INTL FCStone 2012 Annual Report Download - page 6

CHAIRMAN’S LETTER TO SHAREHOLDERS
Ten years ago almost to the day, I invested in and became a director of this company.
With the benet of hindsight, the investment was an excellent one, but at the time, the company’s
future was far from assured. Its stock was trading at around 60 cents per share, and it had a book value
of approximately $1.40 and a pre-investment-market capitalization of less than $2 million.
I don’t think any of us could have imagined at the time how far we would come from these humble
beginnings. Today, INTL FCStone has become a prominent franchise in the commodities sector, with a
particular emphasis on grains and metals. Our stock price is 30 times higher than it was then, and our
book value is more than 12 times higher, at $17.32. Our market capitalization is approximately $350
million, more than 175 times greater than it was when I began my tenure as a director. Other than two
small rounds that raised approximately $40 million in capital, these results have been accomplished
through accretive acquisitions and organic growth.
This growth has not been without its diculties, however. The recent series of global economic
disruptions has negatively aected virtually every nancial services organization worldwide. More
specically, the FCM (Futures Commission Merchant) component of INTL FCStone’s business has, like
all FCMs, been aected by low interest rates, declining commodity trading volumes, the increasing
use of technology to connect customers directly to exchanges, the highly publicized recent collapses
of two prominent FCMs and, perhaps of greatest signicance, the most comprehensive change to
regulatory oversight we have witnessed in our lifetimes.
As a result of all these factors, our stock price has dropped from its peak, reached shortly before the
global nancial crisis, of more than $35 per share. This low current valuation of our company, despite
our long-term achievements, is of concern to both your management and your board of directors.
Nonetheless, our nancial results for the fourth quarter of 2012 are an encouraging indication that the
best is yet to come for INTL FCStone. We produced record adjusted operating revenues of $125 million
for the quarter, as well as a return on equity (ROE) of nearly 16%, directly in line with management’s
targets. In addition, our adjusted revenues were up 21%, and our adjusted earnings rose by a full 166%
compared to the same quarter a year ago.
As I look back at the past 10 years, I am highly encouraged by our performance. We have demonstrated
our ability to grow our larger market segments, and to deal with a geographically and product-diverse
business while at the same time maintaining tight risk control and rst-class operations and support
systems. In addition, we have maintained the capital resources and, more importantly, the liquidity
to deal with these markets. Nothing illustrates our ability to achieve these objectives better than
our performance during the crisis year of 2008, when we not only remained protable but achieved
double digit returns on equity and an increase in book value.
As to the future, we cannot do much about the credit crises, the scal “clis” and other macro factors.
What we can do, however, is strive to continue your company’s performance on an absolute and
comparative basis. The key to our continued success lies in an ongoing and intensive focus on risk
controls, robust systems and the ability to manage and motivate people, plus the strategic vision
necessary to grow the business.
5 | 2012 INTL FCStone Annual Report