Annual Report 2017

This document contains "forward-looking statements" which relate to, without limitation, our plans, objectives, strategies, future operational performance, and anticipated developments in the industry in which we operate. These forward-looking statements are characterized by words such as "anticipate", "estimate", "believe", "intend", "plan", "predict", "may", "will", "would", "should", "continue", "expect" and similar expressions, but these expressions are not the exclusive means of identifying such statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause circumstances or our actual results, performance or achievements to be 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 volume and lower margins; dependence upon prime brokers, ETP issuers, trading counterparties, CCPs and custodians; losing access to an important exchange or other trading venue; occurrence of a systemic market event; incurrence of trading losses; failures or disruption of our trading platform or our or third-party technical infrastructure; risks associated with operational elements of our business and trading generally; ineffective risk management systems, processes and strategies; intense competition in our business; dependence on continued access to sources of liquidity; capacity constraints of computer and communications systems; dependence on third-party software, infrastructure or availability of certain software systems; damage to our reputation and the reputation of our industry; loss of key staff 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 our industry; enhanced media and regulatory attention and its impact upon public perception of us or of companies in our industry; and other risks.

The forward-looking statements contained in this document are based on assumptions, beliefs and expectations that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time, we cannot assure you that such expectations will prove to be correct. Given the risks and uncertainties associated with forward-looking statements, you are cautioned not to place undue reliance on such forward-looking statements.

Such forward-looking statements speak only as of the date on which they are made. Accordingly, other than as required by applicable law or the rules of the stock exchange on which our securities are listed, we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Any forward-looking statements should not be regarded as a representation or warranty by us or any other person with respect to the achievement of the results set out in such statements or that the underlying assumptions used will in fact be the case. If any of these risks and uncertainties materialize, or if any of our underlying assumptions prove to be incorrect, our actual results of operations or financial condition could differ materially from that described herein as anticipated, believed, estimated or expected.

Statements regarding the market, industry and trends, including ETP Assets under Management in certain markets, ETP value traded in certain markets and Flow Traders' competitive position are based on outside data and sources.

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.

Profile

Who we are

We are a leading global financial technology-enabled liquidity provider, with a focus on exchange traded products (ETPs). Our trading desks in Europe, the Americas and Asia provide liquidity across all major exchanges, globally, 24 hours a day. With 399 employees (394 FTEs) at year-end, we continued to build our organization in 2017. Founded in 2004, we cultivate the entrepreneurial, innovative and team-oriented culture that has been with us since the beginning.

What we do

As a technology company operating in the financial services industry, we use our proprietary technology platform to quote bid and ask prices in thousands of ETP listings, as well as similar financial products. We also provide liquidity to institutional counterparties off-exchange across all regions. Liquidity provision makes markets more efficient and transparent, promoting better execution quality and lower overall trading costs for market participants.

As a principal trading firm, we trade for our own account and own risk only. We do not have clients, nor do we provide any investment services or ancillary services to others.

Our strategies are designed to use information that is publicly available and we use fairly simple, non-controversial and transparent order types. We are a strong supporter of fair, transparent and orderly markets. We derive our Net Trading Income (NTI) from the small price differences at which investors are willing to trade ETPs or other financial instruments and those of the underlying or related financial instruments at which we hedge the resulting exposures. We do not have a directional opinion on the markets and aim to be hedged perfectly and instantaneously. This focus on risk management is at the heart of our organization, and our risk functions are closely integrated into our platform.

Message of the Management Board

2017 was a year in which we witnessed subdued investor activity on the markets, leading to reduced market activity. Internally, our focus continued to be on long-term value creation. As well as launching the new FX trading desk, we opened an office in Hong Kong, continued to grow our institutional counterparty base, and laid the groundwork for future expansion into new markets. At the same time, we ensured we are fully prepared for the introduction of MiFID II, and continued to invest in our people and unique culture.

Market developments

Market volatility in 2017 was defined by record lows. A variety of macro-economic issues linked to both US domestic politics and foreign affairs, as well as international ECB developments, suppressed trading activity.

This resulted in investors focusing on liquid products rather than choosing to diversify or alter their investment strategies.

Long-term value creation

During the course of the year, we continued to focus on our strategy of seizing opportunities and creating long-term value. One example is our move into providing liquidity to FX markets, which will enable us to increase efficiency and create a more level playing field for investors. In Asia, we opened an office in Hong Kong that will increase our footprint and visibility in the region, contributing to the company's future growth. In the US, we continued to grow the number of institutional counterparties we are connected to. And in Europe, by investing in and improving our infrastructure, we again managed to secure a healthy share of the market. We also worked diligently on supporting the company's unique culture. For example, we launched Flow Academy, a platform that promotes knowledge sharing across the business, and introduced an employee equity plan. From a regulatory standpoint, we continued to prepare for the upcoming introduction of MiFID II, which we believe will create more market transparency and lead to a situation where the best price wins.

Creating efficiencies

As well as executing our business model as effectively as possible, we also focused on executing it as efficiently as possible. Improving the quality of pricing and the quality of processes means we will be in a better position to scale our business into other asset classes. At the same time, cost

efficiency insights will enable us to move away from strategies that provide limited returns on investment.

Focus in 2018

Looking forward, our focus in 2018 will be building on and scaling up our current activities. We will also continue to maintain a constructive dialogue with regulators, which we believe will lead to a more level playing field across markets.

Following another successful year, we would like to extend our thanks to the dedicated team at Flow Traders, as well as our shareholders and other stakeholders, for their ongoing support and contribution.

Regards,

Dennis Dijkstra, Sjoerd Rietberg and Marcel Jongmans.

Share Information

Flow Traders N.V. shares are listed on Euronext Amsterdam and are included in the Amsterdam Midcap Index (AMX), carrying a weight of 1.455 percent. Flow Traders shares are also included in several other indices as well, issued by leading issuers like MSCI, (several MSCI Small Cap indices), FTSE, (FTSE Developed Europe All Cap Net Tax index) STOXX (STOXX Europe Total Market Small (Net Return) EUR), Wisdom Tree (Eurozone Quality Dividend Growth Index) and Euronext (Euronext 150 Index, Small Caps index).

Introduction and key figures

KEY SHARE INFORMATION

ISIN	NL0011279492
Bloomberg ticker:	FLOW NA
Reuters ticker:	FLOW.AS
Number of shares outstanding	46,534,500
Free float (Euronext definition)*	75%
Market cap at year end (€)	930,690,000

Source: Euronext as per 31 December 2017.

* Note that free float increased to 75% (Euronext definition) as a result of a transaction announced on 15 February 2017.

Performance and key figures

KEY FIGURES PER SHARE

Earnings per share	€0.85
P/E ratio	23.53
Interim dividend per share	€0.30
Final dividend per share	€0.35
Total dividend per share 2017	€0.65
Dividend yield	3.25%
Year-end share price*	€20.00

* Source: Euronext, based on year-end closing.

40,470,000 1,801,130


20,975
159,213

SHARE PRICE PERFORMANCE

Opening price 2 January 2017	€33.16
Annual highest price (closing)	€33.35
Annual lowest price (closing)	€17.13
Closing price 31 December 2017	€20.00
Source: Bloomberg.

Analyst coverage

The following analysts cover Flow Traders as of 31 December 2017:

Institution	Analyst
ABN AMRO	Ron Heijdenrijk
Bank Degroof Petercam	Michael Roeg
Credit Suisse	Martin Price
Exane BNP Paribas	Gregory Simpson
ING	Rosine van Velzen
Kempen	Syed Anil Sharma
Morgan Stanley	Adedapo Oguntade
UBS	Michael Werner / Alex Leng

Financial calendar

1Q Trading Update	24 April 2018
Annual General Meeting	26 April 2018
Ex-dividend final dividend 2017	30 April 2018
Record date final dividend 2017	02 May 2018
Payment date final dividend 2017	04 May 2018
1H Results	27 July 2018
Proposed ex-dividend date interim
dividend 2018	8 August 2018
Proposed record date interim dividend
2018	9 August 2018
Proposed payment date interim
dividend 2018	13 August 2018
Trading update third quarter 2018	18 October 2018

Dividend policy and dividend proposal

Dividend policy

Flow Traders intends to pay dividends annually in two instalments, with a target aggregate dividend pay-out ratio of at least 50 percent of the company's net profits realized during the financial year. The Management Board may decide, with the approval of the Supervisory Board, that the 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.

The payment of dividends, if any, and the amounts and timing thereof will depend on a number of factors, including future profits, financial conditions, general economic and business conditions, future prospects and such other factors as the Management Board, subject to the approval of the Supervisory Board, may deem relevant as well as other legal and regulatory requirements. Our intentions in relation to dividends are subject to numerous assumptions, risks and uncertainties, many of which may be beyond our control.

The Management Board, subject to the approval of the Supervisory Board, may decide to make allocations to reserves and therefore decides how much of the profit will be allocated to reserves. The profits remaining shall be at the disposal of the General Meeting. For 2017, the Management Board has proposed to increase the total dividend payout ratio to at least 75%.

Reserves and dividend proposal for the financial year 2017

Pursuant to Article 24.1 of the company's Articles of Association, the Management Board, with the approval of the Supervisory Board, has decided that of the profit for 2017 (totaling €39.6 million), an amount of €9.3 million shall be added to the reserves. The remaining amount of €30.3 million is at the disposal of the General Meeting.

It is proposed to the General Meeting that a total cash dividend of €0.65 per share will be paid out to shareholders for the financial year 2017, subject to a 15 percent dividend withholding tax (dividendbelasting). An interim cash dividend of €0.30 per share has been paid out on 9 August 2017. This means that the final cash dividend

proposal to the General Meeting is €0.35 per share. Subject to the approval by the General Meeting on 26 April 2018, shares will trade ex-dividend on 30 April 2018. Payment of the final dividend is anticipated to be made on 4 May 2018. Please also refer to the Dividend Policy section in the chapter Our Governance.

Investor Relations

Investor Relations (IR) focuses on optimizing the communication and understanding between Flow Traders and the investor community, its advisors and the analyst community. By attending broker conferences, organizing roadshows to institutional investors after Half Year and Full Year results, organizing investor conference calls, analyst days and the General Meeting, Flow Traders further optimizes the information stream to the market. Flow Traders has a corporate website (www.flowtraders. com/investors) where its financial calendar, press releases and dividend policy can be found. IR is the first point of contact for interested investors, shareholders and analysts.

INVESTOR RELATIONS CONTACT DETAILS

Serge Enneman

Telephone	+31 20 799 6799
E-mail	[email protected]

Our Management Board

Flow Traders has highly experienced management and a unique team-driven culture. Our Management Board consists of Dennis Dijkstra (Co-CEO), Marcel Jongmans (CFO) and Sjoerd Rietberg (Co-CEO).

Dennis Dijkstra joined our company as CFO in 2009 and was appointed Co-CEO in January 2014, focusing on HR and recruitment, institutional trading, relationships with issuers, legal & compliance, internal audit, relationships with regulators and organization structure. Prior to joining Flow Traders, Dennis held positions at Arthur Andersen, Faxtor Securities, NIBC and Sparck. He is currently a supervisory director of Think Capital Holding BV, a Dutch ETF issuer in which Flow Traders holds a 24 percent strategic passive minority interest.

Dennis serves as a board member (treasurer) of APT, the Association of Proprietary Traders in the Netherlands and as of November 2017, Dennis is a supervisory director of DMF Investment Management B.V.

Dennis Dijkstra is a Dutch national who holds a Master's degree in Business Economics from the University of Amsterdam.

Marcel Jongmans joined our company as CFO in October 2016, focusing on finance and tax, risk management, investor relations, clearing, mid-office and business development. He held positions at MeesPierson, Fortis Bank and ABN AMRO Clearing Bank N.V., where he served as CEO for 12 years prior to joining Flow Traders. Marcel holds no ancillary positions.

Marcel Jongmans is a Dutch national who holds a Bachelor's degree in Business Economics from The Hague University of Applied Sciences (HES).

Marcel Jongmans – CFO Sjoerd Rietberg – Co-CEO Sjoerd Rietberg joined our company in 2005 as a senior trader and was named Head of Trading in 2009 and COO in 2010. He was subsequently appointed Co-CEO in January 2014, focusing on trading operations, trading strategy and technology. Sjoerd holds no ancillary positions. Prior to joining Flow Traders, Sjoerd Rietberg held a trading position at Newtrade Derivatives.

Sjoerd Rietberg is a Dutch national with a Master's degree in Finance from Erasmus University Rotterdam.

Our Business

We provide liquidity in financial products, with a focus on exchange-traded products (ETPs). ETPs are baskets of securities made up of shares, bonds, or commodities. ETPs often track indices and, unlike most mutual funds, can be traded throughout the day on trading venues. We do this globally, enabling investors to buy and sell ETPs efficiently by quoting bid and ask prices under virtually all market circumstances.

Markets & Trends

Our business

We trade in well over 10,000 financial instruments, and have access to more than 100 trading venues in 36 countries around the world. We provide liquidity in over 5,500 ETP listings on- and off-exchange.

Off-exchange, we provide liquidity in ETPs on a requestfor-quote basis to over 700 institutional counterparties across the globe, including banks, asset managers, pension funds, insurance companies, family offices, hedge funds, and others in 36 countries and their number increases almost daily. Besides ETPs, we provide liquidity in similar instruments, whose value is correspondingly affected by a change in the value of their underlying assets.

As a liquidity provider, we do not have an opinion on the market. In other words, our results do not depend on the direction of market prices. Our Net Trading Income is realized through the small price differences between the ETPs and other financial instruments we buy or sell, and the prices we pay or receive for the underlying or related financial instruments to mitigate our risk.

The ETP market

The popularity of ETPs has continued to increase in the recent years. According to asset manager BlackRock Advisors, global ETP Assets under Management (AuM) grew from €3,323 billion in 2016 to €3,962 billion by the end of 2017. And this growth is expected to continue, with sources such as BlackRock, PwC, Boston Consulting Group and EY

predicting the market will more than double to over €6 trillion by 2020, as investors continue to invest in low-cost, transparent and easy-to-trade passive investment strategies.

We believe there are a number of reasons for this trend to continue, also after 2020: one is that investors are attracted to the transparent nature of ETPs, which enables them to follow clearly how the underlying securities are performing. Another is that ETPs are liquid and available at low costs, and can be bought and sold easily during market hours. A third reason is that ETPs can be composed of financial instruments from almost any asset class, sector or location, giving investors access to markets that would normally be difficult to reach.

Review of 2017

Global ETP markets continued to gain strength and grew by 19 percent in 2017 measured in AuM. Annual global inflows of ETP AuM were €639 billion in 2017 (2016: €345 billion – source BlackRock Global ETP Landscape December 2017), driven by record investments in fixed income – and equity products. Overall trading activity in 2017 slowed down further, reaching levels not witnessed in over 30 years, as investors reduced diversification in their trading strategies, given economic developments and Central Bank policies. Flows in fixed income were €130 billion in 2017 (2016: €105 billion - source BlackRock Global ETP Landscape December 2017) signifying a growth of 23.3 percent, which can be largely attributed to investors' appetite for better investments in fixed income themes through ETFs.

Global coverage

We trade globally from four offices, in New York, Amsterdam, Singapore and Hong Kong. The largest ETP market is still in the United States, where total ETP value traded (on-exchange and off-exchange) was €15.72 trillion in 2017. Our New York office's total ETP value traded was €245 billion in 2017, an improvement versus 2016 and the highest level for Flow Traders US since inception. With institutional trading gaining momentum in 2017, Flow Traders US continued to grow its overall presence in 2017.

The EMEA ETP market, the world's second largest, had a total ETP value traded of €851 billion in 2017. Our total ETP value traded from our Europe office was €418 billion in 2017. We remained the number one liquidity provider in ETFs in EMEA and managed to grow our on- and off exchange presence further.

In APAC, the ETP market is still fragmented, with large differences in trading volumes, trading costs, regulation and maturity across the financial markets. Additionally, the volumes traded in the APAC region are dominated by the top-10 most traded ETF products, as those 10 determine roughly 60-65 percent of the total market volumes. While that is a lower percentage than in 2016, it is nevertheless still very large. The total ETP value traded (on-exchange and off-exchange) was €1.9 trillion in 2017, including China, while the total ETP value traded at our Singapore office was €23 billion. Overall we grew our market share further to about 4 percent globally. That is the highest level we have ever realized since inception of our company.

ETP market remains high growth market

In the ETP market, we see significant opportunities for growth, driven by the widely expected expansion of this industry in the foreseeable future. This is due to a number of changes within the asset management industry, including:

◾ The continuing shift to global electronic trading, which cuts costs and maximizes efficiency and transparency;
◾ A shift in asset growth from active strategies to more cost-effective, passive strategies;
◾ Increasing ETP adoption globally among institutions, intermediaries and retail investors;
◾ Long-term shifts driven by regulators looking to increase financial stability and transparency, such as MiFID II.

To take advantage of this expected growth, we aim to expand our presence further in all areas of ETP trading in all regions.

In Europe we continue to grow our presence on the different venues and grow the number of counterparties. To date we have established a connection with virtually all issuers active in Europe and we continued to grow our institutional counterparty-base substantially. MiFID II developments are showing a beneficial impact on our counterparty base already, as investors increase their focus on best execution, regardless of research access.

In the Americas, where our current market share has grown substantially in 2017, but is still relatively limited. We believe there is significant growth potential in fixed income ETFs, developed market equity ETFs and institutional trading. Institutional trading has gained mass in 2017 and is expected to grow further in 2018. We will continue to expand the number of products traded, the number of venues in the US and the number of counterparties we are connected to.

In Asia we continue to increase our participation in the markets where we are already active and expand into new markets. At the same time, we remain focused on markets that are potentially opening up, such as China, by capitalizing on our experience and increasing our business development capacities. In order to facilitate our future growth, we opened an office in Hong Kong in the fourth quarter, increasing our footprint and visibility in the region, supporting our institutional trading and reaffirming our role in the ETP ecosystem in the region.

In general, we believe growth can accelerate in all regions in the coming years, as electronic trading continues to evolve and we also start to diversify our technology and trading knowledge into FX trading. In terms of the ongoing discussions surrounding regulation, we continue to anticipate changes that further support a level playing field.

Products

ETPs

ETPs, the main products that we trade, are often compared to mutual funds mainly because they are both baskets of shares, bonds, or commodities. However, that is where the similarity ends. Unlike most mutual funds, the majority of ETPs simply track an index without trying to beat such indices. ETPs have open-ended fund structures rather than closed-end and, unlike mutual funds, can be continuously bought and sold on trading venues during trading hours and off-exchange after trading hours.

They provide investors with exposure to a wide variety of underlying assets, ranging from ETPs that replicate the composition of a particular equity index, to those that provide investors with exposure to assets in specific sectors or countries, to commodities, or to currencies. ETPs also enable investors to create and manage diversified investment portfolios in an efficient manner, as well as enabling them to switch exposures at any given moment during trading days. There are broadly three main categories within ETPs in which we trade:

Exchange-Traded Funds (ETFs)

This category is the most traded, when compared to ETCs and ETNs. ETFs derive their value from shares or bonds held in proportion to an index. For example, a Euro Stoxx 50 ETF would hold the same shares as the Euro Stoxx 50 index, in approximately the same proportions. Fixed-income ETFs derive their value from a portfolio of debt instruments. For example, bonds included in the Barclays US Treasury 1-3 Year Term Index. ETFs are the most widespread among ETPs as measured by AuM.

Exchange-Traded Commodities (ETCs)

ETCs typically derive their value from a commodity index, such as the Bloomberg Commodity Index, although in some cases they derive it from just a single commodity, such as gold or oil, or a certain currency. For example, the SPDR Gold Shares ETC tracks the value of physical gold. ETCs may hold physical assets, but exposure can also be held through derivatives of the underlying commodity, in combination with cash.

Exchange-Traded Notes (ETNs)

ETNs are a type of unsecured, unsubordinated debt security issued by an underwriting bank. The returns of ETNs are based on the performance of the index being tracked. For example, the iPath S&P 500 VIX Short-Term Futures Index TR ETN would track the S&P 500 VIX Short-Term Futures volatility index.

Exchange Traded Products (ETPs) are so called passive investment vehicles An ETP derives it value from an underlying portfolio of securities An ETP is listed on an exchange Exchange Traded Funds (ETF): Investment vehicle that tracks an index or a basket of listed securities Exchange Traded Commodities (ETC): Investment vehicle designed to track single commodities or commodity index Exchange Traded Notes (ETN): Unsecured, unsubordinated debt securities issued by a bank. Returns based upon on the performance of the underlying securities tracked Transparant fund structure with disclosed holdings and weights Low management fees given passive investment approach Continuously tradable on the secondary market Low trading costs What is an ETP? Illustrative structure of an ETP What is an ETP? Key types of ETPs Key advantages of ETPs Underlying securities Total value of securities = \$200 Bundled together Issues 5 ETP shares at \$40 NAV ETP structure Total value of ETP fund = \$200 ETP share (quoted on-exchange) } \$

The ETP ecosystem

The ETP ecosystem is made up of a number of participants who together make ETP investing and trading possible. These include: investors, ETP issuers, exchanges and other trading venues and authorized participants, who can also act as liquidity providers, such as Flow Traders. The ETP ecosystem can be further divided into two markets: the primary market and the secondary market.

Flow Traders is a Critical Component of the ETP Ecosystem

Primary market

Interaction in the primary market takes place between authorized participants (APs) and the issuers, who either issue or cancel ETPs. This is done in reaction to market demand and is called the creation and redemption process. Authorized participants can create ETPs with the issuer by transferring the underlying assets (or cash equivalent) to the issuer in return for a corresponding number of newly issued ETPs. This increases the ETP's AuM. In this way, the issuance of ETPs through authorized participants provides the issuers with access to a broad investor market without having to support a complex and costly trading infrastructure which would be non-core to their business. Redemption is the reverse of the creation process: the authorized participant transfers ETPs to their issuer in exchange for the underlying assets (or a cash equivalent). The issuer then cancels the ETPs it received. This decreases the ETP's AuM.

Secondary market

The secondary market is where ETP trading takes place between market participants, similar to the trading of ordinary shares, at market-determined prices. Secondary market participants include institutional and retail investors, liquidity providers and authorized participants. Secondary markets include exchanges and other automated trading venues, as well as off-exchange trading between market participants such as large institutional investors.

The role of Flow Traders

We have two main roles in the ETP ecosystem. The first is as a liquidity provider. In this role, we help maintain and improve the overall transparency and efficiency of the ecosystem, by quoting bid and ask prices for ETPs on trading venues, as well as off-exchange to institutional investors, that market participants can trade against. By providing

liquidity we make it easier for investors to buy and sell ETPs at a price that should reflect the (relation with the) current price of the underlying asset, and contribute to lower trading costs.

Another role we play in the ETP landscape is as an authorized participant (AP). We have AP-agreements in place with all the major ETP issuers. These agreements link the primary and the secondary ETP market and allow us to either create or redeem the ETPs and optimize our role as a leading liquidity provider in ETPs.

Liquidity Provider

Leading liquidity provider

We are recognized by the ETP industry as a leader in ETP liquidity provision. Each year for the last ten years we have won the 'ETF Market Maker Europe' award in the Global ETF Awards. We received the equivalent distinction in APAC as 'ETF Market Maker Asia-Pacific' in 2011, 2012, 2013, 2015 and 2016. Flow Traders has also been voted 'Best Trading House for ETFs in the ETF Risk European Rankings' in three consecutive years: 2013, 2014 and 2015. Finally, ETF Express awarded Flow Traders with the title 'Best Asia-Pacific Market Maker' in 2013 and 2016 and 'Best European ETF Market Maker' for 2013, 2014, 2015 and 2016. We consistently rank in the top-three in terms of market share of ETP value traded on Europe's five largest ETP trading venues: Deutsche Börse, Borsa Italiana, Euronext, Swiss Exchange (SIX) and LSE. In terms of total on-exchange ETP value traded in Europe, we hold a leading position.

'Each year for the last ten years we have won the "ETF Market Maker Europe" award in the Global ETF Awards'

Pricing

Pricing ETPs accurately

Being able to accurately price the ETPs that we provide liquidity in is vital to the success of our business. Get it wrong, and we lose money or a trade goes to a competitor. Our experience in establishing the pricing relationship between the ETPs and the underlying assets in a variety of market conditions means we can offer competitive bid and ask prices, while still covering our trading costs and locking in transaction profit. We achieve this using pre-set hedging strategies, which (where possible) instantly reduce our market exposure, creating a market-neutral position. And it is these hedging strategies that enable us to trade ETPs in such a way that our Net Trading Income is unaffected by any price movements of the underlying or related securities.

Cutting edge proprietary technology platform

We are a financial technology company. As such, technology lies at the heart of the business, enabling us to provide liquidity in a variety of market environments across the globe. We trade using proprietary and scalable software with the vast majority of our applications developed in-house. These include pricing and trading software, market data processing tools, pre-trade risk controls, and other risk and compliance tools. This is the main reason that our Technology department makes up around one-third of our total staff.

One of our software platform's core features is its modular design, which allows us to rapidly test and implement ongoing enhancements. This also means we can easily and cost-effectively expand our coverage of securities, asset classes, and geographical markets as we grow the business.

In 2017 our total technology expenses grew 7 percent to support the improvements in our infrastructure and the growth in the number of trading venues. In total our 2017 technology expenses were 44 percent of the total fixed expenses. Including salaries this would be 55 percent, which highlights our focus on technology as part of our business model. The number of technology FTEs grew from 118 to 143, also confirming our overall growth.

Real-time risk management

We manage risk effectively across the company. Within the trading environment we reduce our risk by monitoring our trades and positions, market exposure, portfolio efficiency, and liquidity on a real-time basis. Our risk management system is fully integrated with our trading platform, analyzing pricing data and ensuring that our order activity is conducted within pre-determined trading and position limits independently. At the same time the system reconciles internal transaction records against those of our prime brokers and exchanges where possible. Off-exchange we use strict risk management approval and monitoring procedures for institutional trading counterparties. Additionally, we settle almost all of our off-exchange trades through delivery-versus-payment, which means that the delivery of securities occurs simultaneously with payment by the buyer, thus limiting counterparty risk. For more information, please refer to the Our Risk Management chapter.

Strategy

Our strategic ambition

Our ambition is to be the leading global electronic liquidity provider.

Our market

We operate in a highly competitive market that is changing rapidly. It is characterized by heightened regulation and an ever-increasing focus on technology. Yet the market's core function remains the same: transferring risk between market participants. This is where we add value. Our focus will continue to be on providing liquidity in the fast growing ETPs market, and we are striving to trade all ETPs.

Our business principles

Our business principles are being flexible, agile and being focused on continuous improvements. To be successful, we recognize that we need to perform well across all areas of the business. Achieving this involves diligently studying the markets and our responses to them, and using our resources where they have the greatest impact. The outcome of this process defines whether or not we have a competitive edge.

Our strategy

We will achieve our strategic ambition by continuing to grow our business incrementally. This should result in increasing our Net Trading Income, while maintaining our desired risk profile, controlling costs, and securing and attracting the right talent. Increasing our NTI involves increasing the product of volume and revenue capture, where volume is the value of products we trade and revenue capture is the net margin we capture per trade after the corresponding exposure has been hedged. Our risk profile is characterized by having no opinion on market movement or direction.

Growth focus

We focus on incremental growth. Although we will not exclude any possibilities where it concerns M&A activity, any opportunity would have to outweigh the integration costs and cultural issues that could potentially arise.

Pricing

Trading business

market knowledge

to more venues

alternative asset classes

Technology
◾ Provide a stable, performing and resilient infrastructure for our business
◾ Connect to more trading venues to capture additional volume
◾ Further optimize our infrastructure to increase the volume we trade
◾ Implement the latest technology to increase overall trade quality

Risk Management and Control

◾ Increase quality of hedging and pricing by connecting

◾ Increase the volume traded by our Institutional

◾ Leverage our infrastructure by providing liquidity in

◾ Price more accurately by increasing product and

People and Culture

◾ Focus on providing liquidity in products that fit our risk appetite
◾ Apply effective checks and controls on all essential processes
◾ Translate cost insights into more efficiencies
◾ Ensure ongoing compliance with applicable rules and regulation
◾ Ensure our people are encouraged to bring Flow Traders to the next level
◾ Provide an environment that promotes teamwork and cooperation
◾ Promote ownership amongst our employees for the work they do and the outcome thereof
◾ Actively radiate our view on the environment we operate in

Financial overview

Net Trading Income

The 2017 macro-economic topics surrounding the United States' domestic politics and foreign affairs, as well as the ECB developments, pushed trading activity down further and kept flows in the markets centered around liquid products in the absence of the need to diversify investment strategies. The spreads in the market are impacted by the low volatility (characterized by VIX) which was showing levels not seen in a long time. These developments affected our Net Trading Income, which decreased to €166 million (2016: €250 million), although our ETP value traded increased to €686 billion (2016: €640 billion). This shows the market conditions Flow Traders operated in in 2017, as our revenue capture was impacted by the shift to highly liquid products and a prolonged period of low volatility in the market globally. Compared to 2016, our consolidated revenue capture decreased to 2.4 bps (2016:3.9 bps).

Market volatility

In 2017 market volatility declined sharply to record lows. Unlike previous years, 2017 had very few moments of heightened market volatility or pickups noted in volumes traded in the market. VIX touched levels below 10 and set lows not recorded since 1990.

Operational expenses

Our fixed operational expenses developed in line with guidance of 15-20 percent in 2017. We continued to invest in our people and technology to ensure future growth. Due to the strong focus on our cost growth, we were able to maintain an EBITDA margin of 34 percent in 2017 (2016: 47.5 percent). Going forward our costs expect to grow at a maximum rate of 15 percent annually.

Capital base

During the year we continued to maintain a strong, stable capital base, comfortably exceeding our regulatory and prime broker capital requirements. We paid out a €0.30 interim dividend in August 2017 and propose to pay €0.35 as a final dividend. Over the course of 2017 we returned a total of €0.65 through dividends to our shareholders, as we raised the payout ratio to at least 75 percent in the third quarter of 2017.

In November 2017 the Dutch Central Bank informed Flow Traders to amend the capital requirements for investment

'We continued to grow the team, strategies and infrastructure'

firms dealing on their own account. Starting 31 March 2018 Flow Traders is required to meet the regulatory requirement of the EU Capital Requirement Regulation (CRR). After detailed assessment Flow Traders has implemented the requirements applicable and expects to comply with these Capital Requirements as from 31 March 2018 onwards.

Growth

Flow Traders continued to grow its team, strategies and infrastructure in 2017. We increased our institutional counterparties globally to over 700, increased the number of products in which we provide liquidity to around 5,500 and increased the number of venues to which we are connected to, to over 100. To facilitate this growth, we continued to grow the business during the year across all regions, resulting in an increase in the number of FTEs to 394 by year-end (2016: 341).

Our People

Our success is driven by a combination of smart trading strategies, state-of-the-art proprietary technology and prudent risk management. Our people are critical to being able to deliver on these items, which is why we aim to recruit and retain the best talent available.

Culture

Open, informal and diverse culture

Our work environment is a reflection of the things we believe in. We believe that it is more important how you perform than what you wear. So our employees dress comfortably for work – jeans, t-shirts and sneakers are common. We believe that what someone says is more important than who says it. We believe that the contributions of our team-members are crucial to the success of the company. We believe that two people know more than one, and that people can have great ideas even in areas different to their core expertise. Therefore, we welcome and encourage everyone to share their opinions. Anyone with a good idea, be it in his/her own area of expertise or another, will be encouraged to put this forward. This is part of our open and collaborative culture.

Our employees include people from different backgrounds and nationalities. We have economists, engineers, computer scientists, mathematicians, lawyers and physicists among our employees. We harbor people from 43 different nationalities (2016: 36). This diversity ensures different viewpoints are brought into discussions, and we believe this leads to better, more innovative outcomes for the company.

Attract Talent

How we recruit

Our offices are all growing, and we look to hire as many qualified applicants as we can find. However, our selection standards remain high – our candidates need to go through a number of tests and interviews, with less than 1 percent of applicants for Trading positions ultimately receiving a job offer. To find people with the unique skill sets needed for a global liquidity provider we recruit across the globe, advertising and searching across multiple platforms. We also visit campuses in India, Hong Kong, Australia, Singapore, the US, and across Europe, meeting talents in career fairs and workshops. We recruit for all disciplines and look for the best caliber available, regardless of their gender, age, ethnicity, faith or sexual orientation.

Junior traders are typically recruited straight from university. Although our traders have a varied educational background, they share a strong numerical aptitude, which is why a numerical test is an important part of the selection procedure. To experience the world of trading first hand, we invite a selected group of students to our bi-annual Business Course in our Amsterdam office. The two-day event is packed with interesting and challenging trading exercises and simulations and includes quantitative and technical cases to mirror the evolving nature of the role. We also host numerous informal events such as the annual poker tournaments in Amsterdam and New York, and trading competitions in select universities in Canada, the US, Australia and Singapore.

Candidates for roles other than trading are qualified specialists who have relevant work experience. We make very little use of contractors or temporary employees.

In 2017 we continued hosting, participating in, and sponsoring a variety of events, ranging from in-house days, Java User Group Meet ups, WomenHack 'speed dating' and Meeting C++ in Berlin.

We sponsored the IT Cluj Days, one of the biggest IT related fairs in Cluj Napoca with over 800 registered participants. A highlight of the event was our Co-CEO, Sjoerd Rietberg, giving a presentation on "What It Takes to Be a Leading Liquidity Provider in Today's Financial Markets".

'To find people with the unique skill set needed for a global liqidity provided we recruit across the globe'

Engage and Invest

Our Offices

All our offices are designed to provide a pleasant and ergonomically sound place to work. They are flooded with light, have attractive, well laid out interiors and ergonomically-optimized furniture. In addition, to give our people the opportunity to perform at their best, we offer healthy breakfast and lunch options, have our own in-house gym facilities and bar in Amsterdam, Singapore, Hong Kong

and New York, and organize great company trips and parties. We not only use our newly-designed bars for after work gatherings, but also for recruiting events and quarterly staff updates. The bars' authentic feel and design, which contrasts with the sleek, modern, white-and-red interior of our offices, has been well received by visitors. We believe these benefits are important to maintain a healthy and happy workforce and to stimulate bonding and connections beyond employees' direct circle of colleagues, helping to stimulate teamwork across the whole company.

Onboarding

We are a fast growing company. In 2017 we had over 100 new hires, a 16 percent increase in the number of employees versus 2016. Our new colleagues join us from all parts of the world. To make sure they feel at home quickly we offer full relocation support for everyone moving to our offices from abroad. We help with finding a home, applying for a visa and getting to know the local culture. We also offer all international employees the opportunity to attend Dutch language classes.

Our new hires in trading and technology start with an intensive introduction program, bringing them up to speed with our way of working and training them in the specific skills they need to do their job well. All junior traders – including those hired in Asia and the US – begin their global training program at our offices in Amsterdam. In 2017 we also introduced a general onboarding program for all new hires in support functions, which provides a complete overview of our business.

Training and rotation

We help our employees shape their own future. We offer everyone diverse training opportunities, aimed at improving function-specific skills or for their own personal development. To facilitate continuous learning, we launched an exciting new platform in 2017, Flow Academy, with courses spanning all areas of the business and delivered through a variety of interactive formats. The offerings will continue to evolve and expand, helping our people develop even further.

Most of our managers are 'home-grown', having developed into their positions after a number of years working with the company. They set an example and act as an inspiration for new hires, illustrating the career paths open to them. To further support them in their personal growth, a leadership development program will be introduced in 2018.

To complement self-growth, we also like to give our employees the chance to transfer between our offices and experience life and work elsewhere.

Remuneration

We reward our uniquely skilled employees with an attractive combination of fixed and variable pay. When awarding variable compensation, we look beyond an employee's individual results or direct area of responsibility. The variable pay element depends on company performance, individual performance, and how an employee contributed to the long-term success of the company as a whole. We use this compensation structure as an important tool to stimulate team work and risk awareness and to reward performance. For example, awarding variable remuneration and payment of deferred variable remuneration depends on the future

profitability of the company, which means we only award variable remuneration, or pay deferred remuneration, if there is sufficient profit and capital to do so.

In 2017, company-wide average compensation paid per employee was approximately €145,520 while variable remuneration amounted to around 44 percent of total compensation in 2017. In 2017 no employees (including the Management Board) were awarded remuneration of €1 million or more (2016: 19).

'We help our employees shape their own future'

Shares held by employees and Management Board members

We encourage our management and employees to invest in Flow Traders, linking the company's long-term success to their personal financial circumstances. Our Co-CEOs and a significant number of current and former employees have invested in Flow Traders in the past at fair value, using their own net worth. Following our IPO, these shares remain subject to lock-up provisions and the relevant people may only transfer or sell their shares as set out below:

◾ up to 33¹ / ³ percent of these shares became available for sale on 10 July 2016;
◾ up to 66² / ³ percent of these shares became available for sale on 10 July 2017;
◾ all of these shares will be available for sale from 10 July 2018.

The restriction included in the underwriting agreement that the company entered into in respect of the IPO that, without the prior written consent of the joint global coordinators on the company's IPO (acting on behalf of the underwriters), it would not grant any waiver from the lock-up as set out in (i) each of the Co-CEOs' lock-up agreements, or (ii) the lock-up agreements for other employee-shareholders holding a 0.5 percent economic interest (or more) in the company at the time of the IPO has expired.

In 2015 a group of employees bought shares in Flow Traders. These shares are subject to a six-year lock-up period and will only be released as set out below:

◾ up to 25 percent of these shares will become available on 1 June 2018;
◾ up to 50 percent of these shares will become available on 1 June 2019;
◾ up to 75 percent of these shares will become available on 1 June 2020;
◾ all of these shares will become available on 1 June 2021.

In the event of termination of employment during the lock-up period the relevant people must offer their unreleased shares to the company for the lower of (i) the corresponding subscription price paid of €14.44 or (ii) the fair market value of the shares at the time of such termination, and in any event within five business days of Flow Traders having given notice to the relevant participant thereof. The company may at its discretion accept the offer, subject to any applicable restrictions under corporate or securities laws. See also note 26 in the Financial Statements.

NUMBER OF SHARES LOCKED-UP OR UNRELEASED HELD BY CURRENT AND FORMER EMPLOYEES AND MEMBERS OF THE MANAGEMENT BOARD	Shares subject to lock-up	% of outstanding shares	Shares subject to release	% of outstanding shares	Total shares subject to lock-up or release	% of outstanding shares

Dennis Dijkstra (Co-CEO)	350,958	0.8%	50,000	0.1%	400,958	0.9%
Sjoerd Rietberg (Co-CEO)	252,475	0,5%	68,750	0.1%	321,225	0.7%
Others (excluding members of the Supervisory Board)	2,382,833	5.1%	1,297,875	2.8%	3,680,708	7.9%
Total	2,986,266	6.4%	1,416,625	3.0%	4,402,891	9,5%

Shares held by members of the Management Board

The table below provides an overview of the shares held by the members of the Management Board, including those who are under lock-up and as reflected In the AFM register on 31 December 2017:

SHARES HELD BY MEMBERS

OF THE MANAGEMENT BOARD		% of outstanding
(31 December 2017)		total shares
Dennis Dijkstra	1,112,875	2.39
Sjoerd Rietberg	860,000	1.85
Marcel Jongmans	10,000	0.02
Total	1,962,875	4.22

Shares held by members of the Supervisory Board

The co-founders of Flow Traders, Roger Hodenius and Jan van Kuijk, are currently members of the Supervisory Board. The table below provides an overview of the shares indirectly held by them on 31 December 2017 as also reflected in the AFM register.

SHARES INDIRECTLY HELD BY MEMBERS

OF THE SUPERVISORY BOARD		% of outstanding
(31 December 2017)		total shares
R. Hodenius
(Avalon Holding B.V.)	5,711,565	12,27
J.T.A.G. van Kuijk
(Javak Investments B.V.)	5,711,565	12,27
Total	11,423,130	24,55

'Our business principles are being flexible, agile and being focused on continuous improvements'

EMPLOYEES PER BUSINESS UNIT/NATIONALITIES

	Dutch	American	Indian	German	UK	Romanian	Russian Federation	Other	Total
Trading	69	22	14	6	1	-	-	28	140
Technology	33	15	13	8	10	11	11	43	144
Risk & Mid-Office	21	5	1	-	1	-	-	7	35
HR & Facilities	15	5	3	-	1	1	-	5	29
Legal & Compliance	11	3	-	-	-	-	-	-	14
Finance	9	1	-	-	-	1	-	6	18
Managing Directors	9	-	-	1	1	-	-	-	11
Supervisory Board	4	-	-	-	–	-	-	2	6
Internal Audit	2	-	-	-	–	-	-	-	2
Total	173	51	31	15	14	13	11	91	399

NUMBER OF EMPLOYEES AS OF 31 DECEMBER 2017

	Amsterdam	New York	Cluj	Singapore	Hong Kong	Total
Female	34	8	6	11	1	60
Male	239	52	4	41	3	339
	273	60	10	52	4	399

REGULATORY COMPLIANCE

Anti-corruption and bribery matters

We have zero tolerance towards bribery and corruption and we actively ensure that no such behavior occurs. No cases of bribery or corruption were reported in 2017.

AT A GLANCE

Informal 'work hard-play hard' culture

◾ Casual dress code
◾ Highly skilled people
◾ Drive, teamwork, ownership
◾ Aiming to be the best
◾ Playing to win
◾ Enjoying life, organizing great events

Office

Stimulating collaboration and collegiality

◾ Open office spaces
◾ In-house bar
◾ Annual company trips

Lifestyle

Enabling a healthy lifestyle

◾ Free healthy breakfast and lunch
◾ In-house gym
◾ Sports programs and events
◾ Personal trainers
◾ Chair massage
◾ Free drinks and snacks
◾ Quarterly health checks
◾ In-house barber

Flow Traders and Society

Sustainability statement

Our activities influence the society we live in. As a liquidity provider we are active on global financial markets and we contribute to transparency and to the pricing process, enabling market participants to invest at fair prices and lower costs. Our activities contribute to sustainable employment and technological innovation in our society and we are committed to full compliance and integrity. We seek to limit our environmental footprint and contribute to our society and immediate vicinity.

Our activities do not involve the production, use, processing or transport of physical goods. We therefore have not explicitly incorporated sustainable development goals into the company's strategy. However, sustainable business and value creation is of high importance to Flow Traders. We aim to reach a sustainable environment by means of –amongst others – our environmental footprint, societal commitment and commitment to charity and our Equal Opportunity Policy.

We are aware of our impact on society while executing our business strategy. Four themes summarize our interaction with society:

1 We offer liquidity to financial markets;
2 We offer sustainable employment;
3 We are committed to full compliance and integrity;
4 We are involved in society and our immediate vicinity.

1. We offer liquidity on financial markets

We contribute to transparency and effective operation of global financial markets by providing liquidity to markets globally. We facilitate that thousands of exchange-traded products (ETPs) and similar products can be traded across the world's markets, by continuously quoting bid and ask prices. As an innovative segment of global financial markets, ETPs have introduced efficiencies and cut investment costs substantially for a wide range of investors, from pension funds to retail investors. Increased liquidity, higher execution quality, and lower overall trading costs are just some of the benefits that liquidity providers, such as Flow

Traders, offer through these innovative financial products compared to more traditional investment products.

Our role is to enable trading in widely diversified investment products accessible and transparent to anyone at any time, allowing end investors to invest with lower costs and thus potentially higher returns. As a result, over the years, trading costs have dropped dramatically and access to transparent and inexpensive investment products for anyone, and not only the happy few, has never been more efficient. This benefits institutional investors, individual investors and, ultimately, society at large.

Stakeholder dialogue

We enter the public dialogue with full transparency. Our contributions to the regulatory dialogue are typically made public and we are always willing to discuss what we do, and how that impacts the world around us. We have extensive dialogues with interest groups, including those focusing on transparency, institutional and retail shareholder interests, academia and students, local governments, regulators and anyone else who has an interest in what we do, and how we do it. We commit to being approachable and fully transparent with the goal to promote fairness, transparency and orderly functioning of the financial markets.

2. We offer sustainable employment

By creating and maintaining high-quality jobs we help develop a stable and trusting working environment that benefits our people, our business, and society. Since we started in 2004, our goal has been to foster a culture that encourages innovation, entrepreneurialism and risk-awareness, while focusing on drive, teamwork and ownership. Developing talent in-house and maintaining a committed and substantial employee shareholder base strengthens internal bonds and helps create a loyal, forward-looking team. We invest in employees for the long run. We encourage our people to move between offices internationally, to share ideas and best practices across the company, while experiencing life in different cultures. Although our business does not directly affect human rights issues, we are strong proponents of ensuring fair and equal treatment for all and expect the same from our employees, relationships and stakeholders.

Diversity

We believe that a diverse workforce helps create a richer variety of ideas and provides better solutions to the challenges we face. We have a long-standing policy of recruiting and retaining the best talent available, regardless of their gender, ethnicity, faith or sexual orientation. We are committed to providing equal employment opportunities to all qualified job applicants. As a result, we employ people from 43 nationalities across our offices. The composition of our workforce tracks the outflow of the education system in the various roles we offer at Flow Traders. We strongly encourage women to apply for any function within the firm, particularly when they have a background in fields that traditionally have a higher proportion of male employees. In accordance with the Dutch Corporate Governance Code,

we have drafted an Equal Opportunity Policy. Please refer to the chapter Our Governance for further information.

Remuneration

We believe in sharing our profits with all relevant stakeholders, including our employees. Given good performance, employees from any role and office are entitled to receive a variable compensation relative to their contribution to the firm as a whole. We are transparent about how we pay our people and how much we pay them, including management. We have a straight-forward remuneration policy that permits variable pay only when a profit is made. And because variable remuneration is, to a large extent, deferred, it remains at risk of forfeiture in the case that we sustain a loss. We believe this is the strongest incentive for sustainable, risk-aware behavior for all our staff. In addition, we promote employee shareholding, particularly at more senior levels. This aligns the interests of the company with those of our employees by creating 'skin in the game'. Please refer to the sections Our People and Remuneration for more information.

Education

We provide our people with a range of excellent training programs, benefitting them and the company. New hires within the Trading and Technology departments follow rigorous initial training, while in 2017 all our employees received an introduction to Flow Academy. This is an online training resource that provides programs in a wide variety of subjects, including culture, technology, regulatory developments and trading for non-traders. For additional information, please refer to the section Our People.

Employee dialogue

We take good care of our people and stakeholders. We ensure a high-quality working environment, fair treatment and equal remuneration principles for all our staff, including contractors, regardless of gender, tenure or personal factors. All employees and contractors have unrestricted, direct access to senior management and are regularly informed and consulted about key developments. People are encouraged to speak their minds to help make Flow Traders better. Information travels freely and is not restricted unless we need to protect overriding interests, such as those concerning regulations, commercial sensitivities or to protect our intellectual property. In addition, we hold regular employee surveys, including that held by 'Great Place to Work', to hear our employees' views on how the company is doing and their experiences about their day-to-day workplace.

3. We are committed to full compliance and integrity

Flow Traders is a strong proponent of effective, efficient and equal regulation and contributes to the regulatory dialogue in our key jurisdictions as we want markets to be fair, transparent and functioning in an orderly fashion. We commit to complying with all relevant laws and regulations that apply to us, wherever we operate, including in respect of anti-corruption and anti-bribery laws. Integrity and transparency is central to the way we run our business, from our Management Board and Supervisory Board to all our staff, regardless of their role. The company encourages an open culture within its organization and expects its employees to comply with applicable laws, regulations and internal policies. Each employee is responsible for

conducting business ethically and honestly. We have issued a Code of Conduct which forms part of our employment documentation. This Code of Conduct can be found on our website www.flowtraders.com.

Anti-bribery, anti-corruption and anti-money laundering

We have anti-bribery, anti-corruption and anti-money laundering (AML) policies in place that apply to all our staff. We expect our counterparties, business partners, intermediaries, contractors and subcontractors to adhere to the same standards. We believe that the risk of bribery or corruption is very limited as we do not hold or manage client money or funds. We trade financial instruments for our own account and own risk only. We do not maintain production facilities or source raw materials. Nevertheless, staff receive training in anti-bribery, anti-corruption and AML practices.

Key to our Anti-bribery and Anti-corruption Policy is that officials or counterparties may never be placed in an uncomfortable position. No gifts nor favors may lead (or have the appearance to lead) to obligations or embarrass any recipient, and no gifts nor favors of any substantial value may be given to authorities. Facilitation payments are not permitted. We provide clear and recurring guidance in that respect. As part of our constant monitoring, all expenses and gifts relating to external parties are checked by senior managers and employees have to state what the purpose of an expense was and who was the recipient.

Whistle-blowers

On top of our very strong culture of openness, transparency and participation, we also have an elaborate Whistle-blower Policy in place for all staff and relevant contractors, approved by the Management Board and Supervisory Board. Employees are free to raise issues and have the responsibility to report misconduct and incidents, or any reasonable suspicions.

Circumstances may arise that cause an employee to feel insecure or unsafe to the extent that they may not want to use the usual reporting lines. The company provides employees with a safe way of reporting misconduct within its organization and offers adequate protection. The Whistle-blower Policy has wide applications, including in respect of topics such as fraud, market abuse, corruption, anti-money laundering, theft, bribery and any other structural misconduct that threatens the integrity and proper business conduct of Flow Traders. The Whistleblower Policy provides whistle-blowers with anonymity, confidentiality, and the company will not impose sanctions on disclosure (or affect an employee's position) unless the employee is involved in the issue that is being reported. Our Whistle-blower Policy can be found on our website www.flowtraders.com.

Fair taxation

We are committed to being good corporate citizens of the communities we operate in. We pay taxes where they are due and subscribe to fair taxation, both in terms of corporate taxes and wage taxation. In 2017 we paid total taxes of €54.2 million which was 33 percent of our Net Trading Income.

As set out in the Our Governance chapter, Flow Traders operates a fair, transparent and straightforward tax policy. We believe this is an important part of being a sustainable business and in delivering long-term value to all of the company's stakeholders, including the tax authorities in countries whose infrastructure and facilities we benefit

Total taxes paid 2017 (€ 54.2 million)

Total taxes paid 2016 (€ 62.1 million)

from. We do not use aggressive tax structuring or tax havens. We entered into a covenant with the Dutch Tax Authority for horizontal supervision (horizontaal toezicht). This allows the Dutch Tax Authority and ourselves to pro-actively manage our relationship and discuss any tax items in a timely, transparent and professional manner.

Principles of financial reporting and tax policy

Flow Traders is prudent and transparent in respect of its financial reporting and its relations with tax authorities globally. With regard to financial reporting, conservative accounting principles are being applied and one-offs must occur infrequently and be clearly documented.

As aforementioned, Flow Traders operates a fair, transparent and straightforward tax policy, which we believe is important when running a sustainable business and delivering

long-term value to all our stakeholders. The dialogue we have with stakeholders includes discussions on the company's financial reporting and tax policy and, as with all stakeholder input, is considered during our decision making process, but so far has not lead in a desire from the stakeholders to change our tax policy. The open dialogue towards our financial reporting and tax policy has not resulted in any material requests to change our reporting or tax policy. For every business decision, tax aspects are presented and weighed as part of the decision making process. The commercial needs will in no circumstances override compliance with (tax) laws and strives to be compliant with the spirit of the law. The company supports transparency initiatives such as the country-by-country reporting and Base Erosion and Profit Shifting from the OECD and assesses frequently the impact of such initiatives. Where necessary or relevant, Flow Traders take the

appropriate actions to adopt these initiatives in its tax control framework. Further details on our tax policy can be found under Tax Principles on our website, which also serve as KPIs throughout the entire company's performance measurement. The tax function within the company will therefore provide appropriate input as part of the approval process for business proposals to ensure a clear understanding of the tax consequences. We have good standing relationships with the tax authorities in each region in which we operate. We pro-actively manage our relationship with the tax authorities with the aim of minimizing the risk of challenge, dispute or damage that could have an impact on our credibility. We concluded a horizontal supervision agreement with the Dutch tax authorities (horizontaal toezicht) with a view to further strengthening our transparent and professional relationship with the tax authorities. Tax laws, rules and interpretations

are continuously subject to a changing social view towards tax and we cannot be certain of continued benefit from certain tax regimes, such as the FSI Schemes in Singapore and innovation box regime in the Netherlands. The key participants in the Tax Control Framework are well established and include the Supervisory Board, Managing Board, Finance & Tax department, internal auditors and external auditors. They are able to assess and weigh the risks associated with the tax decision process for our business and stakeholders.

Flow Traders pays taxes where profits are earned in accordance with local tax legislation. We do not use tax haven jurisdictions for tax avoidance purposes and carry out our business through entities in jurisdictions where we factually operate our business. With this simple tax philosophy in place, the company can operate its business in line with its belief that it is part of the corporate social responsibility duty to pay taxes where it operates. In addition to corporate income taxes, Flow Traders pays many other taxes, including payroll taxes and social security contributions on the wages of its employees, value added taxes, property taxes. All these taxes are a significant basis of funding governmental public services. Flow Traders sees it as its responsibility to contribute to this. For more information on our tax position, please refer to note 12 of the financial statements.

4. We are involved in society and our immediate vicinity

Environmental footprint

Many of our employees live reasonably close to our offices, limiting travel. We seek to limit our energy use and CO2 emissions to take care of our environment. When refurbishing our offices we sought to use more environmentally friendly solutions for lighting and water consumption. We regularly review opportunities to compensate or limit our footprint, for instance by applying greener alternatives and carrying out annual energy audits in order to assess and reduce our impact on our environment.

Societal commitment and charity

It is important for us to back initiatives that contribute to society. We support a number of charities, not only financially but also by offering access to the knowledge and experience that we have available. Our people feel empowered to support charitable initiatives, which has always been part of our working culture. We engage in community giving throughout the year, and across our offices. We do this by supporting our people in fundraising activities by giving time or access to our network, by providing guidance to help them have as great an impact as possible, and by contributing financially. At the end of 2017 we asked each employee to donate €250 to a charity of their choice. As a result, more than 100 charitable organizations received donations.

Individual employees have also initiated backing of a growing number of charities, with the support of the company and their colleagues. For example, one of our employees collects toys for parents who are unable to

provide presents to their children during the festive season and a large number of employees donated money or toys to support this initiative. Additionally, we sponsored the 'NewTechKids' project, which is designed to provide computer science classes to children ranging from ages 7 to 12.

Our employees also take part in sports events to raise awareness and donations for a range of different charities. At the beginning of 2017 a group of eight employees climbed Kilimanjaro to raise money for the charity War Child.

Dilemmas

In our daily activities we sometimes encounter dilemmas where we weigh our societal impact against business benefits. Being a listed company, we mostly find them in the intersection of regulations and entrepreneurship. Apart from having internal rules and regulations such as the Code of Conduct and the Whistle-blower Policy, we try to assess and resolve these dilemmas by applying common sense and remaining aware of our role within society. For example: while we seek profit by trading in a highly competitive environment, we feel that we must leverage our knowledge and our position as a market participant to safeguard fair, orderly and transparent markets for others. More specifically, we see purpose in protecting retail investor interests in these markets. Therefore, we spend considerable resources and efforts to address such outside interests in our regulatory dialogue as it improves market quality for everyone, including more vulnerable participants.

'We try to assess and resolve dilemmas by applying common sense'

Our Risk Management

Flow Traders' Risk Management Framework (RMF) forms the foundation of our approach to managing key risks.

Where possible, we identify, assess, monitor, quantify and document possible risks which are inherent to trading in an automated environment. In this very dynamic world of automated trading, we have designed our RMF in such a way that it is robust, efficient and transparent. The RMF helps ensure that we have sufficient internal control and internal capital through a consistent, continuous and careful method for addressing, managing and prioritising key risks in the context of our enterprise-wide strategic objectives.

Enterprise Risk Management

We aim for a good balance between our business activities, risk and return. Our risk management is based on the COSO Enterprise Risk Management (ERM) framework, which ensures that the risk appetite and profile are integrated into the day-to-day operations and the strategic, tactical and operational objective setting and decision making.

Effective ERM practices, such as the COSO framework, requires that the key components (control environment, risk assessment, control activities, information and communication and monitoring activities) operate in an

integrated manner with the strategic, operational, reporting and compliance objectives across all company levels.

We incorporate these principles by implementing the following ERM Cycle.

Every year our Management Board sets its business targets following the strategic goals (1). Based on the target and objectives, the Management Board formulates its risk appetite (2). The targets, objectives and risk appetite give direction to the various departments within the company and are used to derive our strategic risks.

'Flow Traders identifies three general risk categories, each with their own specific risks areas'

We implement our Risk Management cycle (3) to ensure that the residual risk profile is (and remains) in line with the set risk appetite. To achieve this, we perform risk (self) assessments (RSA) to identify and assess current and newly arisen risks and compliance with applicable requirements. Following the RSAs, local department heads, global heads in cooperation with the Management Board, then decide on the appropriate risk response. The effects of the chosen risk responses are monitored and periodically the actual residual risk profile is mapped versus the appetite.

Risk categories

Flow Traders identifies three general risk categories (Strategic risks, Operational risks and Financial risks), each with their own specific risks areas:

Risk category	Context
STRATEGIC RISKS
Business and Strategic	This concerns risk related to Flow Traders' strategy, business model and market conditions. Volatility risk
risk	is part of this risk as our Net Trading Income and profitability are primarily a function of the level of
	trading activity, or trading volumes, in the financial instruments in which we trade.
Compliance and	Compliance risk is the threat posed to a company's earnings or capital as a result of violation or
regulatory risk	non-conformance with laws, regulations, or prescribed practices. It also concerns the risk of changing
	regulatory rules (regulatory risk).
	In addition it includes the risk that the integrity of the organisation or its operations is jeopardised as a
	result of unethical behaviour of the organisation, its staff members or management.
Concentration risk	Probability of loss arising from heavily lopsided exposure to a particular group of counterparties or
	products. Concentration risk also includes supplier dependency risks.
Legal risk	The legal risk is the risk of loss resulting from a claim, failure to adhere to legally binding agreements
	and requirements, or failure to adequately protect assets of the firm or a change in law and regulations
	laws and regulations.
Reputation risk	The reputation risk is the risk of loss resulting from negative exposure to stakeholders.
OPERATIONAL RISKS
IT risk	The IT risk concerns the risk of loss resulting from inadequate information technology and processing in
	terms of availability, manageability, integrity, controllability and continuity, insufficient protection, or
	inadequate IT strategy and policy or inadequate use.
IT Security risk	This concerns risks relating to access management and data integrity risks.
Operational risk	The operational risk is the risk of loss resulting from inadequate or failed internal processes and people
	or from external events. The main driver of operational risk is human error.
FINANCIAL RISKS
Liquidity risk	Liquidity risk is the risk that there is not sufficient trading capital or regulatory capital available. This risk
	can be managed by intra-day monitoring of credit lines from the prime brokers, cash, portfolio
	efficiency and liquidity. Furthermore, liquidity risk can arise from having illiquid products on the book
	which cannot be turned in a short timeframe into liquid assets like cash. This part of liquidity risk can be
	mitigated by procedures that only allow trading liquid products and by monitoring the liquidity of the
	book.
Market risk	Market risk is the risk to an institution resulting from movements in market prices; in particular, changes
	in interest rates, foreign exchange rates, and equity and commodity prices. Market risk could be suffered
	in the event of a firm trading on its own account and the portfolio suffering a devaluation due to
	changing market circumstances or developments. This risk can be mitigated by hedging the market
	exposures and making the portfolio less reactive on market movements.
Credit risk	Credit risk is the risk of a counterparty and/or issuing institution involved in trading in or issuing a financial
	instrument defaulting on an obligation, and thus harming the company's financial position.

Risk Management Governance

The effectiveness of risk management is unavoidably linked to commitment and integrity. It is therefore crucial that the Management Board, global and local department heads, and all Flow Traders employees are aware of the company's risk exposure and their own responsibilities, as well as the responsibilities of Flow Traders as a whole.

Our risk management is embedded in the organisation in line with the three lines of defence model.

The first line of defence is formed by trading.

The second line of defence is responsible for policy setting, oversight and monitoring regarding risks, rules and requirements. The Risk Management, Compliance and Finance departments are responsible for the continuous risk management of the company.

The third line of defence is formed by Flow Traders' Internal Audit department.

Roles and responsibilities

Flow Traders Management Board is responsible for:

◾ Risk reporting towards the Risk Committee of the Supervisory Board;
◾ Setting companywide objectives;
◾ Setting boundaries for risk taking by communicating Flow Traders' risk appetite and risk tolerance;
◾ Successfully promoting, sponsoring and coordinating the development of a risk management culture throughout the company;
◾ Guiding the inclusion of risk management practices in all strategic and operational decision making;
◾ Maintaining and monitoring the effectiveness of the framework to manage, monitor and report risk;
◾ Identifying and evaluating the significant risks related to Flow Traders Strategy.

Flow Traders Managing Directors and Global Heads are responsible for:

◾ Setting departmental targets and objectives in line with companywide objectives;
◾ Supporting Flow Traders in the identification, handling, and monitoring of risks related to Flow Traders objectives;
◾ Identifying and evaluating the significant risks related to Flow Traders objectives and operations;
◾ Monitoring risks related to Flow Traders objectives;
◾ Advising Flow Traders on risk mitigating measures;
◾ Reporting on risks and risk management towards the Management Board;
◾ Following up on risk mitigating measures.

Flow Traders Local Heads are responsible for:

◾ Performing annual risk self-assessments to identify, assess, and document existing and new risks and their impact on proposed plans;
◾ The adoption of risk management practices;
◾ Awareness and training on risk management;
◾ The results of risk management activities, relevant to their area of responsibility.

Flow Traders employees are responsible for:

◾ Identifying areas where risk management practices should be adopted and advising their supervisors accordingly;
◾ Giving input to risk self-assessments to identify, asses, and document existing and new risks and their impact on proposed plans.

Risk reporting

We have a standing risk committee that continuously assesses the risks we face in our business, comprised of our Global Head of Risk and Mid-Office and Management Board. Aside from ongoing ad-hoc communication, there is a recurring meeting set up in which they discuss all risk assessments and risk proposals related to position limits, strategies, procedures, capital requirements and other requirements of prime brokers and market developments. Any major changes to our risk systems, strategies and limit setting must subsequently be approved by the Management Board. In 2017, there have not been any major failings in the internal risk management and control systems observed during 2017.Additionally, improvements to the systems are discussed with the Management Board.

Besides the standing risk committee, the company has a Risk Committee of the Supervisory Board. All members of the Supervisory Board are members of this Risk Committee. The Management Board informs the Risk Committee of the Supervisory Board about the effectiveness of the internal risk management and control systems. This includes the reasonable assurance that the aforementioned systems do not contain any material inaccuracies. In addition, the tasks of the Risk Committee of the Supervisory Board includes supervision and monitoring, as well as advising the Management Board on the operation of the company's internal risk management and control systems. The Risk Committee is also responsible for providing advice to the Management Board on the company's development, performance, and sustainability of its trading strategies. It maintains regular contact with the company's Trading and Risk and Mid-Office departments. For more information on the responsibilities of our Risk Committee, please see the chapter Our Governance.

Following a review of the company's risk assessment processes, the monitoring of the company's internal risk management and control systems has been identified as a priority and as a joint responsibility of the Supervisory Board and all committees. All risks relevant to each of the committees of the Supervisory Board are monitored in the Risk Committee of the Supervisory Board. This means that the relevant items set out in best practice provision 1.4.1 of the Corporate Governance Code have been discussed by the Supervisory Board, as all members of the Supervisory Board are members of the Risk Committee. For more information, please refer to the Supervisory Board Report.

Key risks

Market risk

Market risk is the risk of loss resulting from unfavorable market movements, such as prices, when positions in financial instruments are held. The value of a financial instrument may fluctuate because of changes in factors such as equity prices, currency rates, future dividend expectations, interest rates and volatilities. Our hedging strategies, in combination with the use of straightforward products and continuous monitoring, aim to minimize this risk. Our trading philosophy is that we hedge our positions as perfectly as possible and therefore we minimalize exposures towards market. The Risk and Mid-Office department monitors market risk exposure on a continuous basis (including intraday). Based on the limits set per product or the aggregated risk, limit breaches, if any, will trigger action from the Risk team in order to reduce the risk. In addition, the trading positions are also monitored daily, and the applicable haircuts and margins are computed by our prime brokers.

Volatility risk (business risk)

Our Net Trading Income and profitability are primarily a function of the level of trading activity, or trading volumes, in the financial instruments in which we trade, and the bid-ask spreads (which largely determine the profit on the trade, or margins, we capture). Trading volumes in securities, derivatives and other financial instruments on exchanges and in other trading venues worldwide are directly affected by factors beyond our control, including economic and political conditions, broad trends in business and finance, regulatory requirements, actions by central banks, and changes in the markets in which such transactions occur. To cope with periods of little market movement, we diversify in products and markets traded. This to ensure we are not

too depending on the levels of market activity in one asset class or product category. From our experience we know that in these periods some trading desks tend to earn less where others show an increase in earnings. Therefore, these strategies may serve as a (partial) hedge in such circumstances. To control the risk of low market activity, we actively manage our costs and aim to keep our fixed costs low. In addition, we diversify into different markets and products.

Operational risk

Operational risk is defined as the risk of loss arising from inadequate or failed internal processes, people, systems or external events. Operational risk management is an integral part of Flow Traders' management information and control systems. As our operational risks are concentrated in technology events at exchanges and clearing houses, our

investment in technology is important to mitigate those associated risks.

We operate an integrated, in-house developed, high-performance and customized technology platform with frequent and controlled deployments of new hardware and software. Our infrastructure has a modular design which allows us to rapidly test and implement improvements in both hardware and software on an ongoing basis. Controlled releases of hardware and software enhancements provide for minimal disruption to our business.

The environment in which our trading software (or updates of our trading software) is being developed is strictly separated from the environment in which such trading software operates in production. Access to the source code is strictly controlled and limited. Prior to releasing our trading software, or an update into the production environment, any element of our trading software is

subjected to a review of its code, validation in an environment that is separate from our production environment, testing in limited production (processing a strictly limited number of trades) on one trading desk in respect of trading a single financial instrument, followed by more extensive testing across multiple desks and/or trading multiple financial instruments. Each step, and progressing through steps, is documented.

Flow Traders has a monitoring system in place to control undisrupted trading activities in real time. Multilayer monitoring is employed to avoid errors, but, when these occur the relevant teams are notified via multiple notification channels. We rely on multiple third party service providers for business and market data.

Our systems are designed such that they can be monitored real-time, as well as being maintained and supported by qualified professionals from any office. Our risk management system is fully integrated with our trading

platform, analysing real-time pricing data, and is designed to ensure that our order activity is conducted within strict pre-determined trading and position limits. For example, our pre-trade risk controls are designed to prevent the trading engines from sending orders which deviate from our pre-defined risk parameters, such as price and volume limits set by the Risk Management department, which keeps our ordering, trading and positions well within tolerance levels. Our monitoring tools reconcile trades, prices and positions against those of our exchanges and prime brokers. Our IT systems are regularly subjected to penetration tests by external experts. We have a comprehensive IT security system that is designed to protect us from attacks both from inside and outside the platform.

Where we have a technical interface with institutions like our prime brokers and exchanges, the integrity of the connection between the systems and the data that is being exchanged is subject to prior conformance testing and continuous monitoring. Unexpected deviations are flagged and investigated. We also have a disaster recovery plan in place, which, for instance, provides that our Amsterdam office acts as a backup site for other offices.

Regulatory risk

While we have no clients and do not provide investment services or ancillary services to third parties, our markets and nearly all aspects of our business are heavily regulated. Where applicable, entities forming part of our Group have obtained the regulatory licenses and approvals needed to operate their regulated businesses.

Flow Traders' trading operations are established in four international jurisdictions. As a Group we currently trade on more than 100 venues worldwide. In addition, we operate on various other venues through brokers. As we have to comply with our home regulations and the local regulations and

trading rules of all venues on which we trade, our regulatory landscape is vast. Legislators and regulators worldwide strengthen their supervision within our environment, demanding a professional and well-structured compliance organization.

Our Compliance department assists management and operations at Group and local level by identifying, advising on, reviewing and reporting on regulations. It also seeks to maintain a compliant business environment through training and monitoring in order to ensure and enhance the Group's conformance with its regulatory obligations. The Compliance and Risk and Mid-Office departments have promulgated and implemented pre-trade risk controls, internal rules and regulations that were developed following regulatory requirements, guidelines from market authorities, industry best practices and our own best practices.

Laws and regulations, including tax laws, are subject to change or can be interpreted differently in practice over time. While we believe we are well-positioned to address and implement new or changing regulations in general, and while we spend considerable resources to anticipate and implement new or changing regulations, we typically cannot (fully) assess what the impact of such regulations will eventually be in practice. New regulations or revised interpretations of regulations may or may not be beneficial to our business.

Actual or alleged non-compliance with applicable laws or regulatory requirements could adversely affect our reputation, profitability and prospects. This may also be the case for differences in interpretation or lack of timely or complete implementation of regulatory requirements. Sanctions could include fines, penalties, disgorgements and censures, suspension or expulsion from trading venues or the revocation or limitation of licenses. We aim to minimize such risks by focusing considerable management attention, employing highly-qualified compliance and risk professionals, deploying training, monitoring and reporting systems, and continuously evaluating and implementing current and upcoming regulation on our operations. Notwithstanding such efforts, given the highly regulated nature of our business, we are regularly subject to routine (and sometimes more targeted) inquiries and audits from regulators and trading venues. It is difficult to predict or manage the outcome of such inquiries, although we aim to be as transparent and cooperative as possible given the circumstances.

We continuously invest in good professional relationships with trading venues, regulators and other relevant parties. Flow Traders is a founding member of the FIA European Principal Traders Association (FIA EPTA), a member of the FIA Principal Traders Group (FIA PTG) in the US and a member of FIA Asia. These are industry groups that consist of leading principal trading firms. We are also a member of the Dutch Association of Proprietary Traders (APT), operating as an industry body of Netherlands-based liquidity providers. As part of these important groups, we continue to promote, foremost, the principle that all markets and market participants should be adequately and transparently regulated. Within these groups we contribute to discussions regarding current and new regulations, including CRD IV/CRR, MiFID II, Reg AT and market regulations. We will continue to contribute to these discussions and will persist in maximizing transparency in respect of our industry, its benefits for all market participants and fair, orderly and transparent financial markets.

In control statement

The Management Board is responsible for designing and maintaining an adequate system for risk management and internal control. In order to facilitate this, the Risk and Mid-Office department assessed the controls in this process and reported its findings to the Management Board. These findings have been evaluated by the Management Board and by the Supervisory Board. For a more elaborate explanation of our efforts in this regard, please refer to the Our Risk Management chapter.

On the basis of the above, and in accordance with best practice provision 1.4.3 of the Corporate Governance Code, and with due observance of the limitations stated below, we confirm that to the best of our knowledge:

◾ The annual report provides sufficient insights into any failings in the effectiveness of the internal risk management and control systems;
◾ The aforementioned systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies;
◾ Based on the current state of affairs and initial prognoses, it is justified that the financial reporting is prepared on a going concern basis; and
◾ The report states those material risks and uncertainties that are relevant to the expectation of the company's continuity for the period of twelve months after the preparation of the report.

However, these systems cannot provide absolute certainty that no errors have occurred or that our targets will be achieved, or that a misstatement of Flow Traders' financial statements can be prevented.

Statement by the Management Board

As required by section 5:25c of the Dutch Financial Supervision Act (Wet op het financieel toezicht) we state that according to the best of our knowledge:

◾ The financial statements present a true and fair view of the assets, the liabilities, the financial position and the result of Flow Traders N.V. and the companies included in the consolidation; and
◾ The annual report provides a true and fair view of the position as at 31 December 2017 and the state of affairs during the financial year of Flow Traders N.V. and its affiliated companies, whose data have been included in its financial statements, and that the annual report describes the essential risks faced by Flow Traders N.V.

Amsterdam, 1 March 2018

Management Board Dennis Dijkstra, Co-CEO Sjoerd Rietberg, Co-CEO Marcel Jongmans, CFO

'To cope with periods of little market movements, we diversify in products and markets traded'

Our Supervisory Board

Jan van Kuijk, Vice-Chairman Gender: male Age: 51 Nationality: Dutch

Jan was appointed Vice-Chairman of the Supervisory Board on 9 July 2015. He is Chairman of the Trading and Technology Committee, and is a member of the Audit Committee, Risk Committee, and Remuneration and Appointment Committee. His current term expires in 2018. Jan is one of the co-founders of Flow Traders and served as its Co-CEO from its inception in 2004 until January 2014. Until 1996, Jan served as a partner at Optiver, a proprietary trading firm, and was involved in setting up its first electronic trading activities at Deutsche Börse in 1993. In 1997 he co-founded Newtrade Financial Group, an options market-making firm which discontinued after he co-founded Flow Traders in 2004.

Han Sikkens Gender: male Age: 40 Nationality: Dutch

Han was appointed member of the Supervisory Board on 9 July 2015. He serves on the Audit Committee, the Trading and Technology Committee and the Risk Committee. His current term expires in 2018. Han is a managing director with Summit Partners L.P., a global growth equity firm, where he has been since 2004 where he leads the firm's European office. Prior to Summit Partners L.P., he held positions at Scotia Capital and IBM Corporation. Han is currently a director of the following Summit Partners investments: Acturis Limited, Darktrace Limited, Masternaut Group Holdings Limited, Siteimprove A/S and Relex Oy. He previously led Summit Partners' investments in Avast Software B.V., a consumer security software company; Multifonds, a financial software company; SafeBoot Holdings B.V, a provider of enterprise security software; 360 Treasury Systems AG, a global electronic trading venue; and Welltec International ApS, a provider of robotic intervention solutions to the oil and gas industry.

Rudolf Ferscha Gender: male Age: 56 Nationality: Austrian

Rudolf was appointed member of the Supervisory Board on 9 July 2015. He is Chairman of the Remuneration and Appointment Committee, and is a member of the Trading and Technology Committee and the Risk Committee. His current term expires in 2018. Originally a corporate finance and capital markets lawyer, he has over 25 years' board-level experience at international financial institutions, including executive roles on the management boards of Goldman Sachs Bank in Frankfurt and of Deutsche Börse AG. For more than a decade he held direct oversight responsibility for FSA and BaFin regulated derivatives and securities trading businesses. Between 2000 and 2005, Rudolf served as CEO of Eurex, and from 2003 to 2005 Rudolf was Chairman of the Management Board of the Frankfurt Stock Exchange. He is currently independent Board Director of Moody's Investors Service Limited, Moody's Investors Service EMEA Limited, Moody's France SAS and Moody's Deutschland. He is also an independent Board Director at DEAG Classics AG, and a partner at Gledhow Capital Partners.

Roger Hodenius Gender: male Age: 45 Nationality: Dutch

Roger was appointed member of the Supervisory Board on 9 July 2015. He is Chairman of the Risk Committee, and is a member of the Trading and Technology Committee and Remuneration and Appointment Committee. His current term expires in 2019. Roger is one of the co-founders of Flow Traders and served as its Co-CEO from its inception in 2004 until January 2014. Roger was responsible for developing Flow Traders' vision and culture, the trading strategies and the trading floor. Roger served on the Supervisory Board of ThinkCapital Holding B.V. between 2010 and 2012.

Eric Drok, Chairman Gender: male Age: 57 Nationality: Dutch

Eric was appointed Chairman of the Supervisory Board on 9 July 2015. He serves on the Remuneration and Appointment Committee, the Audit Committee, the Trading and Technology Committee and the Risk Committee. His current term expires in 2019. Eric has 30 years domestic and international banking experience, including at ABN AMRO's predecessors, ING Bank and its predecessors and Rabobank. He served as CEO of ING Direct and ING Bank Australia between 2006 and 2009, before becoming a board member of ING Bank Slaski (Poland) until 2011. He then moved to Rabobank, serving three years as Chief International Direct & Retail Banking. His other functions include sitting on the Supervisory Board of Euro Pool Systems International B.V., The Greenery B.V. and Lievense CSO Holding B.V. Eric is Operating Partner at HG-Capital in London.

Olivier Bisserier Gender: male Age: 50 Nationality: French

Olivier was appointed member of the Supervisory Board on 9 July 2015. He is Chairman of the Audit Committee, and serves on the Trading and Technology Committee and the Risk Committee. His current term expires in 2019. Olivier Bisserier is currently the CFO of Booking. com, and has over 25 years of experience in international financial roles. He was a senior manager for PwC until 2000, then had finance director roles and served as European CFO of TNS, an LSE-listed market research group.

Message of the Supervisory Board

Message of the Chairman

In 2017, the Supervisory Board focused on a range of topics that will further strengthen equal opportunity, innovation, and long-term value creation within the company. These included relevant changes to the Corporate Governance Code, strategy-associated risks, the impact of new legislation and regulations, as well as investments, remuneration, and the company's financial results. The Supervisory Board also implemented the outcomes of its 2016 self-assessment, which resulted in adjustments to the structure of the Supervisory Board's committees.

Company developments

Despite a year characterized by lower volatility and decreased market activity, the company again managed to increase its global market share. It also began moving into new markets, becoming both a liquidity provider to FX markets and opening an office in Hong Kong, helping support institutional trading and reaffirming the company's role in the ETP ecosystem in the region. In tandem, work continued on internal developments that the company believes will lead to future growth opportunities.

A year in review

Over the course of the year, the Supervisory Board discussed a range of topics at its regular meetings and within its four committees. These committees were reviewed during the

'Despite a year characterized by lower volatility and decreased market activity, the company again managed to increase its global market share'

Supervisory Board's 2016 self-assessment, with some committees successfully merged. In 2017, the committees were composed as follows: an Audit Committee, a Remuneration and Appointment Committee, a Trading and Technology Committee, and a Risk Committee.

New legislation and regulation, including changes to the Corporate Governance Code, were discussed at Supervisory Board meetings throughout the year. Topics covered included long-term value creation, culture, equal opportunities, MiFID II, and capital requirements. Many of these subjects are already very familiar to the company. For example, long-term value creation has always been an integral part of Flow Traders' strategy, with a large percentage of the IT and development budget linked to originating new ventures and ideas that will lead to further growth.

Following on from this year's self-assessment, the Supervisory Board also introduced a number of additional education days for its members. This gave the Supervisory Board the opportunity to gain greater insights into topics that are particularly pertinent to Flow Traders' business, such as compliance and risk.

During its regular meetings, the Supervisory Board discussed the introduction of culture as a separate aspect of good governance within the Corporate Governance Code. The Supervisory Board believes that Flow Traders has a unique culture that should be nurtured. During the year, the company carried out a survey that measured employees' views on Flow Traders' internal culture, and how this culture can be preserved. The Supervisory Board discussed the survey's outcomes, and concluded that it is vital that the

'The Supervisory Board held a special session on IT security and on IT architecture in 2017, both of which are key to the company's current and future success'

company culture is maintained in a sustainable fashion as the company grows.

The Supervisory Board held a special session on IT security and on IT architecture in 2017, both of which are key to the company's current and future success. The Supervisory Board drew up a new Equal Opportunity Policy, which underlines the company's objective to treating everyone equally, irrespective of age, race, gender, sexual orientation, or religious beliefs during the hiring process and throughout their careers at Flow Traders. This policy is also applicable to the Supervisory Board and the Management Board, where Flow Traders believes that equal opportunities are as relevant.

Over the course of the year, the Supervisory Board monitored the company's progress towards meeting the regulatory requirements under MiFID II and, together with the Management Board, concluded that the company mi be ready for the implementation date. The Supervisory Board also paid particular attention to the implications of the EU Capital Requirements Regulation (CRR), and discussed any impact this might have on the company's remuneration policy in the future.

Looking ahead

Looking further into 2018, the Supervisory Board will continue to focus on long-term value creation, while tracking regulatory developments. The Supervisory Board will follow the implementation of MiFID II, follow and discuss developments linked to CRR, and supervise those projects that the company began in 2017.

Regards,

Eric Drok Chairman of the Supervisory Board

Supervisory Board Report

Meetings of the Supervisory Board

In 2017 the Supervisory Board members met eight times to hold formal Supervisory Board meetings and met several times without holding a formal Supervisory Board meeting. Examples of meetings without holding a formal meeting include a preparation day for the AGM, education and strategy days and the self-assessment day. During these meetings a number of topics, including the following, were discussed:

◾ The new Corporate Governance Code

The new requirements of the Corporate Governance Code were discussed regularly. As stated in the Our Governance chapter, the By-Laws of the Supervisory Board and Management Board, as well as the Terms of Reference of the company's committees, were amended accordingly. Topics including long-term value creation, strategy, culture and diversity were the main discussion points during 2017.

◾ The company's strategy

The company's Management Board focuses on the long-term value creation of the company and has involved the Supervisory Board in translating this long-term value creation into the company's strategy. The Supervisory Board regularly discusses the strategy, the implementation of the strategy, and any associated risks. In September 2017, a Strategy Day was held to comprehensively discuss the company's strategy. The Management Board has also set non-financial KPIs, which are further explained in the Remuneration chapter.

◾ Strategy-associated risks

Reviewing the company's risk assessment processes and the monitoring of the company's internal risk management and control systems remain a priority and joint responsibility of the Supervisory Board and all committees. The assessment comprises an overview of all relevant risks the company is exposed to, the internal controls in place to address these risks, and the Management Board's views on such risks.

◾ New legislation and regulation

The Supervisory Board was updated regularly on developments regarding MiFID II, capital requirements, remuneration, the new Corporate Governance Code, and other items.

◾ Financial results

The Supervisory Board was updated on the company's financial, legal and compliance risks through the Audit Committee and the Risk Committee. Other topics discussed were the annual, half-yearly and quarterly results.

◾ The company's proposed governance structure and related documentation

Each year the Supervisory Board assesses all of the company's policies, By-Laws and Terms of Reference of each of the committees. As a result of the implementation of the new Corporate Governance Code, these documents have been amended accordingly.

◾ Industry-related updates Relevant updates were provided by the heads of specific departments and external advisors.

◾ Large investments

The Management Board explained and discussed any large investments with the Supervisory Board.

◾ Remuneration and variable compensations of Management Board and employees

The Remuneration and Appointment Committee updated the Supervisory Board on remuneration and variable compensation plans for both employees and the Management Board.

◾ The Internal Audit Function

In 2016, the company installed an Internal Audit Function. The recommendations of the Internal Audit Function have been discussed and followed up during 2017.

◾ Attendance Supervisory Board

Han Sikkens could not attend one meeting of the Supervisory Board. Roger Hodenius could not attend two meetings of the Supervisory Board. All other meetings were fully attended by the Supervisory Board and/or committee members. The Management Board also attended each meeting in full or in part. All meetings were held at the company's offices in Amsterdam.

Evaluation of the Supervisory Board

The Supervisory Board discussed the outcome of the self-assessment of 2016, and the follow-up on conclusions of that self-assessment. The follow up has led to a reform of the structure and number of the Supervisory Board's committees. Another conclusion led to the organization of a joint Strategy Day, attended by both the Management Board and the Supervisory Board.

In 2017, the Supervisory Board once again reviewed its own performance using the same survey, thus allowing for comparisons with last year's results. Compared to 2016, the Supervisory Board concluded that its overall functioning has improved. Specific items for follow up that arose this year included continued focus on strategy, the composition of the Supervisory Board and in-depth knowledge of the business of Flow Traders. Other positions of Supervisory Board members were also reviewed as part of the self-assessment.

As of this year, the Supervisory Board's self-assessment includes an independence-assessment. This independence assessment was led by Eric Drok as independent Chairman of the Supervisory Board and Rudolf Ferscha as independent Chairman of the Remuneration and Appointment Committee. Following the assessment, the Supervisory Board determined the independence of the board members Olivier Bisserier, Rudolf Ferscha, Eric Drok and Han Sikkens. Roger Hodenius and Jan van Kuijk were considered non-independent Supervisory Board members. See the Our Governance chapter for more information.

Evaluation of the Management Board

The performance of the Management Board is discussed three times a year between the Chairman of the Supervisory Board and an alternating representative of the Remuneration and Appointment Committee. During performance discussions the representatives talk with the Management Board members individually and with the Management Board as a whole. Guiding structures for these conversations include the Management Board KPI overview and the strategic project goals set for 2017. Based on these discussions the Remuneration and Appointment Committee provides feedback regarding its view on the Management Board's performance to the Supervisory Board, to guide year-end discussion on variable rewards.

Profile of the Supervisory Board

The Supervisory Board profile provides that the qualifications of a particular candidate and fit with the company's needs shall always prevail when filling a position. When selecting members, the Supervisory Board aims for a balance in nationality, gender, age, experience, and active or retired backgrounds. In addition, balance in the experience and affinity with the nature and culture of the business of the company will be sought. The Supervisory Board strives to realize a diverse composition in the nomination and appointment process for vacancies of its members, while taking into account the overall profile and selection criteria for appointments of suitable candidates to the Supervisory Board. As such, diversity, including genderrelated, is an important consideration in the selection process for the (re-)appointment of Supervisory Board members. In 2017, the Supervisory Board has thoroughly reviewed and reconfirmed the Supervisory Board Profile. The Profile can be found on our website: www.flowtraders.com.

Equal Opportunity Policy (Diversity Policy)

The Supervisory Board has drawn up and adopted an Equal Opportunity Policy on 2 November 2017. In this policy we explain our objective to treat everyone equally during the hiring process and throughout their careers at Flow Traders. We are committed to being a truly equal opportunity employer, by recruiting, retaining and promoting people based on merit, and merit alone. We are a firm believer in the benefits of a diverse workplace and we do not make any concessions to quality. Our objective is to provide equal employment opportunities to all qualified job applicants and equal career perspectives for all of our employees, provided they perform highly. When positions become available, we actively encourage all candidates to apply and ensure that the selection and retention processes are truly equal for all applicants and employees. This also holds for our Management Board and Supervisory Board. When it comes to diversity in the Supervisory Board and the Management Board, we adhere to the same principle of equal opportunity as set out above. As a result, our current Supervisory Board is diverse in terms of, inter alia, age, education, nationality, and professional backgrounds. No Supervisory Board or Management Board Members were appointed or reappointed during the financial year 2017. Our Equal Opportunity Policy can be found on our website www.flowtraders.com.

Independence of the Supervisory Board

The Chairman of the Supervisory Board is not a former member of the company's Management Board and is independent within the meaning of best practice provision 2.1.8 of the Corporate Governance Code. Jan van Kuijk and Roger Hodenius do not qualify as independent under the provisions of the Corporate Governance Code as they, as our founders, are former members of the company's

Management Board, prior to conversion, and represent shareholders of the company. Han Sikkens no longer represents a shareholder of the company who holds at least 10 percent of the shares. Given a legal analysis from our advisors and following confirmation of our independence assessment, Han Sikkens is now considered an independent Supervisory Board member.

Committees

The Supervisory Board has four committees: an Audit Committee, a Remuneration and Appointment Committee, a Trading and Technology Committee, and a Risk Committee. Each committee has a preparatory and/or advisory role to the Supervisory Board and reports to the Supervisory Board accordingly. Both the Chairman of the Audit Committee and the Chairman of the Remuneration and Appointment Committee qualify as independent under the provisions of the Corporate Governance Code. The Trading and Technology Committee and the Risk Committee were established to cater for the monitoring of and advising on specific business related topics and reflect our business model of focusing on pricing, cutting-edge technology platform and risk management. These committees are chaired by the founders and former Management Board members of the company. For more information on the responsibilities of our committees, please refer to the chapter Our Governance.

The composition of the committees is as follows:

Audit Committee	Remuneration & Appointment Committee	Trading and Technology Committee	Risk Committee
Olivier Bisserier (Chairman)	Rudolf Ferscha (Chairman)	Jan van Kuijk (Chairman)	Roger Hodenius (Chairman)
Eric Drok	Eric Drok	Olivier Bisserier	Olivier Bisserier
Jan van Kuijk	Roger Hodenius	Rudolf Ferscha	Jan van Kuijk
Han Sikkens	Jan van Kuijk	Roger Hodenius	Han Sikkens
		Han Sikkens	Rudolf Ferscha
		Eric Drok	Eric Drok

The committees report to the Supervisory Board by sharing their advice and recommendations during the Supervisory Board meetings and by circulating the minutes of the meetings or reports. All meetings were held at the company's offices in Amsterdam.

Audit Committee

The Audit Committee met five times in 2017, with each meeting fully attended. Other attendees included one of the Co-CEOs, the CFO, the Global Co-Head of Finance and Tax, the external auditor and the Group Internal Auditor, who had a standing invitation to each meeting.

During these meetings the Committee discussed the annual results, the half-yearly results and the quarterly results and shared the items discussed with the Supervisory Board. Other topics discussed included the Management Board's methods for the assessment of the effectiveness of the design and operation of the company's internal risk and control systems, new and proposed legislative initiatives related to accounting, auditing and financial reporting, tax planning, tax strategy and monitoring, the company's compliance with rules and regulations, the company's Code of Conduct and Whistle-blower Policy, the company's

financing strategy (including the interim dividend proposal) and the methods used to assess the effectiveness of the internal and external audit processes. The company's external auditor, Ernst & Young Accountants LLP (EY), attended all meetings. Topics discussed with the external auditor included their unqualified interim review report, their Audit Plan for the financial year of 2017 and recommendations on the basis of the annual report and financial statements over the financial year 2016. The Audit Committee reviewed the recommendations included in the auditor's report, as issued by the external auditor and discussed the actions taken by management to address any recommendations and observations. The Audit Committee evaluates the performance of the external auditor and discusses this with the Supervisory Board and subsequently with the external auditor. In light of this, the Audit Committee advises the Supervisory Board about the reappointment of the external auditor, before the Supervisory Board determines its nomination for the appointment of the external auditor to the General Meeting. Given the nature of our business, the application of information and communication technology by the company, including risks relating to cyber security, are discussed in detail in the Trading and Technology

Committee. Subsequently, key items in respect of these items are also discussed in the Audit Committee.

External auditor

The Audit Committee and the Management Board reported to the Supervisory Board on EY's functioning as the external auditor, the company's relationship with the external auditor, on its fees, as well as on other audit and non-audit services it provided to the company. EY performed a review of the company's interim financial statements and issued an unqualified review report. The Audit Committee evaluated the qualifications, performance and independence of EY, taking into account the opinions of the Management Board. The Audit Committee also obtained a report from the external auditor regarding, among other topics, its internal quality control procedures. EY confirmed its independence from Flow Traders in accordance with the professional standards applicable to it. EY's lead audit partner was present at all of the Audit Committee meetings held in 2017. Based on the information provided by the Audit Committee, the Supervisory Board nominated EY as external auditor at the company's General Meeting in 2017. Subsequently, EY was reappointed by the General Meeting as external auditor for the financial year 2017.

Internal audit function

The internal audit function (IAF) executed audits that form part of the internal audit plan, approved by the Supervisory Board. Focus areas in this audit plan included the company's systems and controls, operational resilience, data handling, payment process and reconciliation of trading positions. The IAF performed a number of specific reviews at the request of the Management Board and the Audit Committee. The Audit Committee and the Group Internal Auditor discussed the audit results (findings, observations,

recommendations, management feedback and follow-up). The Audit Committee maintains regular dialogue with the IAF. More information can be found in the chapter Our Governance.

Remuneration and Appointment Committee

The Remuneration and Appointment Committee met four times in 2017. All meetings were fully attended. Other attendees to the meetings included the Management Board and the Global Head of HRM & Recruitment. During the meetings the Remuneration and Appointment Committee reviewed the company's General Remuneration Policy, prepared the Equal Opportunity Policy, and drafted proposals to the Supervisory Board for the remuneration practices to be pursued for the Management Board and staff of the company. It also outlined proposals for the remuneration of the individual members of the Management Board for adoption by the Supervisory Board. The size, composition and functioning of the Supervisory Board and Management Board was reviewed and findings reported to the Supervisory Board. Other duties included the monitoring of developments of the Corporate Governance Code and regulations in relation to remuneration policies and the preparation of the Remuneration Report.

Before determination of the remuneration of the Management Board members, the Remuneration and Appointment Committee took note of the individual Management Board members' views with regard to the amount and structure of their own remuneration.

Trading and Technology Committee

The Trading and Technology Committee met three times in 2017, with each meeting fully attended. As the core business of the company is discussed in this committee, all of the Supervisory Board members are now members of the Trading and Technology Committee. The committee discussed the company's IT budget for 2018, IT-related investments and expenses, the main technology-related risks facing the company and the focus on recruiting new talent. Recurring items were the state of the company's hardware and software infrastructure, innovation, cyber-security, and HR-related topics.

The Trading and Technology Committee was also briefed by the Global Head of Trading on developments in the Trading department, including -amongst others- growth areas, budget matters, diversification of products and markets traded. The developments of the new FX trading desk were also discussed. Another recurring topic of discussion was the slow market conditions during the year.

Risk Committee

The Risk Committee met three times in 2017, with each meeting fully attended. Invitees of the meeting were the Management Board members and Global Head of Risk and Mid-Office. The main focus in the meetings was the Management Board's risk assessment. The attendees discussed in detail the relevant risks the company is exposed to, the internal controls in place to address these risks, the Management Board's views on such risks, as well as the effectiveness of the design and operation of the internal risk management and control system. The committee has discussed the way material risks and uncertainties have been analyzed and discussed. More information can be found in the chapter Our Risk Management.

Financial statements and dividend

The 2017 financial statements were prepared by the Management Board. They were discussed both with the Audit Committee and the Supervisory Board, in attendance of EY. The financial statements were audited by EY, who issued an unqualified auditor's report. Reference is made to the auditor's report on page 111 of the financial statements. The Supervisory Board approved the financial statements as audited by EY, including the company's dividend proposal. We invite the General Meeting to:

◾ adopt the financial statements for 2017;
◾ adopt the dividend proposal as proposed by the Management Board and approved by the Supervisory Board; and
◾ discharge the Management Board for their management and the Supervisory Board for its supervision of the company in the financial year under review.

Remuneration report

The General Remuneration Policy was approved in 2016 and has been reviewed by the Remuneration and Appointment committee in 2017 to ensure it remains relevant and is suited to the size of our enterprise and the way it is organized, as well as the nature, scope and complexity of our business activities.

The remuneration of the Management Board consists of a relatively modest fixed base salary and a variable compensation in cash. The awarding of variable remuneration to the members of the Management Board – as well as to all employees – is entirely dependent on the

company's profit in any given year. In that sense, our General Remuneration Policy works as a risk-mitigating tool and a self-correcting mechanism. If there is no profit, no variable remuneration will be awarded. If there is profit, variable remuneration is available for all employees and the Management Board. The cap for the variable remuneration is set at 40 percent minus applicable adjustments (e.g. taxes, capital charges and extraordinary items). In practice, the net percentage has historically amounted to approximately 36 percent of our operating result and this guideline continues to apply going forward. If the company incurs a loss, deferred variable remuneration is reduced or forfeited entirely.

In accordance with the global remuneration model in place for all employees, the members of the Management Board are entitled to annual variable compensation based on performance in respect of individual criteria and their contribution to the success of the company as whole. These criteria reflect quantitative and qualitative criteria related to non-financial performance. Variable remuneration, if awarded, is paid in cash in multiple instalments, providing a strong incentive for long-term value creation. Instalments may be reduced or clawed back under circumstances described in the Remuneration Act, Dutch corporate law and the Corporate Governance Code. Please see the section on the Remuneration of the members of the Management Board in the chapter on Remuneration for a more detailed description.

In 2017, the total average compensation of the individual Management Board members amounted to €507,029 compared to the company-wide average compensation paid per employee of €145,520 resulting in a pay-ratio of 3.5 (2016: 5). The average compensation of the Board Members

is calculated by dividing the total of their fixed based salaries and variable remuneration by the number of FTEs (three). The company-wide average is calculated in similar fashion by adding up fixed salaries and variable remuneration and dividing by the number of FTEs (394.4). Due to the nature of our business activities and the compensation structure of the Management Board, the Supervisory Board tracks the actual performance of the Management Board members and eligibility for variable remuneration throughout the year, with quarterly discussions taking place to facilitate this. Please see the section on Analyses carried out in respect of variable remuneration in the chapter on Remuneration for a more detailed description.

No current or former Management Board member received a severance payment in 2017.

Thank you

Finally, the Supervisory Board would like to thank the members of the Management Board and all of Flow Traders' employees for their tireless efforts and resilience.

Amsterdam, 1 March 2018

Eric Drok Jan van Kuijk Olivier Bisserier Rudolf Ferscha Roger Hodenius Han Sikkens

IN TERVIE W MAURICE VAN TILBURG

Pre-electronic trading era

How did exchange trading develop in the Netherlands?

The Dutch are a sea-faring nation, and trading is an integral part of our culture. So it's perhaps no surprise that the Amsterdam Stock Exchange was established at the beginning of the 17th century by the Dutch East India Company, who wanted a fixed location to issue bonds and shares to the general public. The markets underwent continuing professionalization over the centuries, and then in the mid- to late 20th century we saw the introduction of derivatives. The opening of the European Option Exchange in Amsterdam in the late 1970s and the creation of the first European index was a key moment, as it provided market participants with a new way to

invest. It helped them better deal with risk, for example by hedging, and enabled them to use speculation as an investment strategy. You could also argue that some of today's liquidity providers had their genesis around this period, as it was the first time many parties looked at trading from a more conceptual and algorithmic perspective.

Electronic trading era

What was the impact of the switch to electronic trading?

I was involved in the automation process when we were preparing to switch to electronic trading. One of the main impacts of automation was that it formalized market behavior. It made it much clearer to participants which types of orders were in the market, enabling

investors to better review risk by understanding what was happening at any given moment. For liquidity providers, this created a much stronger link between trading and the commercial and risk-related aspects of the business. For investors, it increased transparency and helped them make more qualified investment decisions.

And the impact on Euronext?

There were a number of positive developments for us. First, it helped us to further strengthen our trading safeguards, which are an incremental part of our market surveillance. The automation allowed us to better follow trends in the market. For example, we were able to introduce circuit-breakers, such as the static collar, which automatically halts trading on a stock in case of wide price

fluctuations. Such safeguards give the market confidence, as investors know that our trading platform and matching engine will respond in a pre-defined and predictable way. Another example is in our derivatives market, where we automatically reject orders that breach our price range, meaning the order doesn't even enter the market, improving risk management. And second, it led to an enormous increase in trading, something that can only be achieved if people can make prices with confidence.

Why do you think Amsterdam was one of the first cities to switch to electronic trading?

I think as a city we're entrepreneurial and pragmatic, which helps when you want to innovate. And the Dutch have always had to work together to solve large issues, >>

such as flood control, which leads to developing consensus-driven solutions. And despite being a relatively small country, we have managed to be involved in large events around the world. >>

What are the main trends you have witnessed within the trading environment over the last ten years?

The overall trend is towards more passive investments, with a drive towards investing in a range of instruments through ETFs. Another significant trend is the availability of information and the speed with which market participants can react to that information. This is a trend that has been developing for centuries, of course, and every time there is a technological jump, there's a corresponding increase in the availability of information. However, it's even more pertinent now, given the incredible response times of today's liquidity providers.

What are some of the issues affecting liquidity providers?

One of the main issues is ensuring that they comply with national and international regulations, such as MiFID II. This is a requirement for them if they want to be able to trade effectively now and in the future. Some 10 years ago the trend was to assume we would be going to one global integrated market. Nowadays, we see

a trend that countries and their markets are becoming more fragmented. It will be important for traders to stay connected to these markets, and specifically the ones with material liquidity.

Insights for the future

What will liquidity provision look like in the future?

Markets and liquidity providers need to be up-to-speed on pricing relevant information. The type of information and the way to integrate that in their trading is changing. To explain this, I see this as being similar to the evolution of expressionist art. There was a long period when artists would create a painting in their studio, always in the same format. The paint tube was invented, and suddenly artists were free to go out in the field and express themselves in completely different ways. The same thing is happening with data. People were used to having access to one source of data, which was the official market price, and it was this price that everyone would react on. Today, liquidity providers are using a range of tools, such as Artificial Intelligence data analysis and high-speed data processing, to better value and price stocks. These developments will continue, and liquidity providers will have to adapt their models accordingly.

Which trends do you see impacting trading in the coming ten years?

One of the clearest recent developments, which has the potential to impact trading going forward, is Brexit. Many parties are looking at what that means for markets, and asking themselves whether the UK and EU will run financial services under the same rules. Another development is the rise of fintech, which I think has the potential to shake up markets, especially those that could be more transparent and efficient. For example, the bond market is particularly opaque, so I could envisage new players looking for ways to trade or issue bonds in a more transparent way. And any area of the market that introduces greater transparency creates an opportunity for liquidity providers.

Name: Maurice van Tilburg

Position: Chief Executive Officer of Euronext Amsterdam and Head of Market Operations Euronext N.V.

Background: A veteran of the exchange sector, Maurice held a range of senior positions at Euronext prior to taking on the mantle of CEO of the Amsterdam exchange, including Head of Business Projects & Design of the European Equity and Equity Derivatives Markets. << Who

Remuneration

We want to attract and retain the best talent available. We believe that awarding an attractive and competitive remuneration package is an important part of our proposition to candidates and employees. Therefore, we offer our employees a combination of fixed and variable pay. We share a single, firm-wide variable remuneration pool and people are awarded a share of that pool based on their performance. No variable remuneration is awarded if there is no or insufficient profit or capital.

Introduction

We not only create transparency in the financial markets, we also firmly believe in being transparent as a company. Our global remuneration model provides for a detailed and transparent awarding procedure with appropriate checks and balances and publication requirements. The company has discussed the company's remuneration model with regulators, legislators, major shareholder representatives and shareholder representative bodies.

Key principles and policy

Our global remuneration model reflects our key principles achieved through the practical implementation of the General Remuneration Policy (as approved by the General Meeting on 19 May 2016 and published on our website, the 'General Remuneration Policy'), the Dutch Act on Remuneration Policy of Financial Undertakings (Wet Beloningsbeleid Financiële Ondernemingen, the 'Remuneration Act'), and the related laws and regulations in a manner that is tailored to the size of our enterprise and the way it is organized, as well as the nature, scope and complexity of our business activities.

It is consistent with, and promotes, sound and effective risk management. It encourages alignment of the risks taken by employees and of the company itself, and does not encourage risk taking which is inconsistent with our risk profile. It is in line with our business strategy, objectives, values and interests and includes measures to avoid

conflicts of interest. Finally, it must not lead to the risk that third parties are treated improperly (although we do not provide any investment service or ancillary service to third parties).

Our global remuneration model

We are committed to attracting and retaining the best talent available. Our staff, including the members of the Management Board, receive competitive remuneration packages. This includes a fixed gross salary and an award from the singular firm-wide variable remuneration pool. The remuneration pool is accrued throughout the year based on Flow Traders' operating result over the performance year reflecting company performance. The variable component of the total remuneration is dynamic, as it is a function of operating results: if there is no or insufficient profit or capital, there will be no variable remuneration. For example, if in any given year no profit is made, none of our employees will receive any variable remuneration. If the company incurs a loss, deferred variable remuneration is reduced or forfeited entirely. This policy also applies to members of the Management Board.

We apply an annual performance cycle. At the beginning of each calendar year clear objectives are set depending on an employee's role, which are in line with our company objectives for the year and our corporate key competencies: drive, ownership and teamwork. Performance is reviewed during mid-year and year-end staff appraisals.

Individual variable remuneration payable from the collective variable compensation pool is dependent on company and business unit performance, individual performance and the individual's contribution to the long-term success of the company as a whole, discouraging a culture of 'star' behavior and fostering collaboration and teamwork. Flow Traders does not base variable remuneration on financial results achieved individually. The Supervisory Board approves the awarding of variable remuneration.

If awarded, for most recipients variable remuneration is paid in cash in two or three annual instalments. The deferred variable component acts as a first loss tranche to compensate for any operating loss in the subsequent year, acting as a buffer before such loss would impact shareholder equity. This serves as an important incentive for risk-aware behavior, keeping in mind the long-term objectives of the company and alignment with our risk appetite. We deem the deferral period sufficient given the

company's risk profile and horizon. Variable remuneration components may become subject to reduction or claw back if it is determined that the relevant employee or member of the Management Board did not meet adequate norms of competence and appropriate behavior or was responsible for behavior that led to a substantial deterioration of the company's position, in accordance with applicable law.

We do not award guaranteed variable remuneration to employees unless the guaranteed variable component is awarded in relation to hiring new staff, limited to the first year of employment, and only if we have a sound and strong capital base. We do not award severance payments if there is a serious imputable act or negligence by the employee in the fulfilment of his or her function or where an employee resigns voluntarily (unless this is the consequence of a serious imputable act or negligence (ernstig verwijtbaar handelen of nalaten) by the company). Employees did not receive any loans from the company as part of their

compensation package in 2017. We do not provide any other ancillary benefits for any employee. We have not reserved or accrued any amounts to cover pension claims or retirement claims.

One of our core values is ownership, and we mean it both in terms of mindset and behavior as well as literally. We believe that being a shareholder aligns the interests of the company with those of our employees. To promote shareholding and reward loyalty we have launched two new initiatives: the Flow Cash Incentive Plan (FCIP) and the Flow Loyalty Incentive Plan (FLIP). Under the FCIP employees have been offered the opportunity to buy company shares in the first open period of 2018 and receive an attractive annual cash incentive over a five-year period for as long as the shares are held by the participant. The right to the cash incentive will be forfeited if the participant transfers his or her shares out of the FCIP or when the employment of the participant with Flow Traders ends. With the FLIP program, company shares are awarded to employees marking their two-year anniversary with the company. Shares awarded under the FLIP are subject to a lock-up period and will remain with the employee regardless of the termination of his or her employment with Flow Traders. The cash incentive under the FCIP as well as the shares awarded under the FLIP are fully paid out of the variable compensation pool. The FCIP and the FLIP terms and conditions are subject to review by the Management Board annually. Both plans have been approved by the Supervisory Board in Q4 2017. As a part of these plans shares have been and will be bought in the market. The Management Board is not eligible to participate in either of these plans.

We encourage our employees to save for old age. At our headquarters in Amsterdam, we partnered with a pension provider, giving employees the freedom of choice to select the option that best suits their individual needs while incentivizing participation in the company-sponsored program. In our other offices we offer schemes that are driven by country-specific practices and regulations.

Remuneration of the members of the Management Board

Introduction

The remuneration of, and other agreements with, the members of the Management Board are required to be determined by the Supervisory Board with due observance of the General Remuneration Policy and applicable laws and regulations. The Supervisory Board has assessed the remuneration of our Management Board members based on their performance in 2017.

The remuneration of our Management Board members consists of a relatively modest fixed base salary and a variable, partially deferred, remuneration in cash. The table below shows the total remuneration awarded to the individual members of the Management Board over 2017.

Fixed remuneration

All members of the Management Board were awarded a gross fixed base salary of €94,608 over 2017.

	Dennis Dijkstra, Co-CEO	Marcel Jongmans CFO	Sjoerd Rietberg, Co-CEO
Gross fixed base salary 2017	€94,608	€94,608	€94,608
Variable remuneration for 2017, to be paid out in instalments
(see Adjustments to variable remuneration below)	€426,643	€383,979	€426,643
Total	€521,251	€478,587	€521,251

Variable remuneration

Based on actual performance over 2017, all members of the Management Board were awarded a total combined variable remuneration of €1,237,265. The variable remuneration awards to the members of the Management Board are determined on the basis of the following principles:

◾ First, the maximum variable remuneration is set by the Supervisory Board within the limits of the firm-wide variable remuneration pool for a given year. As set out above, the pool is approximately 36 percent of the operating results and is directly contingent upon positive operating results. Financial performance indicators are therefore integrated into this self-correcting mechanism: the variable remuneration of the members of the Management Board will be a direct reflection of actual realized company performance.
◾ Second, within those limits, the variable remuneration is determined annually on the basis of a managementassessment performance framework. This framework translates Flow Traders' strategic business objectives into predetermined, assessable performance criteria that can be influenced by the Management Board's performance within a Balanced Performance Scorecard. This Scorecard is composed of four non-financial focus areas, which aim to robustly assess the Management Board member's performance within Flow Traders' operating environment and stakeholder interests. These four areas comprise Growth, External Relationships, Internal Processes / Excellence, and People and Culture. Each year, targets are set for the following performance elements, which are assessed annually, in order to determine management's performance and variable remuneration:
◾ Strengthen the team
◾ Grow Institutional Trading
◾ Increase product venue coverage
◾ Open Hong Kong office

Internal Process / Excellence

◾ Further improve technical infrastructure
◾ Expand analyst capacity
◾ Finalize implementation of Mifid II
◾ Increase overall capital efficiency

Adjustments to variable remuneration

Variable remuneration to members of the Management Board is paid in cash in multiple instalments and may be reduced or clawed back under circumstances described in the Remuneration Act. As explained in the section above on our global remuneration model, the deferred variable component acts as a first loss tranche to compensate any operating loss in the subsequent year, before such loss would impact shareholder equity. If the company incurs a loss, deferred variable remuneration is reduced or forfeited entirely. In addition to the reduction and claw back

External Relationships

◾ Expand the number of prime brokers
◾ Ensure continuous compliance with rules and regulations and maintain positive relationships with regulators
◾ Ensure that the investor community is properly informed
◾ Deepen relationships with issuers

People & Culture

◾ Launch employee share plan

◾ Set up Flow Academy
◾ Stimulate rotation across offices
◾ Create and maintain a positive and challenging environment for employees

provisions of the Remuneration Act, Dutch law and the Corporate Governance Code provide that the remuneration of the members of the Management Board may be reduced or they may be obliged to repay (part of) their variable remuneration to the company if certain circumstances apply.

Pursuant to the applicable laws and regulations, any variable remuneration component conditionally awarded to a member of the Management Board in a previous financial year which would, in the opinion of the Supervisory Board,

produce an unfair result due to extraordinary circumstances during the period in which the predetermined performance criteria have been or should have been applied, the Supervisory Board will have the power to adjust the value downwards or upwards. In addition, the Supervisory Board will have the authority under applicable Dutch law, including the Remuneration Act, to recover any variable remuneration awarded from a member of the Management Board on the basis of incorrect financial or other data (claw back). In addition, variable remuneration components may become subject to claw back and malus pursuant to the Remuneration Act and related regulations.

Pursuant to Dutch law, the Supervisory Board may furthermore adjust the variable remuneration (to the extent that it is subject to reaching certain targets and the occurrence of certain events) to an appropriate level if payment of the variable remuneration were to be

unacceptable according to requirements of reasonableness and fairness.

Scenario analyses carried out in respect of variable remuneration

The variable remuneration of the members of the Management Board is contingent upon a future, unknown, metric: the accrued firm-wide variable remuneration pool which itself depends on the operating result for the given financial year.

Because of the nature of our business activities and the fast paced industry in which we operate, the Supervisory Board tracks actual performance of the Management Board members and eligibility for variable remuneration throughout the year, rather than performing a more hypothetical scenario analysis prior to a financial year while performing a single, one-off, assessment at the end of the

year as set out in the best practice provisions of the Corporate Governance Code. Quarterly discussions take place between the Management Board members and the Remuneration and Appointment Committee for this purpose. In this manner the Supervisory Board regularly assesses the performance indicators and the potential resulting variable remuneration for the Management Board members.

As mentioned, compensation of the members of the Management Board is limited to a relatively modest fixed remuneration component and a variable component dependent on operating result being realized. They did not receive share-based remuneration or other elaborate incentive schemes. This limits the number of scenarios to be meaningfully assessed as prescribed by the best practice provisions.

No shares, pensions, loans and other benefits

In 2017 the members of the Management Board did not receive any shares and no loans were granted by the company to the members of the Management Board as part of their compensation package. We have not reserved nor accrued any amounts to cover pension claims or retirement claims. We do not provide any other ancillary benefits for any member of the Management Board.

Limited severance payments

We do not award severance payments to members of the Management Board that exceed 100 percent of their annual fixed remuneration, and do not award severance payments if there is a serious imputable act or negligence by the employee in the fulfilment of their functions, where they resign voluntarily (unless this is the consequence of a serious imputable act or negligence (ernstig verwijtbaar handelen of nalaten) or failure by the company), and we do not intend to award such payments in the future. In addition, relevant limitations apply under the Remuneration Act.

Remuneration of the members of the Supervisory Board

The General Meeting determines the remuneration of the members of the Supervisory Board following a proposal by the Supervisory Board. The remuneration of the members of the Supervisory Board consists of a fixed base salary and cannot be dependent upon the company's results.

None of the members of the Supervisory Board may receive shares, options for shares or similar rights to acquire shares as part of his or her remuneration. None of the members of the Supervisory Board may hold shares, options for shares or similar securities other than as a long-term investment. The members of the Supervisory Board may also not hold such securities, other than in accordance with the rules on holding or transacting in the company's securities. Members of the Supervisory Board may not accept personal loans or guarantees from the company, other than in the normal course of business and subject to the prior approval of the Supervisory Board.

Fixed gross compensation

The table below shows the total fixed compensation awarded to the individual members of the Supervisory Board. There are no separate committee fees.

	Fixed compen sation per annum	Fixed compen sation 2016
Eric Drok	€75,000	€75,000
Jan van Kuijk	€50,000	€50,000
Olivier Bisserier	€50,000	€50,000
Rudolf Ferscha	€50,000	€50,000
Roger Hodenius	€50,000	€50,000
Han Sikkens	€50,000	€50,000

No variable remuneration shares, pensions, loans and other benefits

The members of the Supervisory Board did not receive variable remuneration for their work as members of the Supervisory Board or any share-based remuneration, and no loans were granted by the company to the members of the Supervisory Board as part of their compensation package. We have not reserved nor accrued any amounts to cover pension claims or retirement claims. We do not provide any other ancillary benefits for any member of the Supervisory Board.

Remuneration disclosures

In 2017, the total amount of variable remuneration awarded to all employees including members of the Management Board was €25.2 million (2016: €58.4 million). No employees were awarded an annual remuneration of €1 million or more in 2017.

Business Unit		Number of employees to whom an annual remuneration of €1 million or more was awarded
	2017	2016
Europe	–	13
Americas	–	4
Asia	–	2
Total	–	19

Remuneration regulations are subject to change. We continuously monitor such changes but currently cannot assess in full what the exact implementation or impact of such changes will be. Changes may have a significant impact on the General Remuneration Policy, our global remuneration model and other remuneration practices of the company and its group companies. It may also impact our ability to attract or retain talent given the global and highly competitive nature of our industry.

Our Governance

We operate a two-tier governance structure, consisting of a Management Board and a Supervisory Board. The Management Board is responsible for the day-to-day management of the company, formulating strategies and policies, and setting and achieving our objectives. The Supervisory Board supervises and advises the Management Board. Each board is accountable to the General Meeting for the performance of its duties.

Our governance is reflected in our internal rules and regulations, including our Articles of Association, Management Board By-Laws, Supervisory Board By-Laws, the Terms of Reference of our Supervisory Board committees and our Code of Conduct. These, together with our policies, can be found on our website.

The new Corporate Governance Code came into force as of 1 January 2017. Flow Traders historically has a strong focus on long-term value creation, culture, risk and fully supports the amended Corporate Governance Code. We have amended our Management Board By-Laws, Supervisory Board By-Laws, and the Terms of Reference of our Supervisory Board committees accordingly.

Management Board

General

Our Management Board consists of two Co-CEOs (Dennis Dijkstra and Sjoerd Rietberg) and one CFO (Marcel Jongmans). Two of them can jointly represent the company, reflecting the four-eyes principle we operate across the company: two people must sign off on significant business decisions. The Management Board is charged with managing the company, subject to the limitations set out in the Articles of Association and the Management Board By-Laws.

The Management Board is responsible for the continuity of the company and is guided by the interests of the company and its business, taking into consideration the company's long-term value creation and the interests of the company's stakeholders, including our employees and our shareholders. Decisions are thus made in a balanced manner. Management has formulated a strategy in line with the long-term value creation. Subsequently, Management is responsible for creating a culture that entails long-term value creation for the company. The Management Board is supervised by the Supervisory Board in this regard. Management is alert to indications of misconduct or irregularities. In accordance with the Corporate Governance Code Management has also taken measures to avoid conflicts of interest.

The members of the Management Board are eager to keep their knowledge and skills up to date and spend sufficient time on their duties and responsibilities.

The Management Board is also responsible for identifying and managing risks associated with the company's strategy and activities. Management ensures that the company has adequate internal risk management and control systems in place. Moreover, the Management Board renders account of the effectiveness of the design and the operation of the internal risk management and control systems. The Internal Audit Function is the responsibility of Management. Management maintains regular contact with the Internal Audit Function.

Before the Management Board can approve any resolutions entailing a significant change in the identity or nature of the company, it must obtain the approval of the General Meeting. The Management Board also has to obtain the approval of the Supervisory Board for a number of resolutions specified in the Management Board By-Laws.

Appointing and dismissing Management Board members

As set out in more detail in our Articles of Association and the Management Board By-Laws, the Supervisory Board makes a non-binding nomination or proposal to appoint, suspend or remove a Management Board member. Following a nomination by the Supervisory Board, the General Meeting can appoint members of the Management Board by an absolute majority of the votes cast, representing more than one third of the issued capital of the company. Appointment of a different candidate than the one proposed by the Supervisory Board requires an absolute majority of the votes cast at the General Meeting, representing at least 50 percent of the issued capital of the

company. Management Board members are appointed for a maximum term of four years. Any (re)appointment of a member of the Management Board must be approved by the Dutch Central Bank (DNB).

The General Meeting can suspend or remove a member of the Management Board upon a proposal by the Supervisory Board with an absolute majority of the votes cast. If votes within the Supervisory Board meeting tie on a proposed nomination, suspension, or dismissal, the General Meeting shall decide. Suspension or removal of a Management Board member which was not proposed by the Supervisory Board requires an absolute majority of the votes cast at the General Meeting, representing at least 50 percent of the issued capital of the company.

The functioning of the Management Board as a whole and the functioning of members individually is evaluated several times per year. A succession plan for the Management Board is in place. Moreover, we have a transparent procedure in place for the (re)appointment of Management Board members. Management Board members are appointed for a term of four years and may be reappointed for a term of a maximum of four years at a time. The Equal Opportunity Policy will be taken into account at (re)appointment.

Supervisory Board

General

The Supervisory Board supervises the Management Board and the general course of affairs of the company and its business. The Supervisory Board supervises the company's focus on long-term value creation and the way in which this is implemented in the company's strategy and culture. The Supervisory Board considers the organizational structure of the company as a whole, as well as general and financial risks and the internal risk management and control systems. In performing its duties, the Supervisory Board acts in accordance with the interests of the company and takes the relevant interests of the company's stakeholders into account. Decisions are thus made in a balanced manner. The Supervisory Board is alert to indications of misconduct or irregularities. It supervises the Management Board when appropriate follow-up actions are taken. In case of a conflict of interest, the Supervisory Board is responsible for the decision-making on how to handle conflicts of interest.

The functioning of the Supervisory Board as a whole and the functioning of members individually is evaluated at least once a year. A succession plan for the Supervisory Board is in place, with the Supervisory Board Profile taken into account. We also have a transparent procedure in place for the (re) appointment of Supervisory Board members.

In 2017 the Supervisory Board consisted of six members: Eric Drok (Chairman), Jan van Kuijk (Vice-Chairman), Olivier Bisserier, Rudolf Ferscha, Roger Hodenius and Han Sikkens. See also the Our Supervisory Board chapter.

Appointing and dismissing Supervisory Board members

Supervisory Board members are appointed for a term of four years and may be reappointed for a further four-year term. A Supervisory Board member may then be reappointed again, for a period of two years, which may be extended by at most two years. The Equal Opportunity Policy will be taken into account at (re)appointments.

When a member of the Supervisory Board is to be appointed, suspended, or removed, the Supervisory Board makes a non-binding nomination or proposal. Following a nomination by the Supervisory Board, the General Meeting may appoint a Supervisory Board member by an absolute majority of the votes cast, representing more than one third of the issued capital of the company. Appointment of a different candidate than the one proposed by the Supervisory Board requires an absolute majority of the votes cast at the General Meeting, representing at least 50 percent of the issued capital of the company. If votes within the Supervisory Board meeting tie on the proposed nomination, the General Meeting decides. Supervisory Board members are appointed for a maximum term of four years. Any appointment of a member of the Supervisory Board must be approved by the Dutch Central Bank (DNB). DNB needs to be notified in writing in case of re-appointments of members of the Supervisory Board.

Following a proposal by the Supervisory Board the General Meeting may suspend or remove members of the Supervisory Board by an absolute majority of the votes cast. The suspension or removal of a Supervisory Board member without a proposal by the Supervisory Board requires an absolute majority of the votes cast at the General Meeting, representing at least 50 percent of the issued capital of the company.

Internal organization

Committees

The Supervisory Board has amended the structure of its committees following last year's self-assessment. The company used to have an Audit Committee, a Remuneration and Appointment Committee, a Trading and Risk Committee and a Technology Committee. As trading and technology have many similar intersections, both committees have been reformed to a Trading and Technology Committee and a separate Risk Committee. Each of the committees has a preparatory and/or advisory role to the Supervisory Board. They each report their findings to the Supervisory Board, which is ultimately responsible for all decision-making. Terms of Reference apply for each committee and the Co-CEOs and CFO have a standing invitation for each committee meeting.

Audit Committee

The Audit Committee discusses the quarterly, interim, and annual figures and supervises the provision of the company's financial information. It also advises the Supervisory Board on the nomination of the external auditor, who is appointed by the General Meeting. It is in regular contact with the internal audit function and the external auditor, monitors the auditor's independence and discusses the audit plans of the internal and external auditor.

In addition to advising the Management Board on financing, tax policy and tax risk framework, it is also responsible for supervising relevant (tax) legislation and regulations and codes of conduct. The design and operation of the internal risk management and control systems are discussed in the Risk Committee in more detail, as well as in the Audit Committee.

In addition to the Co-CEOs and the CFO, the Global Co-Head of Tax & Finance was invited to Audit Committee meetings. The Group Internal Auditor also attends meetings of the Audit Committee.

The Audit Committee is not chaired by the Chairman of the Supervisory Board or a former member of the Management Board. More than half of its members is independent.

Remuneration and Appointment Committee

The Remuneration and Appointment Committee drafts proposals for the company's remuneration policy. It proposes the remuneration of the individual members of the Management Board to the Supervisory Board, and reviews the proposal of the Management Board of the annual remuneration and variable compensations of all employees. It is also responsible for carrying out annual assessments of the individual members of the Supervisory Board and the Management Board and the composition and size of the respective boards. Where necessary, the Remuneration and Appointment committee drafts proposals for (re)appointments, drafts selection criteria and appointment procedures for the Supervisory Board and Management Board. The Committee draws up a plan for the succession of Management Board and Supervisory Board members. It also supervises the Management Board regarding the selection criteria and appointment procedures for senior management.

Depending on the topics discussed, the Co-CEOs, CFO or relevant Global Heads and relevant others are present at committee meetings.

The Remuneration and Appointment Committee is not chaired by the Chairman of the Supervisory Board or a former member of the Management Board.

Risk Committee

The duties of the Risk Committee include supervising and monitoring the operation of our internal risk management and control systems, and advising the Management Board on these operations. It reviews the company's risk assessment processes and control systems, at least annually. The committee also monitors the manner in which the company's risk management function is provided with adequate resources and appropriate access to information, bearing in mind that it should be able to function sufficiently independently from Management. The Risk Committee also undertakes preparatory work for the Supervisory Board's decision-making regarding the supervision of the integrity and quality of the effectiveness of the company's internal risk management and control systems. Subsequently, the effectiveness of the design and operation of the internal risk management and control systems are discussed with the Management Board, and reported to the Supervisory Board.

The Committee maintains regular contact with our Risk and Mid-Office departments. The Global Head of this department and relevant others are invited to committee meetings.

Trading and Technology Committee

The Trading and Technology Committee is responsible for providing advice to the Management Board on the company's development, performance and sustainability of its trading strategies. It is also responsible for reviewing the company's technology budget, supervising the operation of the company's security systems, and assessing the state of

the company's technology in terms of competitiveness and functionality at least once a year. The committee supervises the Management Board on the operations of the company's security systems and related risks. It maintains regular contact with our Trading and Technology departments. The relevant Global Heads and others are invited to committee meetings.

Diversity

The Supervisory Board has drawn up and adopted an Equal Opportunity Policy (Diversity Policy) on 2 November 2017. In this policy we explain our objective to treat everyone equally during the hiring process and throughout their careers at Flow Traders. We are committed to being a truly equal opportunity employer, by recruiting, retaining and promoting people based on merit, and merit alone. We are a firm believer in the benefits of a diverse workplace and we do not make any concessions to quality. Our objective is to provide equal employment opportunities to all qualified job applicants and equal career perspectives for all of our employees, provided they perform highly. When positions become available, we actively encourage all candidates to apply and ensure that the selection and retention processes are truly equal for all applicants and employees. This also holds for our Management Board and Supervisory Board. When it comes to diversity in the Supervisory Board and the Management Board, we adhere to the same principle of equal opportunity as set out above. As a result, our current Supervisory Board is diverse in terms of, inter alia, age, education, nationality, and professional backgrounds. No Supervisory Board or Management Board Members were appointed or reappointed during the financial year 2017. Our Equal Opportunity Policy can be found on our website www.flowtraders.com.

General Meeting, shares and shareholders

Flow Traders highly encourages shareholder participation in the decision-making in the General Meeting. It is of great importance to Flow Traders that its shareholders have an actual say in the annual general meeting of shareholders ('AGM'), and the company therefore encourages an open dialogue. Flow Traders ensures that the General Meeting is adequately provided with information.

Agenda items of the AGM that need to be handled as separate agenda items on the basis of the Corporate Governance Code, will be handled as such.

Flow Traders holds an AGM within six months of the end of the financial year. The agenda for this meeting includes the adoption of the annual accounts, the content of the annual report covering the previous year's financial business, the policy of the company on additions to reserves and on distributions of profits, any proposal to distribute profits, (re) appointment of the external auditor, substantial changes in the governance structure of the company and in the compliance with the Corporate Governance Code, material changes to the articles of association, filling vacancies on the Management Board and/or Supervisory Board, proposals placed on the agenda by the Management Board, and the release from liability of the members of the Management Board and the Supervisory Board for their performance during the financial year.

The report of the Management Board at the General Meeting in 2018 will discuss the corporate governance structure and how the Corporate Governance Code is implemented.

General Meetings can also be held as often as the Management Board or the Supervisory Board deem necessary. A General Meeting is also convened in case of a decision entailing a significant change in the identity or character of the company or its business.

One or more shareholders representing at least the statutory threshold of three percent of the voting rights may request that the Management Board place items on the agenda of a General Meeting. Such a request must be honored by the Management Board provided that the request is received in writing at least 60 days before the date of such a meeting.

Each shareholder is entitled – either in person or via proxy – to attend the General Meeting and to vote during the General Meeting. The General Meeting is the perfect place for shareholders and the Management Board and Supervisory Board to interact. At a General Meeting, shareholders can directly ask questions to the Management Board and/or Supervisory Board. Our Management Board and Supervisory Board highly encourage shareholders to interact.

During the AGM held on 24 May 2017 in Amsterdam, the Netherlands, shareholders voted in favor of adopting the annual accounts, determining the total dividend at €1.25 per share, discharging members of the Management Board and Supervisory Board from liability, granting the authority to issue shares and the authority to restrict or exclude pre-emptive rights (see below for more detail), granting the authority to acquire own shares (see below) and reappointing EY as our auditor. The General Meeting and Management Board discussed the results, remuneration and governance of the company during the General Meeting.

Extraordinary General Meetings will be held if the Management Board or the Supervisory Board is requested to that effect in writing by one or more holders of shares (or holders of rights in rem (beperkte rechten) who also hold the voting rights in relation to those shares) individually or jointly representing 10 percent or more of the issued capital, specifying the details to be discussed.

The company held no Extraordinary General Meetings in 2017. Our next AGM is scheduled to be held on 26 April 2018 in Amsterdam, the Netherlands. More information is available on our website.

Voting rights

Each share carries one vote in the General Meeting. Subject to certain exceptions provided by Dutch law or the Articles of Association, resolutions of the General Meeting are passed by an absolute majority of votes cast. Votes can be cast at the General Meeting either in person or by proxy. These proxies can be granted electronically or in writing to the company or to independent third parties, such as a civil-law notary.

Amendment to the Articles of Association

The General Meeting may pass a resolution to amend the Articles of Association or to wind up the company with an absolute majority of the votes cast. This can only be done if the Management Board has proposed to amend the articles or wind up the company. Such proposal has to be approved by the Supervisory Board.

When a proposal to amend the Articles of Association or to wind up the Company is made to the General Meeting, the intention to propose such resolution must be stated in the relevant notice convening the General Meeting. If it

concerns an amendment to the Articles of Association, a copy of the proposal in which the proposed amendment is quoted verbatim must at the same time be deposited at the company's office and this copy shall be made available for inspection by the shareholders until the end of the General Meeting.

Issue of shares

Shares are issued by a decision of the Management Board. This decision must be approved by the Supervisory Board.

During the AGM held on 24 May 2017, our shareholders renewed the authority of the Management Board, subject to the Supervisory Board's approval, to issue ordinary shares or to grant rights to subscribe for ordinary shares up to and including 24 November 2018 for up to 10 percent of the total number of shares issued at the time of the General Meeting for any purposes. Any issuance exceeding this limit needs approval by the General Meeting.

In addition, the General Meeting renewed the authority of the Management Board, subject to the Supervisory Board's approval, to restrict or exclude applicable pre-emptive rights when issuing ordinary shares or granting rights to subscribe for ordinary shares up to and including 24 November 2018.

At our next AGM scheduled to be held on 26 April 2018, the Management Board intends to request that the General Meeting renews its authorization to issue shares for up to 10 percent of the total number of shares issued at the time of the AGM for any purposes.

Repurchase and purchase of Shares

Shares may be repurchased by the Company by a decision of the Management Board. This decision must be approved by the Supervisory Board. During the AGM held on 24 May 2017, our shareholders renewed the authority of the Management Board to, subject to the Supervisory Board's approval, acquire shares in the capital of the Company, either through purchase on a stock exchange or otherwise. The authority applies up to and including 24 November 2018, under the following conditions: the repurchase (i) may constitute up to 10 percent of the total number of shares issued at the time of the General Meeting; (ii) provided that the company will not hold more shares in stock than 10 percent of the issued share capital; and (iii) at a price (excluding expenses) not less than the nominal value of the shares and not higher than the opening price on Euronext Amsterdam on the day of repurchase plus 10 percent. Any repurchases exceeding these limits need approval by the General Meeting. In order to align our employees' interests with those of our shareholders, the company awarded 100 shares in the company to most employees with a tenure of over two years. The company purchased such shares under the authority granted by the General Meeting over the course of 2017.

At our next AGM scheduled to be held on 26 May 2018, the Management Board will request that the General Meeting renews its authorization to repurchase shares.

Major shareholders

The following shareholders filed their interests in the capital of the company exceeding 3% to be included in the AFM's register of substantial holdings and gross short positions,

www.afm.nl (data as of 31 December 2017). A shareholder must file or update its holdings if its interest exceeds, or drops below, 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. For further detail on individual shareholdings please refer to the AFM's register.

Information which is relevant to our shareholders and which is required to publish or submit pursuant to the provisions of company law and securities law, is posted in a separate section of our website www.flowtraders.com. Our Bilateral Contacts Policy can also be found on our website.

SHAREHOLDINGS ON 31 DECEMBER 2017

Filing date

R. Hodenius
(Avalon Holding B.V.)	12.27%	20 February 2017
J.T.A.G. van Kuijk
(Javak Investments B.V.)	12.27%	20 February 2017
Oyster Asset Management
SA	5.08%	13 December 2017
Templeton Funds	3.09%	14 December 2017
Jupiter Asset Management
Ltd.	3.08%	14 December 2017

The shares indirectly held by Roger Hodenius (Avalon Holding B.V.) and Jan van Kuijk (Javak Investments B.V.) are long-term investments.

Relationship agreement and shareholders agreement

Avalon Holding B.V., Javak Investments B.V. and the combined entities advised by Summit Partners (Summit entities) entered into a relationship agreement with the

company and a shareholders' agreement (amongst each other).

As a result of the transaction completed on 20 February 2017, Summit Partners no longer holds shares in the company and is no longer a party to the relationship agreement or the shareholders' agreement.

The relationship agreement is a Dutch law governed agreement that contains certain arrangements regarding the relationship between the parties thereto. The agreement currently grants each of Avalon Holding B.V. and Javak Investments B.V. a specific right to nominate or designate one Supervisory Board member for appointment (and replacement). This right expires, in respect of each relevant party, if such party ceases to, directly or indirectly, hold more than 5 percent of the shares in the company provided that and for as long as, in aggregate, Avalon Holding B.V. and Javak Investments B.V. together continue to, directly or indirectly, hold more than 5 percent of the company's shares, Avalon Holding B.V. and Javak Investments B.V. shall be entitled to jointly designate one Supervisory Board member for appointment. The relationship agreement also governs the composition of the Supervisory Board committees. The agreement terminates in respect of each of the shareholders, if such party's aggregate shareholding in the company (be it direct, indirect or together with a permitted transferee) falls below 5 percent of the company's outstanding share capital. In case of, among other things, the company becoming subject to insolvency procedures, liquidation, delisting, a merger or a spin-off (with the company as disappearing entity), the agreement automatically terminates.

'One of our core values is ownership, and we mean it both in terms of mindset and behavior as well as literally'

Under the shareholders' agreement governed by Dutch law, Avalon Holding B.V. and Javak Investments B.V. have agreed on certain arrangements in respect of their shareholding in the company. These arrangements include an obligation for each of the parties to vote in favor of the appointment of any individual designated by any of them as a member of the Supervisory Board in accordance with the terms of the relationship agreement (as described above). Furthermore, the parties agreed to reserve the right to consult with each other and coordinate the exercise of their voting rights attached to their respective shares in the company. The shareholders' agreement terminates for any party if such party's aggregate shareholding in the company (be it direct or indirect) falls below 3 percent of the company's outstanding share capital and in case of, among other things, the company becoming subject to insolvency procedures, liquidation, delisting, a merger or spin-off (with the company as disappearing entity).

No dedicated take-over protection structures

Flow Traders does not employ any of the following dedicated take-over protection structures: preference shares, depositary receipts or call options issued to vehicles conducive to protecting the company's interest or independence.

Compliance and integrity

Flow Traders commits to being in compliance with all relevant laws and regulations that apply to it, anywhere, including in respect of tax and anti-corruption laws. Integrity and transparency is central to the way we operate our business, from our Management Board and Supervisory Board to all our staff, regardless of their role. The company

encourages an open culture within its organization and expects its employees to comply with applicable laws, regulations and internal policies. Each employee is responsible for ensuring an honest and ethical conduct of business within the company. Please refer to the chapter Flow Traders and Society for more details on our anti-bribery, anti-corruption and anti-money laundering policies, our Code of Conduct, our Whistle-blower Policy and Tax Principles.

Internal audit

The Internal Audit Function seeks to enhance and protect organizational value by providing risk-based and objective assurance, advice, and insight. An efficient and effective internal audit framework contributes to strong internal controls and to a robust corporate governance structure, which can address significant risks. The scope of internal audit work includes the examination and evaluation of the adequacy and effectiveness of Flow Traders' risk management, control and governance processes as well as the quality of performance in carrying out assigned responsibilities to achieve Flow Traders' stated goals and objectives.

Our Group Internal Audit Charter defines the Internal Audit Function's purpose, authority, responsibility and position within Flow Traders. This charter is aligned with the Corporate Governance Code and with guidance provided by the Institute of Internal Auditors.

The Internal Audit Function is an integral part of our reporting cycle. The Internal Audit Function reports to the Audit Committee and to the Co-CEO responsible for the Internal Audit Function. It aligns its efforts with the external auditor and reports its audit results to the Management

Board, the essence of its audit results to the Audit Committee and informs the external auditor.

Management Board assesses the way in which the internal audit function fulfils its responsibility annually and takes the opinion of the Audit Committee into account.

Compliance with the Corporate Governance Code

The Corporate Governance Code defines a company as a long-term form of collaboration between the principal corporate bodies of a company. For us, these corporate bodies include the Management Board, the Supervisory Board and the General Meeting. The Management Board values and considers the interests of the various stakeholders involved. According to the Corporate Governance Code, good corporate governance results in effective decision-making in a manner which enhances shareholder value and enables a company to maintain a culture of integrity, transparency, and trust. The company has a long standing focus on a long-term value creation strategy, culture and risk. We acknowledge the importance of good corporate governance and endeavor to comply in general with the provisions of the Corporate Governance Code and comply fully with it, with the exception of the following provisions:

◾ Analyses carried out in respect of variable compensation

Best practice provision 3.2.1 of the Corporate Governance Code provides that the Remuneration and Appointment Committee should submit a proposal to the Supervisory Board concerning the remuneration of individual members of the Management Board. The proposal is drawn up in accordance with the remuneration policy that has been established and will, in any event, cover the remuneration structure, the amount of the fixed and variable remuneration components, the performance criteria used, the scenario analyses that are carried out and the pay ratios within the company and its affiliated enterprise. We do not fully comply with the scenario analyses that are carried out as the variable remuneration for the members of the Management Board is contingent upon a future, unknown, metric: the accrued firm-wide variable remuneration pool which itself depends on operating result for the given financial year. Because of the nature of our business activities and the fast paced industry in which we operate, the Supervisory Board tracks actual performance of the Management Board members and eligibility for variable compensation throughout the year, rather than performing a more hypothetical scenario analysis prior to a financial year while performing a single, one-off assessment at the end of the year as set out in the best practice provisions. Quarterly discussions take place between the Management Board members and the Remuneration and Appointment Committee for this purpose. In this manner the Supervisory Board regularly assesses the performance indicators and the potential resulting variable compensation for the Management Board members. Deviation from this provision is likely to continue until further notice.

◾ Independence of Supervisory Board members

Best practice provision 2.1.7 provides that any one of the criteria referred to in best practice provision 2.1.8 (i.-v.) should be applicable to at most one Supervisory Board member and that the total number of Supervisory Board members to whom the criteria referred to in best practice provision 2.1.8 are applicable should account for less than half of the total number of Supervisory

Board Members. Jan van Kuijk and Roger Hodenius, as founders of the company, were attracted to their role as Supervisory Board members because of their specific business-related expertise. They do not qualify as independent under the provisions of the Corporate Governance Code as they are former members of the Management Board of the company prior to its conversion and because they represent shareholders of the company owning an interest of over 10 percent. Deviation from this provision is likely to continue until Roger Hodenius and Jan van Kuijk cease to be members of the Supervisory Board.

Han Sikkens qualifies as an independent Supervisory Board member as of 20 February 2017. As of that date Summit Partners, represented by Han in the Supervisory Board, sold its stake in the company in full. Consequently, Han Sikkens no longer represents a shareholder with an interest of over 10 percent in the

company. Additionally, although Han Sikkens was a member of the board of Flow Traders Coöperatief U.A. (the company's legal predecessor), this board functioned as a one-tier board. His role was comparable to that of a non-executive director. Therefore, according to legal analysis of the above elements, Han Sikkens does not qualify as a former board member by operation of best practice provision 2.1.8 of the Corporate Governance Code.

◾ Independence of committee members As Jan van Kuijk and Roger Hodenius do not qualify as independent Supervisory Board members as set out above, this also effects two Supervisory Board committees of which they are members. Best practice provision 2.3.4, provides that more than half of the members of the Audit Committee and the Remuneration and Appointment Committee should be independent. Both Jan van Kuijk and Roger Hodenius are

members of the Remuneration and Appointment Committee, implying that half (and not more than half) of its members are independent. Deviation from this provision is likely to continue until Roger Hodenius and Jan van Kuijk cease to be members of the Supervisory Board.

◾ Quorum

Best practice provision 4.3.3 provides that the General Meeting of a company that is not subject to the statutory large company regime (structuurregime) may adopt a resolution to cancel the binding nature of a nomination for the appointment of a member of the Management Board or of the Supervisory Board and/or a resolution to remove a member of the Management Board or of the Supervisory Board by an absolute majority of the votes cast. According to the Corporate Governance Code, it may be provided that this majority should represent a given proportion of the issued capital, which proportion may not exceed one-third. If this proportion of the capital is not represented at the meeting, but an absolute majority of the votes cast is in favor of a resolution to cancel the binding nature of a nomination or to remove a board member, a new meeting may be convened at which the resolution may be passed by an absolute majority of the votes cast, regardless of the proportion of the capital represented at the meeting.

In deviation of this best practice provision, the company's Articles of Association provide that the General Meeting may pass a resolution to cancel the binding nature of a nomination for the appointment of a member of the Management Board or of the Supervisory Board and/or a resolution to remove a member of the Management Board or of the Supervisory Board by an absolute majority of the votes cast, representing more than 50 percent of the company's issued capital. In addition, the company's Articles of Association provide that if this quorum is not present or represented at the meeting, such resolution cannot be adopted and in order for such a resolution to be adopted, a new meeting should be convened in which more than 50 percent of the company's issued capital is represented and an absolute majority of the votes are cast in favor of such resolution.

◾ Equal Opportunity Policy (Diversity Policy) Best practice provision 2.1.5 provides that the Supervisory Board should draw up a diversity policy for the composition of the Management Board and Supervisory Board. The policy should address the concrete targets relating to diversity. Flow Traders deviates from best practice provision 2.1.5 as no concrete targets were set on diversity. However, the Supervisory Board has drawn up and adopted an Equal Opportunity Policy on 2 November 2017 that also addresses the diversity aspects of the composition of the Management Board and Supervisory Board. We believe that this policy also attains the purpose of best practice provision 2.1.5. In our view, the policy contributes to good governance, as it reflects our objective to treat everyone equally during the hiring process and throughout their careers at Flow Traders. Flow Traders is committed to being a truly equal opportunity employer, by recruiting, retaining and promoting people based on merit, and merit alone. The company is a firm believer in the benefits of a diverse workplace and does not make any concessions to quality. The objective is to provide equal employment opportunities to all qualified job applicants and equal career perspectives for all employees, provided they perform highly.

When positions become available, Flow Traders actively encourages all candidates to apply and ensure that the selection and retention processes are truly equal for all applicants and employees. This also holds for the Management Board and Supervisory Board. When it comes to diversity in the Supervisory Board and the Management Board, Flow Traders adheres to the same principle of equal opportunity as set out above. As a result, our current Supervisory Board is diverse in terms of, inter alia, age, education, nationality, and professional backgrounds.

Corporate governance statements

Dutch decree on the content of the Management Board report

(Besluit inhoud bestuursverslag)

The information required by section 2a of the Decree is included in the chapters Our Risk Management, Supervisory Board Report, and Our Governance:

◾ our compliance with the Corporate Governance Code can be found in the chapter Our Governance;
◾ the main features of our internal risk management and control systems relating to the financial reporting process can be found in the chapter Our Risk Management;
◾ the functioning of our General Meeting and the authority and rights of our shareholders can be found in the chapter Our Governance;
◾ the composition and functioning of our Management Board, the Supervisory Board and its Committees can be found in the chapters Supervisory Board Report and Our Governance;
◾ the diversity policy regarding the composition of the Management Board and the Supervisory Board including its aims, how it is being effected and the results can be found in the chapters Governance and the Supervisory Board Report (section 3a sub d of the Decree); and
◾ the disclosure of the information required by the Decree on Section 10 EU Takeover Directive can be found in the chapter Our Governance (section 3b of the Decree).

Compliance with article 2:166 of the Dutch Civil Code

Article 2:166 of the Dutch Civil Code states that the seats in the Management Board and the Supervisory Board should contain of at least 30 percent female and 30 percent male members. At Flow Traders, this is currently not the case. We believe in the drive to excel every day, and performing at the highest level possible, throughout all levels of our organization. To achieve this we seek to recruit, retain and promote the best talent, regardless of, inter alia, age, education, ethnicity, gender, nationality, professional background, religious faith or sexual orientation. Our selection is based on relevant education, professional experience and the competencies required. The persons fulfilling their roles in the Management respective Supervisory Board, are in our opinion the best fit for their roles. No Supervisory Board Members or Management Board Members were appointed or up for reappointment during financial year 2017.

Financial Statements

70 Consolidated Financial Statements

105 Company Financial Statements

110 Other Information

CONSOLIDATED STATEMENT OF FINANCIAL POSITION In thousands of euro

	Note	At 31 December 2017	At 31 December 2016

Assets
Cash and cash equivalents	13	5,879	2,736
Financial assets held for trading	14	3,738,649	4,611,770
Trading receivables	15	2,126,594	1,127,374
Other receivables	16	10,302	12,307
Investments available for sale	17	1,475	4,640
Investments in associates	18	571	1,343
Property and equipment	19	27,325	21,597
Intangible assets	20	1,506	1,570
Current tax assets	12	4,698	743
Deferred tax assets	12	1,941	5,592
Assets held for sale	21	816	-
Total assets		5,919,756	5,789,672
Liabilities
Financial liabilities held for trading	22	961,180	2,279,392
Trading payables	23	4,638,107	3,119,212
Liabilities at fair value	24	-	3,281
Other liabilities	25	65,178	109,836
Current tax liabilities	12	318	7,587
Deferred tax liabilities	12	872	273
Total liabilities		5,665,655	5,519,581

Equity	26
Share capital		4,653	4,653
Share premium		152,456	152,456
Retained earnings		86,667	93,887
Currency translation reserve		10,611	19,533
Fair value reserve		(286)	(438)
Total equity		254,101	270,091

Total equity and liabilities		5,919,756	5,789,672

The notes on pages 75 to 104 are an integral part of these consolidated financial statements.

Consolidated statement of profit or loss and other comprehensive income

CONSOLIDATED STATEMENT OF PROFIT OR LOSS In thousands of euro			For the year ended
	Note	2017	2016
Gross trading income		282,314	354,589
Fees related to the trading activities		59,177	56,082
Net financial expenses related to the trading activities		57,184	48,503
Net trading income	9	165,953	250,004
Employee expenses	10	57,393	84,161
Depreciation of property and equipment	19	6,807	5,948
Amortization of intangible assets	20	368	364
Impairment of tangible and intangible assets	19/20	540	2,775
Other expenses	11	52,517	47,115
Operating expenses		117,625	140,363
Operating result		48,328	109,641
Result on equity-accounted investees	18	107	(199)
Profit before tax		48,435	109,442
Tax expense	12	8,840	17,506
Profit for the period		39,595	91,936
Other comprehensive income (loss)
Items that may be reclassified to profit or loss
Foreign currency translation differences - foreign operations	26	(8,922)	1,879
Available for sale changes in fair value		152	228
Other comprehensive income for the year (net of tax)		(8,770)	2,107
Total comprehensive income for the year		30,825	94,043
Earnings per share
Basic and fully diluted earnings per share		0.85	1.98

The notes on pages 75 to 104 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY In thousands of euro

	Share capital	Share premium	Currency translation reserve	Fair value reserve	Retained earnings	Total
Balance at 1 January 2017	4,653	152,456	19,533	(438)	93,887	270,091
Profit	–	–	–	–	39,595	39,595
Total other comprehensive income	–	–	(8,922)	152	–	(8,770)
Total comprehensive income for the period	–	–	(8,915)	152	39,595	30,876

Transactions with owners of the Company
Dividends declared	–	–	–	–	(46,534)	(46,534)
Treasury shares	–	–	–	–	(281)	(281)
Total transactions with owners of the company	–	–	–	–	(46,815)	(46,815)
Balance at 31 December 2017	4,653	152,456	10,611	(286)	86,667	254,101

	Share capital	Share premium	Currency translation reserve	Fair value reserve	Retained earnings	Total
Balance at 1 January 2016	4,653	150,826	17,710	(666)	74,024	246,547
Profit	-	-	-	-	91,936	91,936
Total other comprehensive income	-	-	1,879	228	-	2,107
Reclassification Currency Translation Reserve	-	-	(55)	-	55	-
Total comprehensive income for the period	-	-	1,823	228	91,992	94,043
Transactions with owners of the Company
Share premium	-	1,630	-	-	-	1,630
Dividends declared	-	-	-	-	(72,129)	(72,129)
Total transactions with owners of the company	-	1,630	-	-	(72,129)	(70,498)
Balance at 31 December 2016	4,653	152,456	19,533	(438)	93,887	270,091

The notes on pages 75 to 104 are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS In thousands of euro		For the year ended
	2017	2016
Cash flows from operating activities
Profit for the period	39,595	91,936
Adjusted for:
Depreciation of property and equipment	6,807	5,948
Amortization of tangible and intangible assets	368	364
Impairment of tangible and intangible assets	540	2,775
Result on equity-accounted investees (net of tax)	(107)	199
Net financial expenses related to the trading activities	57,184	48,503
Tax expense	8,840	17,506
Changes in working capital
Financial assets held for trading ◾	873,121	(1,219,005)
Change in Trading receivables ◾	(999,220)	33,864
Other receivables ◾	2,005	(5,622)
Financial liabilities held for trading ◾	(1,318,212)	246,398
Trading payables ◾	1,518,895	935,918
Other liabilities ◾	(45,672)	(9,157)
Other ◾	(8,137)	3,045
Cash flow from operations	136,007	152,680
Interest paid	(57,184)	(49,585)
Interest received	-	1,082
Corporate income tax paid	(15,815)	(24,703)
Cash flows from operating activities	63,008	79,474

CONSOLIDATED STATEMENT OF CASH FLOWS In thousands of euro		For the year ended
	2017	2016
Cash flows from investing activities
Net investments in available for sale instruments	-	(553)
Net investment in associates	-	(735)
Acquisition of property and equipment	(12,252)	(9,024)
Acquisition of intangible assets	(321)	(369)
Cash flows from investing activities	(13,573)	(10,681)
Cash flows from financing activities
Dividends paid	(46,526)	(72,128)
Capital contributions	-	4,105
Treasury shares	(590)	-
Cash flows from financing activities	(47,116)	(68,023)
Effect of movements in exchange rates on cash and cash equivalents	(176)	41
Change in cash and cash equivalents	3,143	811
Changes in cash and cash equivalents
Cash and cash equivalents at opening	2,736	1,925
Cash and cash equivalents at close	5,879	2,736
Changes in cash and cash equivalents	3,143	811

Notes to the consolidated financial statements

All amounts in thousands of euro, unless stated otherwise.

1. Reporting entity

Flow Traders N.V. (referred to as the 'Company') is a public limited liability company (naamloze vennootschap) incorporated under the laws of the Netherlands, having its seat (statutaire zetel) in Amsterdam, the Netherlands, having its registered office at Jacob Bontiusplaats 9, 1018 LL Amsterdam, the Netherlands and registered with the Trade Register of the Chamber of Commerce (Kamer van Koophandel, afdeling Handelsregister) under number 34294936.

These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the 'Group'). The Group is a leading global technology-enabled liquidity provider that specializes in exchange traded products (ETPs). The Group's goal is to be a leading ETP-focused liquidity provider.

The consolidated financial statements of the Group for the annual period ended 31 December 2017 incorporate financial information of Flow Traders N.V., its subsidiaries and associates. The annual financial statements were authorised for issue by the Company's Management Board and the Supervisory Board on 1 March 2018 subject to adoption by the General Meeting of shareholders.

2. Going concern

These financial statements have been prepared on the basis of the going concern assumption.

3. Basis of preparation

a) Statement of compliance

The Group applies International Financial Reporting Standards as adopted by the European Union ('IFRS-EU'). IFRS-EU provides several options in accounting principles. The Group's accounting principles IFRS-EU and its decisions regarding the options available are set out in the section 'Significant accounting policies' below.

b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following items and unless otherwise indicated:

◾ financial assets and liabilities held for trading are measured at fair value with changes recognized in profit or loss;
◾ available for sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income, except for impairment losses which are recognized in profit or loss.

c) Functional and presentation currency

These consolidated financial statements are presented in euros, which is also the Group's functional currency. All financial information presented in euros has been rounded to the nearest thousand, except when otherwise indicated.

d) Use of estimates and judgements

The preparation of the financial statements requires management to form opinions and make estimates and assumptions that influence the reported value of assets and liabilities and of income and expenditure. The actual results may differ materially from these estimates. The estimates and the underlying assumptions are constantly assessed. Revisions of estimates are recognized in the period in which the estimate is revised. For more details, we refer you to the chapter on Fair values of financial instruments.

e) Principles for the preparation of the consolidated statement of cash flows The consolidated statement of cash flows is based on the indirect method.

The cash flows are split into cash flows from operations, including trading activities, investment activities and financing activities. Receivables from and payables to clearing organizations are included in the cash flow from operating activities. Investment activities are comprised of acquisitions, sales and redemptions in respect of financial investments other than in the course of operations, as well as acquisitions and sales of subsidiaries and associates, property and equipment. Movements to the extent that those have not resulted in cash flows are eliminated.

4. Significant accounting policies

The Group has consistently applied the accounting policies as set out below to all periods presented in these consolidated financial statements.

General

a) Basis of consolidation

The Group accounting policies have been applied consistently by all group entities. Intra-Group balances and transactions, and any unrealized income and expenses arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

Subsidiaries

Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control ceases.

When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, any related non-controlled interest and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Investments in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over its financial and operating activities. Control or significant influence follows from facts and circumstances, but there is a rebuttable presumption that significant influence when the Group holds between 20 percent and 50 percent of the voting power of another entity.

Investments in associates are accounted for using the equity method and are recognized initially at cost.

The consolidated financial statements include the Group's share of the profit or loss and other comprehensive income of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases.

When the Group's share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Business combinations

Business combinations are accounted for using the acquisition method as at the date control is transferred to the Group. The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities.

Any contingent consideration payable is measured at fair value at the acquisition date. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

b) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the functional currencies of the Group at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date, with the foreign currency difference recognized in profit or loss. Differences arising on the translation of available for sale equity investments are recognized in other comprehensive income unless the instrument is impaired.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euros at exchange rates at the reporting date. The income and expenses of foreign operations are translated to euros at exchange rates at the dates of the transactions.

Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) of equity. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

c) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

d) Financial assets and liabilities

Recognition

The Group initially recognizes loans and advances on the date on which they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognized on the trade date, which is the date on which the Group becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

Classification

The Group classifies its financial assets into the following categories:

◾ loans and receivables;
◾ investments held-to-maturity;
◾ available for sale investments; and
◾ financial assets at fair value through profit or loss and within the following category as:
◾ held for trading;
◾ designated at fair value through profit or loss.

The Group classifies its financial liabilities, other than financial guarantees and loan commitments, into the following categories:

◾ financial liabilities held for trading; and
◾ other financial liabilities.

Trading assets and liabilities

Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit.

Trading assets and liabilities are initially recognized and subsequently measured at fair value in the statement of financial position, with transaction costs recognized in profit or loss. All changes in fair value are recognized as part of net trading income in profit or loss. Trading assets and liabilities are not reclassified subsequent to their initial recognition, except that non-derivative trading assets, other than those designated at fair value through profit or loss on initial recognition.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Available for sale financial assets

Available for sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Available for sale financial assets are recognized initially at fair value plus any directlyattributable transaction costs.

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available for sale debt instruments, are recognized in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss.

Other financial liabilities

Non-derivative financial liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

Offsetting

Financial assets and liabilities are presented on a net basis when a legal right of offset is agreed between the parties and the Group intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRS-EU, for gains and losses arising from a group of similar transactions such as in the Group's trading activities.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

The Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

The Group valuates its daily trading positions based on theoretical prices whereby the price differences are recorded through the profit or loss account. Those theoretical prices can differ from quoted market prices. The Group's Risk and Mid-Office department monitors whether all differences can be substantiated.

Portfolios of financial assets and financial liabilities that are managed by the Group on the basis of the net exposure to either their market or credit risk are measured on the basis of a price that would be received to sell a net long position or paid to transfer a net short position for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk exposure of each of the individual instruments in the portfolio.

The Group recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

e) Property and equipment

Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Any gain or loss on disposal of an item of property and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss.

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance costs are expensed once incurred.

Items of property and equipment are depreciated on a straight-line basis in profit or loss over the estimated useful lives of each component. Leased assets under financial leases are depreciated over the shorter of the lease term and their useful lives.

The estimated useful lives for the current and comparative years of significant items of property and equipment are as follows:

◾ hardware: 5 years;
◾ office fixtures: 5 years;
◾ other: 5 years.

The depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

f) Intangible assets

Recognition and measurement

Intangible assets are amortized on a straight-line basis in profit or loss over the estimated useful lives of each component. The estimated useful live of significant intangible assets is 5 years.

Goodwill

Goodwill is initially recognized and in subsequent years measured at cost less accumulated impairment losses.

Goodwill in respect of equity-accounted investees is included in the carrying amount of the investment, and any impairment loss is allocated to the carrying amount of the equityaccounted investee as a whole.

Goodwill is tested annually for impairment.

g) Leased assets

Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as financial leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and are not recognized in the Group's statement of financial position.

h) Impairment

Non-derivative financial assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date for indications of impairment. A financial asset is impaired if there is objective evidence of a loss event which impacts the estimated future cash flows of that asset.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, or economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Impairment losses on available for sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve from equity to profit or loss. The loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less of impairment loss recognized previously in profit or loss.

An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognized in profit or loss, and is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

Non-financial assets

The carrying amounts of the Group's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill and indefinite-lived intangible assets are tested annually for impairment. An impairment loss is recognized if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

i) Employee benefits

Short-term employee benefits

Short-term employee benefit obligations are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash variable compensation or (profit-sharing) structures if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

j) Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

k) Lease payments

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease as lease expenses.

l) Income recognition

Net trading income comprises gross trading income less fees and net financial expenses related to the trading activities.

The fees and net financial expenses are directly linked to the trading activity and are therefore directly recognized in the profit and loss account under trading income.

m) Tax

Tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to

tax payable or receivable in respect of previous years. Current tax payable also includes any withholding tax liability arising from the declaration of dividends.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax is not recognized for:

◾ temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
◾ temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will be revised in the foreseeable future; and
◾ taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and management judgement. This assessment relies on estimates and assumptions and may involve judgement about future events. New information may become available that would cause the Group to change its judgement regarding the adequacy of existing tax liabilities or the collectability of tax assets. Such changes will impact tax expense in the period that such a change in estimate is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date.

n) Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in the share premium.

o) Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sale will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification.

Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.

A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.

5. Operating segments

The Group has the following regions in which it operates via its subsidiaries in Europe (the Netherlands, Romania), the Americas (the United States of America) and Asia (Singapore and Hong Kong).

The Group's trading assets and liabilities attributable to each segment are reported to management on the basis of net liquidity. Consequently, the reported total assets in each segment are net of the segment's financial liabilities held for trading and trading payables.

SEGMENT REPORTING				For the year ended 2017
	Europe	Americas	Asia	Total
Gross trading income	177,587	76,502	28,225	282,314
Fees related to the trading activities	32,930	20,795	5,452	59,177
Net financial expenses related to
the trading activities	29,989	21,657	5,538	57,184
Net trading income	114,668	34,050	17,235	165,953
Intercompany recharge	4,059	-	-	4,059
Total revenue	118,727	34,050	17,235	170,012
Employee expenses	36,736	12,844	7,813	57,393
Depreciation of property and
equipment	4,237	1,703	867	6,807
Amortization of intangible assets	302	28	38	368
Impairment of (in) tangible assets	1	518	21	540
Intercompany recharge	-	1,850	2,209	4,059
Other expenses	25,307	19,913	7,297	52,517
Operating expenses	66,583	36,856	18,245	121,684
Operating result	52,144	(2,806)	(1,010)	48,328
Result/(impairment) of
equity-accounted investees	13	94	-	107
Profit before tax	52,157	(2,712)	(1,010)	48,435
Tax expense	8,911	171	(242)	8,840
Profit for the period	43,246	(2,883)	(768)	39,595

Assets	226,853	55,933	37,684	320,470

Capital expenditure	6,370	5,845	3,217	15,432
Liabilities	40,093	18,519	7,757	66,369

SEGMENT REPORTING			For the year ended 2016
	Europe	Americas	Asia	Total
Gross trading income	222,644	95,226	36,719	354,589
Fees related to the trading activities	38,386	11,428	6,268	56,082
Net financial expenses related to
the trading activities	26,736	16,325	5,442	48,503
Net trading income	157,522	67,473	25,009	250,004
Intercompany recharge	20,498	-	-	20,498
Total revenue	178,020	67,473	25,009	270,502
Employee expenses	55,603	18,987	9,571	84,161
Depreciation of property and
equipment	3,875	1,330	743	5,948
Amortization of intangible assets	305	21	38	364
Impairment of (in) tangible assets	2,748	3	24	2,775
Intercompany recharge	-	16,434	4,064	20,498
Other expenses	24,190	16,342	6,583	47,115
Operating expenses	86,721	53,117	21,023	160,861
Operating result	91,299	14,356	3,986	109,642
Result/(impairment) of
equity-accounted investees	42	(241)	-	(199)
Profit before tax	91,341	14,115	3,986	109,443
Tax expense	11,254	6,074	178	17,506
Profit for the period	80,087	8,041	3,808	91,936
Assets	259,290	96,420	40,894	396,604

Capital expenditure	6,613	1,802	1,774	10,189
Liabilities	78,140	36,534	11,839	126,513

6. New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017, and have not been applied in preparing these consolidated financial statements. Those that may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.

The Group applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after 1 January 2017. The Group has not early-adopted any standards, interpretations or amendments that have been issued but are not yet effective. The nature and the impact of each amendment is described below:

IFRS 9 Financial Instruments

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted.

Given the nature of the Group's operations and the fact that the trading portfolio is valued at fair value through profit and loss, the impact on the Group's financial statements is minimal.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, permitting early adoption. Given the nature of the Group's operations the impact on the financial statements is minimal.

Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative

The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). However, the financing position of the Group Is closely

related to the trading position and is therefore short term by nature. The position as per 31 December Is disclosed In note 14,15,22 and 23. Therefore IAS 7 does not have any impact on the financial statements.

Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. However, their application has no effect on the Group's financial position and performance as the Group has no deductible temporary differences or assets that are in the scope of the amendments.

IFRS 16 Leases

The IASB issued the new standard for accounting for leases – IFRS 16 Leases – in January 2016. The new standard does not significantly change the accounting for leases for lessors. However, it does require lessees to recognize most leases on their balance sheets as lease liabilities, with the corresponding right of use assets. Lessees must apply a single model for all recognized leases, but will have the option not to recognize 'short-term' leases and leases of 'low-value' assets. Generally, the profit or loss recognition pattern for recognized leases will be similar to today's financial lease accounting, with interest and depreciation expense recognized separately in the statement of profit or loss.

IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted provided the new revenue standard, IFRS 15, is applied on the same date. Lessees must adopt IFRS 16 using either a full retrospective or a modified retrospective approach.

The Group does not anticipate early adopting IFRS 16, as the amount of the operational leases outstanding are limited and in the short term the impact is expected to be immaterial.

Other new or amended standards are not expected to have a significant impact on the Group's consolidated financial statements.

7. Fair values of financial instruments

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Valuation models

The Group measures fair values using the following fair value hierarchy, depending on the inputs used for making the measurements.

◾ Level 1: inputs that are quoted, unadjusted, market prices in active markets for identical instruments;
◾ Level 2: inputs, other than within Level 1, that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valuated using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered inactive; or other valuation techniques in which all significant inputs are directly or indirectly observable market data;
◾ Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes unobservable inputs that have a significant effect on the instrument's valuation. This category includes instruments that are valuated based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between independent market participants at the measurement date.

The Group uses widely recognized valuation techniques and models (including net present value models and comparisons with similar instruments for which market observable prices exist) for determining the fair value of common, simple financial instruments that use only observable market data and require little management judgement and estimation. Observable prices or model inputs (including risk-free and benchmark interest rates and credit spreads used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations) are usually available in the market for listed debt and equity securities, exchange-traded derivatives and simple over-the-counter derivatives. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and thus reduces the uncertainty associated with determining fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

When the Group measures portfolios of financial assets and financial liabilities on the basis of net exposures to market risks, it applies judgement in determining appropriate portfolio-level adjustments such as bid-ask spreads. Such adjustments are derived from observable bid-ask spreads for similar instruments and adjusted for factors specific to the portfolio. Similarly, when the Group measures portfolios of financial assets and financial liabilities on the basis of net exposure to the credit risk of a particular counterparty, it takes into account any existing arrangements that mitigate the credit risk exposure (e.g. master netting agreements with the counterparty).

Valuation framework

The Group has a control framework with respect to the measurement of fair values. This framework includes a Risk and Mid-Office department which is independent of the Trading department and reports directly to the Management Board. The Risk and Mid-Office department has overall responsibility for independently verifying the results of trading and all significant fair value measurements. The daily reconciliation of the positions and prices between the prime brokers and the Trading department is most important.

The prime brokers of the Group provide electronic position statements on a daily basis, which are uploaded automatically into the Group's databases. The Group and its prime brokers agreed when files will be available and methods for transmission and communication. All data is normalized by the Group so it can be used in multiple internal systems. The information is mainly used for daily independent reconciliation of positions and prices, resulting in profit and loss accounts.

The following reconciliations are executed on a daily basis:

◾ reconciliation of the positions The Risk and Mid-Office department reconciles the positions of the Trading department with information provided by the prime brokers. All differences are reconciled and agreed by the Trading department of the Group and the prime brokers;
◾ reconciliation of prices The Risk and Mid-Office department reconciles prices as provided by the Trading Department with those of the prime brokers and/or data from external data vendors. All differences are reconciled and the Risk and Mid-Office department makes sure that any required follow up action is taken, either by the prime broker or the Trading department. Therefore, all prices are checked with independent sources.

Results of these reconciliation processes are communicated and agreed with Heads of Trading, the Risk and Mid-Office department and the Management Board on a daily basis.

a) Financial assets and liabilities held for trading

The Group mainly trades on regulated and active markets. The financial assets and liabilities held for trading are carried at fair value, based whenever possible on quoted market prices, as published by exchanges, market data vendors and prime brokers.

The valuation of trading positions, both the long and the short positions, is determined by reference to last traded prices from similar instruments from the exchanges at the reporting date. Such financial assets and liabilities are classified as Level 1.

A substantial part of the financial assets and liabilities held for trading are carried at fair value, based on theoretical prices which can differ from quoted market prices. The theoretical prices reflect price adjustments primarily caused by the fact that the Group continuously prices its financial assets and liabilities based on all available information. This includes prices for identical and near-identical positions, as well as the prices for securities underlying the Group's positions, on other exchanges that are open after the exchange on which the financial asset or liability is traded closes. The Group's Risk and Mid-Office department checks the theoretical price independently. As part of Its review, It monitors whether all price adjustments can be substantiated with market inputs. Consequently, such financial assets and liabilities are classified as Level 2.

For offsetting (delta neutral) positions, the Group uses mid-market prices to determine fair value.

b) Available for sale investments

The fair value of available for sale investments is determined by reference to their quoted closing bid price at the reporting date, or if unquoted, determined using a valuation technique and are classified as Level 2.

c) Other receivables

The carrying value of other receivables with a maturity of less than one year is assumed to approximate their fair values.

Fair value hierarchy

				At 31 December 2017
	Level 1	Level 2	Level 3	Total
Long positions in cash market
products	371,712	3,366,149	-	3,737,861
Mark to market derivatives assets	-	788	-	788
Financial assets held for trading	371,712	3,366,937	-	3,738,649
Available for sale investments	-	1,475	-	1,475
Total long positions	371,712	3,368,412	-	3,740,124

Short positions in cash market
products	61,021	900,159	-	961,180
Mark to market derivatives liabilities	-	-	-	-
Financial liabilities held for trading	61,021	900,159	-	961,180
Total short positions	61,021	900,159	-	961,180

				At 31 December 2016
	Level 1	Level 2	Level 3	Total
Long positions in cash market
products	255,133	4,336,440	-	4,591,573
Mark to market derivatives assets	-	20,197	-	20,197
Financial assets held for trading	255,133	4,356,637	-	4,611,770
Available for sale investments	-	4,640	-	4,640
Total long positions	255,133	4,361,277	-	4,616,410
Short positions in cash market
products	431,282	1,848,110	-	2,279,392
Mark to market derivatives liabilities	-	-	-	-
Financial liabilities held for trading	431,282	1,848,110	-	2,279,392
Liabilities at fair value	-	3,281	-	3,281
Total short positions	431,282	1,851,391	-	2,282,673

Due to the short holding period between acquisition and sale, there are no transfers between Level 1 and Level 2. There are no Level 3 positions.

8. Earnings per share

The calculation of the earnings per share has been based on the profit for the year attributable to ordinary shareholders and the number of ordinary shares outstanding.

The treasury shares are still outstanding shares and therefore not deducted from the total number of shares outstanding when calculating the earnings per share.

EARNINGS PER SHARE		For the year ended
	2017	2016
Profit for the year	39,595	91,936
Profit attributable to ordinary shareholders	39,595	91,936

Weighted average number of shares
Issued ordinary shares	46,534,500	46,534,500

Basic and fully diluted earnings per share	0.85	1.98

9. Net trading income

Gross trading income comprises the realized and unrealized income on financial instruments.

Fees related to the trading activities consist of exchange fees, clearing fees and other trading related fees. Net financial expenses related to the trading activities mainly relate to interest expense on the credit facilities with the prime brokers calculated on the drawn amount during the year.

In 2017 the overall fees related to trading remained in line with previous year. This is mainly driven by the overall growht of the company and the relatively low trading volumes.

10. Employee expenses

		For the year ended
	2017	2016
Wages and salaries	23,175	18,795
Variable compensations	25,188	57,274
Social security charges	2,650	2,311
Recruitment and other employment costs	6,380	5,781
Employee expenses	57,393	84,161

The wages and salaries increased in line with the FTE development from 341 as per 31 December 2016 to 394 as per 31 December 2017. Overall employee expenses decreased with 31.8% as a result of the decrease in variable compensation paid to employees. The amount of

variable compensations payable are based to the operational profit of the company. Our Remuneration Policy is approved by our shareholders and available on our website (www.flowtraders.com).

11. Other expenses

	For the year ended
	2017	2016
Technology	37,288	34,762
Housing	4,147	3,407
Advisors and assurance	1,689	1,442
Regulatory costs	1,319	849
Fixed exchange costs	4,580	4,149
Travel expenses	2,033	1,842
Various expenses	1,461	664
Other expenses	52,517	47,115

Overall increase in technology expenses is mainly driven by our continuously improvements and growth of our infrastructure. Increase in Housing expenses due to new offices in New York, Hong Kong and further expansion in Amsterdam. Regular expenses increase due to overall growth of regulatory requirements and the costs to comply.

12. Taxation

Current tax expenses

	For the year ended
	2017	2016
Tax recognized in profit or loss
Current tax expense	5,277	23,648
Movement of deferred tax asset	3,651	(1,486)
Movement of deferred tax liability	599	(176)
Prior years' adjustments	(687)	(4,480)
Tax expense excluding share of tax of equity
accounted investees	8,840	17,506

Reconciliation of the weighted average statutory income rate to the Group's effective income tax rate is as follows:

RECONCILIATION OF EFFECTIVE TAX RATE For the year ended 2017 2016 Profit before tax 48,435 109,442 Dutch income tax rate 25% 25.0% Income tax expected 12,109 27,361 Actual income tax charge 8,840 17,506 In percentage 18,3% 16.0% Difference in tax expense (6.7%) (9.0%)

RECONCILIATION OF EFFECTIVE TAX

RATE				For the year ended
	2017	2017	2016	2016
	(€)		(€)
Dutch tax rate	12,109	25%	27,361	25%
Different weighted average statutory
rate of group	(202)	(0.4%)	751	0.7%
Income (partly) exempted	(3,539)	(7.3%)	(7,552)	(6.9%)
Other (non) deductible costs	472	1.0%	(3,055)	(2.8%)
Subtotal	(3,269)	(6.7%)	(9,854)	(9.0%)
Effective tax rate	8,840	18.3%	17,507	16.0%

No tax was recognized in other comprehensive income in 2017 and 2016.

Current tax assets and liabilities

		At 31 December
	2017	2016
Assets
Europe (the Netherlands)	16	25
Americas (US)	4,542	505
Asia (Singapore)	140	2,103
Total current tax assets	4,698	743

Liabilities
Europe (the Netherlands)	298	3,961
Americas (US)	1	3,217
Asia (Singapore)	19	409
Total current tax liabilities	318	7,587

Recognized deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

RECOGNIZED DEFERRED TAX ASSETS AND LIABILITIES		At 31 December
	2017	2016
Assets
Other liabilities	1,941	5,592
Liabilities
Property and equipment	(872)	(273)
Net asset/(liability)	1,069	5,319

The utilization of the deferred tax asset is dependent upon the US achieving sufficient future taxable profit and subsequently the deductibility of the variable compensation instalments. The movement of the deferred tax asset is driven by the US tax reform and subsequent deduction of the corporate tax rate in the US.

13. Cash and cash equivalents

		At 31 December
	2017	2016
Europe	1,018	1,428
Americas	1,666	465
Asia	3,195	843
Total cash and cash equivalents	5,879	2,736

Cash and cash equivalents include a bank guarantee of €285,256 for office rent (2016: €147,000). The other cash and cash equivalents are available on demand.

14. Financial assets held for trading

		At 31 December
	2017	2016
Cash market products	3,737,861	4,591,573
Derivatives	788	20,197
Total financial assets held for trading	3,738,649	4,611,770

Financial assets held for trading related to settled positions and Is closely related to financial liabilities held for trading, trading receivables and trading payables. The sum of these postions is our net liquidity position at our prime brokers and together with cash used in the management report as trading capital.

15. Trading receivables

		At 31 December
	2017	2016
Receivables for securities sold	2,126,594	1,127,374
Total trading receivables	2,126,594	1,127,374

In accordance with the Group's policy of trade date accounting for regular way sale and purchase transactions, receivables for securities sold represent amounts of receivables for securities that are sold, but not yet settled as at the reporting date. The amount receivable is based on the net unsettled amount per clearing institution.

Please also refer to the note 14 for a better understanding of these positions and what they consist of.

16. Other receivables

		At 31 December
	2017	2016
Prepayments	4,621	6,817
Dividend withholding tax	2,457	2,394
Security deposits	1,893	804
Other	1,331	2,292
Total other receivables	10,302	12,307

All receivables have a maturity of less than 1 year.

17. Available for sale investments

		At 31 December
	2017	2016
Net book amount 1 January	4,640	3,364
Acquisitions / (divestments)	(3,120)	553
Price movements	487	913
Currency movements	(532)	(190)
Total available for sale investments	1,475	4,640

The investments of the Group in various exchanges, through participations or "member seats", are classified as available for sale. These investments are measured at fair value determined on the last available bid before year end in the foreign currencies which are translated to euros at exchange rates at the reporting date.

Divestments in available for sale investments relates to the sale of shares needed for the member seats.

18. Investments in associates

		At 31 December
	2017	2016
Net book amount 1 January	1,343	808
Investments	-	735
Reclassification Think ETF Asset Management	(816)	-
Share of result of subsidiary	107	(199)
Currency movements	(63)	(1)
Total investments in associates	571	1,343

Investments in associates is the Group's 24% ownership in Think ETF Asset Management B.V. (previously ThinkCapital Holding B.V.). and a 10% ownership in Pick Two LLC, a joint venture entity.

In 2017 the company prepared for the sale of the 24% ownership in Think ETF Asset Management B.V. as it no longer was indicated as a core busines. Therefore this asset is reclassified to the 'assets held for sale' category on the balance sheet.

The Group holds Joint Back Office Clearing agreements with three prime brokers for a total amount of €57 thousand in their preferred shares.

In 2017 the Group received no dividends from its investments in associates (2016: nil).

19. Property and equipment

	Hardware	Office fixtures	Other	Total
Cost
Balance at 1 January 2016	14,983	10,344	8,430	33,757
Additions	5,680	3,819	-	9,499
Disposals	(2,189)	(337)	(8,430)	(10,956)
Exchange rate differences	232	48	-	280
Balance at 31 December 2016	18,706	13,874	-	32,580
Balance at 1 January 2017	18,706	13,874	-	32,580
Additions	5,536	8,561	-	14,097
Disposals	(1,784)	(1,048)	-	(2,832)
Exchange rate differences	(1,018)	(478)	-	(1,496)
Balance at 31 December 2017	21,440	20,909	-	42,349
Depreciation and impairment losses
Balance at 1 January 2016	5,154	2,193	3,836	11,183
Depreciation for the year	3,285	2,098	565	5,948
Disposals	1,602	278	4,400	6,280
Exchange rate differences	105	27	-	132
Balance at 31 December 2016	6,942	4,040	-	10,982
Balance at 1 January 2017	6,942	4,040	-	10,982
Depreciation for the year	3,993	2,814	-	6,807
Disposals	(1,484)	(767)	-	(2,251)
Exchange rate differences	(413)	(101)	-	(514)
Balance at 31 December 2017	9,038	5,986		15,024
Carrying amounts
At 1 January 2016	9,829	8,151	4,594	22,574
At 31 December 2016	11,764	9,834	-	21,597
At 31 December 2017	12,404	14,921	-	27,325

Part of the property and equipment was obtained under financial leases. The net carrying amount of the leased equipment was €2,805,000 at 31 December 2017 (2016: €1,920,000). Please refer to note 25 for an overview of the commitments related to these contracts.

20. Intangible assets

	Software	Goodwill	Total
Cost
Balance at 1 January 2016	1,776	502	2,278
Additions	483	-	483
Disposals	(497)	-	(497)
Exchange rate differences	7	-	7
Balance at 31 December 2016	1,769	502	2,271
Balance at 1 January 2017	1,769	502	2,271
Additions	320		320
Disposals	(132)		(132)
Exchange rate differences	(28)		(28)
Balance at 31 December 2017	1,929	502	2,431

Depreciation and impairment losses
Balance at 1 January 2016	775	-	775
Depreciation for the year	364	-	364
Disposals	(441)	-	(441)
Exchange rate differences	3	-	3
Balance at 31 December 2016	701	-	701
Balance at 1 January 2017	701	-	701
Depreciation for the year	368	-	368
Disposals	(131)	-	(131)
Exchange rate differences	(13)	-	(13)
Balance at 31 December 2017	925	-	925
Carrying amounts
At 1 January 2016	1,001	502	1,503
At 31 December 2016	1,068	502	1,570
At 31 December 2017	1,004	502	1,506

Part of the intangible assets were obtained under a financial lease. The net carrying amount of leased Intangible assets was €114,240 at 31 December 2017 (2016: €360,000). Please refer to note 25 for more information about the commitments related to those contracts.

Goodwill

In December 2010 the Group obtained control of TradeSense Solutions B.V. and its subsidiary Flow Traders Technologies SRL (formerly TradeSense Solutions SRL), a software development company with special focus on trading in electronic markets. The goodwill amounted to €502,000.

There were no additions or impairments to the goodwill in 2017 and 2016.

21. Assets held for sale

As per 31 December 2017 the 24% ownership in Think ETF Asset Management BV is reclassified to the 'assets held for sale' category on the balance sheet. During 2017 the company started the sale of the stake and announced the signing of a Share Purchase Agreement on 19 January 2018. The closing of this deal is subject to regulatory approval and expected during Q1 2018.

In our segment reporting this subsidiary was included in the Europe segment.

22. Financial liabilities held for trading

		At 31 December
	2017	2016
Short positions in equity securities trading	961,180	2,279,392
Derivatives	-	-
Total financial liabilities held for trading	961,180	2,279,392

Please also refer to the note 14 for a better understanding of these positions and what they consist of.

23. Trading payables

		At 31 December
	2017	2016
Payables for securities bought	1,933,110	1,096,455
Borrowings	2,704,997	2,022,757
Total trading payables	4,638,107	3,119,212

Please also refer to the note 14 for a better understanding of these positions and what they consist of.

Payables for securities bought

In accordance with the Group's policy of trade date accounting for regular way sale and purchase transactions, payables for securities bought represent amounts payables for securities that were purchased, but not yet settled as at the reporting date. The amount payable is based on the net unsettled amount per clearing institution.

Borrowings

The Group maintains portfolio financing facilities with its prime brokers to facilitate the trading activities (i.e. to finance the purchase and settlement of financial instruments). The drawn amounts on these facilities continuously fluctuate based on our trading positions at any given moment.

The Group entered into interest-bearing credit facilities with ABN AMRO Clearing Bank N.V. (ABN AMRO Clearing), totaling €2,450 million. In addition, the Group entered into interestbearing credit facilities for portfolio margin financing with Bank of America Merrill Lynch (BAML), RBS and Goldman Sachs. These facilities can be modified or terminated at any time. The facilities are exclusively for the financing of positions of the financial instruments traded in the ordinary course of the trading activities using the various prime brokers.

Our prime brokers require the Group to post cash to cover the haircut or margin requirements (representing a minor portion of our portfolio's size, which is variable and calculated on a daily basis depending on portfolio size and composition) in cash or securities as security for our positions held with the relevant prime broker. The positions are subject to pledge and collateral arrangements.

Covenants

Pursuant to the main covenants included in our facilities the Group is required to comply with a net liquidation balance that exceeds the haircut calculated by the prime broker. Both the net liquidation balance and haircut are variable and calculated on a daily basis, depending on portfolio size and composition. The main covenants prescribe certain maximum portfolio-toloan size (variable and calculated on a daily basis, depending on portfolio composition). In addition, they require us to maintain a solvency ratio of at least 4%, calculated by shareholders equity divided by credit limit.

The main covenants also require the Group to supply our prime brokers with financial statements and other information, including information on our trading activities and trading counterparties, and permission to inspect our books and records. Furthermore, they require us to maintain all relevant authorizations and memberships required in order to conduct our business, and comply with all applicable laws, rules and regulations and place restrictions on mergers and disposition of our assets outside the ordinary course of our business.

24. Liabilities at fair value

		At 31 December
	2017	2016
Net book amount 1 January	3,281	2,609
Borrowings (redemptions)	(3,281)	-
Price movements	-	972
Currency movements	-	(300)
Total liabilities at fair value	-	3,281

The liabilities at fair value relate to part of the investments available for sale that are borrowed from our prime brokers. The price and exchange rate differences offset each other in the other comprehensive income.

In line with the investments available for sale the liabilities were repaid in July 2017.

25. Other liabilities

		At 31 December
	2017	2016
Long-term variable compensation payables	15,849	31,017
Long-term financial lease commitments	1,295	821
Subtotal non current liabilities	17,144	31,838

Short-term lease commitments/outstanding loans	1,244	946
Wages and variable compensations payables	36,424	69,148
Wages tax payable	1,200	751
Creditors and accruals	9,166	7,153
Subtotal current liabilities	48,034	77,998
Total other liabilities	65,178	109,836

Financial lease commitments

Financial lease liabilities are as follows:

	Future minimum lease payments Interest				Present value of minimum lease payments
	31 December	31 December	31 December	31 December	31 December	31 December
	2017	2016	2017	2016	2017	2016
Less than one year	1,364	727	120	44	1,244	683
Between one and five years	1,399	849	104	28	1,295	821
Total	2,763	1,576	224	72	2,539	1,504

The Group concluded lease arrangements for IT investments that were classified as financial leases. At inception of the arrangements, payments were split into lease payments and related to other elements based on their fair value.

26. Equity

Share capital and share premium

All ordinary shares rank equally with regard to the Company's residual assets. There are no preferred shareholders.

ORDINARY SHARES

	2017	2016
In issue 1 January	46,534,500	46,534,500
Movements	-	-
Total	46,534,500	46,534,500

Ordinary shares

Holders of the Company's ordinary shares are entitled to dividends and are entitled to one vote per share at general meetings of the Company.

Total authorized capital of the Company is €10 million consisting of 100 million shares of which currently 46,534,500 shares are issued. The nominal value per share is €0.10 each, and therefore the issued and paid up capital amounts to €4,653,000.

Shares acquired by participants in 2015 as part of the EEP 2015 and further set out on page 23 are subject to a lock-up period. When a participant leaves the Company before the end of the lock-up period, the participant must offer any such unreleased shares to the Company at the lower of the price paid by the participant or the market price. During 2017 these shares were used into the Flow Loyalty Incentive Plan whereby all employees receive 100 share in the company at their two years working anniversary.

Treasury shares held by the company are not cancelled. Treasury shares are recognized at cost and deducted from equity as part of the retained earning. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in retained earnings. Treasury shares are used to distribute to employees as further set out on page 51 of our remuneration report.

Currency translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Revaluation reserve

The revaluation reserve comprises the fair value movements on all investments available for sale of the Group.

General distributions

Dividends

It is proposed to the General Meeting that a total cash dividend of €0.65 per share will be paid out to shareholders for the financial year 2017, subject to a 15% dividend withholding tax. An interim cash dividend of €0.30 per share was paid out on 9 August 2017. This means that the final cash dividend proposal to the General Meeting of 26 April 2018 is €0.35 per share.

27. Operating leases

Leases as lessee

Non-cancellable operating lease minimum payments are payable as follows.

OPERATIONAL LEASES		At 31 December
	2017	2016
Less than 1 year	6,915	8,389
Between 1 and 5 years	14,301	17,692
Total leases	21,216	26,081

The Group leases all of its office facilities under operating leases.

28. Other contingent liabilities

Claims

The Group is not involved in any significant and material legal procedures and/or claims and there are no other contingent liabilities.

Fiscal unity

The Group constitutes a fiscal unity with its fully owned Dutch subsidiaries for Dutch income tax purposes. Moreover, Flow Traders B.V. forms part of a fiscal unity for VAT purposes, covering part of the Dutch Group. All companies in the fiscal unity are jointly and severally liable for the tax obligations of the fiscal unity.

Cash incentive provided to employees

As explained in our remuneration policy and on page 51 of the Management Board report, our employees have the possibility to participate In an employee equity plan and are eligible to a cash incentive depending on their share position in the company. One of the conditions for

this cash Incentive is that the employee needs to be employed at the company at time of the payment of the cash incentive. Payments will be made of the first, second, third, fourth and fifth year of the plan. Based on IAS 19, it is not possible to record any costs In relation to the cash incentive as long as the employee did not provide the service. Therefore these costs will be recognized in the coming year in the Profit and Loss.

					Payable amounts
	Year 1 (2018)	Year 2 (2019)	Year 3 (2020)	Year 4 (2021)	Year 5 (2022)
Cash inventive plan 2017	600,000	600,000	600,000	600,000	600,000

29. Related parties

General

The members of the Group's Supervisory Board and the Management Board are considered the persons responsible for managing and controlling the Group.

Key management employee and Supervisory Board compensation

Key management employee compensation comprised the Management Board compensation over 2017 and 2016.

		2016
	Fixed	Variable	Fixed	Variable
Salaries
Management Board	284	1,237	213	4,003
Supervisory Board	325	-	325	-

30. Group companies

SUBSIDIARIES

	Country of incorporation		Ownership interest
		2017	2016
Flow Traders Holding B.V.	Netherlands	100%	100%
Flow Traders U.S. B.V.1	Netherlands	-	100%
Flow Traders B.V.	Netherlands	100%	100%
Global Connect B.V.2	Netherlands	-	100%
Flow Traders Technologies B.V.	Netherlands	100%	100%
Flow Traders Asia Pte. Ltd.	Singapore	100%	100%
Flow Traders Hong Kong Ltd3	Hong Kong	100%	-
Flow Traders U.S. Holding LLC	United States
	of America	100%	100%
Flow Traders U.S. LLC	United States
	of America	100%	100%
Flow Traders U.S. Institutional Trading	United States
LLC	of America	100%	100%
Flow Traders Technologies SRL	Romania	100%	100%

¹ As per 1 January 2017 Flow Traders U.S. B.V. has been merged with Flow Traders Holding B.V.

² As per 29 August 2017 Global Connect B.V. has been merged with Flow Traders Holding B.V.

³ The Hong Kong entity was Incorporated on 20 March 2017

Significant restrictions

The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the supervisory frameworks within which its subsidiaries operate. Please refer to the Capital Management section of this report for more information.

31. Financial risk management

Overview

The Group is exposed to the following risks arising from financial instruments:

◾ credit risk;
◾ market risk;
◾ liquidity risk.

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.

Credit risk

Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligations, and can also arise from the settlement of off-exchange transactions.

At the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. These amounts significantly exceed expected loss in the event of counterparty default, as expected loss takes into account the likelihood of such an event and collateral or security. The maximum exposure to credit risk at the reporting date was as follows:

CARRYING AMOUNT

	2017	2016
Cash and cash equivalents	5,879	2,736
Trading receivables	2,126,594	1,127,374
Other receivables	10,302	12,307

Credit risk related to transactions on exchanges is limited since these are guaranteed by the central counterparty or clearing house related to that exchange. Members of these clearing houses are required to deposit substantial amounts of cash, bonds or equities as guarantee for any failure to settlement of trading.

The Group manages credit risk through its Risk and Mid-Office department that provide specific guidelines, rules and procedures for identifying, measuring and reporting credit risk. Policies include amongst others:

◾ limits for individual product types;
◾ limits per counterparty;
◾ limits on the duration of the exposure;
◾ limits for settlement types;
◾ strict monitoring procedures for late settlements.

Creditworthiness of counterparties is continuously assessed and counterparty exposures are monitored on an intra-day basis.

During 2017, the Group observed no significant concentration of credit risks towards singlecounterparties and geographically there was no concentration of credit risk.

Based on the Group's counterparty credit risk monitoring, the Group believes that no impairment is necessary in respect of trading and other receivables.

Offsetting financial assets and financial liabilities

The disclosures set out in this paragraph include financial assets and financial liabilities that:

◾ are offset in the Group's statement of financial position; or
◾ are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of whether they are offset in the statement of financial position.

The similar agreements include derivative clearing agreements, global master repurchase agreements, and global master securities lending agreements. Similar financial instruments include derivatives, sales and repurchase agreements, reverse sale and repurchase agreements, securities borrowing and securities lending agreements. Financial instruments,

such as loans and deposits, are not disclosed in this paragraph unless they are offset in the statement of financial position.

The ISDA and similar master netting arrangements do not meet the criteria for offsetting in the statement of financial position. This is because they create a right to offset recognized amounts for the parties to the agreement that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle on a net basis or to realize the assets and settle the liabilities simultaneously.

The Group has outsourced collateral management to its prime brokers. It can receive and grant collateral in the form of cash and marketable securities in respect of the following transactions:

◾ derivatives;
◾ sale and repurchase, and reverse sale and repurchase agreements; and
◾ securities lending and borrowing.

The Group receives and grants collateral in the form of cash and marketable securities in respect of derivatives (including swaps). Such collateral is subject to standard industry terms including, where appropriate, an ISDA Credit Support Annex. This means that securities received/granted as collateral can be pledged or sold during the term of the transaction, but have to be returned on maturity of the transaction. The terms also give each party the right to terminate the related transactions on the counterparty's failure to post collateral.

The following tables reconcile the 'Gross amounts of financial assets and financial liabilities presented in the statement of financial position', as set out above, to the line items presented in the statement of financial position.

	Gross amounts of recognized financial assets	Gross amounts of recognized financial liabilities offset in the statement of financial position	Net amounts of financial assets presented in the statement of financial position	Related amounts not offset in the statement of financial position – Financial instrument	Net liquidation value at prime broker
Types of financial assets
Long positions, cash market products and amounts receivable from clearing agent	5,865,243	–	5,865,243	(5,599,287)	265,956
Types of financial liabilities
Short positions, cash market products amounts payable to clearing agents, and borrowings	(5,599,287)	–	5,599,287	(5,599,287)	–

Gross amounts of recognized financial assets Gross amounts of recognized financial liabilities offset in the statement of financial position Net amounts of financial assets presented in the statement of financial position Related amounts not offset in the statement of financial position – Financial instrument Net liquidation value at prime broker Types of financial assets Long positions, cash market products and amounts receivable from clearing agent 5,739,144 - 5,739,144 (5,398,604) 340,540 Types of financial liabilities Short positions, cash market products amounts payable to clearing agents, and borrowings (5,398,604) - 5,398,604 (5,398,604) -

The gross amounts of financial assets and financial liabilities and their net amounts disclosed in the above tables have been measured in the statement of financial position on fair value.

Market risk

The market risk for the Group relates to the risk of the value of a financial instrument fluctuating because of changes in factors including, but not limited to, such as interest rates, volatilities, currency rates, future dividend expectations and equity prices. The Risk and Mid-Office department monitors market risk exposure on a continuous basis (including intraday). Based on the limits set per product or the aggregated risk for the Group, limit breaches, if any, will trigger action from the Risk and Mid-Office department in order to reduce the risk.

In addition to the Group's Risk and Mid-Office department, the trading positions are also monitored daily. The applicable haircut and margins are computed by the Group's prime brokers. The Risk and Mid-Office department computes the haircut using internal models enabling intra-day monitoring. Limits are set on both capital- and credit usage.

Long and short trading positions include securities and derivatives such as: shares, American depositary receipts (ADRs), options, warrants, futures, forward rate agreements (FRAs), and exchange-traded products (ETP). All traded financial instruments are liquid instruments. Therefore, the portfolio can always be liquidated within a short time frame and with limited costs.

The Group seeks to hedge its trading positions to minimize the risk for market movements and does not engage in long and/or short only positions. The direction of market movements, i.e. what the Group considers directional market risk, is not relevant for the Group because of this long/short trading strategy. Because of the manner in which the Group hedges foreign currency, interest rate risk and other price risk, the directional market risk is close to zero. Therefore, no sensitivity analysis has been disclosed.

At 31 December 2016

The overall market risk (including interest rate risk, credit risk, foreign currency risk and settlement risk) of the financial assets and liabilities held for trading are captured in the risk and margin requirements which the Group has to post at its prime brokers and clearing firms. The consolidated margin and haircut requirements over 2017 is shown in the Capital management paragraph. The haircut set out in the graph below reflects the mandatory capital requirement of the prime brokers. Although the positions are fully hedged, a minimum risk close to zero remains as a result of inefficiencies in the models of the prime brokers.

Foreign currency risk

The Group is exposed to currency risk arising from trading positions denominated in a currency other than the respective functional currencies of Group entities, primarily the euro, but also United States dollars and Singapore dollars.

Foreign currency risk also arises on net investments in foreign operations, as well as net results of these foreign operations during the year.

The Group manages foreign currency risk through daily monitoring of the positions by currency. Generally, the Group seeks to hedge foreign currency exposures in currencies other than the functional currency.

The Group does not use financial instruments to hedge the translation risk related to net investments in foreign operations or net results of foreign operations.

Interest rate risk

Interest rates will affect future profitability of the fair value of financial instruments. The Group is exposed to interest rate risk as a result of mismatches of arranged interest rates of assets and liabilities. The Group has limits in place on interest rate gaps for stipulated periods. These limits ensure that interest rate risks are hedged. Positions are monitored on a daily basis and hedging strategies used to ensure positions are maintained within established limits.

All financial instruments are held for trading purposes and are accounted for at fair value on the balance sheet. The Group is engaged in high velocity liquidity provision and therefore all positions held on the balance sheet are short term and, in addition, are all listed on exchanges and therefore liquid and tradable.

As mentioned in the paragraph trading payables, the Group has a credit facility available to facilitate the trading positions accounted for on the balance sheet. In order to match the liquidity and short holding period of these trading positions, the facility has an interest rate payable, which is floating. The Group runs a limited risk on the floating interest due to the fact that the interest is also embedded in the funding and financing of the long/short positions and in the EFP of the future.

Other price risk

Equity price risk and commodity price risk arises from trading positions as well as the Group's investments in available for sale securities. In addition, for its option positions, the implied volatility of the underlying contract is an additional risk factor. Other factors to consider are time and dividend expectations.

The Group manages other price risks by defined limits in terms of individual positions per product and aggregate position per trading desk relating to the size of the exposure, concentrations, pricing and valuation parameters and natural hedging between these long and short positions.

As the Group is active in liquidity provision and does not speculate on directional moves in underlying values, the net delta positions of the portfolios should be close to zero.

In addition to daily internal monitoring measures, applicable haircut and margins are computed by the Group's prime brokers. The haircut analysis measures all positions, individual and correlated, and reflects the different risk components. The third party haircut calculation confirms the internal assessment that completes the Group's overview of the risks that it is exposed to on a daily and overnight basis. An overview of the overall market risk is presented under Market risk.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group's cash position, as well as the other available credit lines with prime brokers, is monitored on a daily basis.

Maturity based on contractual undiscounted cash flows is as follows:

			At 31 December 2017
	Carrying amount	Contractual cash flow	3 months or less
Payable for securities bought	1,933,110	1,933,110	1,933,110
Borrowings	2,704,997	2,704,997	2,704,997
Total trading payables	4,638,107	4,638,107	4,638,107

			At 31 December 2016
	Carrying amount	Contractual cash flow	3 months or less
Payable for securities bought	1,096,455	1,096,455	1,096,455
Borrowings	2,022,757	2,022,757	2,022,757
Total trading payables	3,119,212	3,119,212	3,119,212

Maturity analysis of financial assets and liabilities

The following table shows an analysis of the assets and liabilities according to when they are expected to be recovered or settled.

At 31 December 2017 Total Receivable/ payable on demand Within 3 months 3 months to 1 year >1 year Cash and cash equivalents 5,879 5,879 - - - Financial assets held for trading 3,738,649 3,738,648 - - - Trading receivables 2,126,594 2,126,594 - - - Other receivables 10,302 - 5,952 5,457 1,893 Available for sale investments 1,475 - - - 1,475 Investments in associates 571 - - - 571 Current tax assets 4,698 - - 4,698 - Deferred tax assets 1,941 - - - 1,941 Assets held for sale 816 - 816 - - Non-derivative financial assets 5,891,079 5,871,121 5,952 10,155 5,880 Financial liabilities held for trading 961,180 961,180 - - - Trading payables 4,638,107 4,638,107 - - - Variable compensation payables 52,273 - 36,424 - 15,849 Long-term loans/Lease commitments 2,539 - 324 971 1,244 Other payables 11,556 - 11,556 - - Non-derivative financial liabilities 5,664,655 5,599,287 48,304 971 17,093 Derivative assets 788 788 Derivative assets

					At 31 December 2016
	Total	Receivable/ payable on demand	Within 3 months	3 months to 1 year	>1 year
Cash and cash equivalents	2,736	2,736	-	-	-
Financial assets held for trading	4,591,573	4,591,573	-	-	-
Trading receivables	1,127,374	1,127,374	-	-	-
Other receivables	12,307	-	9,107	2,394	806
Available for sale investments	4,640	-	-	-	4,640
Investments in associates	1,343	-	-	-	1,343
Current tax assets	742	-	742	-	-
Deferred tax assets	5,592	-	-	-	5,592
Non-derivative financial assets	5,746,307	5,721,683	9,849	2,394	12,381
Financial liabilities held for trading	2,279,392	2,279,392	-	-	-
Trading payables	3,119,212	3,119,212	-	-	-
Liabilities at fair value	3,281	-	-	-	3,281
Variable compensation payables	100,165	-	69,148	-	31,017
Long-term loans/Lease commitments	1,767	-	-	946	821
Other payables	15,764	-	15,764	-	-
Non-derivative financial liabilities	5,519,491	5,398,604	84,912	946	35,119
Derivative assets	20,197	20,197	-	-	-
Derivative assets	20,197	20,197

Liquidity and capital resources

Beside equity, the principal source of funds has been liquidity provided by the prime brokers through uncommitted credit lines and margin financing, as well as cash generated from our operating activities. As of 31 December 2017, the Group held €5,9 million in cash and cash equivalents compared to €2.7 million as of 31 December 2016. These balances are maintained primarily to support operating activities, including ensuring that the Group has sufficient short-term access to liquidity, and capital expenditures. .

The Group maintains a highly liquid balance sheet, with a large portion of its total assets consisting of cash, highly liquid marketable securities and short-term trading receivables (arising from securities transactions).

The Group actively manages its liquidity on an intra-day basis and maintains significant portfolio financing facilities with the prime brokers in order to facilitate trading. These facilities are secured by cash and cash equivalents, as well as all financial assets in accounts held at the respective prime brokers. The Group has no outstanding borrowings other than the portfolio financing facilities with prime brokers.

Capital management

The Management Board's policy is to maintain a strong capital base well above the required margins in order to maintain investor, creditor and market confidence and to sustain future development of the business. The Management Board monitors the return on its capital as well as the level of dividends to its shareholders.

The Group is prudentially supervised by the Dutch Central Bank (De Nederlandsche Bank, DNB). In addition, as its Dutch trading subsidiary is a registered investment firm dealing on its own account in its capacity of market maker, the Group is subject to the rules and regulations of the Dutch Financial Services Act (Wet op het Financieel Toezicht) and, as a member of various venues, the Group is also subject to rules and regulations of the exchanges.

If a firm fails to maintain the required capital, it may be subject to suspension or revocation or registration by the applicable regulatory agency, and suspension or expulsion by these regulators could ultimately lead to the Group's liquidation. Additionally, these rules may have the effect of prohibiting a proprietary trading firm from distributing or withdrawing capital and requiring prior notice to and approval from DNB for certain capital withdrawals.

The available capital in the trading companies is monitored on a daily basis to ensure that requirements are met at all times and sufficient capital is available to support the Group's strategy.

During 2017, the Group's capital was above the regulatory minimum requirements.

There were no changes in the Group's approach to capital management during the year.

Capital requirements

The Group's regulators and prime brokers require certain levels of capital, which are managed by the Group in order to maintain net liquidity (which represents the value of our trading positions, principally long and short positions in equity securities, plus cash and cash equivalents) in excess of our various capital requirements at all times.

Flow Traders B.V. - Margin and excess capital 2016 - 2017

Prime broker capital requirements

The prime brokers require the Group to maintain certain minimum capital levels. Prime brokers use different internal systems to calculate required capital amounts (e.g., the so-called 'internal haircut model' and the so-called 'margin based approach model', both intending to ensure sufficient levels of risk allowances) and have different limits structure, pre-funding possibilities and cut-off times for wiring capital. The aggregate capital that is required to maintain by the prime brokers is significantly in excess of the actual risk exposure, principally due to (i) the offsetting legs of a transaction sometimes being cleared through different prime brokers and therefore each leg requiring a margin to be posted separately and therefore no offsets are applicable across prime brokers, irrespective of the overall risk exposure to our business and (ii) margin requirements of its prime brokers being affected by the sophistication of their models (which might not correspond to our models) and the regulatory requirements applicable to them.

The following table sets forth our net liquidity, capital required to be posted by our prime brokers and our excess liquidity as of the dates indicated:

		At 31 December
	2017	2016
Net liquidity at clearings/prime brokers	265,956	340,541
Cash at banks	5,879	2,736
Net trading capital	271,835	343,277

Prime broker margin to be posted	(192,977)	(233,210)
Prime broker excess liquidity	78,858	110,067

As shown in the graphs above under Market risks, during 2017 all prime broker minimum capital level requirements were met for all the trading subsidiaries.

Regulatory capital requirements

The Company and our subsidiary Flow Traders B.V. are subject to separate regulatory capital requirements in the Netherlands and our subsidiary Flow Traders U.S. LLC is subject to regulatory capital requirements in the United States. Flow Traders Asia Pte. Ltd. is exempt from regulatory capital requirements.

Failure to comply with regulatory capital requirements could result in sanctions, including citations, fines, limits to our trading and revocation of a regulatory license.

Dutch regulatory capital requirements

The regulatory capital requirement prescribed by the Dutch Central Bank in respect of Flow Traders B.V. and the Company is deemed to be satisfied if the regulatory capital of Flow Traders B.V. and the Company is at least equal to their last reviewed or audited equity by our external auditor. The following table sets forth regulatory capital, regulatory capital requirements and excess regulatory capital for Flow Traders B.V. and our Group as reported in regulatory filings as of the dates indicated:

FLOW TRADERS B.V.		At 31 December
	2017	2016
Regulatory capital	187,905	154,075
Regulatory capital requirements	93,200	98,300
Excess regulatory capital	94,705	55,775

Group
Regulatory capital	254,100	270,092
Regulatory capital requirements	126,900	168,200
Excess regulatory capital	127,200	101,892

In November 2017 the Dutch Central Bank informed Flow Traders to amend the capital requirements for investment firms dealing on their own account. Starting 31 March 2018 Flow Traders is required to meet the regulatory requirement of the EU Capital Requirement Regulation (CRR). After detailed assessment Flow Traders has implemented the requirements applicable and expects to comply with these Capital Requirements as from 31 March 2018 onwards.

U.S. regulatory capital requirements

The SEC and FINRA impose rules on Flow Traders U.S. LLC, as a registered U.S. broker-dealer, that require notification when regulatory capital levels fall below certain pre-defined criteria. These rules also dictate the ratio of debt-to-equity in Flow Traders U.S. LLC's regulatory capital composition and constrain its ability to expand its business under certain circumstances. These regulations also prohibit repaying subordinated borrowings, paying cash dividends, making loans to the firm's parent, affiliates or employees, or otherwise entering into transactions which would result in a reduction of its total net capital to less than 120% of its required minimum capital. Moreover, Flow Traders U.S. LLC is required to notify the SEC, FINRA and other regulators prior to repaying subordinated borrowings, paying dividends and making loans to its parent, affiliates or employees, or otherwise entering into transactions, which, if executed, would result in a reduction of 30% or more of its excess net capital (net capital less minimum requirement).

The following table sets forth regulatory capital, regulatory capital requirements and excess regulatory capital for Flow Traders U.S. LLC as reported in its regulatory filings as of the date indicated:

FLOW TRADERS U.S. LLC		At 31 December
	2017	2016
Regulatory capital	63,200	110,900
Regulatory capital requirements	33,700	69,900
Excess regulatory capital	29,500	41,000

Singapore regulatory capital requirements

The Singapore trading subsidiary is exempt from regulatory capital requirements. Therefore, its entire equity can be interpreted as excess regulatory capital. Such regulatory excess can be used for other purposes within the Group, including covering capital requirements (prime broker or regulatory) in other trading subsidiaries.

Subsequent events

No material subsequent events have occurred since 31 December 2017 that require recognition or disclosure in this year's financial statements.

The company announced signing of a Share Purchase Agreement on 19 January 2018 on the sale of the 24% stake in Think ETF Asset Management B.V.. The closing of this deal is subject to regulatory approval and expected during Q1 2018.

PARENT COMPANY BALANCE SHEET In thousands of euro			For the year ended
	Note	31 December 2017	31 December 2016
Assets
Participating interest in group companies	32	322,853	290,735
Other investments		-	803
Other receivables		269	73
Cash		168	5
Assets held for sale		816	-
Total assets		324,106	291,616

Liabilities
Liabilities to related parties		65,894	11,861
Current tax liabilities	33	147	3,961
Other liabilities	34	3,964	5,703
Total liabilities		70,005	21,525

Equity
Share capital	35	4,653	4,653
Share premium	35	152,456	152,456
Retained earnings	35	86,667	93,887
Currency translation reserve	35	10,611	19,533
Fair value reserve	35	(286)	(438)
Total equity		254,101	270,091

Total equity and liabilities		324,106	291,616

PARENT COMPANY INCOME STATEMENT			For the year ended
	Note	31 December 2017	31 December 2016
Employee expenses	36	1,898	4,594
Other expenses	37	475	671
Operational expenses		2,373	5,265
Operating result		(2,373)	(5,265)
Share in result from participating interests, after tax	32	40,887	96,219
Result/(impairment) of equity-accounted investments		13	42
Profit before tax		38,527	90,996
Tax expenses		1,068	940
Net result		39,595	91,936

Notes to the parent company financial statements

All amounts in thousands of euros, unless stated otherwise.

Principles for the measurement of assets and liabilities and the determination of the result

In setting the principles for the recognition and measurement of assets and liabilities and determination of the result for its parent Company financial statements, the Group applies the option provided in section 2:362 (8) of the Netherlands Civil Code. The principles for the recognition and measurement of assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of the parent company financial statements are the same as those applied for the consolidated IFRS-EU financial statements. Participating interests over which the Company has significant influence, are measured at equity value. Please see notes to consolidated statements chapter 1 to 4 for a description of the Group's IFRS-EU principles.

The profit from participating interests consists of the Group's share in the results of these participating interests. Results on transactions, comparing the transfer of assets and liabilities between (i) the Group and its participating interests on (ii) between participating interests themselves, are not recognized.

32. Financial fixed assets

		At 31 December
	2017	2016
Participating interest in group companies and associates	322,853	290,735
Total financial fixed assets	322,853	290,735

The movements of the financial fixed assets can be shown as follows:

	2017	2016
Balance at 1 January	290,735	291,201
Changes:
exchange rate differences ◾	(8,922)	1,879
fair value reserve ◾	152	228
share in result of participating interests ◾	40,887	96,219
dividends declared ◾	-	(98,792)
Balance at 31 December	322,853	290,735

33. Current tax liabilities

		At 31 December
	2017	2016
Corporate income tax	147	3,961
Total current tax liabilities	147	3,961

34. Other liabilities

		At 31 December
	2017	2016
Long-term variable compensation payable	1,828	2,531
Subtotal non current liabilities	1,828	2,531

Wages and variable compensations payables	1,940	2,843
Wages tax payable	22	23
Other current liabilities	174	306
Subtotal current liabilities	2,136	3,172
Total other liabilities	3,964	5,703

35. Equity

STATEMENT OF CHANGES IN EQUITY In thousands of euro

	Share capital	Share premium	Currency translation reserve	Fair value reserve	Retained earnings	Total
Balance at 1 January 2017	4,653	152,456	19,533	(438)	93,887	270,091
Profit	–	–	–	–	39,595	39,595
Total other comprehensive income			(8,922)	152	-	(8,770)
Total comprehensive income for the period	–	–	(8,922)	152	39,595	30,825
Transactions with owners of the Company
Dividends declared	–	–	–	–	(46,534)	(46,534)
Treasury shares	–	–	–	–	(281)	(281)
Total transactions with owners of the company	–	–	–	–	(46,815)	(46,815)
Balance at 31 December 2017	4,653	152,456	10,611	(286)	86,667	254,101

36. Employee expenses

		At 31 December
	2017	2016
Wages and salaries	625	554
Variable compensations	1,237	4,003
Social security charges	27	28
Recruitment and other employment costs	9	9
Employee expenses	1,898	4,594

37. Other expenses

		At 31 December
	2017	2016
Advisors and assurance	174	160
Regulatory costs	107	123
Shareholder meeting costs	36	335
Various expenses	158	53
Other expenses	475	671

38. Off-balance sheet commitments

The Company has no off-balance sheet commitments.

39. Claims

The Company is not involved in any significant legal procedures and/or claims. There are no other contingent liabilities.

40. Auditor fees

With reference to Section 2:382a (1) and (2) of the Netherlands Civil Code, the following fees (including VAT) for the financial year have been charged by Ernst & Young Accountants LLP and its member firms and affiliates to the Group, its subsidiaries and other consolidated entities, which did not include tax advice:

FEES OF THE AUDITOR In thousands of euro

	Ernst & Young Accountants LLP	Other EY member firms and affiliates	Total EY
			2017
Statutory audit of annual accounts	200	35	235
Other assurance services	-	-	-
Tax advise	-	-	-
Other non-audit services	-	-	-
Total auditor fees 2017	200	35	235

The 2016 audit fees were charged by Ernst and Young Accountants LLP and it member firms and affiliates to the Group.

	Ernst & Young Accountants LLP	Other EY member firms and affiliates	Total EY
			2016
Statutory audit of annual accounts	190	25	215
Other assurance services	-	-	-
Other non-audit services	-	-	-
Total auditor fees 2016	190	25	215

Amsterdam, 1 March 2018

The Management Board:
D.D.M. Dijkstra	S.A. Rietberg	M.C. Jongmans

The Supervisory Board:

E.D. Drok J.T.A.G. van Kuijk O.J. Bisserier R. Ferscha R.H.C. Hodenius J.K.J. Sikkens

Other information

Provisions in the Articles of Association governing the appropriation of profit

The provisions in the articles of association governing the appropriation of profit read as follows:

1. The Management Board may decide, with the approval of the Supervisory Board, that the profits realized during a financial year will fully or partially be appropriated to increase and/or from reserves. The profits remaining after application to or from reserves shall be put at the disposal of the general meeting at the proposal of the Management Board, with the approval of the Supervisory Board. A proposal to pay dividends shall be dealt with as a separate agenda item at the general meeting. Distributions from the company's distributable reserves are made pursuant to a resolution of the general meeting at the proposal of the Management Board, with the approval of the Supervisory Board. Provided it appears from an interim statement of assets signed by the Management Board that the requirements concerning the position of the company's assets has been fulfilled, the Management Board may, with the approval of the Supervisory Board, make one or more interim distributions to the holders of shares. The Management Board may decide, with the approval of the Supervisory Board, that a distribution on shares shall not take place as a cash payment but as a payment in shares, or decide that holders of shares shall have the option to receive a distribution as a cash payment and/or as a payment in shares, out of the profit and/or at the expense of reserves, provided that the Management Board is designated by the general meeting. With the approval of the Supervisory Board, the Management Board shall determine the conditions applicable to the aforementioned choices.
2. The company's policy on reserves and dividends shall be determined and can be amended by the Management Board, with the approval of the Supervisory Board. The adoption and thereafter each amendment of the policy on reserves and dividends shall be discussed and accounted for at the general meeting under a separate agenda item.
3. Distributions can only be made up to the amount of the distributable part of the shareholders' equity.
4. Dividends and other distributions will be made payable pursuant to a resolution of the Management Board within four weeks after adoption, unless the Management Board sets another date for payment.
5. The claim of a shareholder to receive any distributions shall lapse within five years after they have become due for payment.
6. For all dividends and other distributions in respect of shares included in the Statutory Giro System the company will be discharged from all obligations towards the relevant shareholders by placing those dividends or other distributions at the disposal of, or in accordance with the regulation of, Euroclear Netherlands.
7. In calculating the amount of any distribution on shares, shares held by the Company shall be disregarded.

Independent auditor's report

To: the shareholders and supervisory board of Flow Traders N.V.

Report on the audit of the financial statements 2017 included in the annual report

Our opinion

We have audited the financial statements 2017 of Flow Traders N.V., based in Amsterdam. The financial statements include the consolidated financial statements and the parent company financial statements.

In our opinion:

◾ The accompanying consolidated financial statements give a true and fair view of the financial position of Flow Traders N.V. as at 31 December 2017, and of its result and its cash flows for 2017 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
◾ The accompanying parent company financial statements give a true and fair view of the financial position of Flow Traders N.V. as at 31 December 2017, and of its result for 2017 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

The consolidated financial statements comprise:

◾ The consolidated statement of financial position as at 31 December 2017
◾ The following statements for 2017: the consolidated statements of profit and loss, other comprehensive income, changes in equity and cash flows
◾ The notes comprising a summary of the significant accounting policies and other explanatory information

The parent company financial statements comprise:

◾ The parent company balance sheet as at 31 December 2017
◾ The parent company income statement for 2017
◾ The notes comprising a summary of the accounting policies and other explanatory information

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the "Our responsibilities for the audit of the financial statements" section of our report.

We are independent of Flow Traders N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedragsen beroepsregels accountants (VGBA, Dutch Code of Ethics).

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

MATERIALITY

Materiality	€2,4 million (2016: €5 million)
Benchmark applied	5% of pre-tax income (rounded)
Explanation	We applied pre-tax income as this benchmark is an
	important metric for the users of the financial statements
	of Flow Traders N.V.

We have also taken misstatements into account and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the supervisory board that misstatements in excess of €120 thousand, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Scope of the group audit

Flow Traders N.V. Amsterdam is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of Flow Traders N.V.

Our group audit mainly focused on significant group entities Flow Traders B.V. and Flow Traders U.S. LLC based on the relative size of these components. We have:

◾ Performed audit procedures ourselves at group entity Flow Traders B.V.
◾ Used the work of other auditors when auditing entity Flow Traders U.S. LLC
◾ Performed specific audit procedures at other group entities

By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group's financial information to provide an opinion about the consolidated financial statements.

Our key audit matter

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matter to the supervisory board. The key audit matter is not a comprehensive reflection of all matters discussed.

This key audit matter was 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 this matters. In comparison, last year revenue recognition and reliability and continuity of IT were also identified as key audit matter. The revenues and cash positions could however be reconciled to external party confirmations and no unusual or unexpected transactions were executed during the year. On the basis of our procedures over the IT environment we have no indication that any significant audit risk exists within the area this year. Therefore, these subjects are no longer noted as key audit matter.

Risk	Our audit approach	Key Observation
Fair value measurement of financial instruments
(note 7 of the financial statements)
Flow Traders' fair value measurement of financial	We obtained an understanding of the valuation process,	The method of fair value measurement and the underlying
instruments is based on internally determined theoretical	including verifications done by the risk and middle office	input for valuation of the financial trading assets and
prices, which are also used for quoting purposes. As such,	department. We performed sample testing on the valuation	liabilities is reasonable. The fair value hierarchy and the
valuation can be different than the closing prices at the	of individual positions by comparing the internally developed	classification of the financial instruments is reasonable.
various stock exchanges, for example due to market	prices to external sources.
illiquidity and the opening hours of the stock exchanges.		Finally, we believe the disclosure of the financial instruments
	We evaluated the fair value hierarchy of financial	in the financial statements is appropriate.
The fair values recorded could include estimates and could	instruments and developments therein since prior year.
be biased. Therefore, we have identified the valuation of
financial instruments as a significant risk within our audit.	Furthermore, we inspected the financial statements for
	compliance and consistency with IFRS 13 on disclosure
	requirements for financial instruments.

Report on other information included in the annual report

In addition to the financial statements and our auditor's report thereon, the annual report contains other information that consists of:

◾ The management board's report
◾ Other information pursuant to Part 9 of Book 2 of the Dutch Civil Code

Based on the following procedures performed, we conclude that the other information:

◾ Is consistent with the financial statements and does not contain material misstatements
◾ Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less than the scope of those performed in our audit of the financial statements.

Management is responsible for the preparation of the other information, including the management board's report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements

Engagement

We were engaged by the supervisory board as auditor of Flow Traders N.V. on 19 May 2016, as of the audit for the year 2016 and have operated as statutory auditor since that date.

No prohibited non-audit services

We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities.

Description of responsibilities for the financial statements

Responsibilities of management and the supervisory board for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, management is responsible for assessing the company's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. Management should disclose events and circumstances that may cast significant doubt on the company's ability to continue as a going concern in the financial statements.

The supervisory board is responsible for overseeing the company's financial reporting process.

Our responsibilities for the audit of the financial statements

Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud.

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. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

We have exercised professional judgment and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included e.g.,:

◾ Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control
◾ Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control
◾ Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management
◾ Concluding on the appropriateness of management's use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause a company to cease to continue as a going concern
◾ Evaluating the overall presentation, structure and content of the financial statements, including the disclosures

◾ Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/ or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.

We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor's report.

We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

The Hague, 1 March 2018

Ernst & Young Accountants LLP Signed by T. de Kuijper

FLOW TRADERS | ANNUAL REPORT 2017 115

Flow Traders N.V. Jacob Bontiusplaats 9 1018 LL Amsterdam The Netherlands Tel: +31 20 799 6799 www.flowtraders.com

AI assistant

Flow Traders N.V. — Annual Report 2017

3843_10-k_2018-03-02-084500_38afd10c-af07-40e6-bbe7-4f4459af805c.pdf

Table of contents

Flow Traders at a Glance

Flow Traders at a Glance

Flow Traders at a Glance

2017 FINANCIAL OVERVIEW

Profile

Who we are

What we do

Message of the Management Board

Market developments

Long-term value creation

Creating efficiencies

Focus in 2018

Regards,

Share Information

Introduction and key figures

KEY SHARE INFORMATION

Performance and key figures

KEY FIGURES PER SHARE

SHARE PRICE PERFORMANCE

Analyst coverage

Financial calendar

Dividend policy and dividend proposal

Dividend policy

Investor Relations

INVESTOR RELATIONS CONTACT DETAILS

Serge Enneman

Our Management Board

Our Business

Markets & Trends

Our business

The ETP market

Review of 2017

Global coverage

ETP market remains high growth market

Products

ETPs

Exchange-Traded Funds (ETFs)

Exchange-Traded Commodities (ETCs)

Exchange-Traded Notes (ETNs)

The ETP ecosystem

Flow Traders is a Critical Component of the ETP Ecosystem

Primary market

Secondary market

The role of Flow Traders

Liquidity Provider

Leading liquidity provider

Pricing

Pricing ETPs accurately

Cutting edge proprietary technology platform

Real-time risk management

Strategy

Our strategic ambition

Our market

Our business principles

Our strategy

Growth focus

Pricing

Risk Management and Control

People and Culture

Financial overview

Net Trading Income

Market volatility

Operational expenses

Capital base

Growth

Our People

Culture

Open, informal and diverse culture

Attract Talent

How we recruit

Engage and Invest

Our Offices

Onboarding

Training and rotation

Remuneration

'We help our employees shape their own future'

Flow Traders N.V. Annual Report 2017