fluid and effective communication are critical when building complex platforms at pace. Teams need a wide range of skill-sets and a high level of autonomy, and our new “squad” model has given us that. We have created our new UK investment platform using cross-functional (multi-disciplined) teams, always product led with a clear line of sight to our clients. We keep the customer in mind throughout our build process, creating a rapid feedback loop from customer research to the development team. Cloud technology Cloud technology, delivered through our strategic partner Amazon Web Services (“AWS”), has provided the foundations for creating our new investment platform. To leverage cloud technology effectively weneeded an entirely new approach to architecture and design. Thetransformation programme brought the required skills into the organisation, as well as the foundations of our AWS technology ecosystem, meaning we could hit the ground running. Cloud technologies allow us to more rapidly build and deploy changes to our system, using concepts such as infrastructure-as-code and serverless architecture. We have been able to reduce dependencies on traditional infrastructure support teams, reducing hand-offs in our development processes, thereby accelerating ourdevelopment timelines. You build it, you run it! The implementation of cross-functional squads, coupled with the adoption of cloud technology, has brought a whole new level of empowerment to our delivery teams through what we refer to as “build and run”. This is a powerful concept that demands a high level of discipline and skill from all members of the team, but rewards them with the highest level of autonomy. The teams building our new investment product can rapidly implement change, taking feedback from a customer and delivering the required change, with minimal support required from outside the team. This has been embedded inour teams from the inception of the project, and will allow us to scale our teams and rapidly expand our product in line with customerdemand. Strategic report 25 CMC Markets plc Annual Report and Financial Statements 2022 Non-leveraged UK CMC Invest development We proudly launched our UK investment platform, CMC Invest, in April 2022 on an invitation-only basis. Further enhancements and features are scheduled in phased releases through the rest of the year, with a wider market release on track for the second half of the calendar year. The prioritisation of our product roadmap is guided by one of our core Company values – put our clients first. Throughout the launch year and beyond, we will continue to proactively engage clients and create a dialogue to better understand their investing habits, to then bring forward an investing platform tailored to their needs. The genesis of the product was borne out of client feedback and market research that identified a gap in the UK investment market. While there are many options for an investment platform, there is a lack of a credible alternative that is fully aligned to clients’ needs and financial goals. This was the catalyst for our mandate: challenge the status quo and create a transparent platform, business model and pricing structure that better support clients’ self-directed investment needs and their long-term success. To scope the product we took a fundamental approach to analysing the UK investment market and built up our understanding of clients’ pain points and expectations, whilst leveraging CMC’s expertise in technology and building investment platforms to hone our product designs and solutions. A significant part of our effort has been focusing on establishing the platform to build and iterate successful feature sets. We have mobilised several cross-functional squads that are dedicated to building out the investment product with the singular goal of creating the greatest value for our clients. The investment platform is built using scalable cloud-based technology and processes that enable us to release new features continuously in a secure and highly automated manner. This means we can react quickly to client feedback within hours rather than days or weeks. The teams are accountable for outcomes (as opposed to output) focused on areas such as client adoption, retention and advocacy. We are committed to our mission of inspiring and guiding our clients to realise their financial goals, which means we have made them an intrinsic part of the product development process. To this end, we have also been honing our product development practices to expedite the gathering, organisation and utilisation of client feedback and construct a framework where our clients become an extension of our product team. We are proud to have delivered the first iteration of the new investment platform in under a year, demonstrating the immense capability within CMC Markets and the strength of the team. The first delivery of the platform includes core features, e.g. General Investment Accounts (“GIAs”), UK and US share dealing, watchlists and paperless forms, but, more importantly, we have also set up the framework for rapid development and introduction of new capabilities that will better support CMC’s clients to achieve their investment goals. Technology and innovation continued Strategic report 26 CMC Markets plc Annual Report and Financial Statements 2022 Non-leveraged Australia Client journey optimisation The Australian non-leveraged business started its transformation to an agile, cross-functional squad model around 18 months ago, with the aim to align our product and development teams with key areas across the client journey. The Mobile squad started us off in 2021 and went on to develop powerful new mobile and tablet apps for our iOS and Android users. The success of these apps can be seen in our app ratings which stand at or above 4.5/5 at the end of March 2022. We continued this transformation in 2021/22 with the addition of a new Account Management squad whose initial focus was on redesigning our application process for new clients. This aligned to one of the Group’s key focus areas in 2022 of optimising the client journey and was designed to simplify the user experience, automate manual processes and speed up application and account creation times so clients could start investing sooner. The project started with a comprehensive research phase looking at modern application designs and user flows, reviewing our internal processes and speaking with key stakeholders to gather requirements. Once the results were collated and reviewed, the initial concept design was developed and tested with our new CMC focus group. Thefeedback from these sessions resulted in a number ofchanges to optimise the user experience further before being passed to the squad developers to commence thebuild. In addition to a new modern design, the development team built the new application using scalable cloud-based technology, allowing us to instantaneously scale our IT infrastructure to serve more clients. We’re leveraging cloud services to release new features continuously in a secure and automated manner. The new individual application went live at the end of calendar year 2021 to a small percentage of new clients which enabled us to test the end-to-end process, identify any issues and iteratively update where necessary. The full rollout of the application process is planned for early 2023, before switching our focus to white-label variants, non-individual accounts and some key account management enhancements. Reduction in 99th percentile execution time Leveraged 69% Non-leveraged 71% Operational excellence supporting leadingedgeinnovation The Group’s infrastructure remained extremely resilient throughout 2022 with the leveraged and non-leveraged platforms again achieving uptime of 99.95% and 99.91% respectively, throughout the year, despite periods of elevated volatility driven by COVID-19 and geopolitical events. Once again, our technology has been core to providing our clients with uninterrupted access to the financial markets. We are continuing to improve the consistency and speed of execution for all clients with the 99th percentile execution time down approximately 70% compared to the same time last year for both leveraged and non-leveraged businesses. We recognise that we need to be constantly evolving and innovating to ensure we remain at the leading edge of our industry and have continued to invest significantly throughout the year to ensure this is the case. Putting clients’ needs at the core of our strategy Our product strategy is based on understanding and eliciting these needs from our clients and delivering personalised experiences supporting their key journeys with CMC. We believe that understanding what our clients need and when they need it will underpin clients’ long-term relationships with us through enabling their long-term success. This has been demonstrated through the constant client engagement during the CMC Invest build, resulting in the Group building a detailed understanding of their investing habits and therefore building a platform tailored around their needs. 1 Leveraged percentage represents reduction in Q4 2022, following changes made during thequarter. Read more about our client journey optimisation strategy on page 20 Strategic report 27 CMC Markets plc Annual Report and Financial Statements 2022 Introducing our new focus on sustainability Sustainability At CMC Markets, we empower our people and clients with the means to invest in a positive tomorrow by providing responsible and innovative technological solutions that protect, educate and inspire our people and clients to invest for the future. This ensures that we are aligned with the global capital markets shift towards asustainable future. At a time when sustainability is leading the direction of the financial markets, our mission is to empower our people and clients with the knowledge to invest responsibly and with confidence. We are cognisant and embracing of the mandate handed to the finance industry to support the global sustainability agenda including the critical fight against climate change. We also recognise that adopting practices through a sustainability lens will have real business benefits that support the longevity of the Group and aid in the delivery of our purpose to provide our clients with a first-class technology-backed investing experience with unrivalled access tocapital markets. Over the last year we’ve taken decisive steps towards embedding a greater focus on sustainability within our organisation. We welcomed Kelly Perry as our new Group Head of Sustainability, a newly created senior position that sits within our corporate team with Board exposure. Kelly will play a vital role in advising our Board throughout our sustainability journey, developing the overall strategy and ensuring successful implementation into the overall operations of the Group. Introducing our new strategy: "Our Tomorrow: taking a positiveposition" Over the past year, we have worked closely with a team of sustainability consultants, Design Portfolio, to support a number ofworkstreams, including preparation to meet the requirements ofthe TCFD (read our disclosure on pages 40 to 43) and the facilitation of ourfirst materiality assessment. Following the prioritisation of the sustainability topics that matter most to our business, we are proud to launch the new sustainability strategy that will shape the next few years of activity for the Group: "Our Tomorrow: taking a positive position". This coming year we are committed to embedding the new strategy across the business and, moving forward, our priority will be to determine key performance indicators and targets to measure and monitor our progress against "Our Tomorrow". We intend to report frequently against the development of this strategy and our performance and engage internal and external stakeholders to support our work in this area. "Our Tomorrow" describes how we seek to embed sustainability across the business. We have identified five core strategic priorities that are our areas of focus, which highlight how we protect, empower, innovate and adapt to be a responsible business that is committed to the needs of our people and our planet. How these five strategic priorities interact is key to the success of the future of ourbusiness. To deliver for our clients and for our people, we recognise two key mechanisms: firstly, the role we have to play towards a sustainable future including mitigating the consequences of climate change and better understanding how we can contribute to a low carbon future;and secondly, how having robust governance and leadership underpins our approach to sustainability, and we are taking steps to enhance our oversight and understanding of sustainability at the highest levels. Strategic report 28 CMC Markets plc Annual Report and Financial Statements 2022 “ Upon joining CMC this year, I have been encouraged to see the steps the Group has taken towards being a sustainable business. I am delighted to launch CMC's "Our Tomorrow" sustainability strategy, which demonstrates our ambitions to embed sustainability practices into the overall business and operations for a more positive future. This is an exciting time for the Group and we recognise that being a responsible business is not the work of any one individual, but that we all have an important role to play.” Kelly Perry Group Head ofSustainability Our entire ecosystem needs to come together to ensure the ongoing success of "Our Tomorrow" and to really make an impact, as demonstrated below: C h a n g e p o s i t i v e l e a d i n g b y e x a m p l e a n d d e m o n s t r a t i n g i n t e g r i t y , f o r w a r d t h i n k i n g a n d a c c o u n t a b i l i t y a t e v e r y s t e p u n d e r s t a n d i n g a n d m i t i g a t i n g o u r c l i m a t e i m p a c t s a n d e x p l o r i n g o p p o r t u n i t i e s t o s u p p o r t t h e t r a n s i t i o n t o a g r e e n e r e c o n o m y P l a n e t p o s i t i v e c u l t i v a t i n g c u l t u r e a n d f o s t e ri n g a n i n c l u s i v e a n d i n n o v a t i v e w o r k p l a c e w h e r e e v e r y o n e t h r i v e s P e o p l e p o s i t i v e Client positive protecting our clients and instilling confidence in their investment decisions. Protecting with purpose Platform positive pioneering innovative and sustainable products to solve our clients current and future needs with platforms for good Strategic report 29 CMC Markets plc Annual Report and Financial Statements 2022 Sustainability continued Grounding our strategy in materiality A comprehensive materiality assessment has provided the building blocks to our strategic approach. Through a multifaceted engagement programme with key internal and external stakeholders, industry research and market analysis, we developed the materiality matrix shown below to visualise the topics that matter most to the business. Materiality matrix The vertical axis represents the significance of the topics to our stakeholders, determined on the basis of interviews and surveys conducted with a representative sample of our employees, clients, financiers, and shareholders. To assign the impact score shown on the horizontal axis, we conducted a risk and opportunity mapping exercise for each topic to understand our exposure to potential consequences or benefits. We validated the findings from a prioritisation exercise in workshops consisting of members of our senior leadership team. This matrix and the sustainability strategy we have developed will guide our focus for the next few years and we will continue to track materiality. CMC’s material issues: 1. Client care and protection 2. Leadership and governance 3. Organisational culture 4. Incorporation of ESG factors into platform 5. Diversity and inclusion 6. Talent development 7. Business ethics 8. Climate action 9. Professional integrity 10. Responsible marketing 11. Energy transition 12. Executive pay 13. Green finance 14. Carbon emissions 15. Financial capability and inclusion 16. Employee wellbeing 17. Nature and biodiversity 18. Waste management 19. Labour practices and human rights 20. Responsible procurement Environment Social Governance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Manage CMC’s risk/opportunity exposure Monitor Maximise Mitigate Significance to stakeholders Strategic report 30 CMC Markets plc Annual Report and Financial Statements 2022 Reporting against ourstrategy Outlined below, we share our performance against our new five pillar strategy over the past year, and our plans for the future. 1 – Client positive Driving our efforts to being a market leader by protecting our clients and instilling confidence in their investment decisions. Protecting with purpose. There are many contributing factors that impact the behaviour of the markets which inevitably means it is not upside all the time. The Group recognises that risks and potential financial losses are inherent to our products and how they can impact our clients. Beyond our regulatory obligations, we are exploring a market leading approach to client protection, optimising their experience while ensuring the Group remains aligned with global regulatory bodies. Supporting our clients through education As we continue to develop and diversify our products, we recognise that our retail client base is also evolving to reflect broader and more diverse demographics. This presents exciting new opportunities for the Group and the new wave of investors is fundamentally different from our traditional investor; they are demonstrating less financial literacy 1 and despite this they have an appetite to engage in our sector. We are committed to examining how best to meet the needs of the more diverse and less experienced investors and we areputting education at the centre of our approach. We have a freely available Learning Hub for all investors on our website to help new clients navigate the difference between spreadbetting, CFDs and FX trading including key thematic trends in the market. Responsible marketing The Marketing Communications Policy sets out the standards that apply to the content used in client communications and financial promotions, covering the nature of the content, prominence of certain information, presentation of data and whether it is necessary to add disclosures or risk warnings. Read more about our commitment to client journey optimisation on page 20 2 – Platform positive Pioneering innovative and sustainable products tosolve our clients’ current and future needs withplatforms for good. Investment products are evolving all the time, and we continue to tap into this changing landscape. We have recently expanded our UK investment product suite into a non-leveraged investment platform and we are exploring sustainable product opportunities, in the spirit of the EU’s Sustainable Finance Disclosure Regulation (“SFDR”) and the UK’s forthcoming Sustainability Disclosure Requirements (“SDR”) regimes. Our priority as we review these opportunities is to ensure that these assertions are authentic. We will strive to offer our clients a product suite that allows clients toinvest responsibly and understand the trends towards sustainable investments. Read more about our investments in technology and innovation to support better client experiences on page 25 Sustainability highlights A summary of achievements that have been critical for improving our approach to sustainability: • Completed our first ever materiality assessment, which supported the development of our brand-new sustainability strategy, "Our Tomorrow: taking a positive position". • Welcomed our new Group Head of Sustainability, Kelly Perry, who will oversee the development and implementation of "Our Tomorrow". • Convened the Sustainability Committee, a group of senior leaders that will help to drive the adoption of "Our Tomorrow" across the business. • Conducted a survey of our employees to gain their views and feedback on the key sustainability topics that matter most to them. • Commissioned a review of diversity and inclusion within the business to inform our understanding of our employee community and develop a roadmap for growth. • Undertook a deeper analysis of our climate-related risks and impacts as part of a workstream to produce our first disclosure in line with the recommendations of the TCFD. 1 https://www.fca.org.uk/publication/research/understanding-self-directed-investors.pdf Strategic report 31 CMC Markets plc Annual Report and Financial Statements 2022 Sustainability continued 3 – People positive Cultivating culture and fostering an inclusive and innovative workplace where everyone thrives. Our people have always been core to the success of CMC Markets, and this year we could not be prouder as our teams, in all locations, rose to the challenges that were presented to them. Our future success depends on nurturing and enhancing an environment where our employees can reach their potential, championing talent development, promoting our employees’ mental health and wellness, and taking clear action to make CMC Markets a place where everyone thrives, regardless of beliefs and identities. Diversity and inclusion Having an environment where all employees feel included and valued is important to us and as our business grows we acknowledge that there is more we can do to ensure thiscontinues to be fully embedded in the culture of the organisation. This year the Group has built on the relationships with organisations such as Inclusive Employer and EveryWoman. Inclusive Employer has delivered six virtual workshops with an average of 220 attendees at each live session. The workshops have covered topics from introductory overviews to introducing allyship, alongside more in-depth topics such as an introduction to neurodiversity inclusion. These workshops have provided learning opportunities, encouraged and supported colleagues to connect and open dialogues on inclusion topics. Following the growth and success of our Women@CMC programme in the APACregion, the programme was rolled out in the UK and Europe in January 2022. This has helped to connect women across five different geographies through topic-based development workshops and networking, supported by the Group’s relationship with EveryWoman. The Group’s focus on gender balance, supported by Board andsenior management, has led to reviews of processesand policies across the business to ensure they are suitably diverse and inclusive. This has led to the following changes in the year: • parental leave policies were reviewed and enhanced to further support working parents across the Group. Changes to our maternity pay provision mean we are now in the upper quartile formaternity pay in the UK; and • creation of an internal Talent Acquisition team has allowed the Group to shape recruitment processes to support a more diverse pool of applicants to ensure: • job descriptions are diverse and inclusive; • working patterns and hybrid working are more accessible; and • line managers are supported through recruitment activities. The things we live by Throughout 2022 employee engagement surveys helped us capture what it means to work at CMC and understand how employees feel whilst at work. We have used these learnings to underpin recruitment practices, and provide quality content on our website and social media pages to helps us recruit employees aligned to our ways of working and give a framework for personal development discussions. We stand with our clients We are as passionate about trading as our clients, and we’re here to help them make the most of every opportunity. Weput our clients at the centre of everything we do. We are human We’re personable and approachable. We know thevalue of direct interaction and make ourselves available to talkinperson. We take ownership We make decisions as accountable individuals, not ascommittees. We do ourresearch and listen with intent to driveimprovements. We are bold We’re not afraid to challenge ourselves or the status quo and we’re always looking for ways toimprove. If things don’t work, we learn, iterate and succeed. We work as a team We’re inclusive, welcoming andencourage collaboration. We work together across boundaries and don’t have time for egos. We keep it simple In a complex industry, wealways strive tokeep things assimple as possible. We’rehonest, reliable and straight talking. We focus on impact We focus on solving the most important problems that will deliver the biggest impact. Weuse our time and money wisely and stay focused on the end goal. Strategic report 32 CMC Markets plc Annual Report and Financial Statements 2022 This year the Group engaged a diversity and inclusion consultant to provide an external view and to help develop the Group’s diversity and inclusion strategy going forward. As a Group we want to build on the foundations of everyday diversity and inclusion practices through training, development of policies and practices and embedding a diverse and inclusive culture where employees have the tools to thrive. The strategy will include metric-driven objectives for all senior managers to encourage more inclusive practices, particularly in the areas of (butnot limited to) gender, BAME, disability and socio-economic. Gender pay remains important to the Group and, whilst our published gender pay gap in the UK is 24% as of 5 April 2021, our ongoing monitoring shows that as of March 2022 we have improved to 14%. We continue to drive improvement in this area and measure our progress with real-time metrics and a more robust grading structure to ensure the headline metrics are underpinned by local practice. Learning and development Employee development has continued to be a focus over the lastyear as we launched a global learning management system. This tool aims to become a centralised hub for learning and development. Along with CMC mandatory training, this hub provides learning access to a number of partnered resources such as Intuition, LinkedIn Learning, Pluralsight and MBL, whose remote learning solutions have been invaluable during the pandemic. We have reintroduced some face-to-face learning with the delivery of Management Essentials training to the majority of our line managers in the UK and Europe. The Group recognises the value in developing and supporting growth in its employees with tools in place to; support employees, analyse the needs within the business, and having a comprehensive and structured approach to learning strategies. We aim to continue building on the learning and development culture and embed the value of this within teams as well as at individual level. Senior Managers and Certification Regime The Group continues to be fully aligned with the FCA’s Senior Managers and Certification Regime, and other similar regulations globally. As a result of theunderlying philosophy to work closely with all regulators and adopting the highest standards globally, the business adopted Group conduct requirements across all our offices. A Conduct, Fitness and Propriety Panel (“CFPP”) has been formed to bring together key stakeholders globally to discuss matters and ensure consistency, reporting and policy applications across the Group. The Group has continued to ensure appropriate training is provided, both internally and via external providers, on the conduct rules and other regulatory matters and best practice guidance. 1 Employees of the Group excluding contractors as at 31March 2022. 2 Direct reports of Executive Directors in non administrative roles. All employees Male 658 Female 265 Board of Directors Male 6 Female 2 Senior management Male 31 Female 3 Strategic report 33 CMC Markets plc Annual Report and Financial Statements 2022 3 – People positive continued Employee engagement We recognise that engaged employees make better decisions for our business and customers because; they understand more, are more productive because they like what they do, and innovate more because they want the business to succeed. As we navigate a new landscape of how people communicate, adapting is essential, and we have focused on ensuring we can provide engaging and informative tools that are effective and provide transparency. We continue to enhance our communications with employees and understand the need to modernise and adopt best practices to be more relevant, timely and engaging for our workforce. Having the right culture, policies and practices in place is key to ensuring employees have the tools and optimal processes to maximise their contribution. We offer an employee experience platform which captures survey results in real time along with the Group’s response to feedback received. The tool creates an open feedback channel for employees to communicate with the Executive Leadership team, helping us understand our employees better and turn feedback into positive, sustainable change that boosts performance levels. We regularly communicate with employees at all levels through multiple channels and with the support of our Non-Executive Directors, who have responsibility to oversee engagement with employees. We aim to ensure employees understand any challenges, opportunities, and risks presented to the business through regular town halls. Our new employee experience platform, Culture Amp, was launched in 2021. The current year survey results identified a number of opportunities for development and, in response, the business has implemented the following global communication, social and engagement initiatives: • monthly business and strategy updates delivered by ExecutiveDirectors; • reinstatement of quarterly "meet the Directors" forum for new joiners, temporarily suspending during COVID-19; • engagement with our Non-Executive Directors to provide feedback and hear insights; • launch of Women@CMC programme; • revisions to our work from home approach; and • implementation of an anonymous feedback tool that is forwarded directly to Executive Directors. Overall full engagement was recorded at 66% during our global pulse survey for 2022 (conducted in January 2022), increasing from the 61%recorded during our 2021 global annual survey (conducted in July2021), and 59% during our 2021 global pulse survey (conducted inJanuary 2021). In previous years we have highlighted Average Engagement but can no longer report that metric. Full Engagement isbased on the number of employees who agree or strongly agree with all five core engagement measures. Engagement data Our engagement score Current 66% 2022 global pulse engagement survey How we compared based on: Previous +5% 2021 global engagement survey Score: 61% Benchmark -6% Fintech 2021 Score: 72% Client supplied Sustainability continued Strategic report 34 CMC Markets plc Annual Report and Financial Statements 2022 Talent attraction and retention Voluntary employee turnover at CMC has increased this year to 24% (15% in 2021). Like all industries, the increase was prompted by our core markets for talent reopening as COVID-19 restrictions were lifted. The APAC region, and Australia in particular, have been impacted by the closure of borders significantly reducing the available talent pool. To manage these challenges we have increased our talent acquisition resources, tactically reviewed reward in key functions and focused on internal development where appropriate. As a result, 72employees have been successful in securing a new opportunity orgreater responsibility internally. Despite pandemic challenges, 2022 has been a year of growth with our headcount increasing by 44 globally, principally in our technology functions as we develop new products and features, and in our support functions as we prepared for the launch of the UK non-leveraged investment platform and broaden our appeal to our institutional client base. To continue to support our planned headcount growth for 2023 we are looking toexpand our physical footprint in the UK by opening an office in Manchester, initially focused on increasing our talent pools for technology skills and similar initiatives are being explored inSydney. Reward and benefits The Group offers a highly competitive reward package and we continually review our employee proposition to align it to the external market. This is key to delivering on our hiring plans and motivating our existing employees. Senior management and critical talent have equity incentives and all UK employees have the opportunity to contribute to a Share Incentive Plan. At the year end, 29% of our London workforce were participating in the scheme. Similar equity or cash-equivalent schemes are also available globally. Health and wellbeing The health and safety of the Group’s employees and visitors is of primary importance and we are creating and maintaining a safe and healthy working environment. Health and safety audits and risk assessments are carried out regularly. We have ensured our offices exceed all government and health authority guidance to create COVID-19 safe environments. COVID-19 has continued to play a role in our people-related activities: ensure employees remain healthy, support mental wellbeing and manage increasing retention challenges as the pandemic restrictions are eased. All our offices have successfully re-opened when permitted, followed local guidance and implemented effective COVID-19 secure protocols. Business performance has remained strong during times when offices have been closed to employees, reflecting theinvestment made in our systems and processes to enable home-working and the commitment of our people to continue to driveCMC forward. Asaresult of these developments, we have been able to close one business continuity site in the UK and develop our Sydney site as agrowth location from our main office in Barangaroo. Wehave launched a"Living with COVID-19" policy, retaining the core elements of the COVID-19 secure plan including free testing to continue to support allemployees as each location transitions away from full COVID-19precautions. Engaging with our communities The Group continues to promote the support of local charities across our global offices and recognises the importance of increasing this support as charities have been heavily impacted by the COVID-19 pandemic. Staff are encouraged to engage with charities, using the Group’s corporate volunteer days scheme which is available to all staff wishing to volunteer with charities. We also continue to support staff with our Company matched fundraising scheme. The Group’s charity team have been directly engaged with our charity partners throughout the pandemic and in London we are in the second year of our three-year charity support partnership that will strengthen interactions and impact on children from primary school age, through to taking their first steps into the professionalworld. As CMC transitioned to an agile working environment during the COVID-19 pandemic we upgraded our tech equipment for all employees, allowing us to be in a position to repurpose/rebuild surplus equipment and donate these assets (PCs, monitors, keyboards and accessories), and this is an ongoing initiative whichissupporting a number of different charities. Strategic report 35 CMC Markets plc Annual Report and Financial Statements 2022 4 – Change positive Leading by example and demonstrating integrity, forward thinking and accountability at every step. We conduct our business to the highest standards and seek to lead the industry through our strong commitment to business ethics and professional integrity. This will manifest itself in strong governance processes around our material sustainability issues, including both risks and opportunities. To oversee and guide our approach, we have established a Sustainability Committee, a cross-functional team comprising Board members and business leaders from across our geographies which will be led by our Group Head of Sustainability. Equal opportunities The Group highly values the differences and creativity that a diverse workforce brings and is committed to recruiting, developing and retaining a world-class team irrespective of ethnicities, nationalities, sexual orientation, gender identity, beliefs, religions, cultures or physical abilities. We seek to establish a culture that values meritocracy, openness, fairness and transparency. We affirm that we will not tolerate any form of unlawful and unfair discrimination. In searching for talent, the commitment is always to recruit the best from the broadest applicant pool. All candidates have the right to expect that they will be respected and valued for the contribution that they bring to the Group. We are committed to giving full consideration to applications for employment from disabled persons as well as providing continuing employment to existing employees who become disabled during their employment where practicable. For those disabled persons looking to join CMC Markets or any existing employees who become disabled, whether temporarily or permanently, we work to adapt the working environment and where possible offer flexible working, training and graduated back-to-work plans in conjunction with occupational health to ensure genuine opportunity for all and the retention of employees. Human rights We conduct business in an ethical manner and adhere to policies which support recognised human rights principles. The Group anti-slavery and human trafficking statement can be found on the Group website (www.cmcmarkets.com/group). We actively monitor employee remuneration to ensure we meet all living wage requirements or the local equivalent. Anti-bribery and anti-corruption The Group does not tolerate any form of bribery or inducements andit has an anti-bribery and corruption policy which is applicable toall global staff. The policy is owned by the Heads of Compliance of the UKand Europe, and is implemented by the financial crime team andcompliance officers in offices across the Group. In conjunction with this policy, the Group also provides clear guidance to staff on other policies related to politically exposed persons (“PEPs”), gifts, entertainment and expenses. Should any member of staff like to anonymously raise bribery or corruption concerns they are also ableto do this in accordance with the Group Whistleblowing policy. Purpose • Good governance for the Group • Effectively manage the risks in our operating environment • Recognise and capture the opportunities that are presented • Ensure integration of Our Tomorrow into our global business • Cross-functional transparency and "connecting the dots" • Ensure alignment with the regulatoryrequirements • Work across all operations to orient the Group’s triplebottom line: People, Planet, Profit Structure • Permanent structure within CMC • Board representation required • Constituents should be cross-functional/cross- geographybusiness leaders • Regular monthly meetings to drive Our Tomorrow strategy • Form a subcommittee of sustainability champions to help deliversustainabilitygoals Sustainability Committee Responsibilities • Approve strategic sustainability plans • Provide updates/obtain feedback from Board • Approve sustainability practices: framework, reporting, and other activities • Globalise our sustainability strategy • Bring together internal networks • Define, deliver and measure KPIs • Accountability of Our Tomorrow strategy and performance of the business Sustainability champions (subcommittee) • Strategic direction provided by SustainabilityCommittee • Broader employee engagement and embedding intoour DNA • Champions who are impassioned by sustainabilitymatters • Constituents should be cross functional/cross geography to drive implementation • Proactive/doers • Track and measure developments/datacapture Sustainability continued Strategic report 36 CMC Markets plc Annual Report and Financial Statements 2022 5 – Planet positive Understanding and mitigating our climate impacts and exploring opportunities to support the transition to a greener economy. We have more work to do to understand the full scale of our impacts on the environment. CMC Markets is committed to taking a leading role in the fintech space to mitigate our environmental footprint, from finding ways to enhance our energy efficiency and reduce our impacts on the climate, to embracing more circular ways of thinking about technology and electronic waste. We have mapped out our climate-related risks and opportunities this year as part of our TCFD disclosure, which can be read in detail on page 40. Offices and facilities As we continue to expand and grow our business we are looking at more sustainable office spaces, specifying the need for green credentials and utilising data provided by BREEAM ratings or local equivalents on the buildings we are considering, to inform our decision making. Greenhouse gas emissions (“GHG’s”) GHG’s are calculated in alignment with records used for the production of the consolidated Financial Statements for the relevant accounting period. We have used emission factors from the Department for Business, Energy and Industrial Strategy’s (“BEIS”) “Greenhouse gas reporting: conversion factors 2021” to calculate our Scope 1 emissions and have determined the Scope 2 electricity impacts for electricity from the International Energy Agency (“IEA”) emission factors. All emissions required under the Companies Act 2006 are included except where stated and include Scope 1 (direct emissions from gas consumption) and Scope 2 (indirect emissions from purchased electricity) emissions but exclude Scope 3 (other emissions from business travel and waste) emissions. Diesel usage forbackup generators at one office location has been excluded fromthe report given that it is not material to our carbon emissions. The figures include emissions from all global offices. In some cases estimates are used to calculate usage where actual consumption figures are not available, such as gas consumption in an office and electricity consumption in a data centre, in the UK. The running of our two UK data centres accounts for the majority ofthe Group’s electricity usage, and we continue to look for opportunities to improve their efficiency and performance. The Group’s intensity ratio increased due to a decrease in net operating income, despite emissions reducing by 9%. Total emissions (tCO 2 e) year ended 31 March 2022 Total emissions (tCO 2 e) year ended 31 March 2021 Gas 7% Electricity 93% Gas 7% Electricity 93% Strategic report 37 CMC Markets plc Annual Report and Financial Statements 2022 Global energy consumption by location inkWh Year ended March (in kWh) Year ended March Percentage UK ,, .% Rest of theWorld , .% Total ,, .% Global energy emissions by location intCOe Year ended March (in tCOe) Year ended March Percentage UK ,. .% Rest of theWorld . .% Total ,. .% Sustainability continued Greenhouse Gas Emissions by Scope Unit Year ended March Year ended March Year ended March (base year) Scope 1 Gas consumption tCOe . . . kWh , , , Scope 2 Electricity consumption tCOe ,. ,. ,. kWh ,, ,, ,, Total global emissions tCOe ,. ,. ,. kWh ,, ,, ,, Net operating income £m . . . Headcount number Intensity ratio (total global emissions/net operating income) tCOe/£m . . . Intensity ratio (total global emissions/employee) tCOe/HC . . . Group global emissions per employee (tCOe YoY) 19% Group global emissions (tCOe YoY) 9% 5 – Planet positive continued Strategic report 38 CMC Markets plc Annual Report and Financial Statements 2022 Group non-financial information statement Set out below is the information required by Sections 414CA and 414CB of the Companies Act 2006 (the "Act”) necessary for an understanding of the Group’s development, performance and position in relation to the matters set out in the table below. Reporting requirement Group policies and statements Commentary, outcomes and KPIs Environmental matters • Health and Safety Policy • Travel and Entertainment Policy Stakeholder engagement pages 12 to 13 Sustainability section pages 28 to 39 Employees • Equal Opportunity Policy • Anti-Harassment and Bullying Policy • Physical Security Policy • UK Sabbatical Policy • Diversity and Inclusion Statement and Policy • Board Diversity Policy • Flexible Working Policy Sustainability section pages 28 to 39 Nomination Committee section pages 75 to 77 Social matters • Equal Opportunity Policy • UK Sabbatical Policy • Diversity and Inclusion Statement and Policy • Board Diversity Policy Sustainability section pages 28 to 39 Nomination Committee section pages 75 to 77 Human Rights • Equal Opportunity Policy • Anti-Harassment and Bullying • Physical Security Policy • UK Sabbatical Policy • Diversity and Inclusion Statement and Policy • Board Diversity Policy • Flexible Working Policy Sustainability section pages 28 to 39 Nomination Committee section pages 75 to 77 Anti-corruption and anti-bribery matters • Group Anti-Bribery and Corruption Policy • Group AML Policy • Group Financial Sanctions Policy • Group Politically Exposed Persons Policy • Group Anti-Slavery Policy • Modern Slavery Statement Sustainability section pages 28 to 39 Principal risks Risk management section pages 50 to 56 Business model Our business model section pages 10 to 11 Non-financial key performance indicators Key performance indicators section pages22to24 Strategic report 39 CMC Markets plc Annual Report and Financial Statements 2022 Taskforce on Climate-related Financial Disclosures Climate change poses a complex and unprecedented challenge to humanity, and financial markets have a clear role to play in helping the world to mitigate the consequences of emissions and to adapt to a warming planet. Our industry is also at the early stages of understanding and assessing how climate change may destabilise and disrupt the finance sector in unpredictable ways. We therefore welcome the recommendations of the Taskforce on Climate-related Financial Disclosures (“TCFD”) as a valuable tool that supports knowledge building in our sector in the face of an uncertain future. The Group has made significant strides towards incorporating consideration for climate-related risks into our strategic and financial planning processes. With the support of external sustainability consultancy Design Portfolio, we convened a working group dedicated to jump-starting our approach to TCFD, consisting of cross-departmental senior colleagues representing the investor relations, sustainability, and finance teams. This disclosure represents a summation of the initial stages of this work, which we believe are consistent with the TCFD framework, with the exception of Scope 3 emissions and metrics and targets, with plans for alignment disclosed within this section. We look forward to updating our stakeholders on our new climate-related activities and initiatives in the next reporting cycle. Governance The Board, which takes ultimate responsibility for overseeing the risks and opportunities presented by climate change, also approved the Group’s new sustainability strategy, "Our Tomorrow: taking a better position", to establish the Group’s key areas of focus across the universe of sustainability topics and will continue to feed into efforts to define key initiatives and set targets over the course of 2023. We plan to develop a set of metrics as part of our strong strategic steer towards sustainability that will serve as KPIs for the Board and will provide more details on these in due course. We plan to monitor progress and steer future objectives, including those related to mitigating the Group’s impact on the climate. Climate considerations will be a key focus for us as we evolve our strategy and engage with the Board through our Sustainability Committee. Read more about our new sustainability strategy on page 28. The Board relays its thinking on climate-related risks and opportunities to management via the newly convened Sustainability Committee, chaired by our Group Head of Sustainability. The assessment and management of CMC Markets’ sustainability risks and opportunities are encompassed by the Group Head of Sustainability’s mandate, including the impacts of climate change. The Sustainability Committee consists of a cross-functional senior management team and has representation from the Group’s Board including the Deputy Chief Executive Officer, Chief Financial Officer and Group Head of APAC & Canada, who also will represent the sustainability agenda at Board level, demonstrating the importance of climate considerations to the Group and the commitment we have to ensure an effective impact in our change efforts and integration of sustainability best practices across the business including the implementation of TCFD. The Sustainability Committee provides the forum through which the Group Head of Sustainability keeps senior management abreast of climate-related initiatives and progress against detailed KPIs will be mapped out and disclosed in due course. For more details about the responsibilities of the Sustainability Committee and its role in assessing and managing ESG risks and opportunities, see page 36. TCFD GettyImages-1257716141.pdf Strategic report 40 CMC Markets plc Annual Report and Financial Statements 2022 Strategy and risk management Over the past year we undertook a detailed study to map our climate-related risks and opportunities to support our TCFD disclosure and wider climate change strategic approach. At CMC Markets, we evaluate climate-related risks across two key dimensions. First, we look at the climate crisis through the lens of both risk and opportunity. We are working to better understand the potential financial impacts of climate on our business, and we also see opportunity within our industry to support the transition to a greener economy. Second, we adopt a double-materiality lens thatacknowledges the impacts of our business activities on the environment, and the potential financial consequences of climate riskon our business model. Mapping the potential impacts ofclimate-related risksandopportunities With the support of our specialist consultants, the Group undertook a climate risk mapping exercise to identify and assess the potential exposure of the business to both climate-related risks and opportunities. We evaluated recognised registers of possible climate risks to develop our own internal register of 12 climate-related issues that could impact the Group over a relatively near-term time horizon, categorised across four categories including: Physical risks: Chronic and acute disruptions due to the increased intensity and frequency of extreme weather events, changes in temperature, and other consequences of climate change. Liability risks: Growing possibility of litigation resulting from action or inaction in response to climate-related risks perpetuated by the Group’s activities. Transition risks: The policy, technological and market shifts that may occur as the world endeavours to move towards a low carbon economy. Transboundary risks: Systemic consequences of the climatecrisis that transcend national boundaries and are the culmination of several intersecting climate-related risks. Strategic report 41 CMC Markets plc Annual Report and Financial Statements 2022 New competitive pressures Transition risk Description Companies around the globe are experiencing pressure from customers, investors and regulators to be more sustainable. The finance sector has seen unprecedented growth in new platforms, tools and products to meet demand for investment products that align with the goals of the Paris Agreement. If the Group fails to respond to this trend, we may experience decreased demand and the loss of customers to new innovations in green finance. Potential financial impacts Revenue: Revenues decline as client expectations evolve to favour investment platforms and products oriented towards the green economy. Cost of capital: Equity investors seek competitors innovating in the green finance space. Reputation Transition risk Description Clients, investors, employees and communities increasingly expectto see more definitive action on climate from the privatesector. Should the Group fail to articulate and act on a strategy todecarbonise, we may increasingly face action from keystakeholders. Potential financial impacts Cost of capital: Equity investors seek more climate-friendly businesses for their portfolio. Revenue: Customers leave the platform for more environmentally friendly competitors. OpEx: Talent attraction and retention objectives are impeded due to employee objections to the organisation’s climate practices. Global cost of borrowing Transboundary risk Description The cost of borrowing may increase for companies as lenders shift from a "carrot" to a "stick" approach in assessing ESG-related criteria in the provisions of loans, including climate performance. This could impact the cost of the Group’s committed facility of £55 million. Potential financial impacts Cost of capital: Debt and credit facilities become more expensive, impeding business development. Floods and storms Physical risk Description Floods, storms and extreme weather can cause damage to buildings and other physical assets, disrupting business continuity. Key geographies for the Group are already experiencing extreme weather events like these that have been linked to climate change. Potential financial impacts Asset book value: Due to damages caused by extreme weather events. Revenue: Disruption of business activity should key equipment be forced out of commission. Strategy and risk management continued Across these four categories, we assessed the magnitude and likelihood of each issue to determine which topics present the greatest threat or opportunity to the Group in terms of the potential financial impact on our key resources and relationships such as our people, IT hardware, stakeholder relationships and intellectual property. Using the International Framework’s thinking on capitals as stores of value, where possible we assigned quantitative values to our core capitals. This helped us to contextualise the financial value that could be exposed to climate-related impacts. Transition risk emerged as the risk category where the Group’s strategy has the greatest exposure, particularly in relation to key stakeholder relationships such as our people, clients and investors. We highlight the top four risks we have identified as most relevant to ourbusiness over a short to mid-term time horizon in the table shown here. The results from this exercise were plotted into a series of internal matrices to illustrate trends in the exposure of our categories and capitals. Although the Group’s overall exposure was found to be relatively low in the near term, moving forward we will use the initial TCFD continued Strategic report 42 CMC Markets plc Annual Report and Financial Statements 2022 findings from the risk mapping exercise to refine our methodology further, to probe deeper into potential impacts and to monitor the continued exposure of our strategy, assets and markets to climate-related risks and opportunities. Undertaking early-stage scenario analysis We intend to undertake further scenario analysis to evaluate the resilience of the business and to gain better insight into the potential impacts on our assets, markets and strategy over longer time horizons. We initially started this exercise with three internal scenario narratives as part of this process, building on our work to define our key climate-related risks and opportunities. The first describes a disorderly energy transition to net zero, the second envisions an orderly pathway to net zero and the third assumes that only current climate policies are continued. Against the latter scenario, we have begun to quantify the impacts of physical climate change on our business by evaluating historical trading activity data in instances of extreme heat and storms, using recent examples in regions where we have a presence, for example flooding in Germany, heatwaves in the UK and bushfires in Australia over the past decade, as proxies. No meaningful trends in the data have yet been determined, but we will continue torefine our approach and look forward to sharing a more comprehensive report on the findings from our analysis in due course. Embracing climate-related opportunities Many of the themes that arise from mapping our climate-related risks also manifest as strategic opportunities. We are currently in the process of understanding how best to address new competitive pressures and to enhance our reputation with stakeholders through the development of new products and enhancements to our platforms. As we grow the non-leveraged side of our business, we expect to see rising demand from our retail clients for more tools and better information related to the climate-related impacts of their investments. While we are excited to explore what role we might be able to play in the realm of green finance, we are also conscious of growing regulatory pressure to ensure green financial products are impactful and transparent. We will keep this at the forefront of our decision making to ensure any claims we make about our products and platforms are authentic. Read more about how we are thinking about adopting asustainability lens to product innovation on page 31 Setting a clear strategy to address our climate impacts CMC Markets is also conscious that it has a role to play inmitigatingits impacts on the climate. Our climate change workstreams are informing and supporting our ambitions to better understand our environmental impacts and how we can contribute toa low carbon future. Within the context of our "Our Tomorrow" strategy, we are in the process of setting out a roadmap to determine our internal decarbonisation strategy. We look forward to sharing greater details about our approach and future targets by the next reporting cycle. Learn more about our current initiatives to reduceouremissions on page 37 Adopting an enhanced approach to risk management We aim to integrate stronger consideration for sustainability issues into our risk management in alignment with our new sustainability strategy, "Our Tomorrow". This includes consideration for climate change and the potential climate-related impacts identified through the risk mapping exercise described earlier in this disclosure. As we progress in the adoption of an ERM approach, we will seek to streamline our register of 12 climate-related risks into our refreshed risk management approach. At present, there are no plans to introduce climate change as a principal risk to the business, given early assessments that the risks are low to the Group. However, we will continue to enhance our understanding of how climate-related impacts interact with existing risks such as regulatory and compliance risk. Learn more about our Group-level approach toriskmanagement on page 50 Metrics and targets Our approach to climate risk mapping assigns a rating to each risk according to likelihood and magnitude based on qualitative observations. As such, we do not currently have a formal quantitative methodology to measure our climate-related risks or opportunities. However, as we build our capacity to measure and monitor carbon emissions across our operations and look to embed climate risks into our new ERM framework, we will also evaluate which formal metrics and indicators will best help us to monitor our progress. We will also look to set dedicated KPIs and targets against any initiatives to realise climate-related opportunities. In terms of mitigating our impacts on the climate, we look forward to introducing more granular emissions targets aligned with the Paris Agreement going forward. We currently disclose our entity-level emissions on page 38. This includes our Scope 1 and 2 emissions, but currently excludes Scope 3. We recognise that Scope 3 emission reporting is becoming a higher priority for our stakeholders and plan to consider enhancing our disclosures as our strategy develops. Strategic report 43 CMC Markets plc Annual Report and Financial Statements 2022 Strategic report 44 CMC Markets plc Annual Report and Financial Statements 2022 Financial review Continued investment to grow and diversify the business “ The Group performed very well throughout the year and continues to be in a strong financial position from a liquidity and capital standpoint. This provides us with the confidence that the Group can both capitalise on future opportunities as they arise and continue to invest in our technology.” Euan Marshall Chief Financial Officer 2022 saw a significant decrease in market activity, particularly during H1, from the exceptional levels seen during 2021. Whilst thishas resulted in lower net operating income for the Group, we are inastronger position when comparing to pre-pandemic performance. This has been driven primarily by the material increase in sustained monthly active leveraged and non-leveraged clients when compared to2020. Decreased market volatility, and the resulting lower client trading activity across both the leveraged and non-leveraged businesses, combined with lower client income retention compared to the exceptional levels seen in 2021, resulted in 2022 net operating incomeof £281.9 million. This, combined with a moderate increase inoperating expenses from investment in technology and product, resulted in a statutory profit before tax of £92.1 million (2021: £224.0million). Whilst net operating income and profit before tax havereduced from 2021, the performance of the Group in 2022 wasstrong compared to pre-COVID-19 levels and is a record net operating income year when excluding the COVID-19 influenced 2021 results. The overall health of the Group remains exceptionally strong, with the step-change in active client numbers achieved in 2021 continuing in both our leveraged and non-leveraged businesses throughout the year, combined with client AuM and AuA reaching record highs, providing a solid base of future profitability and growth for the Group. The cohort of clients onboarded during the pandemic displays similar characteristics, including quality and tenure, to those of prior client cohorts, giving the Group confidence of retaining this ongoing stronger and larger client base into the medium term. This, in conjunction with the agreed acquisition of ANZ Bank Share Investing clients in the Australian non-leveraged business, the launch of our CMC Invest platform in the UK and the ongoing focus on improving our institutional product offering, sees the Group exiting the year with significant prospects for diversified growth. Whilst total capital resources decreased to £311.5 million (2021: £323.1million) as a result of the increase in intangible assets and proposed capital distributions to shareholders, the Group OFR ratioremains strong at 489%. Our total available liquidity increased to£469.0 million (2021: £456.1 million) primarily due to cash generated from operations. This healthy capital and liquidity position is reflected in the launch of the £30 million share buyback programme in March 2022. The buyback programme should be considered as part of a normal balanced approach to shareholder returns alongside the current dividend policy, which is unchanged. The ambitious digital transformation and technology investment planwe embarked upon during 2021 has made significant progress throughout 2022 with more frequent product enhancements along with the new CMC Invest platform launched in the UK in April 2022. Our non-leveraged business presents a significant growth opportunity for the Group, and we will continue to invest in the product and platform, both in the UK and in other geographies, over the coming years. In addition, there are still significant areas of opportunity for optimisation and enhancement within the leveraged business, particularly for our institutional business, and investment will continuein technology and product throughout 2023. Strategic report 45 CMC Markets plc Annual Report and Financial Statements 2022 Summary Income Statement £m £m Change £m Change % Net operating income . . (.) (%) Operating expenses (.) (.) (.) (%) Operating profit . . (.) (%) Finance costs (.) (.) (.) (%) Profit before tax . . (.) (%) Profit before tax margin 1 .% .% (.%) — Profit after tax . . (.) (%) Pence Pence Variance Pence Variance % Basic EPS . . (.) (%) Ordinary dividend per share . . (.) (%) 1 Statutory profit before tax as a percentage of net operating income. 2 Ordinary dividends paid/proposed relating to the financial year, based on issued share capital as at 31 March of each financial year. Summary Net operating income for the year decreased by £127.9 million (31%) to £281.9 million, with a decrease in market volatility, particularly in H1, compared to exceptional levels seen in 2021 resulting in lower client trading activity and lower client income retention throughout the period. This lower volatility and trading activity impacted both the leveraged and non-leveraged businesses. The net operating income represents a record for the Group when excluding the COVID-19 impacted 2021. Total operating expenses have increased by £3.6 million (2%) to £187.6 million, with the main driver being investments in our strategic initiatives resulting in higher personnel, professional fees and technology costs. These increases have been partially offset by lower sales-related costs. Profit before tax decreased to £92.1 million from £224.0 million and PBT margin decreased to 32.7% from 54.7%, reflecting the high level of operational gearing in the business. Net operating income overview £m £m Change Leveraged net trading revenue . . (%) Non-leveraged net trading revenue (excl. interest income) . . (%) Net trading revenue 1 . . (%) Interest income . . % Other operating income . . (%) Net operating income . . (%) 1 CFD and spread bet gross client income net of rebates, levies and risk management gains or losses and stockbroking revenue net of rebates. Leveraged net trading revenue decreased by £119.6 million (34%) driven by decreases in both gross client income and client income retention. The reduction in gross client income was a result of the significant volatility in the market in 2021 resulting in exceptionally high client trading activity, with the majority of 2022 returning to more normalised levels. Client income retention was lower during the period at 80% (2021: 104%) as a result of a change in the mix of asset classes traded by clients and lower natural hedging of flow within indices. This resulted in revenue per active client (“RPC”) decreasing by £985 (22%) to £3,575. Leveraged active client numbers decreased by 16% in comparison to 2021; however, monthly active clients remain significantly above pre-COVID-19 levels, demonstrating the structural shift in the Group’s client base. Non-leveraged net trading revenue was 12% lower at £48.0 million (2021: £54.8 million), with decreased client trading activity during the less volatile market environment offset by an active client base which was 6% larger than 2021 and 36% higher than 2020. Strategic report 46 CMC Markets plc Annual Report and Financial Statements 2022 B2B and B2C net trading revenue £m £m % change BC BB Total BC BB Total BC BB Total Leveraged net trading revenue . . . . . . (%) % (%) Non-leveraged net trading revenue . . . . . . (%) (%) (%) Net trading revenue . . . . . . (%) (%) (%) The lower trading activity across the Group was reflected within both our B2C and B2B businesses, with year-on-year decreases in net trading revenue of 34% and 12% respectively. Whilst the leveraged B2C business saw the largest fall in revenue of 40%, the non-leveraged business experienced a comparatively lower fall of 8% and the leveraged B2B business revenue grew 5%, demonstrating the progress the Group continues to make in its strategic direction. Regional performance overview: leveraged % change Net trading revenue £m Gross client income £m Active clients RPC £ Net trading revenue £m Gross client income £m Active clients RPC £ Net trading revenue Gross client income Active clients RPC UK . . , , . . , , (%) (%) (%) (%) Europe . . , , . . , , (%) (%) (%) (%) UK & Europe . . , , . . , , (%) (%) (%) (%) APAC & Canada . . , , . . , , (%) (%) (%) (%) Total . . , , . . , , (%) (%) (%) (%) 1 Spreads, financing and commissions on CFD client trades. Financial review continued Leveraged UK and Europe Gross client income fell by £18.7 million (11%) and RPC decreased by £803 (17%), with active clients decreasing by 21%. UK The number of active clients in the region decreased by 19% to 16,264 (2021: 20,077), in turn driving a gross client income reduction of 13% against the prior year to £107.1 million (2021: £123.2 million). The decreases were predominantly driven by the B2C business. Europe Europe comprises offices in Austria, Germany, Norway, Poland andSpain. Gross client income decreased 5% to £51.1 million (2021:£53.7 million), driven by reduced client trading in the less volatile market environment. RPC also fell by 13% to £2,778 (2021:£3,197). Thenumber of active clients decreased 22% to 15,747 (2021:20,280). APAC & Canada Our APAC & Canada business services clients from our Sydney, Auckland, Singapore, Toronto and Shanghai offices along with other regions where we have no physical presence. Gross client income decreased by 18% to £130.3 million (2021: £158.4 million), primarily driven by decreased active clients and lower market activity throughout the year. Active clients were down 11% to 32,232 (2021:36,234). Performance in the region was impacted by the regulatory intervention by ASIC in Australia at the start of the year,aswell as the wider decrease in market volatility. Non-leveraged The non-leveraged Australian business delivered a very strong top line performance, continuing the momentum from a record year in 2021. While revenue fell 12% to £48.0 million (2021: £54.8 million) due tomore normalised market conditions, the underlying key health metrics of the business continue to achieve new heights. The business finished 2022 with record AuA, up 16% to AUD$80.2 billion (2021: AUD$69.4 billion), while active clients continued to increase, up6% to 246,120 (2021: 232,053). Interest income Global interest rates remained at historically low levels despite moderate increases in Q4 2022, with interest income remaining broadly flat, up 12% to £0.8 million (2021: £0.7 million). The majority ofthe Group’s interest income is earned through our segregated client deposits in our UK, Australia, New Zealand and stockbrokingsubsidiaries. Strategic report 47 CMC Markets plc Annual Report and Financial Statements 2022 Expenses Total costs increased by £4.0 million (2%) to £189.8 million. £m £m Net staff costs – fixed (excluding variable remuneration) . . IT costs . . Marketing costs . . Sales-related costs . . Premises costs . . Legal and professional fees . . Regulatory fees . . Depreciation and amortisation . . Irrecoverable sales tax . . Other . . Operating expenses excluding variable remuneration . . Variable remuneration . . Operating expenses including variable remuneration . . Interest . . Total costs . . Net staff costs Net staff costs including variable remuneration increased £6.2 million (8%) to £84.9 million following significant investment across the business, particularly within technology, marketing and product functions, to support the delivery of strategic projects. Variable remuneration decreased due to the Group performance resulting in lower performance-related pay. £m £m Gross staff costs excluding variable remuneration . . Performance-related pay . . Share-based payments (note 31) . . Total employee costs . . Contract staff costs . . Net capitalisation (.) (.) Net staff costs . . Depreciation and amortisation costs Depreciation and amortisation have increased by £1.7 million (15%) to£12.9 million, primarily due to the depreciation of additional office space in London and the amortisation of staff development costs which were capitalised at the end of the previous financial year. Irrecoverable sales tax Irrecoverable sales tax costs decreased £3.7 million (57%) to £2.8million as a result of a one-off tax recovery and ongoing lowerirrecoverable VAT in the UK. Other expenses Sales-related costs decreased by £3.0 million (51%), primarily drivenby the release of provisions made in the prior year for clientcompensation. Legal and professional fees increased £1.4 million (18%), primarily driven by external consultants who have been engaged to advise on the delivery of various strategic projects during the year. Premises costs decreased £0.5 million (12%) due to the rental of temporary additional office space within London in 2021. This was replaced with permanent space at the start of the financial year to accommodate growth in headcount. Other costs decreased due to a number of factors, with the main drivers being lower bad debt and higher FX gains on balance sheet revaluation, offset by higher bank charges. Taxation The effective tax rate for 2022 was 21.9%, up from the 2021 effective tax rate, which was 20.5%. The effective tax rate has increased in the period due as a result of a higher proportion of the Group’s taxable profits earned outside of the UK, and so taxed at a higher corporate tax rate than the UK’s 19%, notably Australia at 30%. Profit after tax for the year The decrease in profit after tax for the year of £106.1 million (60%) was due to lower net operating income and the operational gearing in thebusiness. Dividend Dividends of £72.6 million were paid during the year (2021: £62.1 million), with £62.4 million relating to a final dividend for the prior year paid inSeptember 2021, and a £10.2 million interim dividend paid in December 2021 relating to current year performance. The Group hasproposed a final ordinary dividend of 8.88 pence per share (2021: 21.43 pence per share). Non-statutory summary Group Balance Sheet £m £m Intangible assets . . Property, plant and equipment . . Net lease liability (.) (.) Fixed assets . . Cash and cash equivalents . . Amounts due from brokers . . Financial investments . . Other assets . — Net derivative financial instruments — . Title transfer funds (.) (.) Own funds . . Working capital (.) . Tax (payable)/receivable (.) . Deferred tax net asset . . Net assets . . The table above is a non-statutory view of the Group Balance Sheet and line names do not necessarily have their statutory meanings. A reconciliation to the primary statements can be found on page 164. Strategic report 48 CMC Markets plc Annual Report and Financial Statements 2022 Financial review continued Fixed assets Intangible assets increased by £20.1 million to £30.4 million (2021: £10.3million) as a result of the transaction with ANZ Bank to transition approximately 500,000 Share Investing clients to CMC (AUD$25million) in addition to the capitalisation of internal resource dedicated to the development of new products and functionality in2022. Net lease liability decreased by £1.7 million during the year due to the net length of lease contracts being lower at the end of 2022 than the prior year. Own funds Amounts due from brokers relate to cash held at brokers either for initial margin or balances in excess of this for cash management purposes. The reduced client trading exposures throughout the year, particularly in equities, resulted in decreases in holdings at brokers for hedging purposes. Cash and cash equivalents have increased during the year as a result of the Group’s operating performance, in addition to the Group holding less cash at our brokers for margining purposes resulting in associated increases in own cash. Financial investments mainly relate to eligible assets held by the Group as core liquid assets used to meet Group regulatory liquidityrequirements. Title transfer funds increased by £13.4 million, reflecting the high levels of account funding by a small population of mainly institutional clients. Working capital The decrease year on year is primarily as a result of the increased market volatility in Q4 of the prior year, which significantly increased the value of the stockbroking receivables yet to settle at the prior year end. Tax payable Tax moved to a payable position due to underpayments in Australia. Deferred tax net asset Deferred net tax assets decreased as a result of accelerated research and development tax deductions in the UK and Australia. Impact of climate risk We have assessed the impact of climate risk on our balance sheet and have concluded that there is no material impact on the Financial Statements for the year ended 31 March 2022. Regulatory capital resources For the year under review, the Group was supervised on a consolidated basis by the FCA. The Group maintained a capital surplus over the regulatory requirement at all times. For the period to 31 December 2021, the Group and its UK regulated subsidiaries were subject to CRD IV, comprising the Capital Requirements Directive (“CRD”) and the Capital Requirements Regulation (“CRR”). From 1 January 2022 the Group and its UK regulated subsidiaries became subject to the Investment Firm Prudential Regime (“IFPR”) astransposed into the FCA’s MIFIDPRU handbook. A new legislative package, the Investment Firm Regulation and Directive (“IFR/IFD”), was also introduced in Europe that became directly applicable to Member States from 26 June 2021. Both regimes have been designed to be more tailored towards investment firms and have led to changes in the treatment of capital, remuneration requirements, governance and transparency provisions. The UK played an instrumental role in the introduction of IFR/IFD and the IFPR has been designed to achieve similar outcomes, albeit tailored where necessary to reflect the structure of the UK market and how it operates. The Group and its UK regulated subsidiaries fall into scope of the IFPR, with the Group’s German subsidiary, CMC Markets Germany GmbH, subject to the provisions of IFR/IFD. On a like for like basis, the Group’s total capital resources decreased to £311.5 million (2021: £323.1 million) with retained earnings for the year being partly offset by the interim and proposed final dividend distribution. In accordance with the IFPR all deferred tax assets must now be fully deducted from core equity Tier 1 capital. At 31 March 2022 the Group had a total OFR ratio of 489% in comparison to a capital ratio of 20.5% in 2021 (as calculated under the CRR). The change in capital treatment under the IFPR has resulted in revisions to the calculation of capital requirements and monitoring metrics. In essence, the Group has a surplus of nearly 5 times the regulatory minimum in comparison to 2021 when it was just over 2.5times the regulatory minimum in accordance with the CRR rules. This is attributable to changes in methodology but also a decrease in market risk exposure. The following table summarises the Group’s capital adequacy position at the year end. The Group’s approach to capital management is described in note 30 to the Financial Statements. £m £m Core equity Tier 1 capital (“CET1 capital”) . . Less: intangibles and net deferred tax assets 2 (.) (.) Total capital resources after relevant deductions . . Own funds requirements (“OFR”) 3 . . Total OFR ratio (%) % % 1 Total audited capital resources as at the end of the financial year of £370.4 million, less proposeddividends. 2 In accordance with the IFPR, all deferred tax assets must be fully deducted from CET1 capital. Deferred tax assets are the net of assets and liabilities shown in note 14. 3 The minimum capital requirement in accordance with MIFIDPRU 4.3. 4 The OFR ratio represents CET1 capital as a percentage of OFR. Strategic report 49 CMC Markets plc Annual Report and Financial Statements 2022 Liquidity The Group has access to the following sources of liquidity that make up total available liquidity: • Own funds: The primary source of liquidity for the Group. It represents the funds that the business has generated historically, including any unrealised gains/losses on open hedging positions. Allcash held on behalf of segregated clients is excluded. Own funds consist mainly of cash and cash equivalents. They also include investments in UK government securities, of which the majority are held to meet the Group’s regulatory liquidity requirements. • Title transfer funds (“TTFs”): This represents funds received from professional clients and eligible counterparties (as defined in the FCA Handbook) that are held under a title transfer collateral agreement (“TTCA”), a means by which a professional client or eligible counterparty may agree that full ownership of such funds is unconditionally transferred to the Group. The Group does not require clients to sign a TTCA in order to be treated as a professional client and as a result their funds remain segregated. The Group considers these funds as an ancillary source of liquidity and places no reliance on them for its stability. • Available committed facility (off-balance sheet liquidity): The Group has access to a facility of up to £55.0 million (2021: £55.0 million) inorder to fund any potential fluctuations in margins required to beposted at brokers to support the risk management strategy. Thefacility consists of a one-year term facility of £27.5 million (2021: £27.5 million) and a three-year term facility of £27.5 million (2021: £27.5 million). The maximum amount of the facility available at any one time is dependent upon the initial margin requirements at brokers and margin received from clients. There was no drawdown on the facility at 31 March 2022 (2021: £nil). The Group’s use of total available liquidity resources consists of: • Blocked cash: Amounts held to meet the requirements of local regulators and exchanges, in addition to amounts held at overseas subsidiaries in excess of local segregated client requirements to meet potential future client requirements. Cash committed to the purchase of shares within the current buyback programme is alsoclassified as blocked cash. This was £28.0 million at 31 March 2022 (2021: £nil). • Initial margin requirement at broker: The total GBP equivalent initial margin required by prime brokers to cover the Group’s hedge derivative and cryptocurrency positions. Own funds have decreased slightly to £369.9 million (2021: £370.4 million). Own funds include short-term financial investments, amounts due from brokers and amounts receivable/payable on the Group’s derivative financial instruments. For more details refer to note 29 ofthe Financial Statements. £m £m Own funds . . Title transfer funds . . Available committedfacility . . Total available liquidity . . Less: blocked cash (.) (.) Less: initial margin requirement at broker (.) (.) Net available liquidity . . Of which: held as liquid asset requirement . . Client money Total segregated client money held by the Group for leveraged clients was £546.6 million at 31 March 2021 (2021: £549.4 million). Client money represents the capacity for our clients to trade and offers an underlying indication of the health of our client base. Client money governance The Group segregates all money held by it on behalf of clients excluding a small number of large clients which have entered a TTCA with the firm. This is in accordance with or exceeding applicable client money regulations in countries in which it operates. The majority of client money requirements fall under the Client Assets Sourcebook (“CASS”) rules of the FCA in the UK, BaFin in Germany and ASIC in Australia. All segregated client funds are held in dedicated client money bank accounts with major banks that meet strict internal criteria and are held separately from the Group’s own money. The Group has comprehensive client money processes and procedures in place to ensure client money is identified and protected at the earliest possible point after receipt as well as governance structures which ensure such activities are effective inprotecting client money. The Group’s governance structure is explained further on pages 60 to 68. Euan Marshall Chief Financial Officer 8 June 2022 Risk management Effective risk management Effective risk management is crucial to the Group’s ongoing success and is embedded across the organisation, ensuring key risks are identified and effectively managed. The Group’s business activities naturally expose it to strategic, financial and operational risks inherent in the nature of the business it undertakes and the financial, market and regulatory environments in which it operates. The Group recognises the importance of understanding and managing these risks and that it cannot place a cap or limit on all of the risks to which it is exposed. However, effective risk management ensures that risks are managed to an acceptable level. The Board, through its Group Risk Committee, is ultimately responsible for the implementation of an appropriate risk strategy, which has been achieved using an integrated Risk Management Framework. The main areas covered by the Risk Management Framework are: • identifying, evaluating and monitoring the principal risks to which the Group is exposed; • setting the risk appetite of the Board in order to achieve its strategic objectives; and • establishing and maintaining governance, policies, systems and controls to ensure the Group is operating within the stated riskappetite. The Board has put in place a governance structure which is appropriate for the operations of an online retail financial services group and is aligned to the delivery of the Group’s strategic objectives including its diversification into non-leveraged businesses. The structure is regularly reviewed and monitored and any changes are subject to Board approval. Furthermore, management regularly considers updates to the processes and procedures to embed good corporate governance throughout the Group. As part of the Group Risk Management Framework, the business is subject to independent assurance by internal audit (third line of defence). The use of independent compliance monitoring, risk reviews (second line of defence) and risk and control self-assessments (first line of defence) provides additional support to the integrated assurance programme and ensures that the Group is effectively identifying, managing and reporting its risks. The Group continues to make enhancements to its Risk Management Framework and governance to provide a more structured approach to identifying and managing the risks to which it is exposed to ensure the Group’s risk management is commensurate to its current operations alongside its aspirations and diversification. The Board annually undertakes a robust assessment of the principal risks facing the Group. The Group has always had an understanding of the importance of the importance of ESG, evidenced by governance review conducted by Independent Audit in respect to Governance and, in turn, the Group is in the process of evolving its framework to a more pure adoption of Enterprise Risk Management framework to support the diversification of its business whilst maintaining its level of oversight and control. Top and emerging risks are those that would threaten the Group's business model, future performance, solvency or liquidity. They form either a subset ofone or multiple principal risks, their management is set out in note 30 to the Financial Statements and they are: • COVID-19: The primary risk faced was from a resilience perspective; the Group has put significant measures in place which have proven to be robust and continues to actively monitor the situation. • Climate change risk: A summary of the process undertaken to assess the risks of climate change on the Group is detailed within pages 40 to 43, with the conclusion that they are not material. • People risk: changing expectations regarding the office working environment and flexible working in combination with skills shortages have given rise to heightened staff acquisition and retention risk. Numerous measures have been put in place during the year to continue to attract and retain talent including changes to policies and remuneration reviews. The risk continues to be heightened. • Market risk management: The Group’s risk management is constantly reviewed to ensure it is optimised and as efficient as possible. For more information on market risk management and mitigation see page 53. Further information on the structure and workings of the Board and Management Committees is included in the Corporate governance report on pages 60 to 68. 1 Board 2 Executive Committees Execution of Board’s risk strategy including riskappetite. 3 Risk and control functions Comprise compliance, financial crime, financial risk (including liquidity risk management) and operational risk. In addition, legal, finance, data privacy and security functions are also considered as part of the control functions within the Group. 4 Business functions Identify, own, assess and manage risks. Design, implement and monitor suitable controls, issue management, KRI and risk appetite reporting. 2 3 4 1 Strategic report 50 CMC Markets plc Annual Report and Financial Statements 2022 Principal risks Principal risks Business and strategic risks Acquisitions and disposals risk Description The risk that mergers, acquisitions, disposals or other partnership arrangements made by the Group do not achieve the stated strategic objectives or that they give rise to ongoing or previously unidentified liabilities. Management and mitigation • Robust corporate governance structure including strong challenge from independent Non-ExecutiveDirectors. • Vigorous and independent due diligence process. • Aligning and managing the businesses with Group strategy as soon as possible after acquisition. Strategic/business modelrisk Description The risk of an adverse impact resulting from the Group’s strategic decision making as well as failure to exploit strengths or take opportunities. It is a risk which may cause damage or loss, financial or otherwise, to the Group as a whole. Management and mitigation • Strong governance framework established including three independent Non-Executive Directors andthe Chairman sitting on the Board. • Robust governance, challenge and oversight from independent Non-Executive Directors. • Managing the Group in line with the agreed strategy, policies and risk appetite. Preparedness forregulatory change risk Description The risk that changes to theregulatory framework the Group operates in impact the Group’s performance. Such changes could result in theGroup’s product offering becoming less profitable, more difficult to offer to clients, or an outright ban on the product offering in oneor more of thecountries where the Groupoperates. Management and mitigation • Active dialogue with regulators and industry bodies. • Monitoring of market and regulator sentiment towards the product offering. • Monitoring by and advice from compliance department on impact of actual and possible regulatorychange. • A business model and proprietary technology that are responsive to changes in regulatoryrequirements. Reputational risk Description The risk of damage to the Group’s brand or standing with shareholders, regulators, existing and potential clients, the industry and the public at large. Management and mitigation • The Group is conservative in its approach to reputational risk and operates robust controls to ensure significant risks to its brand and standing are appropriately mitigated. • Examples include: • proactive engagement with the Group’s regulators and active participation with trade and industry bodies and positive development of media relations with strictly controlled media contact; and • systems and controls to ensure we continue to offer a good service to clients and quick and effective response to address any potential issues. Strategic report 51 CMC Markets plc Annual Report and Financial Statements 2022 Financial risks Credit and counterparty risks Description The risk of losses arising from a counterparty failing to meet its obligations as they fall due. Management and mitigation Client counterparty risk The Group’s management of client counterparty risk is significantly aided by the automated liquidation functionality. This is where the client positions are reduced should the total equity of the account fall below a pre-defined percentage of the required margin for the portfolio held. Other platform functionality mitigates risk further: • tiered margin requires clients to hold more collateral against bigger or higher risk positions; • mobile phone access allowing clients to manage their portfolios on the move; • guaranteed stop loss orders allow clients to remove their chance of debt from their position(s); and • position limits can be implemented on an instrument and client level. The instrument level enables the Group to control the total exposure the Group takes on in a single instrument. At a client level this ensures that the client can only reach a pre-defined size in any one instrument. In relevant jurisdictions, CMC offers negative balance protection to retail clients limiting the liability of a retail investor to the funds held in their trading account. However, after mitigations, there is a residual risk that the Group could incur losses relating to clients (excluding negative balance protection accounts) moving into debit balances if there is a market gap. Financial institution credit risk Risk management is carried out by a central liquidity risk management (“LRM”) team under the Counterparty Concentration Risk Policy. Mitigation is achieved by: • monitoring concentration levels to counterparties and reporting these internally/externally on a monthly/quarterly basis; and • monitoring the credit ratings and credit default swap (“CDS”) spreads of counterparties and reporting internally on a weekly basis. Insurance risks Description The risk that an insurance claim by the Group is declined (in full or in part) or there is insufficient insurance coverage. Management and mitigation • Use of a reputable insurance broker which ensures cover is placed with financially secure insurers. • Comprehensive levels of cover maintained. • Rigorous claim management procedures are in place with the broker. • Full engagement with relevant business areas regarding risk and coverage requirements and related disclosure to brokers and insurers. The Board’s appetite for uninsured risk is low and as a result the Group has put in place established comprehensive levels of insurance cover. Tax and financial reporting Description The risk that financial, statutory or regulatory reports including VAT and similar taxes are submitted late, incomplete or areinaccurate. Management and mitigation • Robust process of checking and oversight in place to ensureaccuracy. • Knowledgeable and experienced staff undertake and overview the relevant processes. Principal risks continued Strategic report 52 CMC Markets plc Annual Report and Financial Statements 2022 Liquidity risk Description The risk that there is insufficient available liquidity to meet the liabilities of the Group as they fall due. Management and mitigation • Risk management is carried out by a central LRM team under policies approved by the Board and in line with the FCA’s Investment Firms Prudential Regime (“IFPR”). The Group utilises a combination of liquidity forecasting and stress testing to identify any potential liquidity risks under both normal and stressed conditions. The forecasting and stress testing fully incorporates the impact of all liquidity regulations in force in eachjurisdiction that the Group operates in and any other impediments to the free movement of liquidity around the Group. Risk is mitigated by: • the provision of timely daily, weekly and monthly liquidity reporting and real-time broker margin requirements to enable strong management and control of liquidity resources; • maintaining regulatory and Board-approved buffers; • managing liquidity to a series of Board-approved metrics and keyrisk indicators; • a committed bank facility of up to £55.0 million to meet short-term liquidity obligations to broker counterparties in the event that the Group does not have sufficient access to its own cash; and • a formal Contingency Funding Plan (“CFP”) is in place that is designed to aid senior management to assess and prioritise actions in a liquidity stress scenario. Market risk Description The risk that the value of our residual portfolio will decrease due to changes in market risk factors. The three standard market risk factors are price moves, interest rates and foreign exchange rates. Management and mitigation • Trading risk management monitors and manages the exposures it inherits from clients on a real-time basis and in accordance with Board-approved appetite. • The Group predominantly acts as a market maker in linear, highly liquid financial instruments in which it can easily reduce market risk exposure through its prime broker (“PB”) arrangements. This significantly reduces the Group’s revenue sensitivity to individual asset classes and instruments. • Financial risk management runs stress scenarios on the residual portfolio, comprising a number of single and combined Company-specific and market-wide events in order to assess potential financial and capital adequacy impacts to ensure the Group can withstand severe moves in the risk drivers it is exposed to. Operational risks Business change risk Description The risk that business change projects are ineffective, fail to deliver stated objectives, or result in resources being stretched to the detriment of business-as-usual activities. Management and mitigation • Governance process in place for all business change programmes with Executive and Board oversight and scrutiny. • Key users engaged in development and testing of all key changeprogrammes. • Significant post-implementation support, monitoring and review procedures in place for all changeprogrammes. • Strategic benefits and delivery of change agenda communicated to employees. Business continuity anddisaster recoveryrisk Description The risk that a business continuity event or system failure results in a reduced ability or inability to perform core business activities or processes. Management and mitigation • Multiple data centres and systems to ensure core business activities and processes are resilient to individual failures. • Remote access systems to enable staff to work from home or other locations inthe event of a disaster recovery or business continuity requirement. • Periodic testing of business continuity processes and disasterrecovery. • Robust incident management processes and policies to ensure prompt response to significant systems failures or interruptions. Strategic report 53 CMC Markets plc Annual Report and Financial Statements 2022 Principal risks continued Operational risks continued Financial crimerisk Description The risk that the Group is not committed to combatting financial crime and ensuring that our platform and products are not used for the purpose of money laundering, sanctions evasion or terrorism financing. Management and mitigation Adherence with applicable laws and regulations regarding anti-money laundering (“AML”), counter terrorism financing (“CTF”), sanctions and anti-bribery and corruption is mandatory and fundamental to our AML/CTF framework. We have strict and transparent standards and we continuously strengthen our processes to ensure compliance with applicable laws and regulations. CMC Markets reserves the right to reject any client, payment, or business that is not consistent with our risk appetite. This risk is further mitigated by: • establishing and maintaining a risk-based approach towards assessing and managing the money laundering and terrorist financing risks to the Group; • establishing and maintaining risk-based know your customer (“KYC”) procedures, including enhanced due diligence (“EDD”) for those customers presenting higher risk, such as politically exposed persons (“PEPs”); • establishing and maintaining risk-based systems for surveillance and procedures to monitor ongoing customer activity; • procedures for reporting suspicious activity internally and to the relevant law enforcement authorities or regulators as appropriate; • maintenance of appropriate records for the minimum prescribed record keeping periods; • training and awareness for all employees; • provision of appropriate MI and reporting to senior management on the Group’s compliance with the requirements; and • oversight of Group entities for financial crime in line with the Group AML/CTF oversight framework. Information and data security risk Description The risk of unauthorised access to, or external disclosure of, client or Company information, including those caused by cyberattacks. Management and mitigation • Dedicated information security and data protection expertise within the Group. • Technical and procedural controls implemented to minimise the occurrence or impact of information security and data protectionbreaches. • Access to information and systems only provided on a “need-to-know” and “least privilege” basis consistent with the user’s role and also requires the appropriate authorisation. • Regular system access reviews implemented across the business. Information technology and infrastructure risk Description The risk of loss of technology services due to loss of data, system or data centre or failure of a third party to restore services in a timely manner. Management and mitigation • Continuous investment in increased functionality, capacity and responsiveness of systems and infrastructure, including investment in software that monitors and assists in the detection and prevention of cyber attacks. • Software design methodologies, project management and testing regimes to minimise implementation and operational risks. • Constant monitoring of systems performance and, in the event of any operational issues, changes to processes are implemented to mitigate future concerns. • Operation of resilient data centres to support each platform (twoin the UK to support Next Generation and two in Australia to support stockbroking). • Systems and data centres designed for high availability and data integrity enabling continuous service to clients in the event of individual component failure or larger system failures. • Dedicated Support and Infrastructure teams to manage key production systems. Segregation ofduties between Development and Production Support teams where possible to limit development access to production systems. Strategic report 54 CMC Markets plc Annual Report and Financial Statements 2022 Legal (commercial/litigation) risks Description The risk that disputes deteriorate into litigation. Management and mitigation • Compliance with legal and regulatory requirements including relevant codes of practice. • Early engagement with legal advisers and other risk managers. • Appropriately managed complaints which have a legal/litigious aspect. • An early assessment of the impact and implementation of changes in the law. Operations (processing) risk Description The risk that the design or execution of business processes is inadequate or fails to deliver an expected level of service andprotection to client or Company assets. Management and mitigation • Investment in system development and upgrades to improve process automation. • Enhanced staff training and oversight in key business processingareas. • Monitoring and robust analysis of errors and losses and underlying causes. Procurement and outsourcing risk Description The risk that third-party organisations inadequately perform, or fail to provide or perform the outsourced activities or contractual obligations to the standards required by the Group. Management and mitigation • Responsibility for procurement, vendor management and general outsourcing owned by the Chief Financial Officer under the Senior Managers and Certification Regime, with the accountability to ensure compliance to the Group procurement process and completion of key activities, based on the risk profile of the service required by the organisation. • Outsourcing only employed where there is a strategic gain in resource or experience, which is not available in house. • Due diligence performed on service supplier ahead of outsourcing being agreed. • Service-level agreements in place and regular monitoring of performance undertaken. People risk Description The risk of loss of key staff, having insufficient skilled and motivated resources available or failing to operate people-related processes to an appropriate standard. Management and mitigation • The Board has directed that the Group maintains active People, Succession and Resource Plans forthe Group and all key individuals and teams, which will mitigate some of the risk of loss of key persons. It will adopt policies and strategies commensurate with its objectives of: • attracting and nurturing the best staff; • retaining and motivating key individuals; • managing employee-related risks; • achieving a high level of employee engagement; • developing personnel capabilities; • optimising continuous professional development; and • achieving a reputation as a good employer with an equitable remuneration policy. Strategic report 55 CMC Markets plc Annual Report and Financial Statements 2022 Principal risks continued Operational risks continued Regulatory and compliance risk Description The risk of regulatory sanction or legal proceedings as a result of failure to comply with regulatory, statutory or fiduciary requirements or as a result of a defectivetransaction. Management and mitigation • Internal audit outsourced to an independent third-party professional services firm. • Effective compliance oversight and advisory/technical guidance provided to the business. • Comprehensive monitoring and surveillance programmes, policies and procedures designed bycompliance. • Strong regulatory relations and regulatory horizon scanning, planning and implementation. • Controls for appointment and approval of staff holding a senior management or certified function and annual declarations to establish ongoing fitness and propriety. • Governance and reporting of regulatory risks through the Risk Management Committee, Group Audit Committee and Group Risk Committee. • Robust anti-money laundering controls, client due diligence and sanctions checking. Conduct risk Description The risk that through our culture, behaviours or practices we fail to meet the reasonable expectations of our customers, shareholders or regulators. Management and mitigation • The Treating Customers Fairly (“TCF”) and Conduct Committee iscomprised of senior management and subject matter experts; it convenes regularly to evaluate and challenge the TCF MI alongside any emerging issues or incidents which could impact client fairness. It reports to the Board via the Risk Management Committee (“RMC”) which is also charged with approving the TCFPolicy. • Also, the Conduct, Fitness and Propriety Panel is chaired by global HR, with Deputy CEO as well as global and regional HR and compliance membership. The Committee discusses specific conduct- related matters, including any serious concerns raised in the TCF Committee, breaches of the Code of Conduct, serious complaints specific to an employee or any concerns with a Certified or Senior Manager Function. • APAC has a Conduct Committee for the region, nominated jointly by the APAC and stockbroking Boards. It aims to ensure a customer-centric perspective in how CMC goes about compliance obligations and business activities to ensure we are delivering good customer outcomes. It is chairedby the Head of HR APAC and consists of Board representatives across the region as well asthe Head of APAC Commercial. Accordingly, governance structures, control mechanisms and organisational culture should be sufficiently relevant, suitable and sustainable to support good organisational conduct. Client money segregation risk The risk that the Group fails to implement adequate controls and processes to ensure that client money is segregated in accordance with applicable regulations. • The Client Money and Asset Protection Committee ("CMAPC"), which reports into the RMC, is a fundamental part oftheGroup’s client money governance and oversight procedures. The CMAPC is chaired by the ChiefFinancial Officer, an FCA-approved person, who is responsible for overseeing the controls andprocedures in place to protect client money. • The Committee is comprised of senior management from across the Group which oversees functions which impact client money. The CMAPC forms a key part of the oversight of client money in addition to compliance and internal audit. The Strategic report was approved by the Board on 8 June 2022. On behalf of the Board Euan Marshall Chief Financial Officer 8 June 2022 Strategic report 56 CMC Markets plc Annual Report and Financial Statements 2022 Corporate governance 57 CMC Markets plc Annual Report and Financial Statements 2022 Corporate governance 58 Board of Directors 60 Governance report 69 Group Audit Committee report 73 Group Risk Committee report 75 Group Nomination Committee report 78 Directors’ remuneration report 100 Directors’ report Corporate governance Board of Directors The role of the Board This section of the Annual Report and Financial Statements sets out the Group governance structure and the role of the Board of Directors. The Board provides entrepreneurial leadership and strategic oversight in relation to the long-term, sustainable success of the Company. TheBoard, taking account of relevant stakeholder interests, is responsible for the establishment of the Group’s purpose, values and strategy and has oversight of implementation within necessary financial, human resources and cultural frameworks. The Board has ultimate responsibility to prepare the Annual Report and Financial Statements and to ensure that appropriate internal controls and risk management systems are in place in order to assess, manage and mitigate risk. The Board delegates the in-depth review and monitoring of internal controls and risk management to the Group Audit Committee and Group Risk Committee respectively. The terms of reference of these Board Committees (and the Remuneration and Nomination Committees) are available on the CMC Marketsplc Group website (https://www.cmcmarketsplc.com/investors/corporate-governance/committees/). Committee membership A Group Audit Committee R Remuneration Committee G Group Risk Committee M Risk Management Committee N Nomination Committee E Executive Committee Chairman James Richards Chairman Lord Peter Cruddas Chief Executive Officer Paul Wainscott Senior Independent Director Appointment 1 April 2015 Committee membership G R N Skills and experience James joined the Group as a Non-Executive Director in April 2015 and was appointed as Chairman with effect from 1January 2018 and Chair of the Nomination Committee from 31January 2018. He has previously held positions as Chair of the Remuneration Committee and been a member of the Nomination Committee, Group Risk Committee and Group Audit Committee. James was admitted to the roll of solicitors in England and Wales in 1984 and in the Republic of Ireland in 2012. James was a partner at Dillon Eustace, a law firm specialising in financial services in Ireland (2012 to 2016). Prior to this he was a finance partner at Travers Smith LLP for 14 years. Having occupied various senior positions within leading law firms, James has extensive experience in derivatives, debt capital markets and structured finance working with major corporates, central banks andgovernmentalorganisations. No external appointments Appointment 3 June 2004 Committee membership E Skills and experience Peter founded the Group and became its Chief Executive Officer in 1989. Peter held this role until October 2007, and again between July 2009 and June 2010. Between 2003 and March 2013, he also served as the Group’s Executive Chairman. InMarch 2013, he once again became the Group’s Chief Executive Officer and is responsible for running theGroup on a day-to-day basis. Prior to founding the Group, Peterwas chief dealer and globalgroup treasury adviser atS.C.F. Equity Services, where hewas responsible for all the activities of a dealing room whose principal activities were trading in futures and options in currencies, precious metals, commodities and spotforwards on foreign exchange and bullion. Current external appointments The Peter Cruddas Foundation Finada Limited Member of the UK House of Lords Appointment 19 October 2017 Committee membership G RA N Skills and experience Paul joined the Group as an independent Non- Executive Director in October 2017 and acts as the Group’s Senior Independent Director. Paul served as finance director at the Peel Group for 27years until March 2018. During his time at the Peel Group, Paul gained wide experience at both board level and in several different business sectors, including real estate, transport, media andutilities. No external appointments Corporate governance 58 CMC Markets plc Annual Report and Financial Statements 2022 Board of Directors Clare Salmon Independent Non-Executive Director Matthew Lewis Head of Asia Pacific & Canada David Fineberg Deputy Chief Executive Officer Susanne Chishti Independent Non-Executive Director Sarah Ing Independent Non-Executive Director Euan Marshall Chief Financial Officer Appointment 14 September 2017 Committee membership G RA N Skills and experience Sarah joined the Group as a Non-Executive Director in September 2017. She has over 30years’ experience in accountancy, investment banking and fund management, including time with HSBC and UBS. She is a Chartered Accountant and was a top- rated equity research analyst covering the general financials sector. Sarah also founded and ran a hedge fund investment managementbusiness. Sarah is also a non-executive director of Marex Group plc, XPS Pensions Group plc and Gresham House plc. At Marex Group plc she chairs the audit and compliance committee and is a member of the remuneration and risk committees. At XPS Pensions Group plc she sits on the audit and risk, remuneration and nomination committees and chairs the sustainability committee. At Gresham House plc, Sarah is also chair of the audit committee and is a member of the nomination, remuneration and sustainability committees. Current external appointments XPS Pensions Group plc Marex Group plc Gresham House plc Appointment 1 November 2019 Committee membership E M Skills and experience Euan joined the Group in November 2011 and he has held a variety of roles across the finance function, including Group Head of Finance. Hewas appointed as Chief Financial Officer in November 2019, where he is responsible for the management of all finance functions globally and investor relations. Euan has been a member of the Chartered Institute of Management Accountants since 2005 and has over 20 years’ experience working in financial services and business consulting including at Barclays, HSBC and Deloitte. Euan holds a BSc in Economics fromtheUniversity of Nottingham. No external appointments Appointment 2 October 2017 Committee membership G RA N Skills and experience Clare joined the Group as a Non-Executive Director in October 2017. She has held a broad variety of international leadership roles with board-level experience across a range of service businesses. These have included the AA, RSA, Vodafone, ITV, Prudential, Royal London and Amigo Holdings PLC. Clare is also an experienced non-executive director having spent six years on the board of Alliance Trust Plc, and was CEO of the British Equestrian Federation. Current external appointments GS Yacht Charters LLP Scottish Widows Independent Governance Committee Bank of Ireland (UK) PLC Appointment 1 November 2019 Committee membership E M Skills and experience Matthew joined the Group in September 2005 and has held a variety of roles including Senior Dealer, Head of Eastern Equities, Headof Sales Trading ANZ, Head of Trading Eastern Region and Director of Asia. In his current role as the Head of Asia Pacific &Canada, he is responsible for implementing the Group’s business strategies across the APAC & Canada region for both the retail and wholesale CFD and foreign exchange business. He is also responsible for the Group’s stockbroking business. Prior to joining the Group, Matthew worked for Commonwealth Securities, Australia’s largest provider of financial services, dealing in equities, before moving into derivatives as an options trader and warrants representative. Matthew has over 20 years’ experience in financial services and holds a Bachelor of Economics from the University of Sydney. No external appointments Appointment 1 January 2014 Committee membership E M Skills and experience David joined the Group in November 1997 working on the trading desk and developed the Group’s multi-asset CFD and spread bet dealing desk. As a senior dealer he was responsible for managing the UK and US equity books. Between April 2007 and September 2012, he was the Group’s Western Head of Trading, covering all asset classes for the western region. In September 2012 David was appointed to the role of Group Head of Trading and in January 2014 was appointed as the Group Director of Trading with overall responsibility for the trading and pricing strategies andactivities across the Group. InJune 2017 his role further expanded when he became Group Commercial Director andthen in April 2019 he was promoted to the position of Deputy Chief Executive Officer. No external appointments Appointment 1 June 2022 Committee membership G RA N Skills and experience Susanne joined the Group as a Non-Executive Director in June 2022. She started her career working for a fintech company in Silicon Valley. She has 25 years’ experience in financial technology (fintech), banking, investment management and consulting, including time with Deutsche Bank, Lloyd’s Banking Group, Morgan Stanley Investment Management and Accenture. Susanne is currently the CEO of FINTECH Circle, Europe’s first fintech community focused on investments, innovation, and education, and the co-author of seven fintech books published by Wiley. She is often invited to share her fintech thought leadership at international fintech conferences andasa judge at fintech competitions. Current external appointments FINTECH Circle Crown Agents Bank Limited JLG Group PLC LenderWize Limited Corporate governance 59 CMC Markets plc Annual Report and Financial Statements 2022 Corporate governance 60 CMC Markets plc Annual Report and Financial Statements 2022 Governance report Introduction to corporate governance “ TheBoard continues to recognise that aneffective governance framework is fundamental in ensuring the Group’s abilityto deliver long-term value for ourshareholders and stakeholders.” James Richards Chairman in respect of the approach adopted by the Company to the application of: • Provision 11 of the Code, which requires that the Board shouldinclude an appropriate combination of Executive and Non-Executive Directors, a full explanation of the Company’s compliance is provided on pages 61 and 66; and, • Provision 25 of the Code, and specifically the requirement for a board committee comprised of independent directors to review the company’s internal financial controls and internal control and risk management systems, the Group Risk Committee’s composition has not met this requirement for the year. Further explanation is provided on page 73 of the Group Risk Committee Report. The recent and anticipated director appointments referenced on page 66 will facilitate the re-consideration of the Group Risk Committee composition in the forthcoming financial year. As advised in last year’s Annual Report, Independent Audit (https://www.independentaudit.com/) was appointed in January 2021 to undertake an in-depth review of the operation of the Board and its Committees, and its report was presented to the Board at its meeting in June 2021. This governance review afforded the Board an opportunity to reconsider its approach to governance and implement new processes designed to enhance its operation, details of which are set out in Accountability under Board evaluation on page 66 and in the Group Risk Committee report on page 73 and in the Nomination Committee report on page 75. Dear shareholders, On behalf of the Board, I am pleased to present the Group Corporate governance report for the year ended 31 March 2022. The Board continues to recognise that an effective governance framework is fundamental in ensuring the Group’s ability to deliver on its strategy and ensure long-term value for our shareholders and stakeholders. COVID-19 The financial year under review saw the consequences of COVID-19 continue to have an effect on business. The Board oversaw proactive planning and agile responses to the various government announcements affecting the business globally and related developments throughout the year including in relation to the lifting of relevant restrictions. UK Corporate Governance Code As a company listed on the Main Market of the London Stock Exchange, CMC Markets plc has applied the Principles as set out in the 2018 UK Corporate Governance Code published by the Financial Reporting Council (“FRC”) and available at www.frc.org.uk (the “Code”) for the financial year ended 31 March 2022. Corporate governance 61 CMC Markets plc Annual Report and Financial Statements 2022 Board composition It is critical that the Board has the right composition, so it can provide balanced leadership for the Group and the independent discharge of its duties to shareholders. This relies on the Board having the right balance of skills and experience and objectivity, as well as a good working knowledge of the Group’s business. As advised in last year’s Annual Report, the various technological advances, product enhancements and development of the Group’s non-leveraged product offering, had led the Board to hold off appointing a further Non-Executive Director during 2022. However, we can now confirm that Susanne Chishti has been appointed to the Group Board as a Non-Executive Director effective as of 1 June 2022. Susanne brings a wealth of technology and fund experience to the Board’s composition and outlook and will be able to contribute effectively based on her significant experience within the technology sector. As was announced on 28 April 2022 Clare Salmon is not putting herself up for re-election at this year’s AGM. I would like to thank Clare very much for her hard work, insight and guidance during her time as a Non-Executive Director. The Board is now in the process of looking for suitable candidates for appointment as a further Non-Executive Director. Further detail in relation to the selection process is provided on page 76 in the Nomination Committee report. Board effectiveness The balance of skills, experience and independence of the Board and individual Directors is subject to ongoing review by the Nomination Committee. It was further considered by the governance review undertaken by Independent Audit, as referenced above in relation to the Board’s composition. All Directors received computer and screen-based training on relevant financial services matters with emphasis on the responsibilities with regard to regulation and compliance and have access to other know-how resources and education programmes offered by third-party service providers with whom the Group has established relevant links. A programme of technical business briefings related to CMC’s business portfolio is being prepared for 2023. Stakeholder engagement Mindful of relevant obligations under the Code, stakeholder engagement has been a further consideration for the Board this year and we will continue to develop relevant relationships for the benefit of the Company. A regular update in relation to stakeholder engagement is now a feature of Board papers and ongoing governance consideration and has seen matters such as flexible working, charity contributions, investor experience and ESG strategy being considered. Shareholder engagement As Chairman, I am responsible for the effective communication between shareholders and the Company and for ensuring the Board understands the views of major shareholders. Regular investor relations reports are distributed to the Board and considered at Board meetings. Directors regularly meet with a cross-section of the Company’s shareholders to ensure an ongoing dialogue is maintained and report to the Board on the feedback received from shareholders. Furthermore, correspondence is conducted with shareholders during the course of the year on a number of fronts. I will also always make myself available to meet any of our shareholders who wish to discuss matters regarding the Company. I am looking forward to the forthcoming year as the Group seeks to grow and continue to deliver on its strategy and technology in relation to established markets in the leveraged and non-leveraged space, client journey optimisation and its institutional offering. James Richards Chairman 8 June 2022 Corporate governance 62 CMC Markets plc Annual Report and Financial Statements 2022 Board leadership and purpose The Board provides entrepreneurial leadership and oversight of the delivery of strategic objectives and the long-term, sustainable success of the Company, taking into account stakeholder priorities and employee engagement feedback. Further, with regard to the setting of strategy the Board has considered the diversification of the Company’s product offerings to ensure a robust range of products designed to be successful within a changing regulatory environment and appealing to changing stakeholder requirements, with the objective of preserving long-term value. Stakeholder and employee-related matters form part of the Board’s decision making processes, facilitated by the investment in employee engagement surveys, the work of the Designated Non-Executive Director for Employee Engagement, ongoing shareholder dialogue and market feedback. To evidence this: • the Board has considered a number of employee-related responses to the post-pandemic restrictions working environment, including more flexible working arrangements, market-based remuneration benchmarking and investment in efficient collaborative work platforms, all encompassed within a People Strategy regularly discussed by the Nomination Committee; • the Board has considered capital distribution initiatives in response to a regular theme of shareholder enquiry, resulting in share buy back announcements on 2 March and 15 March 2022; • a number of strategies within the Nomination Committee have been considered by the Board, including in relation to ESG and diversity and inclusion (“D&I”), responding to shareholder interests and advocacy, leading to a number of Board decisions, including, for instance, the taking on of a new energy efficient leased space in Barangaroo, Sydney in Australia, the recruitment of a Group Head of Sustainability and working with a D&I consultant; Board composition Corporate governance: member meeting attendance Board Group Audit Group Risk Nomination Remuneration Name Position meetings Committee Committee Committee Committee James Richards Chairman 10(10) — 4(4) 5(5) 8(8) Paul Wainscott Senior Independent Director 9(10) 8(8) 4(4) 5(5) 8(8) Sarah Ing Independent Non-Executive Director 10(10) 8(8) 4(4) 5(5) 8(8) Clare Salmon Independent Non-Executive Director 9(10) 8(8) 4(4) 5(5) 8(8) Lord Cruddas Chief Executive Officer 10(10) — — — — David Fineberg Deputy Chief Executive Officer 10(10) — — — — Euan Marshall Chief Financial Officer 10(10) — — — — Matthew Lewis Head of Asia Pacific & Canada 8(10) — — — — Governance report continued • the UK CMC Invest offering, developed as a major strategic initiative, in line with market sentiment in search of an accessible retail investment platform; and, • Board consideration of various charitable initiatives, including, the CMC Charity of the Year nomination process, appointment of Charity Champions and ad hoc charity and community campaigns, as well as Company sponsored volunteering schemes. Consistent with the diversification of the Company’s product offerings, the Board’s strategy has addressed leveraged and non- leveraged initiatives. In the leveraged space, the Board has continued to oversee the strategic focus on established markets, client journey optimisation and its institutional offering through an innovative and resilient set of technological solutions. In CMC Markets Invest the Group has launched a non-leveraged UK retail investment platform. The Board’s leadership includes an awareness of the importance of a working culture which promotes inclusion and acceptance of differing approaches to facilitating the successful delivery of strategic projects and initiatives. Again flowing from Board discussions and more focused consideration at Nomination Committee meetings, Directors have overseen an internal shift towards improved engagement on initiatives relating to diversity and inclusion, including an ongoing programme of training facilitated by Inclusive Employers (https://www.inclusiveemployers.co.uk/about/) establishing internal interest groups e.g. Women at CMC, engagement with industry groups e.g. the Investing and Saving Alliance (TISA), and development of flexible working and platform based collaborative work tools. Diversity and inclusion have informed departmental and Group- wide discussions. The Board is able to monitor progress in relation to such initiatives through six-monthly employee engagement surveys (facilitated by CultureAmp (https://www.cultureamp.com/) an independent third party dedicated to providing employee engagement tools and insights to enable an organisation to build a category-defining culture) and feedback from the programme of meetings undertaken by the Non-Executive Director with Designated Responsibility for Employee Engagement. Corporate governance 63 CMC Markets plc Annual Report and Financial Statements 2022 Separate to these new initiatives the Group has an established process in relation to the reporting and processing of employee- related issues. Within a structure ultimately overseen by the Board, any employee can raise a matter of concern at any time through day-to-day management reports or whistleblower channels as appropriate. The Board receives a Whistleblowing Report annually which will highlight matters raised through the appropriate whistleblowing channels and any updates to the whistleblowing procedures and Group policy. The Board recognises the importance of an understanding of employee engagement and the prevailing Group culture to ensure alignment with delivery on strategy in a way that ensures acommitment to the Group’s values. Matters reserved for the Board It is recognised that certain matters cannot, or should not, be delegated and the Board has adopted a schedule of matters reserved for Boardconsideration and approval. The matters reserved for the Board fall into the following areas: • strategy and management; • structure and capital; • financial reporting and controls; • internal controls and risk management; • contracts; • communications; • Board membership and other appointments; • remuneration; • delegation of authority; • corporate governance matters; • policies; • political and charitable donations; • appointment of principal professional advisers; • material litigation; • whistleblowing; • pension schemes; and • insurance. The schedule of matters reserved for the Board is available on the CMC Markets plc Group website, https://www.cmcmarketsplc.com/investors/ corporate-governance/. Governance report continued Corporate governance 64 CMC Markets plc Annual Report and Financial Statements 2022 Division of responsibilities Responsibilities of the Chairman include: • leadership of the Board and ensuring open and effectivecommunication between the Executive and Non-Executive Directors; • ensuring Board meetings are effective by setting appropriate and relevant agenda items, creating an atmosphere whereby all Directors are engaged and freetoenter healthy and constructive debate; • ensuring effective communication between major shareholders and the Board; • overseeing each Director’s induction and ongoing training;and • leadership of the Board effectiveness process through hisrole as Chair of the Nomination Committee. Responsibilities of the CEO include: • day-to-day management of the Group’s business andimplementation of the Board-approved strategy; • acting as Chair of the Executive Committee and leading the senior management team in devising and reviewing Group development for consideration by the Board; • responsibility for the operations and results of the Group;and • promoting the Group’s culture and standards. Responsibilities of the Senior Independent Director (“SID”) include: • acting as a sounding board for the Chairman and serving asan intermediary for the other Directors as necessary; • acting as lead independent Non-Executive Director; • leading the Non-Executive Directors in the performance evaluation of the Chairman, with input from the Executive Directors; and • being available to shareholders in the event that the Chairman, Chief Executive Officer or other Executive Directors are unavailable. Responsibilities of the Non-Executive Directors include: • constructively challenging management proposals andproviding advice in line with their respective skills andexperience; • helping develop proposals on strategy; • having a prime role in appointing and, where necessary, removing Executive Directors; and • having an integral role in succession planning. Senior Independent Director Non-Executive Directors Chairman CEO The roles of the Chairman and Chief Executive Officer (“CEO”) are separate, clearly defined in writing and agreed by the Board. Corporate governance 65 CMC Markets plc Annual Report and Financial Statements 2022 Governance structures as at 31 March 2022 Activities of the Board The Board has a comprehensive meeting planner for the next 12 months that ensures all matters for Board consideration are presented and considered in a timely manner. Key areas of focus during this financial year were: • consideration and approval of the Annual Report and Financial Statements and half year results and interim dividend approvals; • ongoing monitoring of the effect of COVID-19 restrictions on the operation of CMC platforms and products; • issuance of shares to the EBT; • approval of Group property management issues and Group Boardappointments; • employee engagement survey results review; • review of CMC Markets plc governance arrangements and results of the Independent Audit governance review; • consideration of intra-Group outsourcing and service arrangements; • the development and launch of new products, including the development of a retail investment platform; • risk management and risk appetite; • the review and approval of ICAAP, ILAA and other regulatorydocuments; • oversight of CASS reporting and compliance; • oversight of the transition to Enhanced Firm status under theSMCR at relevant UK regulated Group entities; • stakeholder engagement; • consideration and approval of a share buy back programme; • approval of Board policies, e.g. whistleblowing; • evaluation of a managed separation of leveraged and non-leveraged businesses; and • Insurance renewal arrangements andapprovals. Group Board Group Audit Committee Group Risk Committee Risk Management Committee Internal assurance Independent Assurance External auditors Group internal audit Group Remuneration Committee Group Nomination Committee Executive Committee Project Management Committee Treating Customers Fairly and Conduct Committee Client Money Review Group Committee Management Committee Internal assurance Independent assurance Direct reporting line Reporting line for certain matters Board/Board Committee Senior Management Committee Corporate governance 66 CMC Markets plc Annual Report and Financial Statements 2022 Election of Directors The 2022 AGM will be held at 10.00 a.m. on 28 July 2022 at 133Houndsditch, London EC3A 7BX. Following recommendations from the Nomination Committee and review by the Chairman, the Board considers that all Directors continue to be effective, remain committed to their roles and have sufficient time available to perform their duties. In accordance with the Company’s Articles of Association, other than Clare Salmon, all Directors will seek re-election at the Company’s 2022 AGM, which will be set out in the Notice of AGM. Conflicts of interest The Company’s Articles of Association, in line with the Companies Act 2006, allow the Board to authorise any potential conflicts of interest that may arise and impose limits or conditions as appropriate. The Board has a formal process for the Directors to disclose any conflicts of interest and any decision of the Board to authorise a conflict of interest is only effective if it is agreed without the conflicted Director(s) voting or without their votes being counted. In making such a decision, the Directors must act in a way they consider in good faith will be most likely to promote the success of the Group. Independence of Non-Executive Directors and timecommitment Each of the Non-Executive Directors is considered to be independent. Each Director is aware of the need to allocate sufficient time to the Company in order to fulfil their responsibilities and is notified of all scheduled Board and Board Committee meetings. Board independence For the financial year ended 31 March 2022 the Board composition did not comply with the requirements of Provision 11 regarding at least half of the Board, excluding the Chairman, being independent Non-Executive Directors. However, this position remained under consideration through the year as thought was given to suitable Non-Executive Director appointees with experience to complement the diversification of the Group’s business. As has been confirmed on page 61, Susanne Chishti has been appointed to the Group Board as a Non-Executive Director effective as of 1 June 2022. Therefore, for the period 1 June 2022 to date of AGM on 28 July 2022 the Board’s composition will have met the requirements of Provision 11. However, as a result of Clare Salmon’s decision not to stand for re-election, the Board will no longer meet the requirements of Provision 11, subsequent to the AGM, and steps will be taken to appoint a successor as detailed on page 76 of the Nomination Committee report. Directors’ induction A formal procedure for Director induction and ongoing training is in place. As part of a new Director’s onboarding, a skills gap analysis and Learning and Development plan is created. The skills assessment is used by the Company to tailor induction meetings and training requirements for all new Directors. One-on-one meetings are organised between the Director and the management team in relevant areas of the business to allow an incoming Director to familiarise themselves with the management team and their respective roles and responsibilities and to gain a greater understanding and awareness of the industry in which the firm operates. These meetings also facilitate an opportunity for new Directors to discuss the business strategy and model, risk management, governance and controls and the requirements of the regulatory framework. These meetings and training arrangements form a key part of the Learning and Development Plan. Non-Executive Directors attended internally and externally facilitated training sessions and have access to online and digital platform-based training and information resources. Board support The Board operates in accordance with the provisions of the Articles of Association and established processes and approved policies, as appropriate, and has access to relevant resources as required. Each Director has access to the Company Secretariat Department for advice and related services. The Company Secretary provides meeting papers to Directors in a timely manner to allow for conducive and effective Board and Board Committee meetings. As stated in each of the Board Committees’ terms of reference and the Company’s Articles of Association, the Directors may take independent professional advice at the Company’s expense. Board evaluation As advised in last year’s Annual Report, Independent Audit was commissioned to undertake a review of governance arrangements which concluded over the first two quarters of 2021 with a report provided to the June 2021 Board meeting. During the course of the evaluation, Independent Audit met with Non-Executive and Executive Directors and members of the senior management team, as well as reviewing previous Board, Board Committee and Management Committee materials. The evaluation reported on a number of Board and governance issues, but was ultimately strategy centric with a view to ensuring that Board and Committee business was designed to effectively discharge strategic responsibilities; the review also included a discrete focus on risk and its inter-relationship with strategy. The review focused on the Board’s role in the articulation of strategy, monitoring progress and ensuring focus; the role of Board papers to support the Board’s strategic obligations; Board processes and administration; education; compliance horizon scanning and meetingstructuring. As a result of the review, Board and Committee meeting frequency and sequencing have been amended; meeting structures have been modified with agendas effectively mapping to terms of business and matters reserved; Board and Committee paper templates are being developed; and senior management and delegated authority structures re-considered to provide effective and purposeful support to Board processes. Accountability Governance report continued Corporate governance 67 CMC Markets plc Annual Report and Financial Statements 2022 Board responsibilities in relation to the AnnualReportand Accounts The Board has ultimate responsibility for reviewing and approving theAnnual Report and Financial Statements and it has considered andendorsed the arrangements enabling it to confirm that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and that it provides the information necessary forshareholders to assess the Company’s position and performance, business model and strategy. With the assistance of the Group Audit Committee, the Board ensured that sufficient time and resources were available to encompass the disclosure requirements that the Group is subject to and that the Annual Report and Financial Statements met all relevant disclosure requirements. The Board believes in the governance principles of being open, transparent and compliant with the Principles of the Code. Following review by the Group Audit Committee, the Board considered and agreed that the Annual Report and Financial Statements contained the necessary information for shareholders to assess the Company’s performance, strategy and overall business model. Group Audit Committee The Group Audit Committee has been delegated responsibility for the monitoring and oversight of the external and internal audit of internal controls. The Committee’s responsibilities, main activities and priorities for the next reporting cycle are set out on pages 69 to 72. Group Risk Committee The Group Risk Committee has been delegated responsibility for themonitoring and oversight of risk management, mitigation and recommendation for and approval of the risk appetite to the Board. The Committee’s responsibilities, main activities and priorities for the coming year are set out on pages 73 and 74. 2021/22 Key shareholder events June 2021 2021 full-year results July 2021 Q1 2022 trading update and Annual General Meeting 2021 September 2021 Trading update October 2021 H1 2022 pre-close trading update November 2021 H1 2022 interim results January 2022 Q3 2022 trading update March 2022 Intention to launch share buyback programme 2022 pre-close trading update Corporate governance 68 CMC Markets plc Annual Report and Financial Statements 2022 Shareholder engagement The Board recognises the importance of good communication with shareholders. The Board maintains regular contact with a cross-section of the Company’s shareholders to ensure that the Group strategy takes due consideration of shareholder views. During the year there were a number of meetings with significant shareholders and potential investors to ensure the Board was regularly apprised of shareholder sentiment and shareholder correspondence was also shared with the Board as appropriate. Investor relation reports are distributed to the Board and considered at each Board meeting. Stakeholder engagement The Board recognises its various legal, fiduciary, statutory and governance obligations and duties in relation to stakeholder engagement, including those specified in the Principles and Provisions of the Code and Section 172 of the Companies Act 2006, and receives regular stakeholder engagement updates in the Board papers. Please also see the discussion on pages 12 and 13 regarding responding to stakeholders’ needs and under Board Leadership and Purpose on pages 62 and 63, and as mentioned elsewhere initiatives in relation to the development of a non-leveraged trading platform, charitable donations and capital redistribution planning. Employee engagement In relation to employee engagement, Clare Salmon is the designated Non-Executive Director with responsibility to engage with (and oversee engagement with) employees, and involve relevant views and experiences in Board discussion and decision making (the “Designated Director”). Clare draws on her considerable experience across a number of listed and non-listed businesses in executive and non-executive positions of communicating with stakeholders and raising relevant issues at Board level. The Designated Director’s responsibility is to engage with (and oversee engagement with) employees in ways that are most effective in discerning relevant views and understanding related experiences. The Board as a whole reviews and considers the results of the employee engagement survey. The Board has considered a number of employee-related initiatives emerging in the wake of the COVID-19 pandemic (including in relation to flexible working, salary benchmarking, collaborative work tools and a related People Strategy) which have been discussed at length. Clare has led and enhanced Board discussion across these initiatives based upon the knowledge that she has built as the Designated Director through regular engagement with employees across the global business. Clare’s insight has been supplemented by informed internal research, actual qualitative examples and real-time employee engagement survey results. In the discharge of their various legal, statutory and governance obligations and duties, the Directors have endeavoured to act to promote the success of the Group for the benefit of its members as a whole, and in doing so have regard to the interests of its various stakeholders. Details of the various stakeholder groups and their associated engagement strategies are provided on pages 12 and 13. The Board ensures, in its discussion of relevant matters, that stakeholder interests are considered in related discussions and decision making processes, and inform policies and procedures. Internal controls over financial reporting The Group has an Internal Control Framework in place to ensure that the financial information produced is accurate, reliable and timely such that it can be used by all stakeholders to monitor performance and aid effective decision making. The internal control framework consists of: • Forecasting and budgeting: The Group has a detailed forecasting and budgeting process in place that is well embedded across the Group. • Financial Accounting and Reporting: The finance team produce Group consolidated accounts on a monthly basis, and the team is well staffed with a good level of experience. There are full reconciliation and reporting processes in place to ensure that any issues are identified and resolved in a timely manner. Detailed reconciliations are completed between the trading systems and the general ledger to ensure completeness. • Management reporting: The Group has a detailed suite of MI that is prepared, daily, weekly, monthly and quarterly. This MI was prepared and improved throughout the year to reflect appropriate measurements as the business has changed. • Tax: The Group has a formal tax strategy, reviewed and approved annually by the Audit Committee, in addition to monthly tax compliance monitoring, quarterly attestations with items raised within the recently established Tax Risk Committee. • IT environment: The Group is heavily reliant on its IT systems and has systems and controls to ensure that they are operational and accessible at all times. There have been no IT issues in the year that could impact the financial reporting of the Group. Governance report continued Corporate governance 69 CMC Markets plc Annual Report and Financial Statements 2022 Paul Wainscott, Chair Sarah Ing, Independent Non-Executive Director Clare Salmon, Independent Non-Executive Director Attended meeting Did not attend Paul Wainscott Chair of the Group AuditCommittee Members and attendance Dear shareholders As Chair of the Group Audit Committee (the“Committee”) I am pleased to present the Group Audit Committee report. The Committee is the independent BoardCommittee that assesses and has independent oversight of financial reporting and the effectiveness of internal control systems. This report summarises theactivities, key responsibilities and future focus of the Committee. Paul Wainscott Senior Independent Director andChair of the Group Audit Committee 8 June 2022 Principal responsibilities of the Group Audit Committee The Committee operates within the agreed terms of reference, which outline the key responsibilities of the Committee. The Committee’s full terms of reference can be found on the Group’s website: https://www.cmcmarketsplc.com/investors/ corporate-governance/committees/. Areas of focus in 2021/22 The main responsibilities during the year, incompliance with the requirements of theCode, were as follows: • to monitor the integrity of the Financial Statements of the Group; • to review and report to the Board on significant financial reporting issues andjudgements; • to assess the adequacy and effectiveness of the Group’s internal control systems and report to the Board on any key findings; • to review and approve the Internal Audit Charter and Annual Internal Audit Plan; • to review the findings of all internal audit reports, make recommendations as appropriate and monitor resolution plans; • to review the performance of the internal audit function; • to review and make recommendations tothe Board on the effectiveness and independence of the Company’s external auditor including appointment, reappointment and removal oftheexternalauditor; • to co-ordinate the external auditor re-tender process and recommendation for appointment for 2023 at the 2022 Annual General Meeting; and, • to review the findings of the externalauditor. Group Audit Committee report Corporate governance 70 CMC Markets plc Annual Report and Financial Statements 2022 Group Audit Committee report continued Composition and advisers The Committee is chaired by Paul Wainscott with Sarah Ing, ClareSalmon and, from 1 June 2022, Susanne Chishti as members. The Committee is considered independent to management and the members are all independent Non-Executive Directors. The Code requires the inclusion on the Committee of at least one member determined by the Board as having recent and relevant financial experience. The Committee Chair is considered to continueto fulfil this requirement. The Committee as a whole has competence in relation to the leveraged and non-leveraged business sectors in which the Company operates. The Committee held eight meetings during the financial year. The key activities and discussion points are outlined in the relevant section of this Committee report. The Chief Executive Officer, Deputy Chief Executive Officer, ChiefFinancial Officer, Head of Asia Pacific & Canada, Group Head ofFinance, Group Head of Risk, General Counsel & Company Secretary, and Group Head of Financial Crime &UK Money Laundering Reporting Officer attend Committee meetings by invitation. The Group Chairman was invited to and attended all meetings. Representatives from PricewaterhouseCoopers LLP (“PwC”), the external auditor, and Grant Thornton LLP, the internal auditors, attend the Committee meetings by standing invitation. Further, subsequent to the conclusion of the auditor re-tender process in September 2021, which resulted in Deloitte LLP being recommended for appointment for 2023 at the 2022 Annual General Meeting, representatives of Deloitte LLP have attended Committeemeetings. Committee attendance is presented on page 69. Statement of internal controls andinternal audit The Group’s internal audit function is externally facilitated by Grant Thornton LLP. The internal audit function has a reporting line to the Committee and has direct access to the Committee Chair and each Committee member. The Committee reviews all internal audit reports, follows up verification reports on any findings identified by internal audit, and annually approves the Internal Audit Plan and Charter. External auditor The Committee considers the reappointment of the external auditor annually and such consideration includes review of the independence of the external auditor and assessment of the auditor’s performance. As advised in last year’s Annual Report, upon the Company’s entry to the FTSE 350 in 2021 the requirement to re-tender audit arrangements following PwC’s external audit role for the Company for a period of ten years was triggered. The Company initiated a re- tender process in relation to the 2022 audit, but following discussions with the Competition and Markets Authority (“CMA”) was given permission to defer the re-tender process. The Group confirms that it has complied with the provisions of the CMA Order in respect of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. The re-tender process was completed during 2022 in relation to the 2023 external audit. At the conclusion of the re-tender process the Board confirmed, on the recommendation of the Committee, that Deloitte LLP be appointed the Group’s external auditor and a resolution to this effect will be put before the shareholders at the 2022 AGM. The Committee, in line with Financial Reporting Council (“FRC”) guidance, continues to review the qualification, expertise, resources, effectiveness and independence of the external auditor. The Committee also reviews the appointment of staff from the external auditor to positions within the Group (when necessary) and meets with the external audit partner at least annually without Executive management present. The Group’s audit and other services fees are disclosed in note 8 of the Financial Statements. Other services fees include the controls opinion relating to the Group’s processes and controls over client money segregation and compliance with The Capital Requirements (Country-by-Country Reporting) Regulations 2013. Non-audit services policy The Group has a number of relationships with independent advisory and assurance firms which provide alternatives to using PwC. During the year ended 31 March 2022, PwC provided non-audit services to the Group. However, all services provided fall under categories explicitly permitted under the 2019 Ethical Standards. In order to ensure compliance with the Ethical Standard issued by the FRC regarding the requirement for safeguarding independence of the external auditor, the Committee has in place a formal policy governing the engagement of the auditor to provide non-audit services, which was reviewed and reapproved in March 2022. TheCommittee received a non-audit services report for review andapproval with the nature of expenditure categorised by discretionary/non-discretionary and incurred and proposed fees. Priorities for financial year 2023 The Committee’s focus will continue to be to ensure that all relevant accounting practices and disclosures are adhered to and that controls around these obligations are successfully embedded with a strong culture of disclosure and transparency. There will be continued focus on internal systems of control and particular focus will be paid to the results of upcoming internal audits. For the forthcoming year significant attention will be paid to the on-boarding of the new external auditor. Corporate governance 71 CMC Markets plc Annual Report and Financial Statements 2022 At each scheduled meeting the Committee: • receives a report from the Chief Financial Officer on the year-to-date financial performance of the Group; • receives an update on current and planned internal audits and any internal audit issues highlighted in completed audit reports; • receives a Group tax update; and • receives an update on significant accounting judgements. Main activities during the financial year Agendas for scheduled Committee meetings are based on a pre-agreed annual meeting planner to ensure that the Committee fulfils its responsibilities in line with its terms of reference and regulatory obligations. July 2021 • Considered and approved the 2021 Internal Audit Charter. • Considered progress in relation to the external auditor re-tender process • Considered the external auditor evaluation in respect of the 2021 financial year. January 2022 • Considered the Q3 trading update and recommended to the Board for approval. • Discussed the potential need to reconsider the current internal audit approach given the increasing size of the Group. • Considered industry approach to operational resilience compliance. • Received an update in relation to the external auditor handover process. March 2022 • Considered the update on year-end audit presented by the external auditor. • Considered the accounting and tax considerations of the share buy backprogramme. • Considered the Group’s exposure to, and control environment surrounding, cryptocurrency holdings. • Reviewed non-audit services policy. • Considered FRC correspondence relating to the lawfulness of the interim dividend that had been paid during FY21. Further detail in relation to this matter can be found on page 101 of the Directors’ report. May 2021 • Considered the year-end audit report presented by the external auditor and discussed the audit with the lead audit partner, including relevant significant audit and accounting matters. In line with the Committee terms of reference, the Committee met with the Group auditor without management or the Executive Directors present. • Reviewed the Annual Report and Financial Statements, including the specific disclosures such as going concern, viability and risk management, fair, balanced and understandable and internal controls reporting, for recommendation to the Board. • Discussed non-audit fees. • Having considered the auditor’s independence letter, concluded that the auditor remained independent and objective and recommended the auditor’s reappointment to the Board. • Reviewed the annual report from the Money Laundering Reporting Officer (“MLRO”). November 2021 • Considered the half-year audit report presented by the external auditor and discussed the report with the lead audit partner. • Reviewed the interim results, including consideration of going concern, risk management and internal controls reporting, for recommendation to the Board. Agreed the annual Internal Audit Plan for 2022. Agreed the external auditor engagement letter, management representation letter and Audit fee. • Update in relation to non-audit services and fees. • Accounting treatment of the ANZ transaction. September 2021 • Considered and approved Tax Strategy and Policy. • Concluded the external auditor re-tender process with a recommendation to the Board in respect of the proposed auditor for 2023 to be considered at the 2022 Annual General Meeting. • Discussed FCA requirements in relation to operational resilience within relevant regulated Group companies. Corporate governance 72 CMC Markets plc Annual Report and Financial Statements 2022 Group Audit Committee report continued Role of the Committee Responsibilities discharged Conclusion or action taken Going concern and long-term viability It is required that the Directors make statements in the Annual Report as to the going concern and longer-term viability of the Group. The Committee reviewed reports from management that assessed the impact of various stress tests and longer-term business risks to determine how the Group would be able to remain viable through periods of liquidity or capital stress. Following challenge of management on the individual scenarios and impacts thereof, the Committee agreed to recommend the Going Concern and Viability Statement to the Board for approval. Re-tender of the Group’s external auditors Following the Group’s entry to the FTSE 350 index in 2021, a re-tender, led by the Committee Chair, was undertaken during 2022 for all external audit arrangements. The Committee reviewed reports from the Chair and management that detailed the regulatory requirements and best practice guidelines of an audit re-tender, along with feedback from management on all participating firms. The Committee selected two firms, by means of a balanced scorecard compiled by the Chair and management, to participate in a final presentation. Following detailed consideration and discussion, the Committee agreed to recommend Deloitte LLP to the Board for appointment as the Group’s external auditors and consideration at the 2022 AGM. Control improvements and remediation The Group completed a number of remediation and improvement activities to its internal controls during 2022 which were highlighted as part of the 2021 external audit. The Committee requested detailed and regular progress updates from management with a view to gaining timely resolution. The Committee requested to be kept informed of all developments in the remediation efforts. The acquisition of Share Investing clients from Australia and New Zealand Banking Group Limited (“ANZ”) The Group acquired approximately 500,000 Share Investing clients from ANZ, with a phased transition and payment arrangement over a 12-18 month period. The Committee reviewed reports from management that detailed the accounting treatment of the acquisition. The Committee concluded that the accounting treatment of the acquisition wasappropriate. Continued client interest in cryptocurrencies The Group has seen continued interest from clients in the cryptocurrency asset class. This led to ongoing focus on the cryptocurrency counterparties that the Group hedges its exposure with and the Group’s accounting treatment of cryptocurrency assets. The Committee reviewed reports from management proposing an update to the accounting policy on cryptocurrency assets and the ongoing monitoring and assessment of controls at cryptocurrency counterparties. The Committee approved the change in accounting policy and requested to bekept abreast of any developments withcryptocurrency counterparties controlassessments. Share buyback programme A share buyback programme was launched in March 2022, for an aggregate purchase price of up to £30 million. The Committee reviewed a report from management detailing the proposed accounting treatment of the buyback programme and its impact on the Group’s capital, liquidity and Financial Statements. The Committee concluded that the accounting treatment of the programme wasappropriate. Corporate governance 73 CMC Markets plc Annual Report and Financial Statements 2022 Group Risk Committee report Dear shareholder As the Chair of the Group Risk Committee (the “Committee”) I am pleased to present the Group Risk Committee report. The Committee plays in important role in overseeing the operation of the Group’s Risk Management Framework and risk appetite and advises the Board on the Group’s risk strategy. The Committee reviews, challenges and recommends for approval by the Board, if it sees fit, the Group’s key processes and procedures which, for the financial year ended 31 March 2022, included its Internal Capital Adequacy Assessment Process (“ICAAP”), Individual Liquidity Adequacy Assessment (“ILAA”) and Group Contingency Funding Plan (“CFP”). The Committee ensures that a robust risk culture continues to be embedded across the business and actively monitors and discusses the latest risk and regulatory developments affecting the Group. The principal areas of focus for the Committee during the year are shown in this report. Clare Salmon Independent Non-Executive Director andChairoftheGroup RiskCommittee 8 June 2022 Principal responsibilities of the Group Risk Committee The main role and responsibilities of the Committee are: • oversight of the Group’s risk appetite andtolerance; • review and recommendation of the RiskAppetite Statement and Risk Management Framework; • provision of advice and recommendations to the Board to assist in Board decision making in relation to risk appetite and risk management; • oversight of financial and liquidity risks including the responsibilities of the risk management functions; • review, challenge and recommendation tothe Board with regard to ICAAP, ILAA and the Group Contingency Funding Plan; • oversight of, and recommendations to theBoard on, current risk exposures andfuture risk strategy; • review of the risks associated with proposed strategic transactions; • review of the effectiveness of the Group’srisk systems; • approval of the annual Risk Plan; • approval of the annual Compliance Plan;and • review of risk taking by Directors and senior management as it impacts their remuneration incentives. The Committee’s full terms of reference canbe found on the Group’s website (www.cmcmarkets.com/group/committees). The Committee has oversight of the Group’s risk management processes as detailed on pages 50 to 56. Composition The Committee is chaired by Clare Salmon with James Richards, Sarah Ing, Paul Wainscott and, from 1 June 2022, Susanne Chishti, as members, all of whom were considered independent, or, in the case of James Richards, considered independent on appointment. The Board believes James Richards continues to demonstrate objective judgement. Clare Salmon, Chair James Richards, Chairman Sarah Ing, Independent Non-Executive Director Paul Wainscott, Senior Independent Director Attended meeting Did not attend Clare Salmon Chair of the Group RiskCommittee Members and attendance Corporate governance 74 CMC Markets plc Annual Report and Financial Statements 2022 Composition continued The Committee held four meetings during the financial year. Committee attendance is presented on page 73. The Chief Executive Officer, Deputy Chief Executive Officer, ChiefFinancial Officer, Head of Asia Pacific & Canada, Group Head ofRisk, and General Counsel & Company Secretary attend Committee meetings by standing invitation. Representatives from other areas of the business attend the Committee meetings by invitation as appropriate to the matter under consideration. The Committee Chair also holds regular individual meetings with the Group Head of Risk, the General Counsel & Company Secretary and other relevant members of the Executive and SeniorManagement teams. During the year the Committee Chair also met with our current auditor, PricewaterhouseCoopers LLP, and the proposed auditor, Deloitte LLP. Main activities during the financial year • Review of outcomes of the Group governance review • Review and recommendation of Risk Appetite Statement and Risk Management Framework • Review and recommendation of ILAA, ICAAP and CFP • Review of annual risk plan • Robust assessment of principal and emerging risks • Received updates on proposed changes to the regulatory environment • Compliance Plan approval • Review of the potential impact of the Ukraine conflict • Received update regarding post-Brexit compliance • Review of adequacy of internal controls Group governance review As part of the Board evaluation process and wider review of the Group’s governance arrangements, Independent Audit was appointed in January 2021 to undertake a review of the Group’s risk management systems. The review made several recommendations with regards to the oversight of risk exercised by the Committee, the information that the Committee receives on a regular basis and the role of the Risk Management Committee within the Group’s governance framework. The Committee also saw opportunities to enhance its focus on operational, reputational and people risk in light of the Group’s potential diversification plans and following volatile and unpredictable market circumstances after pandemic restrictions were lifted. Additionally, the Committee perceived the need to improve the quality of the Group’s horizon scanning to ensure the Group is fully prepared for a broader range of potential scenarios resulting from the volume of change that had been seen both within the business and the external environment. As a result of the outcomes of the review, the Chair of the Committee has spent time with the Group Head of Risk to make a number of changes to the categorisation, ownership and presentation of the Group’s risk information and to ensure that the materiality of each risk was linked in terms of materiality and probability to the Group’s three- year business plan. The Committee has also sought guidance from a range of external subject matter experts to support the change process. This review has led us to consider the introduction of an enhanced governance process to better identify risks and mitigations which will be launched in the next financial year. At management level, the role of the Risk Management Committee within the Group’s governance framework has been reviewed and a decision has been taken to set up an Executive Risk Committee (“ERC”) as the management forum to discuss risk issues. The aim of the ERC is to assist the Group Head of Risk and the Executive Directors in identifying and synthesising the Group’s risks. These risks are then presented to the Committee for review by the Group Head of Risk, as second line of defence, and the Executive Directors, as first line of defence. The ERC reports into the Executive Directors. Risk appetite and exposure The Committee has oversight of and makes recommendations to the Board on current risk exposures and future risk appetite and strategy. The Committee reviews the risks associated with proposed strategic transactions and the effectiveness of risk mitigation and monitoring processes. During the year the Committee received a presentation from the Group Head of Risk on the potential risks arising from the launch of a non-leveraged platform. Throughout the year the Committee has monitored the Group’s top and emerging risks. The Committee routinely asks business leaders to present an overview of their risk management practice and receives updates onkey issues. In the financial year ended 31 March 2022 updates were provided on post-Brexit compliance, management of risks within the Group’s European business and a review of the changes in the Group’s cryptocurrency asset exposure. The Committee reviewed proposed changes to the Group Risk Appetite Statement and Risk Management Framework and made recommendations for Board approval of both documents. The Committee recommended the Group’s ICAAP, ILAA and CFP to the Board for approval. Risk management and internal controls The Group continues to invest in risk management and internal controls and challenges the business to improve and enhance the Risk Management Framework. The Committee confirmed at its May 2022 meeting, acting as a Committee of the Board, that it was satisfied that the Group’s risk management and internal controls wereeffective. Regulatory compliance The Committee continued to closely monitor global regulatory changes and the impact on the Group. During the year, the Committee received updates on various regulatory issues including the application of product intervention powers on the issuance and distribution of binary options and CFDs to retail clients by ASIC and the impact of the introduction of IFPR on the Group. Priorities for financial year 2022/23 In the year ahead the Committee will focus on enhancing the Group’s risk management systems and embedding the recommendations arising from the Group governance review, including the newly adopted approach to documenting the Group’s top risks and mitigations. The Committee will continue to take an active role in advising the Board on risk matters and monitoring the risks associated with regulatory change and the impact that any changes could have on the Group. Group Risk Committee report continued Corporate governance 75 CMC Markets plc Annual Report and Financial Statements 2022 Group Nomination Committee report Dear shareholder I am pleased to present the Nomination Committee (the “Committee”) report which summarises the work of the Committee during the year ended 31March 2022. Throughout this period the Committee has been the forum for discussing the outcomes of the Group governance review, which was completed by Independent Audit in June 2021, and its subsequent implementation. Specifically for the Committee, the review has resulted in changes to our remit, further details of which can be found later in this report. Additionally, we have spent time reviewing the composition of the Board alongside succession planning at both Board and senior management level, have reviewed the role of and received updates from Clare Salmon, our Designated NED for workforce engagement, and discussed future training needs of the Board. Further information on our activities and our priorities for the next year are provided on the following pages. James Richards Chairman and Chair of the Group NominationCommittee 8 June 2022 Principal responsibilities of the Nomination Committee The main roles and responsibilities of the Committee are: • to evaluate and review the structure, size and composition of the Board including the balance of skills, knowledge, experience and diversity of the Board and keep under review the leadership needs of the organisation to ensure the continued ability to compete effectively in the marketplace; • to ensure plans are in place for orderly and emergency succession plans in relation to the Board and senior management and oversee the development of a diverse pipeline for succession, taking into account the challenges and opportunities facing the Company and the skills and expertise needed in the future; • to identify and nominate suitable candidates for appointment to the Board including evaluating the balance of skills, knowledge and diversity on the Board and preparing a description of the role required for a particular appointment; • to oversee the Board evaluation process and, in analysing the results of the evaluation, identify whether there are any skill gaps or opportunities to strengthen the Board; • to assess the Board Directors’ conflicts of interest; • to assess and keep under review the independence, time commitment and engagement of each of the Non-Executive Directors; and • to oversee the Group’s People Strategy including talent management, diversity and inclusion and workforce engagement. The Committee’s full terms of reference are available on the Group’s website: www.cmcmarkets.com/group/committees. James Richards, Chair Paul Wainscott, Senior Independent Director Clare Salmon, Independent Non-Executive Director Sarah Ing, Independent Non-Executive Director Attended meeting Did not attend James Richards Chair of the Group NominationCommittee Members and attendance Corporate governance 76 CMC Markets plc Annual Report and Financial Statements 2022 Group Nomination Committee report continued Composition The Committee is chaired by James Richards with Sarah Ing, Clare Salmon, Paul Wainscott and, from 1 June 2022, Susanne Chishti as members. The Committee is considered independent to management. The Committee held five meetings during the financial year. Committee attendance is presented on page 75. The Committee has considered ongoing succession for the Board and as part of this process it was agreed an additional Non-Executive Director should be appointed. The Committee discussed the current Board composition and balance of skills and noted that the appointment of an additional Non-Executive Director with either technology or regulatory experience would complement the existing membership. Susanne Chishti was identified as a suitable potential candidate with technology experience. Following an interview with the Chairman, she was invited to meet the rest of the Board prior to the Committee considering any recommendation being made to the Board. Following this process, the Committee recommended and the Board approved the appointment of Susanne Chishti with effect from 1 June 2022. She also joined the Audit, Nomination, Remuneration and Risk Committees from this date. Susanne brings extensive fintech knowledge alongside expertise in technology driven innovation which will be highly beneficial as the Group continues to develop its strategy and enhance its offering to clients. On 28 April 2022 it was announced that Clare Salmon, Chair of the Group Risk Committee, would retire as a Non-Executive Director at the end of the Annual General Meeting on 28 July 2022. The Chairman is leading the process for her successor and has appointed The Inzito Partnership to assist with this search. The Inzito Partnership does not have any connection with the Company or any individual Directors other than to assist with Non-Executive appointments. The search process is ongoing and we will announce any further appointments in due course. Governance review and implementation As advised in last year’s Annual Report, Independent Audit was commissioned to undertake a review of the Group’s governance arrangements including how the Board operates as a whole, how it agrees its priorities and the information it receives, which concluded in the second half of 2021 with a report provided in June 2021. As part of the review, Independent Audit met with individual members of the Board, the General Counsel & Company Secretary and relevant members of the senior management team. Independent Audit has no other connection with the Company or any of the individual Directors. As a result of the findings, the Committee undertook a comprehensive review of its role and its terms of reference which were updated to include additional responsibilities in relation to the Group’s People Strategy, including talent management, diversity and inclusion, and workforce engagement, the Board appointment process and succession planning for both the Board and senior management team. Main activities during the financial year Agendas for scheduled Committee meetings are based onapre-agreed annual meeting planner to ensure that the Committee fulfils its responsibilities in line with its terms ofreference and regulatory obligations. May 2021 • NED time commitment and independence review • Determination of Director re-election September 2021 • Scope of role for designated NED for workforce engagement and current engagement programme • NED recruitment discussion • Discussion on remit of Committee in light of governance review results December 2021 • Review of Committee terms of reference • Update on workforce engagement programme • Update on outcomes from the governance review January 2022 • Update on CMC Markets UK plc move to designation as Enhanced Firm • Update on workforce engagement programme • Update on Group People Strategy • Board composition and update on NED recruitment March 2022 • Board succession planning • Senior management succession planning • People Strategy discussion • Board training Corporate governance 77 CMC Markets plc Annual Report and Financial Statements 2022 Diversity and inclusion The Committee recognises the benefits of diversity, whilst ensuring that appointments are based on merit when recruiting. The Board’s Diversity Policy can be found on the CMC Markets plc Group website and gender diversity statistics are presented on page 33. The Group maintains a Diversity and Inclusion Statement and Policy. The Committee is committed to reviewing the Group’s current and proposed initiatives regarding diversity and inclusion through its consideration of the overall People Strategy for the organisation. Further details of how the Group has looked to further support diversity and inclusion throughout the year can be found in the Sustainability section on pages 28 to 39. Governance review and implementation continued At its September and December 2021 meetings the Committee received progress updates on the implementation of the findings of the governance review. Further details on the outcomes of the governance review can be found on page 66. People strategy Throughout the year the Committee has discussed the Group’s approach to workforce engagement, including the workforce engagement methods set out in the Code, alongside the need to implement a Group-wide People Strategy to address a number of employee matters that had been raised in response to the post-pandemic restrictions working environment. Additionally, the Committee receivedupdates from Clare Salmon as the Designated NED for workforce engagement and discussed the results arising from various employee engagement and pulse surveys that had taken place throughout the year. The main areas of focus highlighted as a result of employee engagement activities that had taken place acrossthe business included career progression and opportunities for employees, flexible working arrangements, and diversity andinclusion. The Committee spent time with the Deputy CEO and the Group Head of HR discussing the optimal way to design a comprehensive People Strategy which was aligned with the Group’s strategy and purpose and aligned with its values and also having due regard to the environmental, social and governance initiatives being undertaken by the Group and addressing matters raised by employees. Theproposed People Strategy will be presented to the Committee inthe first half of 2023. Succession planning In addition to its consideration of succession planning for the Board, the Committee considered the senior management team at its March meeting, taking into account the opportunities and challenges facing the Group and the skills, experience and knowledge that will be needed in the future. The Committee will continue to review the succession plans in place and ensure that a diverse pipeline of talented individuals is being developed across theorganisation. Financial statements 105 CMC Markets plc Annual Report and Financial Statements 2022 Independent auditors’ report To the members of CMC Markets plc Report on the audit of the financial statements Opinion In our opinion, CMC Markets plc’s group financial statements and parent company financial statements (the “financial statements”): • give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2022 and of the group’s profit and the group’s and parent company’s cash flows for the year then ended; • have been properly prepared in accordance with UK-adopted international accounting standards; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise: the Consolidated and Parent company statements of financial position as at 31 March 2022; the Consolidated income statement and Consolidated statement of comprehensive income, the Consolidated and Parent company statements of changes in equity, and the Consolidated and Parent company statements of cash flows for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Our opinion is consistent with our reporting to the Group Audit Committee. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. Other than those disclosed in Note 8 to the financial statements, we have provided no non-audit services to the parent company or its controlled undertakings in the period under audit. Our audit approach Overview Audit scope Group • The group consists of a UK holding company with a number of subsidiary entities and branches containing the operating businesses of both the UK and overseas territories. • We determined the appropriate work to perform based on the consolidated balances of the group. The majority of the audit work was performed by the group engagement team in London, including a full scope audit of the significant component CMC Markets UK Plc. • The following entities were also determined to be significant components and were subject to full scope audits by component auditors PwC Australia: CMC Markets Stockbroking Ltd and CMC Markets Asia Pacific Pty Ltd. • Where a non-significant component comprised a significant proportion of one or more consolidated account balances, specific audit procedures were performed over those account balances in those components. Parent company • The parent company audit was performed by the group engagement team in London. Key audit matters • Cryptocurrency assets (group). • Carrying value of newly capitalised intangible assets under development (group). • Investment in subsidiaries (parent company). Materiality • Overall group materiality: £4,605,000 (2021: £4,610,000) based on 5% of profit before tax. • Overall parent company materiality: £1,708,000 (2021: £1,686,600) based on 1% of net assets. • Performance materiality: £3,450,000 (2021: £3,455,000) (group) and £1,281,000 (2021: £1,264,900) (parent company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. Financial statements 106 CMC Markets plc Annual Report and Financial Statements 2022 Independent auditors’ report continued To the members of CMC Markets plc Report on the audit of the financial statements continued Our audit approach continued Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. The following were key audit matters last year, but are no longer considered to be key audit matters for the reasons set out below: • Impact of COVID-19 (group and parent company) - The impact of COVID-19 on the operations and performance of the group and parent company have lessened in the current year. • Risk of fraud in revenue recognition (group) - The revenue stream to which this applied in the prior year, is immaterial in the current year. The following are new key audit matters this year: • Cryptocurrency assets (group) • Carrying value of newly capitalised intangible assets under development (group) • Investment in subsidiaries (parent company). Key audit matter How our audit addressed the key audit matter Cryptocurrency assets (group) Accounting Policy - Page 119 Significant accounting judgements and estimates - Page 120 Disclosure - Note 18 In order to economically hedge cryptocurrency exposures arising from client activity, the group holds cryptocurrency assets. At year-end, the group held £13.4m of such assets, with £12.5m of them at one custodian (“the Custodian”). Owning cryptocurrency assets introduces particular financial reporting risks, notably with regards to demonstrating the existence and ownership of the cryptocurrency assets, with some relevant controls operating at the Custodian. The Custodian procures and provides the group with a controls assurance report over the design and operation of key controls at the Custodian, and an associated bridging letter which addresses the period from the reference date of the controls report to 31 March 2022. The assurance opinion in the Custodian controls report assumes the effective design and operation of complementary controls at both CMC Markets (as the user entity) and the Custodian’s subservicer (“the Subservicer”). The complementary user entity controls (“CUECs”) within CMC Markets include controls over access to the Custodian account and periodic reconciliations between group and Custodian records. The complementary controls at the Subservicer include certain technology access and change management controls over the infrastructure provided by the Subservicer to the Custodian. The Subservicer procures and provides the group with a controls assurance report over the design and operation of key controls at the Subservicer, and an associated bridging letter which addresses the period from the reference date of the controls report to 31 March 2022. We performed the following controls testing regarding the cryptocurrency assets held at the Custodian: • Obtained and reviewed the Custodian controls assurance report and associated bridging letter; • Evaluated the design, implementation and operating effectiveness of relevant complementary controls within CMC Markets; and • Obtained and reviewed the Subservicer controls assurance report and associated bridging letter. We found that key controls were designed, implemented and operated effectively, and therefore determined that we could place reliance on these key controls for the purposes of our audit. Our substantive audit testing over cryptocurrency assets held at the Custodian included the following: • Confirmation of cryptocurrency assets held at the Custodian; • Testing the year-end reconciliation of CMC’s records to the Custodian; • Testing the year-end valuation of a sample of cryptocurrency assets; and • Evaluating the accounting treatment of the cryptocurrency assets. Based on the work performed, we are satisfied that the cryptocurrency assets have been appropriately recognised in the financial statements. Financial statements 107 CMC Markets plc Annual Report and Financial Statements 2022 Key audit matter How our audit addressed the key audit matter Carrying value of newly capitalised intangible assets under development (group) Accounting Policy - Page 123 Significant accounting judgements and estimates - Page 121 Disclosure - Note 12 Strategic change in the business has included the acquisition of customer relationships in Australia (£14.2m) and the development of a new software platform in the UK (£6.1m). These are capitalised as “Assets under development” and judgement is required in determining the extent and timing of the capitalisation. As the assets were not yet in use at the year-end, impairment assessments were required. These required the estimation of future cashflows associated with these new assets. Customer relationships in Australia The capitalised amount of £14.2m comprises the total consideration payable for thecustomer relationships being acquired. We evaluated the accounting treatment on recognition and agreed the amount to the underlying contract. The year-end impairment assessment determines the recoverable amount using avalue-in-use calculation. Our testing of the assessment included the following: • Identification of the key inputs and assumptions underpinning the forecast revenues and costs; • Evaluation of those key inputs and assumptions, including with reference to historic performance; • Evaluation of the discount rate used; and • Testing the mathematical integrity of the calculation. We found the recoverable amount to have been based on reasonable and supportable assumptions. Based on the work performed, we are satisfied that the asset has been appropriately recognised in the financial statements. New UK software platform The capitalised amount of £6.1m comprises the estimated time spent on the development of the asset, by both internal staff and external contractors. Ourtesting of the capitalisation included the following: • Evaluation of the judgement to capitalise the costs, based on the activities being performed; • Agreeing capitalised amounts to underlying support, including payroll records; and • Evaluation of the nature and estimated proportion of internal staff time capitalised, including enquiry with a sample of project team members and inspection of their employment contracts. The year-end impairment assessment determined the recoverable amount using a value-in-use calculation. Our testing of the assessment included the following; • Identification of the key inputs and assumptions underpinning the forecast revenues and costs; • Evaluation of those key inputs and assumptions, including comparison to industry and market information; • With support of our valuations specialists, evaluation of the discount rate used; and • Testing the mathematical integrity of the calculation. We found the recoverable amount to have been based on reasonable and supportable assumptions, noting that total revenue is a major source of estimation uncertainty requiring disclosure. We evaluated the relevant disclosuresin Notes 1 and 12. Based on the work performed, we are satisfied that the asset has been appropriately recognised in the financial statements and that appropriate disclosure has been made regarding the estimation uncertainty in determining itsrecoverable amount. Financial statements 108 CMC Markets plc Annual Report and Financial Statements 2022 Independent auditors’ report continued To the members of CMC Markets plc Key audit matter How our audit addressed the key audit matter Investment in subsidiaries (parent company) Accounting Policy - Page 124 Disclosure - Note 15 The parent company has total investments in subsidiaries of £169.0m, of which £167.7m is an investment in CMC Markets Holdings Limited, the holding company that, via a series of other holding companies, owns the operating entities of the group. This investment is held at cost less any provision for impairment. Judgement is required to determine whether this investment might be impaired. At the year-end, no impairment provision is held against this investment. We have evaluated management’s impairment assessment, noting that the carrying value of the investment is supported by the recoverable amount oftheunderlying operating companies. Based on the work performed, we are satisfied that no impairment of the parentcompany’s investment in CMC Markets Holdings Limited is required. How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as awhole, taking into account the structure of the group and the parent company, the accounting processes and controls, and the industry inwhich they operate. The group operates through a network of companies primarily in the UK, Europe and Asia Pacific each of which is considered to be a financial reporting component. In establishing the overall approach to our audit of the financial statements, we determined the type of work that was required to be performed over the components by us, as the group engagement team, or auditors from other PwC network firms operating under our instruction (‘component auditors’). Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to beable to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the consolidated financial statements as a whole. This included regular communication with the component auditors throughout the audit, the issuance of instructions, areview of the results of their work and attendance at clearance meetings. Any components which were considered individually financially significant in the context of the group’s consolidated financial statements wereconsidered full scope audit components. We considered the significance of other components in relation to primary statement account balances. We considered the presence of any significant audit risks and other qualitative factors (including history of misstatements through fraud or error). Any component which was not already included as a full scope audit component but was identified as being individually financially significant in respect of one or more account balances was subject to specific audit procedures over those account balances. All remaining components were subject to procedures which mitigated the risk of material misstatement including testing of entity level controls, information technology general controls and group level analytical review procedures. The parent company audit was performed by the group engagement team. In planning and executing our audit, we considered the group’s governance framework and climate change risk assessment processes as outlined in the Strategic Report. This, together with our own risk assessment, provided us with a good understanding of the potential impact ofclimate change on the financial statements. Management has considered the potential impacts of climate change on the financial statements and concluded that there is no risk of a material impact at the reporting date. That conclusion is consistent with our audit procedures. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Report on the audit of the financial statements continued Our audit approach continued Key audit matters continued Financial statements 109 CMC Markets plc Annual Report and Financial Statements 2022 Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Financial statements – group Financial statements – parent company Overall materiality £4,605,000 (2021: £4,610,000). £1,708,000 (2021: £1,686,600). How we determined it 5% of profit before tax 1% of net assets Rationale for benchmark applied We set materiality as being 5% of profit before tax, which is a typical approach for profit oriented groups like CMC Markets plc. In the prior year, we used 1% of total revenues but now consider 5% of profit before tax to be a more appropriate basis due to normalisation of the group’s financial performance. We have used net assets as the materiality benchmark as the parent company of the group primarily holds investments in its underlying subsidiaries. This is consistent with the benchmark used in the prior year. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range ofmateriality allocated across components was between £236,000 and £3,616,000. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Ourperformance materiality was 75% (2021: 75%) of overall materiality, amounting to £3,450,000 (2021: £3,455,000) for the group financial statements and £1,281,000 (2021: £1,264,900) for the parent company financial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Group Audit Committee that we would report to them misstatements identified during our audit above £227,000 (groupaudit) (2021: £230,000) and £85,000 (parent company audit) (2021: £84,300) as well as misstatements below those amounts that, inourview, warranted reporting for qualitative reasons. Conclusions relating to going concern Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis ofaccounting included: • Evaluation of management’s going concern assessments; • Evaluation of management’s financial forecasts and management’s stress testing of liquidity and regulatory capital, including the severity ofthe stress scenarios and assumptions that were used; and • Substantiation of liquid resources held by, and liquidity facilities available to, the group. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation ofthe financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the parent company’s ability to continue as a going concern. In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt thegoing concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Financial statements 110 CMC Markets plc Annual Report and Financial Statements 2022 Independent auditors’ report continued To the members of CMC Markets plc Report on the audit of the financial statements continued Reporting on other information continued With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 31 March 2022 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. Directors’ Remuneration In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Corporate governance statement The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: • The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks; • The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; • The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the group’s and parent company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; • The directors’ explanation as to their assessment of the group’s and parent company’s prospects, the period this assessment covers and why the period is appropriate; and • The directors’ statement as to whether they have a reasonable expectation that the parent company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial statements and our knowledge and understanding of the group and parent company and their environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit: • The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the group’s and parent company’s position, performance, business model and strategy; • The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and • The section of the Annual Report describing the work of the Group Audit Committee. We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors. Financial statements 111 CMC Markets plc Annual Report and Financial Statements 2022 Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Statement of Directors’ responsibilities in respect of the Financial Statements, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to laws and regulations issued by the Financial Conduct Authority (“FCA”) (including the Listing Rules), UK tax legislation, and equivalent local laws and regulations applicable to other countries the group operates in, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to the potential for manual journal entries being recorded in order to manipulate financial performance. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included: • Discussions with management and those charged with governance in relation to known or suspected instances of non-compliance with laws and regulations and fraud; • Reviewing key correspondence with regulators, such as the FCA, in relation to the group’s compliance with applicable regulations; • Writing to external legal counsel to identify any instances of non-compliance with laws and regulations, and assessing their potential impact; • Evaluation of the parent company’s actions to address the unlawful dividends declared and review of the related disclosures made in the Directors’ Report; • Identifying and testing what we considered to be higher risk manual journal entries, including backdated post close journals, journals created and approved by the same person, journals posted to unusual account combinations and journals posted by infrequent users; and • Incorporating unpredictability into the nature, timing and/or extent of our testing. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Financial statements 112 CMC Markets plc Annual Report and Financial Statements 2022 Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not obtained all the information and explanations we require for our audit; or • 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 • certain disclosures of directors’ remuneration specified by law are not made; 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. We have no exceptions to report arising from this responsibility. Appointment Following the recommendation of the Group Audit Committee, we were appointed by the members on 29 October 2009 to audit the financial statements for the year ended 31 March 2010 and subsequent financial periods. The period of total uninterrupted engagement is 13 years, covering the years ended 31 March 2010 to 31 March 2022. Other matter As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial statements form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS. Hamish Anderson (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 9 June 2022 Financial statements 113 CMC Markets plc Annual Report and Financial Statements 2022 Consolidated income statement For the year ended 31 March 2022 GROUP Note Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Revenue 32 5,809 461 ,30 8 Interest income 834 74 6 Total revenue 4 3 26,643 462,054 Introducing partner commissions and betting levies (4 4 , 6 93) (52 , 2 8 8) Net operating income 3 281,950 409, 7 66 Operating expenses 5 (189,1 31) (18 3 , 9 9 4) Net impairment gains on financial assets 1,494 — Operating profit 94 , 313 2 25 ,7 7 2 Finance costs 7 (2, 177) (1 ,76 2) Profit before taxation 8 9 2 ,1 36 224 , 0 1 0 Taxation 9 (20,1 38) (4 5 , 9 0 3) Profit for the year attributable to owners of the parent 71,998 178 ,1 07 Earnings per share Basic earnings per share 10 24 . 8p 61.5p Diluted earnings per share 10 24 .7p 61.2p As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The Company had no other comprehensive income. Financial statements 114 CMC Markets plc Annual Report and Financial Statements 2022 Consolidated statement of comprehensive income For the year ended 31 March 2022 GROUP Note Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Profit for the year 71,998 178 ,1 07 Other comprehensive income/ (expense): Items that may be subsequently reclassified to income statement Loss on net investment hedges, net of tax 27 (1 ,089) (2 , 0 07) Currency translation differences 27 1 ,761 4 ,563 Changes in the fair value of debt instruments at fair value through other comprehensive income, net of tax 27 (54) (5 4) Other comprehensive income for the year 618 2,5 02 Total comprehensive income for the year attributable to owners of the parent 72, 616 180,609 Financial statements 115 CMC Markets plc Annual Report and Financial Statements 2022 Consolidated statement of financial position At 31 March 2022 GROUP Note 31 March 2022 £’000 31 March 2021 £’000 ASSETS Non-current assets Intangible assets 12 30,328 10, 330 Property, plant and equipment 13 24,94 1 26 ,1 0 5 Deferred tax assets 14 6,022 6 , 370 Financial investments 19 13 , 4 4 8 — Trade and other receivables 16 1 ,7 97 1, 800 Total non-current assets 76, 5 3 6 44,6 05 Current assets Trade and other receivables 16 156 ,917 1 2 7, 1 1 9 Derivative financial instruments 17 2 ,3 59 3 , 24 1 Current tax recoverable — 1 , 74 9 Other assets 18 13 , 4 43 — Financial investments 19 14,4 97 28 ,10 4 Amounts due from brokers 19 6 ,117 253,895 Cash and cash equivalents 20 176, 57 8 118 ,921 Total current assets 559 ,9 11 533,029 Total assets 6 3 6 , 4 47 57 7, 6 3 4 LIABILITIES Current liabilities Trade and other payables 21 215 ,8 53 152 , 25 3 Derivative financial instruments 17 2 , 362 3, 07 7 Share buyback liability 2 7, 2 6 4 — Borrowings 22 194 945 Lease liabilities 23 4,916 4 , 599 Current tax payable 429 — Provisions 24 369 1, 889 Total current liabilities 251, 3 87 1 62 ,76 3 Non-current liabilities Borrowings 22 — 194 Lease liabilities 23 9, 269 1 0,7 27 Deferred tax liabilities 14 3,30 9 1 ,62 2 Provisions 24 2 ,117 1 , 811 Total non-current liabilities 14,6 95 14, 35 4 Total liabilities 266,082 177,117 EQUITY Equity attributable to owners of the Company Share capital 25 73 ,1 93 73 ,29 9 Share premium 25 4 6 , 236 46 , 236 Capital redemption reserve 25 281 — Own shares held in trust 26 (1,094) (382) Other reserves 27 (7 5,980) (49, 3 3 4) Retained earnings 3 2 7, 7 2 9 330,698 Total equity 3 70,365 4 0 0, 517 Total equity and liabilities 6 3 6 , 4 47 57 7, 6 3 4 The Financial Statements on pages 113 to 158 were approved by the Board of Directors on 8 June 2022 and signed on its behalf by: Lord Cruddas Euan Marshall Chief Executive Officer Chief Financial Officer Financial statements 116 CMC Markets plc Annual Report and Financial Statements 2022 Parent company statement of financial position At 31 March 2022 Company registration number: 05145017 COMPANY Note 31 March 2022 £’000 31 March 2021 £’000 ASSETS Non-current assets Investment in subsidiary undertakings 15 168,962 168,111 Total non-current assets 168,962 168,111 Current assets Trade and other receivables 16 1,020 14,019 Cash and cash equivalents 20 28,263 167 Total current assets 29,283 14,186 Total assets 198,245 182,297 LIABILITIES Current liabilities Trade and other payables 21 143 60 Share buyback liability 27,264 — Total current liabilities 27,407 60 Non-current liabilities Borrowings 22 — 13,549 Total non-current liabilities — 13,549 Total liabilities 27,407 13,609 EQUITY Equity attributable to owners of the Company Share capital 25 73,193 73,299 Share premium 25 46,236 46,236 Capital redemption reserve 25 281 — Share buyback reserve (27,264) — At 1 April 49,153 48,527 Profit for the year attributable to the owners 102,550 61,140 Other changes in retained earnings (73,311) (60,514) Retained earnings 78,392 49,153 Total equity 170,838 168,688 Total equity and liabilities 198,245 182,297 The Financial Statements on pages 113 to 158 were approved by the Board of Directors on 8 June 2022 and signed on its behalf by: Lord Cruddas Euan Marshall Chief Executive Officer Chief Financial Officer Financial statements 117 CMC Markets plc Annual Report and Financial Statements 2022 Consolidated and parent company statements of changes in equity For the year ended 31 March 2022 GROUP Note Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Own shares held in trust £’000 Other reserves £’000 Retained earnings £’000 Total equity £’000 At 1 April 2020 72,8 99 4 6 , 23 6 — (43 3) (51,836) 2 1 6 , 013 282 , 879 New shares issued 400 — — — — — 400 Profit for the year — — — — — 1 78 , 1 07 1 78 , 107 Other comprehensive income for the year — — — — 2, 502 — 2,502 Acquisition of own shares held in trust 26 — — — (36 4) — — (36 4) Utilisation of own shares held in trust 26 — — — 41 5 — — 415 Share-based payments — — — — — (2 , 45 8) (2, 4 58) Tax on share-based payments — — — — — 1,1 6 4 1 ,16 4 Dividends 11 — — — — — (62 ,12 8) (6 2 ,128) At 31 March 2021 73, 299 4 6, 236 — (382) (49 , 3 3 4) 330,698 40 0 , 517 New shares issued 175 — — — — — 175 Profit for the year — — — — — 71 ,998 7 1,998 Other comprehensive income for the year — — — — 618 — 618 Acquisition of own shares held in trust 26 — — — (1 ,0 0 6) — — (1 ,0 06) Utilisation of own shares held in trust 26 — — — 294 — — 294 Share buyback 25 (2 81) — 281 — (2 7, 2 6 4) (2 , 975) (30, 239) Share-based payments — — — — — 59 59 Tax on share-based payments — — — — — 553 553 Dividends 11 — — — — — (72 ,6 04) (72 ,6 04) At 31 March 2022 73 ,1 93 46 , 23 6 281 (1,094) (7 5,980) 3 2 7, 7 2 9 370,365 Total equity is attributable to owners of the Company COMPANY Note Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Share buyback reserve £’000 Retained earnings £’000 Total equity £’000 At 1 April 2020 72,899 46,236 — — 48,527 167,662 New shares issued 400 — — — — 400 Profit for the year — — — — 61,140 61,140 Share-based payments — — — — 1,621 1,621 Dividends — — — — (62,135) (62,135) At 31 March 2021 73,299 46,236 — — 49,153 168,688 New shares issued 175 — — — — 175 Profit for the year — — — — 102,550 102,550 Share-based payments — — — — 2,272 2,272 Share buyback 25 (281) — 281 (27,264) (2,975) (30,239) Dividends 11 — — — — (72,608) (72,608) At 31 March 2022 73,193 46,236 281 (27,264) 78,392 170,838 Financial statements 118 CMC Markets plc Annual Report and Financial Statements 2022 Consolidated and parent company statements of cash flows For the year ended 31 March 2022 GROUP COMPANY Note Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Cash flows from operating activities Cash generated from operations 28 1 81 ,79 5 15 1, 30 0 12,784 754 Interest income 1 , 74 2 1 ,784 — 21 Tax paid (14,651) (33 ,620) — — Net cash generated from operating activities 168,886 119,464 12,784 775 Cash flows from investing activities Purchase of property, plant and equipment (3 , 50 0) (4 ,1 6 2) — — Investment in intangible assets (21 , 813) (8,028) — — Purchase of financial investments (28,337) (28 , 9 33) — — Proceeds from maturity of financial investments 2 7, 5 1 1 25 ,176 — — Outflow on net investment hedges (998) (1 ,76 1) — — Investment in subsidiaries — — (1,030) (469) Amounts contributed by subsidiaries in relation to share- based payments — — 2,157 2,587 Dividends received — — 103,617 61,950 Net cash (used in)/generated from investing activities (2 7, 1 3 7) (1 7, 7 0 8) 104,744 64,068 Cash flows from financing activities Repayment of borrowings (10,945) (5 1 ,19 0) (13,549) (2,700) Proceeds from borrowings 10,000 50 ,000 — — Principal elements of lease payments (5, 9 62) (6,057) — — Proceeds from issue of Ordinary Shares — 80 175 400 Acquisition of own shares (831) (4 4) — — Share buyback (2 , 975) — (2,975) — Dividends paid (72 ,6 04) (6 2,1 28) (72,608) (62,135) Finance costs paid (2 ,1 51) (1 , 74 9) (475) (351) Net cash used in financing activities (85 ,46 8) (7 1,088) (89,432) (64,786) Net increase in cash and cash equivalents 56, 281 30,668 28,096 57 Cash and cash equivalents at the beginning of the year 20 118,92 1 8 4 , 3 07 167 110 Effect of foreign exchange rate changes 1 , 376 3,946 — — Cash and cash equivalents at the end of the year 20 176 , 578 118,92 1 28,263 167 Financial statements 119 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements For the year ended 31 March 2022 1. General information and basis of preparation Corporate information CMC Markets plc (the “Company”) is a public company limited by shares incorporated in the United Kingdom and domiciled in England and Wales under the Companies Act 2006. The nature of the operations and principal activities of CMC Markets plc and its subsidiaries (collectively the “Group”) are set out in note 3. Functional and presentation currency Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Group’s Financial Statements are presented in Sterling (GBP), which is the Company’s functional and the Group’s presentation currency. Foreign operations are included in accordance with the policies set out in note 2. Going concern The Directors have prepared the Financial Statements on a going concern basis which requires the Directors to have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the Financial Statements. The Group has considerable financial resources, a broad range of products and a geographically diversified business. Consequently, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook. Accordingly, the Directors have reasonable expectation that the Group has adequate resources for that period and believe it is appropriate toadopt the going concern basis in preparing the Financial Statements. Further details are set out in the Viability statement on page 100. Basis of accounting On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted International Accounting Standards in its Group financial statements on 1 April 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. The financial statements of the Group have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Financial Statements have been prepared in accordance with the going concern basis, under the historical cost convention, except in the case of “Financial instruments at fair value through profit or loss (“FVPL”)” and “Financial instruments at fair value through other comprehensive income (“FVOCI”)”. The financial information is rounded to the nearest thousand except where otherwise indicated. The Company and Group’s principal accounting policies adopted in the preparation of these Financial Statements are set out in note 2 below. These policies have been consistently applied to all years presented, with the exception of the adoption of the new and revised standards as set out below. The Financial Statements presented are at and for the years ended 31 March 2022 and 31 March 2021. Financial annual years are referred to as 2022 and 2021 in the Financial Statements. Application of new and revised accounting standards The following standards and interpretations applied for the first time in the current financial year, but do not have a significant impact on the financial statements of the Company and the Group: Interest Rate Benchmark Reform Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Accounting policy – Other assets Other assets represent cryptocurrencies controlled by the Group. The Group offers various cryptocurrency-related products that can be traded on its platform. The Group purchases and sells cryptocurrencies as part of its hedging activity. The Group holds cryptocurrency assets for trading in the ordinary course of its business, effectively acting as a commodity broker-dealer in respect of the underlying cryptocurrency assets. In the prior period cryptocurrency assets were disclosed within “Amount due for brokers” (31 March 2021: £1,520,000). The assets will continue to be measured at fair value less cost to sell with changes in valuation being recorded within revenue in the income statement in the period in which they arise. Cryptocurrency assets are not financial instruments, and they are categorised as non-financial assets. Cryptocurrency assets continue to be held at fair value through profit and loss therefore the adoption of this accounting policy impacts classification only. Other assets amount to £13,443,000 and are presented as a separate line in the consolidated statement of financial position. The Statement of Financial Position has not been restated to reclassify the comparative, on grounds of materiality. There is no further impact for the year ended 31 March 2022 and for the year ended 31 March 2021. Financial statements 120 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 1. General information and basis of preparation continued New accounting standards in issue but not yet effective At the date of authorisation of the Financial Statements, the following new standards and interpretations relevant to the Company and the Group were in issue but not yet effective and have not been applied to the Financial Statements: IFRS 17 Insurance contracts Reference to the Conceptual Framework – Amendments to IFRS 3 Annual Improvements to IFRS Standards 2019-2020 Classification of Liabilities as Current or Non-current – Amendments to IAS 1 Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 Definition of Accounting Estimate – Amendments to IAS 8 Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Company and the Group in future periods. Basis of consolidation The Financial Statements incorporate the financial information of the Company and its subsidiaries. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. CMC Markets plc became the ultimate holding company of the Group under a Group reorganisation in 2006. The pooling of interests method of accounting was applied to the Group reorganisation as it fell outside the scope of IFRS 3 “Business Combinations”. The Directors adopted the pooling of interests as they believed it best reflected the true nature of the Group. All other business combinations have been accounted for by the acquisition method of accounting. Under the acquisition method of accounting, the identifiable assets, liabilities and contingent liabilities of a subsidiary are measured initially at their fair values at the date of acquisition, irrespective of the extent of any minority interest. 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. Acquisition-related costs are expensed as incurred. Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those adopted by the Group. All inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Significant accounting judgements and estimates The preparation of Financial Statements in conformity with IFRSs requires the use of certain significant accounting judgements. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. No significant estimates were used in the preparation of the financial statements. The judgements that have the most significant impact on the presentation or measurement of items recorded in the Financial Statements are as follows: Deferred taxes The recognition and measurement of deferred tax assets involve significant judgment. The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Contingent liabilities Judgement has been applied in evaluating the accounting treatment of the specific matters described in Note 34 (Contingent Liabilities), notably the probability of any obligation or future payments arising. Accounting for cryptocurrencies The Group has recognised £13,443,000 (31 March 2021: £1,520,000 in ‘’Amounts due from brokers’’) of cryptocurrency assets and rights to cryptocurrency assets on its Statement of Financial Position as at 31 March 2022. These assets are used for hedging purposes and held for sale in the ordinary course of business. A judgement has been made to apply the measurement principles of IFRS 13 Fair value measurement in accounting for these assets. The assets are presented as ‘other assets’ on the Consolidated Statement of Financial Position. Financial statements 121 CMC Markets plc Annual Report and Financial Statements 2022 1. General information and basis of preparation continued Significant accounting judgements and estimates continued Intangible assets The Group has recognised £14,237,000 of intangible assets under development on its Statement of Financial Position as at 31 March 2022 relating to the transaction with Australia and New Zealand Banking Group Limited (“ANZ’’) to transition its portfolio of Share investing clients to CMC for AUD$25m. A judgement has been made to apply the recognition and measurement principles of IAS 38 Intangibles in accounting for these assets. The Group has recognised £6,054,000 of intangible assets under development on its Statement of Financial Position as at 31 March 2022 relating to the development of the UK CMC Invest trading platform. In performing the annual impairment assessment, which concluded that no impairment was required, it was determined that the recoverable amount of the asset is a source of estimation uncertainty which is sensitive to the estimated future revenues from the UK CMC Invest business. Relevant disclosure is included in Note 12. 2. Summary of significant accounting policies Total revenue Revenue Revenue comprises the fair value of the consideration received from the provision of online financial services in the ordinary course of the Group’s activities, net of client rebates. Revenue is shown net of value added tax after eliminating sales within the Group. The Group generates revenue principally from commissions, spreads and financing income associated with stockbroking and acting as a spread bet and contract for difference market maker to its clients, and the transactions undertaken to hedge the resulting risks. Leveraged – Contracts for difference (“CFD”) and spread bet Revenue from CFD and spread bet represents: • fees paid by clients for commission and funding charges in respect of the opening, holding and closing of financial spread bets and contracts for difference, together with the spread and fair value gains and losses for the Group arising on client trading activity; and • fees paid by the Group in commissions and funding charges arising in respect of hedging the risk associated with the client trading activity and the Group’s currency exposures, together with the spread and fair value gains and losses incurred by the Group arising on hedging activity. Commission and funding charges are accounted for in accordance with IFRS15 “Revenue from Contracts with Customers”. Commission income is earned and recognised when the trade is placed, and funding charges when an open position is held by a customer at 5:00pm New York time. Spread and fair value gains and losses are accounted for in accordance with IFRS9 “Financial Instruments” and IFRS13 “Fair Value Measurement”. Open client and hedging positions are fair valued on a daily basis and the unrealised gains and losses arising on this valuation are recognised in revenue, alongside realised gains and losses on positions that have closed. Non-leveraged – Stockbroking revenue from contracts with customers Revenue from the provision of financial information and stockbroking services to third parties represents fee and commission income. The Group recognises this revenue when the amount for the service can be determined and the performance obligation has been satisfied, this leads to the revenue being recognised on the date of the Group providing the service to the client. Other revenue from contracts with customers Other revenue from the provision of financial information, dormancy fees and balance conversions are accounted for in accordance with IFRS15 “Revenue from Contracts with Customers”. Interest income Total revenue also includes interest earned on the Group’s own funds, clients’ funds and broker trading deposits. Interest income is accrued based on the effective interest rate method, by reference to the principal outstanding and at the interest rate applicable. In addition, the Group earns interest income on UK Government securities held as financial investments, calculated using the effective interest method. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases. This is presented within other interest income. Introducing partner commissions and betting levies Commissions payable to introducing partners and spread betting levies are charged to the income statement when the associated revenue is recognised and are disclosed as a deduction from total revenue in deriving net operating income. Betting levy is payable on net gains generated from clients on spread betting and the Countdowns products. Financial statements 122 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 2. Summary of significant accounting policies continued Segmental reporting The Group’s segmental information is disclosed in a manner consistent with the internal reporting provided to the chief operating decision maker (“CODM”). The chief operating decision maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the CMC Markets plc Board. Operating segments that do not meet the quantitative thresholds required by IFRS 8 are aggregated. The segments are subject to annual review and the comparatives restated to reflect any reclassifications within the segmental reporting. Share-based payment The Group issues equity settled and cash settled share-based payments to certain employees. Equity settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at date of grant. The fair value determined at the grant date of the equity settled share-based payment is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the income statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the retained earnings. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Cash settled share-based payments are measured at expected value at vesting date at least once per year, along with the likelihood of meeting non-market-based vesting conditions and the number of shares that are expected to vest. The cost is recognised in the income statement with a corresponding accrual. Retirement benefit costs A defined contribution plan is a post-employment benefit plan into which the Group pays fixed contributions to a third-party pension provider and has no legal or constructive obligation to pay further amounts. Contributions are recognised as staff expenses in profit or loss in the years during which related employee services are fulfilled. The Group operates defined contribution pension schemes for its Directors and employees. The assets of the schemes are held separately from those of the Group in independently administered funds. Taxation The tax expense represents the sum of tax currently payable and movements in deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Consolidated Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial information and the corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences may be utilised. Deferred tax is calculated using tax rates and laws enacted or substantively enacted by the balance sheet date and are expected to apply when the asset or liability is settled. Such assets and liabilities are not recognised if the temporary difference arises from the goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction, which affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, 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. The carrying amounts of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax is charged or credited in the Consolidated Income Statement, except when it relates to items credited or charged directly to equity, in which case the tax is also dealt with in equity. Foreign currencies Transactions denominated in currencies, other than the functional currency, are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in the income statement for the year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity. Financial statements 123 CMC Markets plc Annual Report and Financial Statements 2022 2. Summary of significant accounting policies continued Foreign currencies continued On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates applicable to the relevant year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or expense in the year in which the operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Intangible assets Goodwill Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s interest in the identifiable assets, liabilities and contingent liabilities of a subsidiary, at the date of acquisition. Goodwill arising on the acquisition of subsidiaries is included within “intangible assets” at cost less accumulated impairment losses. Goodwill is tested for impairment annually. Any impairment is recognised immediately in the Consolidated Income Statement and is not subsequently reversed. On disposal of a subsidiary, the attributed amount of goodwill, which has not been subject to impairment, is included in the determination of the profit or loss on disposal. Goodwill is allocated to cash-generating units for purposes of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination, identified according to business segment. Computer software (purchased and developed) Purchased software is recognised as an intangible asset at cost when acquired. Costs associated with maintaining computer software are recognised as an expense as incurred. Costs directly attributable to internally developed software are recognised as an intangible asset only if all of the following conditions are met: • it is technically feasible to complete the software so that it will be available for use; • management intends to complete the software and use it; • there is an ability to use the software; • it can be demonstrated how the software will generate probable future economic benefits; • adequate technical, financial and other resources to complete the development and to use the software are available; and • the expenditure attributable to the software during its development can be reliably measured. Where the above conditions are not met, costs are expensed as incurred. Directly attributable costs that are capitalised include software development and employee costs. Costs which have been recognised as an asset are amortised on a straight-line basis over the asset’s estimated useful life from the point at which the asset is ready to use. Trademarks and trading licences Trademarks and trading licences that are separately acquired are capitalised at cost and those acquired from a business combination are capitalised at the fair value at the date of acquisition. Amortisation is charged to the income statement on a straight-line basis over their estimated useful lives. Client relationships The fair value attributable to client relationships acquired through a business combination is included as an intangible asset and amortised over the estimated useful life on a straight-line basis. The fair value of client relationships is calculated at the date of acquisition on the basis of the expected future cash flows to be generated from that asset. Separate values are not attributed to internally generated client relationships. Following initial recognition, computer software, trademarks and trading licences and client relationships are carried at cost or initial fair value less accumulated amortisation. Amortisation is provided on all intangible assets at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the balance sheet date, of each asset on a straight-line basis over its expected useful life as follows: Item Amortisation policy Computer software (purchased or developed) 3-10 years or life of licence Trademarks and trading licences 10–20 years Client relationships 14 years Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Assets under development are transferred to the relevant intangible asset class and amortised over their useful life from the point at which the asset is ready to use. Assets under development are tested for impairment annually. Financial statements 124 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 2. Summary of significant accounting policies continued Property, plant and equipment Property, plant and equipment (“PPE”) is stated at cost less accumulated depreciation and any recognised impairment loss. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided on all PPE at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the balance sheet date, of each asset on a straight-line basis over its expected useful life as follows: Item Depreciation policy Furniture, fixtures and equipment 5 years Computer hardware 5 years Leasehold improvements 15 years or life of lease The useful lives and residual values of the assets are assessed annually and may be adjusted depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets. 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 the Consolidated Income Statement. Investment in subsidiary undertakings In the parent company statement of financial position, investment in subsidiary undertakings is stated at cost less any provision for impairment. Impairment of assets Assets subject to amortisation or depreciation are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cashflows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less cost to sell and value in use. Value in use is the estimated discounted future cash flows generated from the asset’s continued use, including those from its ultimate disposal. Net realisable value is the estimated amount at which an asset can be disposed of, less any direct selling costs. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. An assessment is made at each balance sheet date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated and previously recognised impairment losses are reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately. Financial instruments Classification The Group classifies its financial assets in the following measurement categories: • those to be measured subsequently at fair value (either through other comprehensive income (“OCI”), or through profit or loss); and • those to be measured at amortised cost. Measurement At initial recognition, the Group measures all financial asset at its fair value plus, in the case of a financial asset measured through other comprehensive income, transaction costs that are directly attributable to the acquisition of the financial asset. Regular way transactions are recognised on trade date. The Group subsequently measures cash and cash equivalents, amounts due from brokers and trade and other receivables at amortised cost. The Group subsequently measures derivative financial instruments and financial investments at fair value. Cash and cash equivalents Cash and cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Amounts due from brokers Amounts due from brokers represent funds placed with hedging counterparties, a proportion of which are posted to meet broker margin requirements. All derivatives used as hedges held for trading are margin traded. Assets or liabilities resulting from profits or losses on open positions are recognised separately as derivative financial instruments. Financial statements 125 CMC Markets plc Annual Report and Financial Statements 2022 2. Summary of significant accounting policies continued Other assets Other assets represent cryptocurrencies controlled by the Group. The Group offers CFDs on cryptocurrencies as a product that can be traded on its platform. As part of a wider hedging strategy, the Group purchases and sells cryptocurrencies to hedge the clients’ positions. The Group holds cryptocurrency assets for trading in the ordinary course of its business, effectively acting as a commodity broker-dealer in respect of the underlying cryptocurrency asset. The assets are recognised on trade date and measured at fair value with changes in valuation being recorded in the income statement in the period in which they arise. Cryptocurrency assets are not financial instruments, and they are categorised as non-financial assets. Trade and other receivables Trade receivables primarily comprise amounts due from clients and stockbroking settlement balances. They are short term in nature are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are short term and do not contain a significant financing element and therefore expected credit losses are measured using the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from the initial recognition of the receivables. Amounts are written off when there is no reasonable expectation of recovery of the amount. The expected loss model for these trade receivables has been built based on the levels of loss experienced, with due consideration given to forward-looking information. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within other operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against other operating costs in the income statement. The Group sub-leases some of its leased premises. Under IFRS 16, an intermediate lessor accounts for the head lease and the sub-lease as two separate contracts. The intermediate lessor is required to classify the sub-lease as a finance or operating lease by reference to the right-of- use asset arising from the head lease (and not by reference to the underlying asset as was the case under IAS 17). The Group, as a lessor, has reclassified certain of its sub-lease agreements as finance leases and recognised a lease receivable equal to the net investment in the sub- lease. This is presented within Other Debtors. Financial investments Under IFRS 9, financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling and that contain contractual terms that give rise on specified dates to cash flows that are SPPI are measured at FVOCI. Financial investments are non-derivative financial assets and are recognised on a trade date basis. Financial investments are initially measured at fair value plus directly related transactions costs. They are re-measured at fair value and changes are recognised in OCI until the assets are sold or disposed of. Interest income is calculated using the effective interest method on debt securities. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to the income statement. Derivative financial instruments Derivative financial instruments, comprising index, commodities, foreign exchange and treasury futures and forward foreign exchange contracts, are classified as “fair value through profit or loss” under IFRS 9, unless designated as accounting hedges. Derivatives not designated as accounting hedges are initially recognised at fair value. Subsequent to initial recognition, changes in fair value of such derivatives and gains or losses on their settlement are recognised in the income statement. For accounting hedges, the Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The Group designates certain derivatives as either: Held for trading Derivatives classified as held for trading are included in this category. The Group uses derivative financial instruments in order to hedge derivative exposures arising from open client positions, which are classified as held for trading. All derivatives held for trading are carried in the statement of financial position at fair value with gains or losses recognised in revenue in the income statement. Held as hedges of net investments in foreign operations Where a foreign currency derivative financial instrument is a formally designated accounting hedge of a net investment in a foreign operation, foreign exchange differences arising on translation of the financial instrument are recognised in the net investment hedging reserve via other comprehensive income to the extent the hedge is effective. The Group assesses the effectiveness of its net investment hedges based on fair value changes of its net assets and the fair value changes of the relevant financial instrument. The gain or loss relating to the ineffective portion is recognised immediately in operating expenses in the income statement. Accumulated gains and losses recorded in the net investment hedging reserve are recognised in operating costs in the income statement on disposal of the foreign operation. Financial statements 126 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 2. Summary of significant accounting policies continued Derivative financial instruments continued Economic hedges (held as hedges of monetary assets and liabilities, financial commitments or forecast transactions) These are derivatives held to mitigate the foreign exchange risk on monetary assets and liabilities, financial commitments or forecast transactions. Where a derivative financial instrument is used as an economic hedge of the foreign exchange exposure of a recognised monetary asset or liability, financial commitment or forecast transaction, but does not meet the criteria to qualify for hedge accounting under IFRS, no hedge accounting is applied and any gain or loss resulting from changes in fair value of the hedging instrument is recognised in operating costs in the income statement. Trade and other payables Trade and other payables are not interest bearing and are stated at fair value on initial recognition and subsequently at amortised cost. Leases Under IFRS 16, when the Group is the lessee, it is required to recognise both: • a lease liability, measured at the present value of remaining cash flows on the lease; and • a right of use (ROU) asset, measured at the amount of the initial measurement of the lease liability, plus any lease payments made prior to commencement date initial direct costs, and estimated costs of restoring the underlying asset to the condition required by the lease, less any lease incentives received. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. Subsequently, the lease liability will increase for the accrual of interest, resulting in a constant rate of return throughout the life of the lease, and reduce when the payments are made. The right of use asset will amortise to the income statement over the life of the lease. The lease liability is remeasured when there is a change in one of the following: • future lease payments arising from a change in an index or rate; • the Group’s estimate of the amount expected to be payable under a residual value guarantee; or • the Group’s assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the ROU asset, or is recorded in the income statement if the carrying amount of the ROU asset has been reduced to nil. On the consolidated statement of financial position, the ROU assets are included within property, plant and equipment. The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date). Lease payments on short-term leases are recognised as expense on a straight-line basis over the lease term. Extension and termination options are included in a number of property leases in the Group. Management considers the facts and circumstances that may create an economic incentive to exercise an extension or termination option in order to determine whether the lease term should include or exclude such options. Extension or termination options are only included within the lease term if they are reasonably certain to be exercised in the case of extension options and not exercised in the case of termination options. Borrowings All loans and borrowings are initially recognised at cost, being the fair value of the consideration received, net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Provisions A provision is a liability of uncertain timing or amount that is recognised when the Group has a present obligation (legal or constructive) as a result of a past event where it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is material. The increase in the provision due to the unwind of the discount to present value over time is recognised as an interest expense. Share capital Ordinary and Deferred Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Own shares held in trusts Shares held in trust by the Company for the purposes of employee share schemes are classified as a deduction from shareholders’ equity and are recognised at cost. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of equity shares. Financial statements 127 CMC Markets plc Annual Report and Financial Statements 2022 2. Summary of significant accounting policies continued Capital redemption reserve The capital redemption reserve was created for capital maintenance purposes as a result of the share buyback programme. When shares are repurchased out of the Company’s profits, the amount by which the Company’s issued share capital is diminished must be transferred to the capital redemption reserve. This amount is the nominal value of the shares bought back. See note 25. Share buyback reserve The share buyback reserve was created as a result of the share buyback programme and on inception of the contract amounted to the full value of the share buyback programme plus directly attributed costs. As shares are being repurchased, the share buyback reserve amount is reduced by the consideration paid for the repurchased shares with a corresponding transaction recorded within Retained earnings to reflect the consumption of distributable profits. See note 27. Employee benefit trusts Assets held in employee benefit trusts (“EBT”) are recognised as assets of the Group, until these vest unconditionally to identified employees. A full provision is made in respect of assets held by the trust as there is an obligation to distribute these assets to the beneficiaries of the employee benefit trust. The employee benefit trusts own equity shares in the Company. These investments in the Company’s own shares are held at cost and are included as a deduction from equity attributable to the Company’s equity owners until such time as the shares are cancelled or transferred. Where such shares are subsequently transferred, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity owners. Client money The Group holds money on behalf of clients in accordance with the Client Asset (“CASS”) rules of the FCA and other financial markets regulators in the countries in which the Group operates. The amounts held on behalf of clients at the balance sheet date are stated in notes 20 and 21. Segregated client funds comprise individual client balances which are pooled in segregated client money bank accounts. Segregated client money bank accounts hold statutory trust status restricting the Group’s ability to use the monies and accordingly such amounts and are not recognised on the Group’s Statement of Financial Position. 3. Segmental reporting The Group’s principal business is online retail financial services including stockbroking and providing its clients with the ability to trade contracts for difference (“CFD”) and financial spread betting on a range of underlying shares, indices, foreign currencies, commodities and treasuries. The Group also makes these services available to institutional partners through white label and introducing broker arrangements. The Group’s CFDs are traded worldwide, whereas the financial spread betting products are only available to trade in the UK and Ireland and the Group provides stockbroking services only in Australia. The Group’s business is generally managed on a geographical basis and, for management purposes, the Group is organised into four segments: • Leveraged – CFD and spread bet – UK and Ireland (“UK & IE”); • Leveraged – CFD – Europe; • Leveraged – CFD – Australia, New Zealand and Singapore (“APAC”) and Canada; and • Non-leveraged – Stockbroking – Australia. These segments are in line with the management information received by the chief operating decision maker (“CODM”). Revenues and costs are allocated to the segments that originated the transaction. Costs generated centrally are allocated to segments on an equitable basis, mainly based on revenue, headcount or active client levels, or where central costs are directly attributed to specific segments. Year ended 31 March 2022 Leveraged Non-leveraged GROUP UK & IE £’000 Europe £’000 APAC & Canada £’000 Australia £’000 Central £’000 Total £’000 Segment revenue net of introducing partner commissions and betting levies 80,891 43,795 108,384 48,046 — 281,116 Interest income (413) — 335 912 — 834 Net operating income 80,478 43,795 108,719 48,958 — 281,950 Segment operating expenses (18,767) (6,480) (22,755) (10,422) (129,213) (187,637) Segment contribution 61,711 37,315 85,964 38,536 (129,213) 94,313 Allocation of central operating expenses (35,527) (30,597) (40,689) (22,400) 129,213 — Operating profit 26,184 6,718 45,275 16,136 — 94,313 Finance costs (432) (290) (195) (168) (1,092) (2,177) Allocation of central finance costs (474) (207) (411) — 1,092 — Profit before taxation 25,278 6,221 44,669 15,968 — 92,136 Financial statements 128 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 3. Segmental reporting continued Year ended 31 March 2021 Leveraged Non-leveraged GROUP UK & IE £’000 Europe £’000 APAC & Canada £’000 Australia £’000 Central £’000 Total £’000 Segment revenue net of introducing partner commissions and betting levies 125,947 65,035 163,236 54,802 — 409,020 Interest income (26) — 533 239 — 746 Net operating income 125,921 65,035 163,769 55,041 — 409,766 Segment operating expenses (19,909) (6,574) (21,950) (10,039) (125,522) (183,994) Segment contribution 106,012 58,461 141,819 45,002 (125,522) 225,772 Allocation of central operating expenses (36,336) (30,393) (37,320) (21,473) 125,522 — Operating profit 69,676 28,068 104,499 23,529 — 225,772 Finance costs (484) (36) (242) (213) (787) (1,762) Allocation of central finance costs (331) (134) (322) — 787 — Profit before taxation 68,861 27,898 103,935 23,316 — 224,010 The measurement of net operating income for segmental analysis is consistent with that in the income statement and is broken down by geographic location and business line below. Net operating income by geography Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Leveraged Non-leveraged Total Leveraged Non-leveraged Total UK 80,478 — 80,478 125,921 — 125,921 Australia 49,020 48,958 97,978 101,127 55,041 156,168 Other countries 103,494 — 103,494 127,677 — 127,677 Total net operating income 232,992 48,958 281,950 354,725 55,041 409,766 The Group uses “Segment contribution” to assess the financial performance of each segment. Segment contribution comprises operating profit for the year before finance costs and taxation and an allocation of central operating expenses. The measurement of segment assets for segmental analysis is consistent with that in the balance sheet. The total of non-current assets other than deferred tax assets, broken down by location and business line of the assets, is shown below. Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Leveraged Non-leveraged Total Leveraged Non-leveraged Total UK 41,168 — 41,168 22,662 — 22,662 Australia 3,244 23,010 26,254 4,336 8,357 12,693 Other countries 3,092 — 3,092 2,880 — 2,880 Total non-current assets 47,504 23,010 70,514 29,878 8,357 38,235 4. Total revenue Revenue GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Leveraged 247,987 373,006 Non-leveraged 74,326 83,310 Other revenue 3,496 4,992 Total 325,809 461,308 Leveraged revenue represents CFD and spread bet revenue. Non-leveraged revenue represents stockbroking revenue. Financial statements 129 CMC Markets plc Annual Report and Financial Statements 2022 4. Total revenue continued Interest income GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Bank and broker interest 825 681 Interest on financial investments 9 43 Other interest income — 22 Total 834 746 The Group earns interest income from its own corporate funds and from segregated client funds. 5. Operating expenses GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Net staff costs (note 6) 84,862 78,653 IT costs 28,721 26,162 Sales and marketing 27,363 30,399 Premises 3,343 3,794 Legal and professional fees 8,568 7,234 Regulatory fees 5,576 5,002 Depreciation and amortisation 12,901 11,239 Irrecoverable sales tax 2,789 6,536 Other 15,480 15,017 189,603 184,036 Capitalised internal software development costs (472) (42) Operating expenses 189,131 183,994 The above presentation reflects the breakdown of operating expenses by nature of expense. 6. Employee information The aggregate employment costs of staff and Directors were: GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Wages and salaries 74,352 66,694 Social security costs 9,475 9,452 Other pension costs 2,230 1,916 Share-based payments 2,418 2,489 Total Directors and employee costs 88,475 80,551 Contract staff costs 3,880 3,243 92,355 83,794 Capitalised internal software development costs (7,493) (5,141) Net staff costs 84,862 78,653 Compensation of key management personnel is disclosed in the Directors’ remuneration report on page 91. Financial statements 130 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 6. Employee information continued The monthly average number of Directors and employees of the Group during the year is set out below: GROUP Year ended 31 March 2022 Number Year ended 31 March 2021 Number By activity: Key management 8 8 Client acquisition and maintenance 420 392 IT development and support 252 217 Global support functions 215 179 Total Directors and employees 895 796 Contract staff 22 22 Total staff 917 818 The Company had no employees during the current year or prior year. 7. Finance costs GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Interest and fees on bank borrowings 1,451 926 Interest on lease liabilities 700 818 Other finance costs 26 18 Total 2,177 1,762 8. Profit before taxation GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Profit before tax is stated after charging/(crediting): Depreciation 10,081 9,254 Amortisation of intangible assets 2,820 1,985 Net foreign exchange gain (1,179) (222) Auditors’ remuneration for audit and other services (see below) 2,057 1,975 Fees payable to the Company’s auditors, PricewaterhouseCoopers LLP, were as follows: GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Audit services Audit of CMC Markets plc’s financial statements 659 681 Audit of CMC Markets plc’s subsidiaries 780 777 Total audit fees 1,439 1,458 Non-audit services Audit-related services 618 517 Total non-audit fees 618 517 Total fees 2,057 1,975 Financial statements 131 CMC Markets plc Annual Report and Financial Statements 2022 9. Taxation GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Analysis of charge for the year Current tax: Current tax on profit for the year 18,642 35,124 Adjustments in respect of previous years (465) (815) Total current tax 18,177 34,309 Deferred tax: Origination and reversal of temporary differences 1,699 11,508 Adjustments in respect of previous years 409 86 Impact of change in tax rate (147) — Total deferred tax 1,961 11,594 Total tax 20,138 45,903 The standard rate of UK corporation tax charged was 19% with effect from 1 April 2017. Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions. The effective tax rate of 21.86% (year ended 31 March 2021: 20.49%) differs from the standard rate ofUK corporation tax of 19% (year ended 31 March 2021: 19%). The differences are explained below: GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Profit before taxation 92,136 224,010 Profit multiplied by the standard rate of corporation tax in the UK of 19% (year ended 31 March 2021: 19%) 17,506 42,562 Adjustment in respect of foreign tax rates 2,500 3,918 Adjustments in respect of previous years (56) (729) Impact of change in tax rate (147) 1 Expenses not deductible for tax purposes 291 415 Recognition of previously unrecognised tax losses — (678) Other differences 44 414 Total tax 20,138 45,903 GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Tax on items recognised directly in equity Tax credit on share-based payments 553 1,164 10. Earnings per share (“EPS”) Basic EPS is calculated by dividing the earnings attributable to the equity owners of the Company by the weighted average number of Ordinary Shares in issue during each year excluding those held in employee share trusts which are treated as cancelled. For diluted earnings per share, the weighted average number of Ordinary Shares in issue, excluding those held in employee share trusts, is adjusted to assume vesting of all dilutive potential weighted average Ordinary Shares and that vesting is satisfied by the issue of new Ordinary Shares. GROUP Year ended 31 March 2022 Year ended 31 March 2021 Earnings attributable to ordinary shareholders (£’000) 71,998 178,107 Weighted average number of shares used in the calculation of basic EPS (’000) 290,815 289,677 Dilutive effect of share options (’000) 1,022 1,485 Weighted average number of shares used in the calculation of diluted EPS (’000) 291,837 291,162 Basic EPS 24.8p 61.5p Diluted EPS 24.7p 61.2p For the year ended 31 March 2022, 1,022,000 (year ended 31 March 2021: 1,485,000) potentially dilutive weighted average Ordinary Shares in respect of share options in issue were included in the calculation of diluted EPS. Financial statements 132 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 11. Dividends GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Declared and paid in each year Final dividend for 2021 at 21.43p per share (2020: 12.18p) 62,410 35,393 Interim dividend for 2022 at 3.50p per share (2021: 9.20p) 10,194 26,735 Total 72,604 62,128 The final dividend for 2022 of 8.88 pence per share, amounting to £25,778,000 was proposed by the Board on 8 June 2022 and has not been included as a liability at 31 March 2022. The dividend will be paid on 11 August 2022, following approval at the Company’s AGM, to those members on the register at the close of business on 15 July 2022. The dividends paid or declared in relation to the financial year are set out below: GROUP Year ended 31 March 2022 Pence Year ended 31 March 2021 Pence Declared per share Interim dividend 3.50 9.20 Final dividend 8.88 21.43 Total dividend 12.38 30.63 12. Intangible assets GROUP Goodwill £’000 Computer software £’000 Trademarks and trading licences £’000 Client relationships £’000 Assets under development £’000 Total £’000 Cost At 1 April 2020 11,500 121,085 1,409 2,684 1,054 137,732 Additions — 2,678 — — 5,350 8,028 Transfers — 275 — — (275) — Disposals — — (57) — (33) (90) Research and development grant — (515) — — — (515) Foreign currency translation — 2,472 45 311 52 2,880 At 31 March 2021 11,500 125,995 1,397 2,995 6,148 148,035 Additions — 77 — — 21,736 21,813 Transfers — 5,246 — — (5,246) — Disposals — — (356) — — (356) Foreign currency translation — 869 11 100 970 1,950 At 31 March 2022 11,500 132,187 1,052 3,095 23,608 171,442 Accumulated amortisation and impairment At 1 April 2020 (11,500) (117,907) (1,053) (2,684) — (133,144) Charge for the year — (1,945) (40) — — (1,985) Foreign currency translation — (2,223) (42) (311) — (2,576) At 31 March 2021 (11,500) (122,075) (1,135) (2,995) — (137,705) Charge for the year — (2,773) (47) — — (2,820) Disposals — — 287 — — 287 Foreign currency translation — (764) (12) (100) — (876) At 31 March 2022 (11,500) (125,612) (907) (3,095) — (141,114) Carrying amount At 1 April 2020 — 3,178 356 — 1,054 4,588 At 31 March 2021 — 3,920 262 — 6,148 10,330 At 31 March 2022 — 6,575 145 — 23,608 30,328 Computer software includes capitalised development costs of £26,487,000 relating to the Group’s Next Generation trading platform which has been fully amortised. Research and Development expenditure recognised as expense during the year amounted to £1,690,00 (31 March 2021: £824,000). Financial statements 133 CMC Markets plc Annual Report and Financial Statements 2022 12. Intangible assets continued Impairment Intangibles are tested for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not berecoverable. Assets under development are tested for impairment annually. There was no impairment identified in the year ended 31March2022 (year ended 31 March 2021: £nil). At 31 March 2022, the Group had no material capital commitments in respect of intangible assets (31 March 2021: £nil). Impairment sensitivity analysis The recoverable amount of the asset under development relating to the UK CMC Invest platform has been determined using a value-in-use discounted cashflow calculation. This uses the most recent board-approved forecast results, a discount rate of 7.7% and long term growth rate (beyond the forecasting period) of 0%. The carrying value of the asset at 31 March 2022 was £6,054,000. The recoverable amount is sensitive to changes in forecast revenues. A 4.5% reduction in forecast revenues would determine a recoverable amount equal to the carrying value of £6,054,000. A 12% reduction in forecast revenues would result in the full impairment of the asset. 13. Property, plant and equipment GROUP Leasehold improvements £’000 Furniture, fixtures and equipment £’000 Computer hardware £’000 Right-of-use asset £’000 Total £’000 Cost At 1 April 2020 18,600 9,807 31,008 17,657 77,072 Additions — 58 4,805 1,707 6,570 Disposals (43) (408) (12) (870) (1,333) Foreign currency translation 716 199 448 652 2,015 At 31 March 2021 19,273 9,656 36,249 19,146 84,324 Additions 106 198 3,196 5,362 8,862 Disposals (2,733) (1,007) (2,262) (275) (6,277) Foreign currency translation 237 75 192 324 828 At 31 March 2022 16,883 8,922 37,375 24,557 87,737 Accumulated depreciation At 1 April 2020 (12,156) (8,523) (24,166) (4,089) (48,934) Charge for the year (1,796) (554) (2,756) (4,148) (9,254) Disposals 43 408 12 546 1,009 Foreign currency translation (484) (126) (325) (105) (1,040) At 31 March 2021 (14,393) (8,795) (27,235) (7,796) (58,219) Charge for the year (1,642) (414) (3,225) (4,800) (10,081) Disposals 2,736 1,001 2,248 181 6,166 Foreign currency translation (222) (72) (147) (221) (662) At 31 March 2022 (13,521) (8,280) (28,359) (12,636) (62,796) Carrying amount At 1 April 2019 6,444 1,284 6,842 13,568 28,138 At 31 March 2021 4,880 861 9,014 11,350 26,105 At 31 March 2022 3,362 642 9,016 11,921 24,941 The carrying amount of recognised right-of-use assets relate to the following types of assets: Financial statements 134 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 13. Property, plant and equipment continued GROUP Computer hardware £’000 Leasehold properties £’000 Total £’000 At 1 April 2020 914 12,654 13,568 Additions — 1,707 1,707 Disposals — (324) (324) Charge for the year (609) (3,539) (4,148) Foreign currency translation — 547 547 At 31 March 2021 305 11,045 11,350 Additions — 5,362 5,362 Disposals — (94) (94) Charge for the year (305) (4,495) (4,800) Foreign currency translation — 103 103 At 31 March 2022 — 11,921 11,921 Refer to note 23 for further details on lease liabilities. 14. Deferred tax GROUP 31 March 2022 £’000 31 March 2021 £’000 Deferred tax assets to be recovered within 12 months 1,807 1,966 Deferred tax assets to be recovered after 12 months 4,215 4,404 6,022 6,370 Deferred tax liabilities to be settled within 12 months (993) (495) Deferred tax liabilities to be settled after 12 months (2,316) (1,127) (3,309) (1,622) Net deferred tax asset 2,713 4,748 Deferred income taxes are calculated on all temporary differences under the liability method at the tax rate expected to apply when the deferred tax will crystallise. The gross movement on deferred tax is as follows: GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 At 1 April 4,748 14,324 Charge to income for the year (2,108) (11,594) Charge to equity for the year (135) (7) Change in tax rate 147 — Research and development tax credit — 310 Foreign currency translation 61 1,715 At 31 March 2,713 4,748 Financial statements 135 CMC Markets plc Annual Report and Financial Statements 2022 14. Deferred tax continued The following table details the deferred tax assets and liabilities recognised by the Group and movements thereon during the year: GROUP Tax losses £’000 Accelerated capital allowances £’000 Other timing differences £’000 Total £’000 At 1 April 2020 6,415 689 7,220 14,324 Charge to income for the year (7,106) (3,317) (1,171) (11,594) Charge to equity for the year — — (7) (7) Research and development tax credit — — 310 310 Foreign currency translation 826 276 613 1,715 At 31 March 2021 135 (2,352) 6,965 4,748 Charge to income for the year (41) 1,894 (3,961) (2,108) Charge to equity for the year — — (135) (135) Research and development tax credit (1) 169 (21) 147 Foreign currency translation — 11 50 61 At 31 March 2022 93 (278) 2,898 2,713 The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of the temporary differences can be deducted. The recoverability of the Group’s deferred tax asset in respect of carry forward losses is based on an assessment of the future levels of taxable profit expected to arise that can be offset against these losses. The Group’s expectations as to the level of future taxable profits take into account the Group’s long-term financial and strategic plans and anticipated future tax adjusting items. In making this assessment, account is taken of business plans including the Board-approved Group budget. Key budget assumptions are discussed in the Directors’ viability statement. Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. As at 31 March 2022 the Group did not recognise deferred tax assets of £181,000 (at 31 March 2021: £267,000) in respect of losses amounting to £724,000 (year ended 31 March 2021: £1,068,000). These relate to the Group’s subsidiary, Information Internet Ltd and there are no time limits on their utilisation. The Group has recognised a deferred tax asset of £94,000 (at 31 March 2021: £95,000) in respect of losses of £375,000 (year ended 31 March 2021: £380,000) in the Group’s subsidiary, Information Internet Ltd as at 31 March 2021. A deferred tax asset of £nil (at 31 March 2021: £310,000) has arisen for the Group in respect of Research and Development tax credits arising in Australia which have not been used due to the existence of tax losses. The credits are expected to be utilised in future. On 5 March 2021 the UK government announced that from 1 April 2023 the Corporation Tax main rate will be increased from 19% to 25%. This was substantively enacted on 24 May 2021. Deferred tax balances are reported at the substantively enacted tax rate of 25% at 31 March 2022. Financial statements 136 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 15. Investment in subsidiary undertakings COMPANY Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 At 1 April 168,111 169,023 Capital contribution relating to share-based payments 2,272 1,621 Amounts contributed by subsidiaries in relation to share-based payments (2,157) (2,587) Investment 1,030 469 169,256 168,526 Impairment (294) (415) At 31 March 168,962 168,111 The list below includes all of the Group’s direct and indirect subsidiaries as at 31 March 2022: Country of incorporation Principal activities Held CMC Markets Holdings Ltd England Holding company Directly CMC Markets UK Holdings Ltd England Holding company Indirectly CMC Markets Investments Limited England Online trading Indirectly CMC Markets Investments Nominee Limited England Online trading Indirectly CMC Markets UK plc England Online trading Indirectly Information Internet Ltd England IT development Indirectly CMC Spreadbet plc England Financial spread betting Indirectly CMC Markets Overseas Holdings Ltd England Holding company Indirectly CMC Markets Asia Pacific Pty Ltd Australia Online trading Indirectly CMC Markets Group Australia Pty Ltd Australia Holding company Indirectly CMC Markets Stockbroking Ltd Australia Stockbroking Indirectly CMC Markets Stockbroking Services Pty Ltd Australia Employee services Indirectly CMC Markets Stockbroking Nominees Pty Ltd Australia Stockbroking nominee Indirectly CMC Markets Stockbroking Nominees (No. 2 Account) Pty Ltd Australia Dormant Indirectly CMC Markets Canada Inc Canada Online trading Indirectly CMC Markets NZ Ltd New Zealand Online trading Indirectly CMC Markets Singapore Pte Ltd Singapore Online trading Indirectly CMC Business Services (Shanghai) Limited China Training and education Indirectly CMC Markets Germany GmbH Germany Online trading Indirectly CMC Markets Middle East Ltd UAE Online trading Indirectly Please refer to pages 162 and 163 for the registered office addresses of the subsidiaries above. All shareholdings are of Ordinary Shares. The issued share capital of all subsidiary undertakings is 100% owned, which also represents the proportion of the voting rights in the subsidiary undertakings. The list below includes all of the Group’s employee benefit trusts as at 31 March 2022: Country of incorporation CMC Markets plc Employee Share Trust Jersey CMC Markets plc UK Share Incentive Plan England CMC Markets plc (Discretionary Schemes) Employee Share Trust England Investment in subsidiary undertakings are tested for impairment annually. Total provision for impairment recorded during the year ended 31 March 2022 amounted to £294,000 (year ended 31 March 2021: £415,000). Financial statements 137 CMC Markets plc Annual Report and Financial Statements 2022 16. Trade and other receivables GROUP COMPANY 31 March 2022 £’000 31 March 2021 £’000 31 March 2022 £’000 31 March 2021 £’000 Current Gross trade receivables 15,256 9,103 — — Less: provision for impairment of trade receivables (6,219) (7,762) — — Trade receivables 9,037 1,341 — — Amounts due from Group companies — — 1,013 159 Prepayments and accrued income 11,143 9,799 7 79 Stockbroking debtors 134,324 99,035 — — Other debtors 2,413 16,944 — 13,781 156,917 127,119 1,020 14,019 Non-current Other debtors 1,797 1,800 — — Total 158,714 128,919 1,020 14,019 Stockbroking debtors represent the amount receivable in respect of equity security transactions executed on behalf of clients with a corresponding balance included within trade and other payables (note 21). As at 31 March 2021, the other debtors balance included a deposit of AUD$25,000,000 (£13,781,000) which was repaid as part of the transaction with ANZ as described in note 1. 17. Derivative financial instruments Assets GROUP 31 March 2022 Notional amount £m 31 March 2022 Carrying amount £’000 31 March 2021 Notional amount £m 31 March 2021 Carrying amount £’000 Held for trading Index, commodity, foreign exchange, cryptocurrency and treasury futures 97.5 1,774 198.1 2,058 Forward foreign exchange contracts 90.2 417 227.0 681 Held for hedging Forward foreign exchange contracts – economic hedges 14.0 78 27.2 331 Forward foreign exchange contracts – net investment hedges 40.0 90 52.2 171 Total 241.7 2,359 504.5 3,241 Liabilities GROUP 31 March 2022 Notional amount £m 31 March 2022 Carrying amount £’000 31 March 2021 Notional amount £m 31 March 2021 Carrying amount £’000 Held for trading Index, commodity, foreign exchange, cryptocurrency and treasury futures 107.6 (1,690) 217.6 (2,409) Forward foreign exchange contracts 79.4 (131) 38.1 (216) Held for hedging Forward foreign exchange contracts – economic hedges 36.0 (530) 48.6 (451) Forward foreign exchange contracts – net investment hedges 4.7 (11) — (1) Total 227.7 (2,362) 304.3 (3,077) The fair value of derivative contracts and cryptocurrencies are based on the market price of comparable instruments at the balance sheet date. All derivative financial instruments have a maturity date of less than one year. Financial statements 138 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 17. Derivative financial instruments continued Held for trading As described in note 30, the Group enters into derivative contracts and holds cryptocurrencies in order to hedge its market price risk exposure arising from open client positions. Held for hedging The Group’s forward foreign exchange contracts are designated as either economic or net investment hedges. Economic hedges are held for the purpose of mitigating currency risk relating to transactional currency flows arising from earnings in foreign currencies but do not meet the criteria for designation as hedges. During the year ended 31 March 2022, £869,000 of gains net of revaluation gains or losses relating to economic hedges were recognised in the income statement (year ended 31 March 2021: gains of £328,000). The Group has designated a number of foreign exchange derivative contracts as hedges of the net investment in the Group’s foreign operations. At 31 March 2022, £8,662,000 (31 March 2021: £7,573,000) of fair value losses were recorded in net investment hedging reserve within other reserves. At 31 March 2022, £7,827,000 (31 March 2021: £6,066,000) of fair value gains were recorded in the translation reserve within other reserves. During the year ended 31 March 2022, fair value losses of £1,089,000 (year ended 31 March 2021: losses of £2,007,000) relating to net investment hedges were recognised in other comprehensive income. All changes in the fair value were treated as being effective under IFRS 9 “Financial Instruments”; as a result there was no amount reclassified from the net investment hedging reserve or translation reserve into the income statement. The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets at the balance sheet date. The Group’s derivative positions are reported gross on the statement of financial position, as required by IAS 32 where there are no offset rights in place. There are no further netting arrangements or collateral posted which would impact the settlement of these balances. 18. Other assets GROUP 31 March 2022 £’000 31 March 2021 £’000 Exchange 953 — Vaults 12,490 — Total 13,443 — Other assets are cryptocurrencies, which are owned and controlled by the Group for the purpose of hedging the Group’s exposure to clients’ cryptocurrency trading positions. The Group holds cryptocurrencies on exchange and in vault as above. 19. Financial investments GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 UK government securities At 1 April 28,037 25,385 Purchase of securities 28,337 28,933 Maturity of securities and coupon receipts (28,428) (26,256) Net accrued interest (17) 29 Changes in the fair value of debt instruments at fair value through other comprehensive income (54) (54) At 31 March 27,875 28,037 Equity securities At 1 April 67 60 Foreign currency translation 3 7 At 31 March 70 67 Total 27,945 28,104 Financial statements 139 CMC Markets plc Annual Report and Financial Statements 2022 19. Financial investments continued The effective interest rates of UK government securities held at the year end range from -0.19% to 1.72% (31 March 2021: -0.20% to 1.70%). GROUP 31 March 2022 £’000 31 March 2021 £’000 Analysis of financial investments Non-current 13,448 — Current 14,497 28,104 Total 27,945 28,104 Financial investments are shown as current assets when they have a maturity of less than one year and as non-current when they have a maturity of more than one year. All of the Group’s UK government securities measured at FVOCI are considered to have low credit risk. These UK government securities are held to meet the Group’s regulatory threshold requirements under IFPR. There was no impairment identified in the year ended 31 March 2022 (year ended 31 March 2021: £nil). 20. Cash and cash equivalents GROUP COMPANY 31 March 2022 £’000 31 March 2021 £’000 31 March 2022 £’000 31 March 2021 £’000 Gross cash and cash equivalents 723,213 668,304 28,263 167 Less: client monies (546,635) (549,383) — — Cash and cash equivalents 176,578 118,921 28,263 167 Analysed as: Cash at bank 176,578 118,921 28,263 167 Cash and cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Analysis of net cash GROUP 31 March 2022 £’000 31 March 2021 £’000 Cash and cash equivalents 176,578 118,921 Borrowings (194) (1,139) Lease liabilities (14,185) (15,326) Net cash 162,199 102,456 GROUP Borrowings Lease liabilities Sub-total Cash and cash equivalents Total At 1 April 2020 (1,631) (19,273) (20,904) 84,307 63,403 Financing cash flows 1,190 6,057 7,247 30,668 37,915 Inception/modification of leases and non-cash borrowings (698) (1,181) (1,879) — (1,879) Foreign exchange adjustments — (929) (929) 3,946 3,017 At 31 March 2021 (1,139) (15,326) (16,465) 118,921 102,456 Financing cash flows 945 5,962 6,907 56,281 63,188 Inception/modification of leases — (4,658) (4,658) — (4,658) Foreign exchange adjustments — (163) (163) 1,376 1,213 At 31 March 2022 (194) (14,185) (14,379) 176,578 162,199 Financial statements 140 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 21. Trade and other payables GROUP COMPANY 31 March 2022 £’000 31 March 2021 £’000 31 March 2022 £’000 31 March 2021 £’000 Current Gross trade payables 593,995 580,062 10 — Less: client monies (546,635) (549,383) — — Trade payables 47,360 30,679 10 — Tax and social security 2,242 236 — — Stockbroking creditors 123,875 89,091 — — Accruals and other creditors 42,376 32,247 133 60 Total 215,853 152,253 143 60 Stockbroking creditors represent the amount payable in respect of equity and securities transactions executed on behalf of clients with a corresponding balance included within trade and other receivables (note 16). 22. Borrowings GROUP COMPANY 31 March 2022 £’000 31 March 2021 £’000 31 March 2022 £’000 31 March 2021 £’000 Current Other liabilities 194 945 — — 194 945 — — Non-current Other liabilities — 194 — — Amount due to Group companies — — — 13,549 — 194 — 13,549 Total 194 1,139 — 13,549 The fair value of financial liabilities is approximately equivalent to the book value shown above. Bank loans In March 2022 , the syndicated revolving credit facility was renewed at a level of £55,000,000 (31 March 2021: £55,000,000) where £27,500,000 had a maturity date of March 2023 and £27,500,000 had a maturity date of March 2025. This facility can only be used to meet broker margin requirements of the Group. The rate of interest payable on any loans is the aggregate of the applicable margin and SONIA. Other fees such as commitment fees, legal fees and arrangement fees are also payable on this facility (note 7). No amount was outstanding on this facility at 31 March 2022 (31 March 2021: £nil). Financial statements 141 CMC Markets plc Annual Report and Financial Statements 2022 23. Lease liabilities The Group leases several assets including leasehold properties and computer hardware to meet its operational business requirements. Theaverage lease term is 2.1 years. ROU asset balances relate to both leasehold properties and computer hardware. Refer to note 13 for a breakdown of the carrying amount ofROU assets. The movements in lease liabilities during the year were as follows: GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 At 1 April 15,326 19,273 Additions 4,658 1,181 Interest expense 700 818 Lease payments made during the year (6,662) (6,875) Foreign currency translation 163 929 At 31 March 14,185 15,326 GROUP 31 March 2022 £’000 31 March 2021 £’000 Analysis of lease liabilities Non-current 9,269 10,727 Current 4,916 4,599 Total 14,185 15,326 The lease payments for the year ended 31 March 2022 relating to short-term leases amounted to £207,000 (year ended 31 March 2021: £748,000). As at 31 March 2022 the potential future undiscounted cash outflows that have not been included in the lease liability due to lack of reasonable certainty the lease extension options might be exercised amounted to £nil (31 March 2021: £nil). Refer to note 29 for maturity analysis of lease liabilities. 24. Provisions GROUP EBT commitments £’000 Property related £’000 Other £’000 Total £’000 At 1 April 2020 122 1,958 394 2,474 Additional provision — 113 1,463 1,576 Utilisation of provision (122) (27) (258) (407) Currency translation — 57 — 57 At 31 March 2021 — 2,101 1,599 3,700 Additional provision — 623 — 623 Utilisation of provision — (326) (1,506) (1,832) Currency translation — 18 (23) (5) At 31 March 2022 — 2,416 70 2,486 The provision relating to EBTs represents the obligation to distribute assets held in EBTs to beneficiaries. The property-related provisions include dilapidation provisions. Dilapidation provisions have been capitalised as part of cost of ROU assets and are amortised over the term of the lease. These dilapidation provisions are utilised as and when the Group vacates a property and expenditure is incurred to restore the property to its original condition. The other provisions balance on 31 March 2022 predominantly relates to provisions made for client complaints linked to market volatility during Q1 2021. GROUP 31 March 2022 £’000 31 March 2021 £’000 Analysis of total provisions Current 369 1,889 Non-current 2,117 1,811 Total 2,486 3,700 Financial statements 142 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 25. Share capital, share premium and capital redemption reserve Number £’000 GROUP AND COMPANY 31 March 2022 31 March 2021 31 March 2022 31 March 2021 Authorised Ordinary Shares of 25p 400,000,000 400,000,000 100,000 100,000 Allotted, issued and fully paid Ordinary Shares of 25p 290,293,919 290,717,473 72,573 72,679 Deferred Shares of 25p 2,478,086 2,478,086 620 620 Total 292,772,005 293,195,559 73,193 73,299 Share class rights The Company has two classes of shares, Ordinary and Deferred, neither of which carries a right to fixed income. Deferred Shares have no voting or dividend rights. In the event of a winding-up, Ordinary Shares shall be repaid at nominal value plus £500,000 each in priority to Deferred Shares. GROUP AND COMPANY Ordinary Shares Number Deferred Shares Number Total Number At 1 April 2020 289,117,473 2,478,086 291,595,559 New shares issued 1,600,000 — 1,600,000 At 31 March 2021 290,717,473 2,478,086 293,195,559 New shares issued 700,000 — 700,000 Shares cancelled (1,123,554) — (1,123,554) At 31 March 2022 290,293,919 2,478,086 292,772,005 GROUP AND COMPANY Ordinary Shares £’000 Deferred Shares £’000 Share premium £’000 Capital redemption reserve £’000 Total £’000 At 1 April 2020 72,279 620 46,236 — 119,135 New shares issued 400 — — — 400 At 31 March 2021 72,679 620 46,236 — 119,535 New shares issued 175 — — — 175 Shares cancelled (281) — — 281 — At 31 March 2022 72,573 620 46,236 281 119,710 Movements in share capital and premium During the year ended 31 March 2022, 700,000 (year ended 31 March 2021: 1,600,000) shares with nominal value of 25 pence were issued to Employee Benefit Trusts (EBTs). During the year ended 31 March 2022, 1,123,554 (year ended 31 March 2021: nil) shares with nominal value of 25 pence were cancelled pursuant to the share buyback programme. During the year ended 31 March 2022, no Ordinary Shares were converted to Deferred Shares in accordance with the terms of grant to employees who have now left the Group (year ended 31 March 2021: nil). Capital redemption reserve On 14 March 2022, the Board approved a share buyback programme with up to £30.0 million to be returned to shareholders. During the period starting 17 March 2022 and up to 31 March 2022, the Company repurchased and cancelled 1,123,554 Ordinary Shares with nominal value of 25 pence. The amount by which the Company’s share capital is diminished on the cancellation of the purchased shares is transferred to the capital redemption reserve. This amounted to £281,000 for the year ended 31March 2022. Financial statements 143 CMC Markets plc Annual Report and Financial Statements 2022 26. Own shares held in trust GROUP Number £’000 Ordinary Shares of 25p At 1 April 2020 355,904 433 Acquisition 1,610,877 364 Utilisation (1,630,770) (415) At 31 March 2021 336,011 382 Acquisition 1,039,903 1,006 Utilisation (722,299) (294) At 31 March 2022 653,615 1,094 The shares are held by various EBTs for the purpose of encouraging or facilitating the holding of shares in the Company for the benefit of employees and the trustees will apply the whole or part of the trust’s funds to facilitate dealing in shares by such beneficiaries. 27. Other reserves GROUP Translation reserve £’000 Net investment hedging reserve £’000 FVOCI reserve £’000 Merger reserve £’000 Share buyback reserve £’000 Total £’000 At 1 April 2020 1,503 (5,566) 27 (47,800) — (51,836) Currency translation differences 4,563 — — — — 4,563 Losses on net investment hedges — (2,007) — — — (2,007) Losses on financial investments at FVOCI — — (54) — — (54) At 31 March 2021 6,066 (7,573) (27) (47,800) — (49,334) Currency translation differences 1,761 — — — — 1,761 Share buyback — — — — (27,264) (27,264) Losses on net investment hedges — (1,089) — — — (1,089) Losses on financial investments at FVOCI — — (54) — — (54) At 31 March 2022 7,827 (8,662) (81) (47,800) (27,264) (75,980) Translation reserve The translation reserve is comprised of translation differences on foreign currency net investments held by the Group. Net investment hedging reserve Overseas net investments are hedged using forward foreign exchange contracts. Gains and losses on instruments used to hedge these overseas net investments are shown in the net investment hedging reserve. These instruments hedge balance sheet translation risk, which is the risk of changes in reserves due to fluctuations in currency exchange rates. All changes in the fair value of these hedging instruments were treated as being effective under IFRS 9 “Financial Instruments”. FVOCI reserve The Group holds certain UK government securities measured at FVOCI. For these investments, changes in fair value are accumulated within the FVOCI reserve within other reserves. The accumulated changes in fair value are transferred to profit or loss when the investments are derecognised or impaired. Merger reserve The merger reserve arose following a corporate restructure in 2005 when a new holding company, CMC Markets plc, was created to bring all CMC companies into the same corporate structure. The merger reserve represents the difference between the nominal value of the holding Company’s share capital and that of the acquired companies. Financial statements 144 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 27. Other reserves continued Share buyback reserve On 14 March 2022, the Board approved a share buyback programme with up to £30.0 million to be returned to shareholders. On inception of the contract, a financial liability of £30,239,000 was established representing the financial liability for the full value of the share buyback programme plus directly attributable costs. The share buyback reserve amount is reduced by the consideration paid for the repurchased shares with a corresponding transaction recorded within Retained earnings to reflect the consumption of distributable profits. The shares purchased and the average price paid per share for the year ended 31 March 2022 were as follows: Year ended 31 March Number of shares purchased Aggregate purchase amount Average price of shares purchased 2022 1,123,554 £2,975,000 £2.65 28. Cash generated from/(used in) operations GROUP COMPANY Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Cash flows from operating activities Profit before taxation 92,136 224,010 102,550 61,140 Adjustments for: Interest income (834) (746) — (21) Dividends received — — (103,617) (61,950) Finance costs 2,177 1,762 475 648 Impairment of investment in subsidiaries — — 294 415 Depreciation 10,081 9,254 — — Amortisation of intangible assets 2,820 1,985 — — Research and development tax credit (743) (728) — — Loss/(Profit) on disposal of property, plant and equipment 86 (109) — — Other non-cash movements including exchange rate movements (681) (908) — — Share-based payment 356 (2,045) — — Changes in working capital (Increase)/Decrease in trade and other receivables (29,800) 59,616 12,999 553 Decrease/(Increase) in amounts due from brokers 57,778 (119,619) — — Increase in other assets (13,443) — — — Increase/(Decrease) in trade and other payables 63,600 (24,932) 83 (31) Decrease in net derivative financial instruments 76 2,574 — — (Decrease)/Increase in provisions (1,814) 1,186 — — Cash generated from operations 181,795 151,300 12,784 754 29. Financial instruments Analysis of financial instruments by category The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments on an IFRS 9 basis. 31 March 2022 GROUP Assets at FVOCI £’000 Assets at FVPL £’000 Assets at amortised cost £’000 Total £’000 Financial assets Cash and cash equivalents — — 176,578 176,578 Financial investments 27,875 70 — 27,945 Amounts due from brokers — — 196,117 196,117 Derivative financial instruments — 2,359 — 2,359 Trade and other receivables excluding non-financial assets — — 148,092 148,092 27,875 2,429 520,787 551,091 Financial statements 145 CMC Markets plc Annual Report and Financial Statements 2022 29. Financial instruments continued Analysis of financial instruments by category continued 31 March 2022 Liabilities at FVOCI £’000 Liabilities at FVPL £’000 Liabilities at amortised cost £’000 Total £’000 Financial liabilities Trade and other payables excluding non-financial liabilities — — (213,611) (213,611) Share buyback liability — — (27,264) (27,264) Derivative financial instruments — (2,362) — (2,362) Borrowings — — (194) (194) Lease liabilities — — (14,185) (14,185) — (2,362) (255,254) (257,616) 31 March 2021 GROUP Assets at FVOCI £’000 Assets at FVPL £’000 Assets at amortised cost £’000 Total £’000 Financial assets Cash and cash equivalents — — 118,921 118,921 Financial investments 28,037 67 — 28,104 Amounts due from brokers — 1,520 252,375 253,895 Derivative financial instruments — 3,241 — 3,241 Trade and other receivables excluding non-financial assets — — 119,617 119,617 28,037 4,828 490,913 523,778 31 March 2021 Liabilities at FVOCI £’000 Liabilities at FVPL £’000 Liabilities at amortised cost £’000 Total £’000 Financial liabilities Trade and other payables excluding non-financial liabilities — — (152,017) (152,017) Derivative financial instruments — (3,077) — (3,077) Borrowings — — (1,139) (1,139) Lease liabilities — — (15,326) (15,326) — (3,077) (168,482) (171,559) Maturity analysis 31 March 2022 GROUP On demand £’000 Less than three months £’000 Three months to one year £’000 After one year £’000 Total £’000 Financial assets Cash and cash equivalents 176,578 — — — 176,578 Financial investments 70 — 14,837 13,338 28,245 Amounts due from brokers 196,117 — — — 196,117 Derivative financial instruments — 2,359 — — 2,359 Trade and other receivables 144,364 1,810 354 1,564 148,092 517,129 4,169 15,191 14,902 551,391 Financial liabilities Trade and other payables (excluding non-financial) (213,611) — — — (213,611) Share buyback liability (27,264) — — — (27,264) Derivative financial instruments — (2,362) — — (2,362) Borrowings — — (194) — (194) Lease liabilities — (1,443) (4,146) (9,506) (15,095) (240,875) (3,805) (4,340) (9,506) (258,526) Net liquidity gap 276,254 364 10,851 5,396 292,865 Financial statements 146 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 29. Financial instruments continued Maturity analysis continued 31 March 2021 GROUP On demand £’000 Less than three months £’000 Three months to one year £’000 After one year £’000 Total £’000 Financial assets Cash and cash equivalents 118,921 — — — 118,921 Financial investments 67 — 27,251 — 27,318 Amounts due from brokers 253,895 — — — 253,895 Derivative financial instruments — 3,241 — — 3,241 Trade and other receivables 101,553 14,589 1,674 1,800 119,616 474,436 17,830 28,925 1,800 522,991 Financial liabilities Trade and other payables (excluding non-financial) (152,017) — — — (152,017) Derivative financial instruments — (3,077) — — (3,077) Borrowings — (42) (904) (194) (1,140) Lease liabilities — (1,453) (3,660) (11,444) (16,557) (152,017) (4,572) (4,564) (11,638) (172,791) Net liquidity gap 322,419 13,258 24,361 (9,838) 350,200 The amounts disclosed in the table are the contractual undiscounted cash flows, including principal and interest payments, these amounts will not reconcile to the amounts disclosed in the Statement of Financial Position. Given that 94% of the Group’s financial assets are available on demand, there is no significant maturity risk as at 31 March 2022 (31 March 2021: 91%). 31 March 2022 COMPANY On demand £’000 Less than three months £’000 Three months to one year £’000 After one year £’000 Total £’000 Financial assets Cash and cash equivalents 28,263 — — — 28,263 Trade and other receivables 1,013 — — — 1,013 29,276 — — — 29,276 Financial liabilities Trade and other payables (143) — — — (143) Share buyback liability (27,264) — — — (27,264) (27,407) — — — (27,407) Net liquidity gap 1,869 — — — 1,869 31 March 2021 COMPANY On demand £’000 Less than three months £’000 Three months to one year £’000 After one year £’000 Total £’000 Financial assets Cash and cash equivalents 167 — — — 167 Trade and other receivables 159 13,781 — — 13,940 326 13,781 — — 14,107 Financial liabilities Trade and other payables (60) — — — (60) Borrowings — — — (13,549) (13,549) (60) — — (13,549) (13,609) Net liquidity gap 266 13,781 — (13,549) 498 Financial statements 147 CMC Markets plc Annual Report and Financial Statements 2022 29. Financial instruments continued Fair value estimation The Group’s assets and liabilities that are measured at fair value are derivative financial instruments, financial investments in UK government securities and equity securities. The table below categorises those financial instruments measured at fair value based on the following fair value measurement hierarchy: • Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); or • Level 3 – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). 31 March 2022 GROUP Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 Financial investments 27,875 — 70 27,945 Derivative financial instruments (current assets) — 2,359 — 2,359 Derivative financial instruments (current liabilities) — (2,362) — (2,362) 27,875 (3) 70 27,942 31 March 2021 GROUP Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000 Financial investments 28,037 — 67 28,104 Derivative financial instruments (current assets) — 3,241 — 3,241 Derivative financial instruments (current liabilities) — (3,077) — (3,077) Amounts due from brokers 1,520 — — 1,520 29,557 164 67 29,788 30. Financial risk management The Group’s day-to-day business activities naturally expose it to strategic, financial (including credit, counterparty, market and liquidity) and operational risks. The Board accepts that it cannot place a cap or limit on all of the risks to which the Group is exposed to, however, effective risk management ensures that risks are managed to an acceptable level. The Board is ultimately responsible for the implementation of an appropriate risk strategy, defining and communicating the Group’s risk appetite, the establishment and maintenance of effective systems and controls, and continued monitoring of the adherence to Group policies. The Group has adopted a standard risk process, through a five-step approach to risk management: risk identification; risk assessment; risk management; risk reporting; and risk monitoring. The approach to managing risk within the business is governed by the Board-approved Risk Appetite Statement and Risk Management Framework. The Board sets the strategy and the policies for managing these risks and delegates the monitoring and management of these risks to various Committees including the Risk Management Committee, which in turn reports to the Group Risk Committee. The Group’s ICAAP review document is prepared under the requirements set out in the Financial Conduct Authority (“FCA”) Rulebook in accordance with CRD IV. From 1st January 2022, the Investment Firm Prudential Regime (“IFPR”) has become applicable for FCA regulated investment firms. A key purpose of an ICAAP review document, and its successor the ICARA review document, is to inform a firm’s board of the ongoing assessment of the firm’s risks, how the firm intends to mitigate those risks, and how much current and future capital and liquidity isnecessary to hold against those risks. This is achieved by considering potential stresses as well as mitigating factors. Financial risks arising from financial instruments are categorised into market, credit, counterparty and liquidity risks which, together with how the Group categorises and manages these risks, are described below. 1 The Capital Requirements Directive (2013/36/EU) (“CRD”) and the Capital Requirements Regulation (575/2013) (“CRR”), called “CRD IV”. Financial statements 148 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 30. Financial risk management continued Market risk Market risk is defined as the risk that the value of our residual portfolio will decrease due to the change in market risk factors. The three standard market risk factors are price moves, interest rates and foreign exchange rates. Mitigation of market risk The Group benefits from a number of factors which also reduce the volatility of its revenue and protect it from market shocks as follows: • Natural mitigation of concentration The Group acts as a market maker in over 10,000 cross asset class instruments, specifically equities, equity indices, commodities, treasuries, foreign exchange and cryptocurrencies. Due to the high level of notional turnover there is a high level of internal crossing and natural aggregation across instruments and asset classes to mitigate significant single instrument concentration risk within the portfolio. • Natural aggregation In the year ended 31 March 2022 , the Group had over 64,000 Leveraged active clients. This large international client base has a diverse range of trading strategies resulting in the Group enjoying a high degree of natural aggregation between clients. This “portfolio effect” leads to a significant reduction in the Group’s net market risk exposure. • Ease of hedging The Group predominantly acts as a market maker in linear, highly liquid financial instruments in which it can easily neutralise market risk exposure through its prime broker (“PB”) arrangements. In order to avoid over-reliance on one arrangement the Group policy is to have two PBs per asset class. For instruments where there is no equivalent underlying market (e.g. Countdowns) the Group controls its risk through setting prudent position/exposure limits. This is further augmented by dealer monitoring and intervention, which can take the form of restricting the size offered or, if deemed necessary, restricting the clients’ ability to take a position in an instrument. Market risk limits Market risk exposures are managed in accordance with the Group’s Risk Appetite Statement and Group Risk Management Framework to ensure that the Group has sufficient capital resources to support the calculated market risk capital requirement as well as staying within its risk appetite. The Group manages this component under notional position limits that are set on an instrument and asset class level with overarching capital-based limits. Client exposures can vary significantly over a short period of time and are highly dependent on underlying market conditions. The Group’s own funds requirements (“OFR”) are calculated in accordance with the IFPR. The Market Risk OFR has decreased compared to the prior year and remains within the Board-approved risk appetite. GROUP OFR 31 March 2022 £’000 31 March 2021 £’000 Asset class Consolidated equities 20,284 29,462 Commodities 7,586 7,362 Fixed income and interest rates 2,062 1,067 Foreign exchange 14,222 18,090 Cryptocurrencies 551 6,140 44,705 62,121 Market price risk – stress testing Group Financial Risk conducts market price risk stress testing on a daily basis. The stress testing approach is tailored according to the asset class and the client behaviour to ensure the most suitable stress testing model is used. For example longer/shorter holding periods, intra-day movements or end-of-day positions, historical volatility or Conditional Value at Risk (“CVaR”)/ Expected Tail Loss (“ETL”) (for severe market movements). The Group not only runs likely and probable scenarios but also extreme case stress scenarios, where thestress factors simulate low probability severe events to assess potential impact on capital adequacy. Financial statements 149 CMC Markets plc Annual Report and Financial Statements 2022 30. Financial risk management continued Non-trading book interest rate risk Interest rate risk arises from either less interest being earned or more being paid on interest-bearing assets and liabilities due to a change in the relevant floating rate. Interest rate risk is felt by the Group through a limited number of channels: income on segregated client and own funds; debits on client balances that are over a pre-defined threshold; and changes to the value of fixed rate UK government securities held. The sensitivity analysis performed is based on a reasonable and possible move in the floating rate by 1.25% upwards and 0.25% downwards. Thisis in line with the Bank of England MPC’s projections. This is summarised in the below table and reflects the Group’s view that in the current economic environment, interest rate volatility is unlikely to have a significant impact on the profits of the Group. Changes in interest rate variables result in a decrease/increase in the fair value of fixed rate financial assets classified as available for sale. Thishas no material impact on the Group’s equity. 31 March 2022 GROUP Absolute increase £’000 Absolute decrease £’000 Impact of 1.25% change 0.25% change Profit after tax 5,776 (990) Equity 5,776 (990) 31 March 2021 GROUP Absolute increase £’000 Absolute decrease £’000 Impact of 0.50% change 0.25% change Profit after tax 1,530 (671) Equity 1,530 (671) Non-trading book foreign exchange risk Foreign exchange risk is the risk that the Group’s results are impacted by movements in foreign exchange rates. CMC is exposed to foreign exchange risk in the form of transaction and translation exposure. Transaction exposure is from holdings of cash and other current assets and liabilities in a currency other than the base currency of the entity. This risk is hedged each month by the Liquidity Risk Management team according to a policy based on a cap and floor model, with gains/losses recognised in the income statement. Any foreign exchange transaction exposures are hedged in accordance with Group Foreign Exchange Hedging Policy. Given the effectiveness of the hedging programme (Income statement impact in year ended 31 March 2022: gain of £52,000 (year ended 31 March 2021: gain of £328,000), no sensitivity analysis has been performed. These “fair value hedges” are derivative financial instruments and are reported as described in note 17. Translation exposure occurs when the net assets of an entity are denominated in a foreign currency other than GBP, when the Consolidated Statement of Financial Position is prepared. The Group hedges this exposure by using FX spot, forwards and swaps in relation to exposures considered to have a potential material impact on the Group’s net assets and regulatory capital. The unhedged portion does not pose a significant risk to the capital adequacy or to the ongoing profitability of the Group. The economic relationship between the hedged item and the hedging instrument is determined using critical terms matching for the purpose of assessing hedge effectiveness. The Group Risk Management Policy outlines the Group’s appetite to manage the translation exposure. The Dollar offset method is used to determine ineffectiveness. At 31 March 2022, £8,662,000 (31 March 2021: £7,573,000) of fair value losses were recorded in net investment hedging reserve within other reserves. At 31 March 2022, £7,827,000 (31 March 2021: £6,066,000) of fair value gains were recorded in translation reserve within other reserves. During the year ended 31 March 2022, fair value losses of £1,089,000 (year ended 31 March 2021: losses of £2,007,000) relating to net investment hedges were recognised in other comprehensive income. All changes in the fair value were treated as being effective under IFRS 9 “Financial Instruments”; as a result there was no amount reclassified from the net investment hedging reserve or translation reserve into the income statement. These “net investment hedges” are derivative financial instruments and are reported as described in note 17. Financial statements 150 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 30. Financial risk management continued Credit risk Credit risk is the risk of losses arising from a counterparty failing to meet its obligations as they fall due. Credit risk is divided into credit, counterparty and settlement risk. Below are the channels of credit risk the Group is exposed through: • Financial Institutions (“FIs”); and • Client. Financial institution credit risk The Group has relationships with a number of counterparties that provide prime brokerage and/or banking services (e.g. cash accounts, foreign exchange trading, credit facilities, custodian services, etc.). FI credit risk can be felt in the following ways: • For FIs used as a bank and those as a broker, the Group does not receive the funds the FIs hold on the Group’s account. • For FIs used as a prime broker, a default will result in a loss of any unrealised profits and could cause the need to re-hedge at a different broker at a different price. • For FIs used as a cryptocurrency counterparty, the loss of physical assets. Mitigation of FIs credit risk To mitigate or avoid a credit loss: • The Group maintains, where practical, a range of relationships to reduce over-reliance on a single FI – as detailed in the Group Counterparty Concentration Risk Policy. • The Group regularly monitors the credit worthiness of the Institutions that it is exposed to and reviews counterparties at least annually – asdetailed in the Group Hedge Counterparty Selection Policy. Contractual losses can be reduced by the “close-out netting” conditions in the ISDA and broker agreements. If a specified event of default occurs, all transactions or all of a given type are terminated and netted (i.e. set off against each other) at market value or, if otherwise specified in the contract or if it is not possible to obtain a market value, at an amount equal to the loss suffered by the non-defaulting party in replacing the relevant contract. In order to manage both credit and counterparty credit risk within appetite the Group sets internal limits. As defined in the Group’s policies the limits determine the total balance that can be held with each rated FI, each unrated FI and each cryptocurrency counterparty. These limits are expressed as a maximum percentage of capital, in the case of rated FIs, or a fixed amount for both unrated FIs and cryptocurrency counterparties. Liquidity Risk Management monitors the credit quality of all FIs and cryptocurrency counterparties, by tracking the credit ratings issued by Standard & Poor’s and Fitch rating agencies, the credit default swap (“CDS”) spreads determined in the CDS market, share price, performance against a relevant index, and other relevant metrics. All rated FIs that the Group transacts with are of investment grade quality; however, no quantitative credit rating limits are set by the Group that FIs must exceed because the choice of suitable FIs is finite and therefore setting minimum rating limits could lead to the possibility that no FIs are able to meet them. As an alternative, the Group reviews negative rating action and large CDS spread widening to FIs on a case-by-case basis. Should an institution’s credit rating fall below investment grade, the Risk Management Committee will be called and options discussed. Possible actions by the Group to reduce exposure to FIs depend on the nature of the relationship and the practical availability of substitute FIs. Possible actions include the withdrawal of cash balances from a FI on a daily basis, switching a proportion of hedge trading to another prime broker FI or ceasing all commercial activity with the FI. The tables below present CMC Markets plc’s exposure to credit institutions (or similar) based on their long-term credit rating: 31 March 2022 GROUP Cash and cash equivalents £’000 Amounts due from brokers £’000 Other assets £’000 Net derivative financial instruments £’000 Total £’000 AA+ to AA- 56,252 — — — 56,252 A+ to A- 26,618 — — — 26,618 BBB+ to BBB- 79,055 172,771 — 5 251,831 Unrated 14,653 23,346 13,443 (8) 51,434 176,578 196,117 13,443 (3) 386,135 Financial statements 151 CMC Markets plc Annual Report and Financial Statements 2022 30. Financial risk management continued Credit risk continued Mitigation of FIs credit risk continued 31 March 2021 GROUP Cash and cash equivalents £’000 Amounts due from brokers £’000 Net derivative financial instruments £’000 Total £’000 AA+ to AA- 55,948 — — 55,948 A+ to A- 56,364 86,568 202 143,134 BBB+ to BBB- 3,796 115,805 (38) 119,563 Unrated 2,813 51,522 — 54,335 118,921 253,895 164 372,980 No cash balances or deposits with institutions were considered impaired (year ended 31 March 2021: £nil). Client counterparty risk The Group’s CFD and spread bet business operates a real-time mark-to-market leveraged trading facility where clients are required to lodge collateral against positions, with any profits and losses generated by the client credited and debited automatically to their account. As with any leveraged product offering, there is the potential for a client to lose more than the collateral lodged. Client counterparty risk captures the risk associated with a client defaulting on its obligations due to the Group. As the Group does not offer most of its retail clients credit terms and has a robust liquidation process, client counterparty risk will in general only arise when markets and instruments gap and the movement in the value of a client’s leveraged portfolio exceeds the value of the equity that the client has held at the Group leaving the client account in deficit. “Negative balance protection” accounts do not pose counterparty risk to the Group as the maximum loss for this account type is limited to their account value. Further to this the Group operates as a designated clearing broker in Australia, where trading is subject to a settlement process for financial products transacted on the Australian Security Exchange and Chi-X Australia. As a result of this clearing process, the Group has settlement risk if a client or counterparty do not fulfil their side of the agreement by failing to deliver the underlying stock or value of the contract. While international securities trading is further offered to clients, this trading is predominantly fully vetted, which limits the settlement exposure generation. Mitigation of client counterparty risk • Liquidation process This is the automated process of closing a client’s open position(s) if the account’s total equity is not enough to cover a predefined percentage of required margin for the portfolio held. Pre-emptive processes are also in place where a client’s free equity (total equity less total margin requirement) becomes negative 1 . At this point the client’s account is restricted from increasing their position and a notification is sent inviting them to review their account. 1 Clients in some regions may use limited risk accounts, where it is guaranteed that a client cannot move to a negative equity balance. • Tiered margin Tiered margins were implemented in September 2013 on the Next Generation platform. It enables the Group to set higher margin rates (therefore requiring a client to lodge more collateral) against positions that are deemed to be more risky due to risk profile, which could be due to size relative to the underlying turnover, the Group’s risk appetite or volatility of the instrument. • Position limits Position limits can be implemented on an instrument and client level. The instrument level enables the Group to control the total exposure the Group acquires in a single instrument. At a client level this ensures that the client can only reach a pre-defined size in any one instrument or asset class. Additionally, a position limit on an underlying instrument can be applied limiting the overall exposure that can be reached through different futures of the same underlying. For FX the client position limits are based on Net Open Position (“NOP”) which limits the currency exposure a client can reached via different FX pairs. Client counterparty risk stress testing Group Financial Risk conducts client counterparty risk stress testing on a daily basis based on an internal model developed to assess the potential client counterparty risk exposure. The Group’s stress testing is based on scenarios with different severity including stress factors which simulate low probability severe events to assess potential impact. Financial statements 152 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 30. Financial risk management continued Credit risk continued Client debt history The Group determines expected credit losses for amounts due from clients, based on historic experience and forward looking considerations. The charge for the year was £575,000 (year ended 31 March 2021: £3,042,000), which amounts to 0.2% of total revenue (year ended 31 March 2021: 0.6%). During the year, debts of £2,118,000 were written off, which represented 0.7% of revenue (year ended 31 March 2021: £1,133,000, 0.2% of revenue). The table below details the movement on the Group provision for impairment of trade receivables under the expected credit loss model: GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Opening provision 7,762 5,853 Net debt provided 575 3,042 Debt written off (2,118) (1,133) Closing provision 6,219 7,762 Debt ageing analysis The Group seeks to minimise the effects of client debts on the Company’s profit and loss. Client debts are managed very early in their life cycle in order to minimise the likelihood of them ageing. Under the simplified approach, debts that are past due carry an expected credit loss provision as set out in the table below: 31 March 2022 GROUP Debt £’000 Provision £’000 Less than one month 221 28 One to three months 200 81 Three to twelve months 371 366 Over twelve months 5,749 5,744 6,541 6,219 31 March 2021 GROUP Debt £’000 Provision £’000 Less than one month 175 42 One to three months 2,348 1,363 Three to twelve months 1,308 1,162 Over twelve months 5,272 5,195 9,103 7,762 UK government securities All of the Group’s UK government securities measured at FVOCI are considered to have low credit risk. The majority of these UK government securities are held to meet the Group’s regulatory threshold requirements under IFPR. These UK government are in Stage 1 and ECL is immaterial for the year ended 31 March 2022 (year ended 31 March 2021: £nil). Cash and cash equivalents While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the ECL is immaterial for the year ended 31 March 2022 (year ended 31 March 2021: £nil). Financial statements 153 CMC Markets plc Annual Report and Financial Statements 2022 30. Financial risk management continued Liquidity risk Liquidity risk is the risk that there is insufficient available liquidity to meet the obligations of the Group as they fall due. Liquidity is managed centrally for the Group by the Treasury team. The Group utilises a combination of liquidity forecasting and stress testing (formally documented in the Individual Liquidity Adequacy Assessment (“ILAA”) and its successor the ICARA) to ensure that it retains access to sufficient liquid resources under both normal and stressed conditions to meet its liabilities as they fall due. Liquidity forecasting incorporates the impact of liquidity regulations in force in each jurisdiction that the Group is active in and other impediments to the free movement of liquidity around the Group, including its own protocols on minimum liquidity to be retained by overseas entities. Liquidity stress testing is performed quarterly using a range of firm-specific and market-wide scenarios that represent severe but plausible stress events that the Group could be exposed to over the short and medium term. The Group ensures that the tests are commensurate to its current and future liquidity risk profile. Output from the quarterly stress testing process is used to calibrate a series of limits and metrics which are monitored and reported to senior management daily. This process seeks to ensure that the Group has appropriate sources of liquidity in place to meet its liabilities as they fall due under both “business as usual” and stressed conditions. Due to the risk management strategy adopted and the changeable scale of the client trading book, the largest and most variable consumer of liquidity is PB margin requirements. Thecollateral calls are met in cash from own funds but to ensure liquidity is available for extreme spikes, the Group has a committed bank facility of £55.0 million to meet short-term liquidity obligations to PBs in the event that it does not have sufficient access to own cash and toleave a sufficient liquidity buffer to cope with a stress event. The Group does not actively engage in maturity transformation as part of its underlying business model and therefore maturity mismatch ofassets and liabilities does not represent a material liquidity risk. Own funds Own funds is a key measure the Group uses to monitor the overall level of liquidity available to the Group. Own funds includes investments in UK government securities, the majority of which are held to meet the Group’s regulatory threshold requirements under IFPR. The derivation of own funds is shown in the table below: GROUP 31 March 2022 £’000 31 March 2021 £’000 Cash and cash equivalents (net of bank overdraft) 176,578 118,921 Amount due from brokers 196,117 253,895 Other assets 13,443 — Financial investments 27,945 28,104 Derivative financial instruments (current assets) 2,359 3,241 416,442 404,161 Less: title transfer funds (44,133) (30,679) Less: derivative financial instruments (current liabilities) (2,362) (3,077) Own funds 369,947 370,405 Financial statements 154 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 30. Financial risk management continued Liquidity risk continued Own funds continued The following Own Funds Flow Statement summarises the Group’s generation of own funds during each year and excludes all cash flows in relation to monies held on behalf of clients. Additionally, short-term financial investments, amounts due from brokers and amounts receivable/ (payable) on the derivative financial instruments have been included within “own funds” in order to provide a clear presentation of the Group’s potential cash resources. GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Operating activities Profit before tax 92,136 224,010 Adjustments for: Finance costs 2,177 1,762 Depreciation and amortisation 12,901 11,239 Other non-cash adjustments (1,124) (4,083) Tax paid (14,651) (33,620) Own funds generated from operating activities 91,439 199,308 Movement in working capital 18,532 13,863 Outflow from investing activities Net purchase of property, plant and equipment and intangible assets (25,313) (12,190) Other outflow from investing activities (998) (1,761) Outflow from financing activities Proceeds from issue of Ordinary Shares — 80 Interest paid (2,177) (1,762) Dividends paid (72,604) (62,128) Share buyback (2,975) — Other outflow from financing activities (7,738) (7,291) Total outflow from investing and financing activities (111,805) (85,052) (Decrease)/Increase in own funds (1,834) 128,119 Own funds at the beginning of the year 370,405 238,340 Effect of foreign exchange rate changes 1,376 3,946 Own funds at the end of the year 369,947 370,405 Capital management The Group’s objectives for managing capital are as follows: • to comply with the capital requirements set by the financial market regulators to which the Group is subject; • to ensure that all Group entities are able to operate as going concerns and satisfy any minimum externally imposed capital requirements; and • to ensure that the Group maintains a strong capital base to support the development of its business. The capital resources of the Group consist of equity, being share capital reduced by own shares held in trust, share premium, other reserves and retained earnings, which at 31 March 2022 totalled £370,365,000 (31 March 2021: £400,517,000). The Group has been compliant with all applicable prudential regulatory requirements to which it is subject throughout the year. The Group’s ICAAP review document, prepared under the requirements of the FCA and CRD IV, is an ongoing assessment of CMC Markets plc’ risks and risk mitigation strategies, to ensure that adequate capital is maintained against risks that the Group wishes to take to achieve its business objectives. The Group is currently preparing the first iteration of its ICARA review document. The outcome of the ICARA is presented as an Internal Capital and Liquidity Assessment document covering the Group. It is reviewed and approved by the Board on an annual basis. Further information on the Group’s management of regulatory capital was previously provided in the “Pillar 3 Disclosure” report, which is available on the CMC Markets plc website (www.cmcmarkets.com/group). In accordance with the new IFPR rules, disclosure requirements are now only applicable at a solo regulated entity level. These are also available on the Group’s website. The Group’s country-by-country reporting disclosure is also available in the same location on the website. Financial statements 155 CMC Markets plc Annual Report and Financial Statements 2022 31. Share-based payment The Group operates both equity and cash settled share options schemes for certain employees including Directors. Current awards have been granted under the terms of the Management Equity Plan 2015 (“2015 MEP”), the Combined Incentive Plan (“2018 CIP”), the UK Share Incentive Plan (“UK SIP”) and the International Share Incentive Plan (“Australian SIP”). Equity settled schemes are offered to certain employees, including Executive Directors in the UK and Australia and automatically vest on vest date subject to conditions described below for each scheme. Cash settled schemes are offered to certain employees outside of the UK and Australia. Equity schemes for UK employees are settled net of employee taxes due. The rights of participants in the various employee share schemes are governed by detailed terms, including in relation to arrangements which would apply in the event of a takeover. Consolidated Income statement charge for share-based payments The total costs relating to these schemes for the year ended 31 March 2022 was £2,418,000 (year ended 31 March 2021: £2,489,000). For the year ended 31 March 2022 the charge relating to equity settled share-based payments was £2,269,000 (year ended 31 March 2021: £1,620,000) and the charge relating to cash settled share-based payments was £149,000 (year ended 31 March 2021: £869,000). No shares were gifted to employees during the year (year ended 31 March 2021: nil). Current schemes 2015 MEP Share options granted under the 2015 MEP are predominantly equity settled, with the exception of certain participants that are cash settled. The options granted have been in the form of “non-market performance” awards. The Remuneration Committee approves any awards made under the 2015 MEP. Current schemes are: • Long Term Incentive Plan: awards to senior management and critical staff, excluding Executive Directors. The options have dividend equivalence where additional shares will be awarded in place of dividends on vesting. The only vesting condition of the current equity settled awards is that employees remain employed by the Group. The fair value of awards were calculated using the average of the share price three days prior to the grant date. 2018 CIP Share awards granted to the Executive Directors under the 2018 CIP have been in the form of conditional awards and are equity settled. TheRemuneration Committee approves any awards made under the 2018 CIP. Shares awarded are deferred over a period of at least three years subject to a performance underpin. The Committee will review Group performance over the relevant period, taking into account factors such as a) the Company’s TSR performance, b) aggregate profit levels and c) any regulatory breaches during the period. Financial statements 156 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 31. Share-based payment continued Current schemes continued Number Scheme Share price at award Vesting date At the start of the year Awarded during the year Forfeited during the year Dividend equivalent awarded during the year Exercised during the year At the end of the year Combined Incentive Plan 349.2p 20 July 2023 97,893 — — 6,886 — 104,779 Combined Incentive Plan 349.2p 20 July 2024 73,420 — — 5,164 — 78,584 Combined Incentive Plan 349.2p 20 July 2025 73,417 — — 5,164 — 78,581 Combined Incentive Plan 445.8p 22 July 2024 — 108,282 — 6,136 — 114,418 Combined Incentive Plan 445.8p 21 July 2025 — 81,212 — 4,601 — 85,813 Combined Incentive Plan 445.8p 20 July 2026 — 81,212 — 4,601 — 85,813 Executive Retention Scheme 204.7p 5 July 2021 208,416 — (9,590) — (198,826) — Long Term Incentive Plan 204.7p 5 July 2021 537,013 — (20,970) — (516,043) — Long Term Incentive Plan 87.8p 24 June 2021 312,512 — (502) — (312,010) — Long Term Incentive Plan 349.2p 20 July 2022 480,331 — (8,168) 30,190 (9,913) 492,440 Long Term Incentive Plan 445.8p 20 July 2023 — 448,865 (34,397) 28,045 — 442,513 Total 1,783,002 719,571 (73,627) 90,787 (1,036,792) 1,482,941 The weighted average share price at exercise of options was 459.5 pence and the weighted average exercise price of exercised awards for UK participants (881,714 shares) was £nil and for Australian participants (155,078 shares) was £nil. The weighted average remaining contractual life of share options outstanding at 31 March 2021 was 1.5 years and the weighted average share price of awarded options during the period was 445.8p. In addition, cash settled awards have been granted and vest in periods from April 2022 to April 2024. Balances of 38,360 awards, 67,704, 36,064 awards, 63,643 awards and 16,193 awards in each of the four tranches remained at the end of the period, with a total carrying value of £369,000 as at 31 March 2022 (31 March 2021: £463,000). All of these awards benefit from dividend equivalence. The value of these awards is the share price on the date these awards vest. UK and Australia SIP awards Shares awarded under the UK SIP scheme are held in trust in accordance with UK tax authority conditions and all shares awarded under the Australian scheme are held in a UK trust. Employees are entitled to receive dividends in the form of additional shares on the shares held in trust as long as they remain employees. UK employees are invited to subscribe for up to £1,800 of partnership shares relating to each tax year with the Company matching on a one-for- one basis. All matching shares vest after three years should the employee remain employed by the Group for the term of the award. Australian employees are invited to subscribe for up to the equivalent of £1,800 of investment shares with the Company matching on a one-for-one basis. Matching shares for each scheme vest on the third anniversary after award date should the employee remain employed bythe Group for the term of the award. Financial statements 157 CMC Markets plc Annual Report and Financial Statements 2022 31. Share-based payment continued Current schemes continued Number Country of award Award date Share price at award Vesting period/ date At the start of the year Awarded during the year Forfeited during the year Exercised during the year At the end of the year UK April 2018 to March 2019 85.5p to 204.5p April 2021 to March 2022 85,880 — (3,129) (82,751) — UK April 2019 to March 2020 79.3p to 179.2p April 2022 to March 2023 100,643 — (6,417) — 94,226 UK April 2020 to March 2021 194.6p to 425.2p April 2023 to March 2024 53,724 — (4,800) — 48,924 UK April 2021 to March 2022 225.8p to 518.0p April 2024 to March 2025 — 77,371 (3,858) — 73,513 Australia 5 April 2018 178.2p 5 April 2021 4,029 — — (4,029) — Australia 5 April 2019 83.5p 5 April 2022 8,229 — (1,797) — 6,432 Australia 5 April 2020 201.0p 5 April 2023 3,179 — — — 3,179 Australia 6 April 2021 527.0p 6 April 2024 — 2,904 — — 2,904 Total 255,684 80,275 (20,001) (86,780) 229,178 The weighted share price at the exercise date of options exercised during the year ended 31 March 2022 was 366.9 pence (year ended 31March 2021: 282.3 pence). The fair value of SIP awards is determined to be the share price at grant date without making adjustments for dividends as awardees are entitled to dividend equivalents over the vesting period. Movement in share options 890,633 new share options were granted in the year ended 31 March 2022 (year ended 31 March 2021: 858,829) and these are detailed above inthe current schemes section. Movements in the number of share options outstanding are as follows: GROUP Year ended 31 March 2022 Number Year ended 31 March 2021 Number At beginning of year 2,038,686 4,046,690 Awarded (including dividend equivalents) 890,633 858,829 Forfeited (93,628) (148,280) Exercised (1,123,572) (2,718,553) At end of year 1,712,119 2,038,686 32. Retirement benefit plans A defined contribution plan is a post-employment benefit plan into which the Group pays fixed contributions to a third-party pension provider and has no legal or constructive obligation to pay further amounts. Contributions are recognised as staff expenses in the income statement in the years during which related employee services are fulfilled. The Group operates defined contribution pension schemes for its Directors and employees. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension charge for these plans for the year ended 31 March 2022 was £2,230,000 (year ended 31 March 2021: £1,916,000). 33. Related party transactions Company The amounts outstanding with Group entities at year end were as follows: COMPANY Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Amounts due from subsidiaries 1,013 159 Amounts due to subsidiaries — (13,549) Financial statements 158 CMC Markets plc Annual Report and Financial Statements 2022 Notes to the consolidated and parent company financial statements continued For the year ended 31 March 2022 33. Related party transactions continued Group Transactions between the Group and its other related parties are disclosed below: Compensation of key management personnel GROUP Year ended 31 March 2022 £’000 Year ended 31 March 2021 £’000 Key management compensation: Short-term employee benefits 2,599 3,750 Post-employment benefits 50 60 Share-based payments 462 256 3,111 4,066 Aggregate remuneration of highest paid Director 858 1,460 Key management comprises the Board of CMC Markets plc only. Compensation of key management personnel is disclosed in the Directors’ remuneration report on page 91. A related party transaction amounting to £818.40 took place between CMC Markets UK plc and Peter Cruddas Foundation relating to royalties on books purchased. Directors’ transactions A number of the Directors have company credit cards and have, during the course of the year, used the company credit cards for personal expenses. All personal expenses have been reimbursed by the Directors. There were no other transactions with Directors. 34. Contingent liabilities The Group operates in a number of jurisdictions around the world and as a result uncertainties exist regarding the interpretation of regulatory, tax and legal matters in these territories. In addition, the Group engages in partnership contracts that could result in non-performance claims and from time-to-time is involved in disputes during the ordinary course of business. Sometimes legal disputes can have a financially significant face value, but the Group’s experience is that such claims are usually resolved without any material loss. The Group provides for claims where costs are likely to be incurred. Where there are uncertainties regarding regulatory, tax and legal matters and a provision has not been made and there are no contingent liabilities where the Group considers any material adverse financial impact to be probable. Brexit approach There is regulatory uncertainty regarding the Group’s historical approach to the use of reverse solicitation provisions allowing EEA clients to trade with UK subsidiaries after 31 December 2020. The risk to the approach has now been mitigated given the majority of EEA clients’ activities with the UK subsidiary ceased prior to 31 March 2021. The Group continues to engage with the regulatory authorities in the EEA markets where the UK subsidiary continued to service clients after 31 December 2020. Whilst it is possible that regulatory censure may result from these matters, they are in their early stages and such an outcome is not currently considered probable. UK banking surcharge In the absence of them qualifying for a specific exemption, the Group’s regulated companies in the UK would be subject to the Bank Corporation Tax surcharge of 8% on taxable profits over £25m. The Group has concluded that the relevant entities meet the exemption requirements and therefore the related tax charge, which would amount to £21.8m (31 March 2021: £15.0m) in respect of all relevant periods, has not been provided for. The Group’s position is supported by external advice although it is possible that it could be challenged. 35. Ultimate controlling party The Group’s ultimate controlling party is Lord Cruddas by virtue of his majority shareholding in CMC Markets plc. 36. Events after the Reporting Period On 31 May 2022, the Group received notice of a class action lawsuit being brought against one of its operating entities. The Group is currently reviewing the statement of claim and at this time it is not possible to reliably estimate the possible financial effect, if any, on the Group. In continuation of the buyback programme commenced in March 2022, during the period starting 1 April 2022 and up to 7 June 2022, the Company repurchased and cancelled 3,480,149 Ordinary Shares with a nominal value of 25 pence for an aggregate purchase amount of £9,744,000. The average price of shares purchased was £2.80. Shareholder information 159 CMC Markets plc Annual Report and Financial Statements 2022 Shareholder information Group history CMC Markets plc began trading in 1989 as a foreign exchange broker, led by founder Lord Peter Cruddas. In 1996, the Group launched the world’s first online retail forex trading platform, offering its clients the opportunity to take advantage of markets previously only accessible to institutional traders. CMC Markets plc has since become a global leader in online trading. There have been a number of significant milestones for the Group over the past 30 years, as it has expanded into new markets around the world and continues to promote innovation and new trading technology. In 2000, CMC Markets plc expanded its business to become a CFD broker. A year later, the Group launched an online financial spread betting service, becoming the first spread betting company to release the daily Rolling Cash® bet. The groundbreaking daily Rolling Cash® concept was to become an industry benchmark. In 2002, CMC Markets plc opened its first overseas office in Sydney, launching into the Australian market as an online CFD and forex provider. By 2007, the Group had expanded its global footprint with offices in New Zealand, Germany, Canada, Singapore and Sweden. Further global growth followed over the next few years, with offices opened across Europe – and most recently in Poland, in 2015. The Group continued to grow its product offering during the year, following the launch of its fixed-odds Countdowns product in 2015. The Company successfully listed on the London Stock Exchange in February 2016. In April 2016 CMC Markets plc successfully introduced Digital 100s. Later in the year it unveiled Knock-Outs in Germany and Austria, as CMC Markets plc became the first CFD provider to offer the product in Germany, reinforcing its position as a global leader in innovation. Further cementing its place as one of the industry leaders, the Group was awarded a number of important accolades during the year. In the 2016 Investment Trends UK Leveraged Trading Report, which measures customer satisfaction, CMC Markets plc ranked first across 17 service categories among CFD traders. The Group achieved the highest rating for overall satisfaction, mobile trading, platform features and charting in all three product segments of spread betting, CFD trading and FX. Additional notable recognition came as the Company won Financial Services Provider of the Year for the fourth successive year, an award voted for by the readers of Shares Magazine. The Company also received Best CFD Broker for its burgeoning institutional offering, in line with one of its core strategic objectives. The Company successfully completed the white label stockbroking partnership with ANZ Bank in Australia during 2018, representing the largest migration of client accounts in Australian Stock Exchange history and making the Company the second largest retail stockbroker in the country. In 2021 CMC Markets launched the dedicated institutional brand, CMC Connect, positioning the Company to service the ever-growing number of client types interested in its products. Timeline 1989 – CMC Markets plc begins operations in the UK 1996 – Launches the world’s first online retail FX trading platform 2000 – Starts offering CFDs in the UK 2001 – Launches online spread betting service in the UK 2002 – Opens first non-UK office in Sydney, Australia 2005 – Offices opened in Beijing, Canada and Germany 2007 – Singapore and Sweden offices opened; and Goldman Sachs purchases 10% stake 2008 – CMC Markets (Australia) starts offering a stockbroking service following the acquisition of local stockbroker Andrew West & Co 2010 – Next Generation platform is launched; offices opened in Italy and France; and spread betting iPhone app launched in the UK 2011 – CMC Markets plc wins Financial Services Provider of the Year (Shares Magazine) 2012 – Spread betting app for Android™ launched 2013 – CMC Markets plc wins 33 industry awards globally 2014 – CMC Markets plc celebrates 25 years of being a world leader in online trading 2015 – Countdowns launched; Poland and Austria offices opened; and Stockbroking Pro platform launched 2016 – CMC Markets plc lists on the London Stock Exchange, trading as CMCX; and Digital 100s and Knock-Outs launched 2018 – CMC Markets (Australia) completes the ANZ Bank white label stockbroking transaction 2019 – CMC Markets plc celebrates its 30th year and launches exclusive cryptocurrency, forex and commodity indices 2020 – CMC Markets plc releases dedicated institutional brand, CMC Connect 2022 – CMC Invest launched in the UK, offering stockbroking services to UK clients Shareholder information 160 CMC Markets plc Annual Report and Financial Statements 2022 Five-year summary Group income statement For the year ended 31 March 2022 £m 2021 £m 2020 £m 2019 £m 2018 £m Net operating income 281.9 409.8 252.0 130.8 187.1 Operating expenses (187.6) (184.0) (151.3) (123.1) (125.9) Operating profit 94.3 225.8 100.7 7.7 61.2 Finance costs (2.2) (1.8) (2.1) (1.4) (1.1) Profit before tax 92.1 224.0 98.7 6.3 60.1 Taxation (20.1) (45.9) (11.7) (0.5) (10.4) Profit after tax 72.0 178.1 86.9 5.8 49.7 Other metrics 2022 2021 2020 2019 2018 Own funds generated from operations (£m) 91.4 199.3 102.0 8.2 55.5 Profit margin PBT margin (%) 32.7 54.7 39.2 4.8 32.1 Earnings per share (“EPS”) Basic EPS (pence) 24.8 61.5 30.1 2.0 17.3 Diluted EPS (pence) 24.7 61.2 29.9 2.0 17.1 Dividend per share Interim dividend per share (pence) 3.50 9.20 2.85 1.35 2.98 Final dividend per share (pence) 8.88 21.43 12.18 0.68 5.95 Total ordinary dividend per share (pence) 12.38 30.63 15.03 2.03 8.93 Client metrics (unaudited) 2022 2021 2020 2019 2018 Leveraged revenue per active client (£) 3,575 4,560 3,750 2,068 2,964 Leveraged number of active clients 64,243 76,591 57,202 53,308 59,165 Shareholder information 161 CMC Markets plc Annual Report and Financial Statements 2022 Five-year summary continued Group statement of financial position At 31 March 2022 £m 2021 £m 2020 £m 2019 £m 2018 £m ASSETS Non-current assets Intangible assets 30.3 10.3 4.6 5.0 4.4 Property, plant and equipment 24.9 26.1 28.1 18.1 20.7 Deferred tax assets 6.0 6.4 16.5 11.6 8.8 Financial investments 13.5 — — 11.3 10.8 Trade and other receivables 1.8 1.8 2.3 2.7 2.2 76.5 44.6 51.5 48.7 46.9 Current assets Trade and other receivables 156.9 127.2 186.3 118.0 48.0 Derivative financial instruments 2.4 3.2 5.4 2.9 7.3 Current tax recoverable — 1.7 0.8 3.4 — Financial investments 14.5 28.1 25.4 10.7 10.3 Other assets 13.4 — — — — Amounts due from brokers 196.1 253.9 134.3 88.1 156.9 Cash and cash equivalents 176.6 118.9 84.3 48.7 60.5 559.9 533.0 436.5 271.8 283.0 Total assets 636.4 577.6 488.0 320.5 329.9 LIABILITIES Current liabilities Trade and other payables 215.8 152.3 177.1 100.6 91.8 Derivative financial instruments 2.4 3.1 2.4 4.3 3.9 Share buyback liability 27.3 — — — — Borrowings 0.2 0.9 0.9 1.1 1.3 Lease liabilities 4.9 4.6 4.7 — — Current tax payable 0.4 — — — 2.3 Short-term provisions 0.4 1.9 0.5 0.2 0.1 251.4 162.8 185.6 106.2 99.4 Non-current liabilities Trade and other payables — — — 4.8 5.5 Borrowings — 0.2 0.8 1.2 2.3 Lease liabilities 9.2 10.7 14.6 — — Deferred tax liabilities 3.3 1.6 2.2 1.2 0.7 Long-term provisions 2.1 1.8 1.9 2.0 2.0 14.6 14.3 19.5 9.2 10.5 Total liabilities 266.0 177.1 205.1 115.4 109.9 EQUITY Total equity 370.4 400.5 282.9 205.1 220.0 Total equity and liabilities 636.4 577.6 488.0 320.5 329.9 Shareholder information continued Shareholder information 162 CMC Markets plc Annual Report and Financial Statements 2022 Proposed final dividend for the year ended 31March2022 Ex-dividend date: Thursday 14 July 2022 Record date: Friday 15 July 2022 Dividend payment date: Thursday 11 August 2022 Annual General Meeting The 2022 AGM will be held at 10.00 a.m. on Thursday 28 July 2022 at 133Houndsditch, London EC3A 7BX. Registrars/shareholder enquiries Link Group can be contacted to deal with any questions regarding your shareholding using the contact details listed below. Alternatively, you can access www.cmcmarketsshares.co.uk, where you can view and manage all aspects of your shareholding securely. Email [email protected] Mail Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL Phone Tel: 0371 664 0300 Calls to 0371 664 0300 are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom are charged at the applicable international rate. Phone lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. CMC Markets plc 133 Houndsditch London EC3A 7BX United Kingdom Registered number: 05145017 Tel: 020 7170 8200 Website: www.cmcmarkets.com LEI: 213800VB75KAZBFH5U07 Company Secretary Patrick Davis Investor relations Email: [email protected] Website: www.cmcmarkets.com/group/investor-relations Brokers Peel Hunt LLP 100 Liverpool Street London EC2M 2AT RBC Capital Markets Riverbank House 2 Swan Lane London EC4R 3BF Independent auditors PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Legal advisers Linklaters LLP One Silk Street London EC2Y 8HQ Media relations advisers Camarco 107 Cheapside London EC2V 6DN Global offices UK – head office CMC Markets plc, CMC Markets UK plc, CMC Spreadbet plc, CMC Markets Holdings Ltd, CMC Markets UK Holdings Ltd, CMC Markets Overseas Holdings Ltd, Information Internet Ltd, CMC Markets Investments Ltd, CMC Markets Investments Nominee Ltd 133 Houndsditch London EC3A 7BX T +44 (0)20 7170 8200 E [email protected] www.cmcmarketsplc.com Australia CMC Markets Asia Pacific Pty Ltd, CMC Markets Stockbroking Ltd, CMC Markets Group Australia Pty Ltd, CMC Markets Stockbroking Nominees Pty Ltd, CMC Markets Stockbroking Nominees (No. 2 Account) Pty Ltd, CMC Markets Stockbroking Services Pty Ltd Level 20, Tower 3 International Towers 300 Barangaroo Avenue Sydney NSW 2000 T 1300 303 888 T +61 (0)2 8221 2100 E [email protected] [email protected] www.cmcmarkets.com.au Shareholder information 163 CMC Markets plc Annual Report and Financial Statements 2022 Global offices continued Austria CMC Markets Germany GmbH Zweigniederlassung Wien CMC Markets Zweigniederlassung Österreich The ICON Vienna, Wiedner Gürtel 13 Tower 24, 10th floor 1100 Wien T +43 (0)1 532 1349 0 E [email protected] www.cmcmarkets.at Canada CMC Markets Canada Inc Suite 2915 100 Adelaide Street West Toronto Ontario M5H 1S3 T +1 416 682 5000 E [email protected] www.cmcmarkets.ca China (Shanghai) CMC Business Service (Shanghai) Limited Room 3404, Floor 34 Shanghai Tower No. 501, Middle Yincheng Road Lujiazui Financial Center Pudong District Shanghai T (China toll free) 4008 168 888 E [email protected] www.cmcmarkets.com/zh China (Beijing) CMC Markets UK plc Beijing Representative Office Unit 22, Room 1901, Tower E2 Oriental Plaza No.1 East Chang An Avenue Dong Cheng District Beijing 100738 T +86 (0)10 8520 0021 www.cmcmarkets.cn Germany CMC Markets Germany GmbH CMC Markets Niederlassung Frankfurt am Main der CMC Markets UK plc Garden Tower Neue Mainzer Straße 46-50 60311 Frankfurt am Main T +49 (0)69 2222 44 000 E [email protected] www.cmcmarkets.de New Zealand CMC Markets NZ Ltd Level 25 151 Queen Street Auckland 1010 T +64 (0)9 359 1200 E [email protected] www.cmcmarkets.co.nz Norway CMC Markets Germany GmbH Filial Oslo Filial Oslo Fridtjof Nansens Plass 6 0160 Oslo T +47 22 01 97 02 E [email protected] www.cmcmarkets.no Poland CMC Markets Germany GmbH sp. z o.o. oddział w Polsce CMC Markets UK Spółka Akcyjna Oddział w Polsce Emilii Plater 53 00-113 Warsaw T +48 22 160 5600 E [email protected] www.cmcmarkets.pl Singapore CMC Markets Singapore Pte Limited CMC Markets Singapore Invest Pte Limited 9 Raffles Place #30-02 Republic Plaza Singapore 048619 T 1800 559 6000 (local) T +65 6559 6000 E [email protected] www.cmcmarkets.com.sg Spain CMC Markets Germany GmbH, Sucursal En Espana CMC Markets UK plc Sucursal en Espana Calle Serrano No 21 4th Floor 28001 Madrid T +34 911 140 700 E [email protected] www.cmcmarkets.es UAE CMC Markets Middle East Ltd Unit GD-GB-00-15-BC-36-0 Level 15, Gate Building Dubai International Financial Centre Dubai 507183 T +97143742818 Shareholder information continued Shareholder information 164 CMC Markets plc Annual Report and Financial Statements 2022 Appendix: Alternative Performance Measures Reconciliation of gross client income to net operating income GROUP 2022 £m 2021 £m Gross client income 288.5 335.3 Rebates and levies (20.6) (20.8) Net client income 267.9 314.5 Risk management gains/(losses) (38.3) 34.7 Leveraged net trading revenue 229.6 349.2 Non-leveraged net trading revenue 48.0 54.8 Other operating income 3.5 5.1 Revenue net of introducing partner commissions and betting levies (note 3) 281.1 409.1 Interest income 0.8 0.7 Net operating income 281.9 409.8 Reconciliation of non-statutory summary Group Balance Sheet to Primary Statements Fixed assets GROUP Mar-22 £’000 Mar-21 £’000 Intangible assets (note 12) 30,328 10,330 Property, plant and equipment (note 13) 24,941 26,105 Lease liabilities (note 23) (14,185) (15,326) Fixed assets 41,084 21,109 Fixed assets (rounded to £m) 41.1 21.1 Working Capital GROUP Mar-22 £’000 Mar-21 £’000 Trade and other receivables (note 16) 158,714 128,919 Trade and other payables (note 21) (215,853) (152,253) Share buyback liability (note 25) (27,264) — Borrowings (note 22) (194) (1,139) Provisions (note 24) (2,486) (3,700) Title transfer funds 1 44,133 30,679 Working Capital (42,950) 2,506 Working Capital (rounded up to £m) (43.0) 2.6 1 Amounts deducted from ‘own funds’. Deferred tax net asset GROUP Mar-22 £’000 Mar-21 £’000 Deferred tax assets (note 14) 6,022 6,370 Deferred tax liabilities (note 14) (3,309) (1,622) Deferred tax net asset 2,713 4,748 Deferred tax net asset (rounded to £m) 2.7 4.7 Appendices CMC Markets plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on Galerie Matt, an FSC® certified material. This document was printed by Park Communications using its environmental print technology, which minimises the impact of printing on the environment, with 99% of dry waste diverted from landfill. Both the printer and the paper mill are registered to ISO 14001. CBP012858 CMC Markets plc Annual Report and Financial Statements 2022 CMC Markets plc 133 Houndsditch London EC3A 7BX United Kingdom T +44 (0)20 7170 8200 E [email protected] www.cmcmarketsplc.com CMC Markets plc Annual Report and Financial Statements 2022