Annual Report 2017 This document contains “forward-looking statements” which relate to, without limitation, our plans, The forward-looking statements contained in this document are based on assumptions, beliefs and objectives, strategies, future operational performance, and anticipated developments in the industry in expectations that we have made in light of our experience in the industry, as well as our perceptions of which we operate. These forward-looking statements are characterized by words such as “anticipate”, historical trends, current conditions, expected future developments and other factors we believe are “estimate”, “believe”, “intend”, “plan”, “predict”, “may”, “will”, “would”, “should”, “continue”, “expect” and appropriate under the circumstances. Although we believe that the expectations reflected in such similar expressions, but these expressions are not the exclusive means of identifying such statements. forward-looking statements are reasonable at this time, we cannot assure you that such expectations Such forward-looking statements involve known and unknown risks, uncertainties and other important will prove to be correct. Given the risks and uncertainties associated with forward-looking statements, factors that could cause circumstances or our actual results, performance or achievements to be you are cautioned not to place undue reliance on such forward-looking statements. materially different from any future circumstances, results, performance or achievements expressed or implied by such statements. Such factors include, among other things, reduced levels of overall trading Such forward-looking statements speak only as of the date on which they are made. Accordingly, other volume and lower margins; dependence upon prime brokers, ETP issuers, trading counterparties, CCPs than as required by applicable law or the rules of the stock exchange on which our securities are listed, and custodians; losing access to an important exchange or other trading venue; occurrence of a systemic we do not undertake any obligation to update or revise any of them, whether as a result of new market event; incurrence of trading losses; failures or disruption of our trading platform or our or information, future events or otherwise. Any forward-looking statements should not be regarded as third-party technical infrastructure; risks associated with operational elements of our business and a representation or warranty by us or any other person with respect to the achievement of the results trading generally; ineffective risk management systems, processes and strategies; intense competition in set out in such statements or that the underlying assumptions used will in fact be the case. If any of our business; dependence on continued access to sources of liquidity; capacity constraints of computer these risks and uncertainties materialize, or if any of our underlying assumptions prove to be incorrect, and communications systems; dependence on third-party software, infrastructure or availability of our actual results of operations or financial condition could differ materially from that described herein certain software systems; damage to our reputation and the reputation of our industry; loss of key staff as anticipated, believed, estimated or expected. or failure to attract and retain other highly skilled professionals; changes to applicable regulatory requirements; compliance with applicable laws and regulatory requirements, including those specific to Statements regarding the market, industry and trends, including ETP Assets under Management in our industry; enhanced media and regulatory attention and its impact upon public perception of us or of certain markets, ETP value traded in certain markets and Flow Traders’ competitive position are based companies in our industry; and other risks. on outside data and sources. Table of contents 2 12 41 69 Flow Traders at a Glance our business Message of the Supervisory board Financial Statements 5 20 43 70 Profile our People Supervisory board Report Consolidated Financial Statements 6 26 48 105 Message of the Management Flow Traders and Society Interview Maurice van Tilburg Company Financial Statements board 7 32 51 110 Share Information our Risk Management Remuneration other Information 10 40 58 our Management board our Supervisory board our Governance FLOW TRADERS | ANNUAL REPORT 2017 1 > TAblE oF ConTEnTS Flow Traders at a Glance 2017 BY NUMBERS Global ETP Assets under Global ETP value traded Management (AuM) (€bn) (€bn) 3,962 18,519 19% -13% 2016: 3,323 2016: 21,287 Flow Traders ETP net Trading Income value traded (€bn)* (nTI) (€m) 686 166 7% -34% 2016: 640 2016: 250.0 EbITdA (€m) net Profit (€m) FTEs 56.0 39.6 394 -53% -57% 16% 2016: 118.7 2016: 91.9 2016: 341 FLOW TRADERS | ANNUAL REPORT 2017 2 > Flow TRAdERS AT A GlAnCE Flow Traders at a Glance AMSTERDAM CLUJ NEW YORK HONG KONG AMERICAS EUROPE ASIA (est. 2009) (est. 2004) (est. 2007) number of number of number of ETP listings ETP AuM (€bn) ETP listings ETP AuM (€bn) SINGAPORE ETP listings ETP AuM (€bn) 3,679 2,949 5,486 660 1,592 354 Flow ETP value Flow ETP value Flow ETP value traded (€bn) nTI (€m) traded (€bn) nTI (€m) traded (€bn) nTI (€m) 245 34.1 418 115.2 23 16.6 FTE FTE FTE 60 279 55 FLOW TRADERS | ANNUAL REPORT 2017 3 > Flow TRAdERS AT A GlAnCE Flow Traders at a Glance 2017 FINANCIAL OVERVIEW In thousands of euro For the year ended 2017 2016 Net Trading Income 165,953 250,004 Personnel expenses (fixed) 32,205 25,928 Personnel expenses (variable) 25,188 58,404 Technology expenses 37,288 34,762 other expenses 15,229 12,181 Operating expenses 109,910 131,275 EBITDA 56,043 118,728 depreciation of property and equipment 6,807 5,948 Amortization of intangible assets 368 364 Impairment of (in)tangible assets 540 2,775 Operating result 48,328 109,641 Revaluation of equity-accounted investees 107 (199) Profit before tax 48,435 109,442 Tax expense 8,840 17,506 Profit for the period 39,595 91,936 net trading capital 271,834 343,277 Regulatory capital 254,101 270,092 Regulatory Capital Required1 126,899 168,200 Excess capital 144,935 175,077 KPI EbITdA margin 33.8% 47.5% number of outstanding shares 46,534,500 46,534,500 basic and fully diluted earnings per share 0.85 1.98 1 Regulatory Capital Required relates to the situation as per 31 December 2017. FLOW TRADERS | ANNUAL REPORT 2017 4 > Flow TRAdERS AT A GlAnCE Profile Who we are What we do our strategies are designed to use information that is publicly available and we use fairly simple, non-controversial we are a leading global financial technology-enabled As a technology company operating in the financial services and transparent order types. we are a strong supporter of liquidity provider, with a focus on exchange traded products industry, we use our proprietary technology platform to fair, transparent and orderly markets. we derive our net (ETPs). our trading desks in Europe, the Americas and Asia quote bid and ask prices in thousands of ETP listings, as well Trading Income (nTI) from the small price differences at provide liquidity across all major exchanges, globally, 24 as similar financial products. we also provide liquidity to which investors are willing to trade ETPs or other financial hours a day. with 399 employees (394 FTEs) at year-end, we institutional counterparties off-exchange across all regions. instruments and those of the underlying or related financial continued to build our organization in 2017. Founded in liquidity provision makes markets more efficient and instruments at which we hedge the resulting exposures. 2004, we cultivate the entrepreneurial, innovative and transparent, promoting better execution quality and lower we do not have a directional opinion on the markets and aim team-oriented culture that has been with us since the overall trading costs for market participants. to be hedged perfectly and instantaneously. This focus on beginning. risk management is at the heart of our organization, and our As a principal trading firm, we trade for our own account and risk functions are closely integrated into our platform. own risk only. we do not have clients, nor do we provide any investment services or ancillary services to others. AMERICAS EUROPE ASIA FLOW TRADERS | ANNUAL REPORT 2017 5 > PRoFIlE Message of the Management Board This resulted in investors focusing on liquid products rather efficiency insights will enable us to move away from than choosing to diversify or alter their investment strategies that provide limited returns on investment. strategies. Focus in 2018 Long-term value creation looking forward, our focus in 2018 will be building on and during the course of the year, we continued to focus on our scaling up our current activities. we will also continue to strategy of seizing opportunities and creating long-term maintain a constructive dialogue with regulators, which we value. one example is our move into providing liquidity to FX believe will lead to a more level playing field across markets. markets, which will enable us to increase efficiency and create a more level playing field for investors. In Asia, we Following another successful year, we would like to extend opened an office in hong Kong that will increase our our thanks to the dedicated team at Flow Traders, as well as footprint and visibility in the region, contributing to the our shareholders and other stakeholders, for their ongoing company’s future growth. In the US, we continued to grow support and contribution. Marcel Jongmans (CFO), Sjoerd Rietberg and Dennis Dijkstra (Co-CEOs) the number of institutional counterparties we are connected to. And in Europe, by investing in and improving our Regards, infrastructure, we again managed to secure a healthy share 2017 was a year in which we witnessed subdued investor of the market. we also worked diligently on supporting the dennis dijkstra, Sjoerd Rietberg and Marcel Jongmans. activity on the markets, leading to reduced market activity. company’s unique culture. For example, we launched Flow Internally, our focus continued to be on long-term value Academy, a platform that promotes knowledge sharing creation. As well as launching the new FX trading desk, we across the business, and introduced an employee equity opened an office in hong Kong, continued to grow our plan. From a regulatory standpoint, we continued to prepare institutional counterparty base, and laid the groundwork for for the upcoming introduction of MiFId II, which we believe future expansion into new markets. At the same time, we will create more market transparency and lead to a situation ensured we are fully prepared for the introduction of MiFId where the best price wins. II, and continued to invest in our people and unique culture. Creating efficiencies Market developments As well as executing our business model as effectively as Market volatility in 2017 was defined by record lows. possible, we also focused on executing it as efficiently as A variety of macro-economic issues linked to both US possible. Improving the quality of pricing and the quality of domestic politics and foreign affairs, as well as international processes means we will be in a better position to scale our ECb developments, suppressed trading activity. business into other asset classes. At the same time, cost FLOW TRADERS | ANNUAL REPORT 2017 6 > MESSAGE oF ThE MAnAGEMEnT boARd Share Information Flow Traders N.V. shares are listed on Euronext Introduction and key figures Performance and key figures Amsterdam and are included in the Amsterdam Midcap Index (AMX), carrying a weight of KEY SHARE INFORMATION KEY FIGURES PER SHARE 1.455 percent. Flow Traders shares are also ISIn NL0011279492 Earnings per share €0.85 included in several other indices as well, issued by bloomberg ticker: FLOW NA P/E ratio 23.53 leading issuers like MSCI, (several MSCI Small Cap Reuters ticker: FLOW.AS Interim dividend per share €0.30 indices), FTSE, (FTSE Developed Europe All Cap number of shares outstanding 46,534,500 Final dividend per share €0.35 Net Tax index) STOXX (STOXX Europe Total Free float (Euronext definition)* 75% Total dividend per share 2017 €0.65 Market Small (Net Return) EUR), Wisdom Tree Market cap at year end (€) 930,690,000 dividend yield 3.25% (Eurozone Quality Dividend Growth Index) and Source: Euronext as per 31 December 2017. Year-end share price* €20.00 Euronext (Euronext 150 Index, Small Caps index). * Note that free float increased to 75% (Euronext definition) as a result of a * Source: Euronext, based on year-end closing. transaction announced on 15 February 2017. Share price and volume 2017 (in EUR) (in %) 35.0 10.0 30.0 7.5 25.0 5.0 20.0 2.5 15.0 0.0 January February March April May June July August September October November December Share volume (traded volumes as % of equity float) Last price FLOW TRADERS | ANNUAL REPORT 2017 7 > ShARE InFoRMATIon VOLUMES Financial calendar The payment of dividends, if any, and the amounts and Total annual volume 40,470,000 timing thereof will depend on a number of factors, including daily volume - high 1,801,130 1Q Trading Update 24 April 2018 future profits, financial conditions, general economic and daily volume - low 20,975 Annual General Meeting 26 April 2018 business conditions, future prospects and such other factors Average daily volume 159,213 Ex-dividend final dividend 2017 30 April 2018 as the Management board, subject to the approval of the Source: Bloomberg. Record date final dividend 2017 02 May 2018 Supervisory board, may deem relevant as well as other legal Payment date final dividend 2017 04 May 2018 and regulatory requirements. our intentions in relation to SHARE PRICE PERFORMANCE 1h Results 27 July 2018 dividends are subject to numerous assumptions, risks and opening price 2 January 2017 €33.16 Proposed ex-dividend date interim uncertainties, many of which may be beyond our control. Annual highest price (closing) €33.35 dividend 2018 8 August 2018 Annual lowest price (closing) €17.13 Proposed record date interim dividend The Management board, subject to the approval of the Closing price 31 december 2017 €20.00 2018 9 August 2018 Supervisory board, may decide to make allocations to Source: Bloomberg. Proposed payment date interim reserves and therefore decides how much of the profit will dividend 2018 13 August 2018 be allocated to reserves. The profits remaining shall be at Analyst coverage Trading update third quarter 2018 18 October 2018 the disposal of the General Meeting. For 2017, the The following analysts cover Flow Traders as of 31 december Management board has proposed to increase the total 2017: dividend payout ratio to at least 75%. Institution Analyst Dividend policy and dividend proposal Abn AMRo Ron heijdenrijk bank degroof Petercam Michael Roeg Dividend policy Credit Suisse Martin Price Flow Traders intends to pay dividends annually in two Exane bnP Paribas Gregory Simpson instalments, with a target aggregate dividend pay-out ratio InG Rosine van Velzen of at least 50 percent of the company’s net profits realized Kempen Syed Anil Sharma during the financial year. The Management board may Morgan Stanley Adedapo oguntade decide, with the approval of the Supervisory board, that the UbS Michael werner / Alex leng profits realized during a financial year will fully or partially be appropriated to increase and/or form reserves. A distribution of (interim) dividends is subject to applicable rules and regulations, the Articles of Association of the company, the by-laws of the Management board, and the by-laws of the Supervisory board. It is anticipated that our interim dividends will be declared and paid following the publication of our results for the first half of each year. however, there can be no assurance that in any given year a dividend will be proposed or declared. FLOW TRADERS | ANNUAL REPORT 2017 8 > ShARE InFoRMATIon