ePlus Annual Report 2016

FY2016 Annual Report · ePlus

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Plus500 Limited
Plus500 Limited
ANNUAL REPORT AND ACCOUNTS
ANNUAL REPORT AND ACCOUNTS
2016
2016

World’s Trading Machine

http://www.plus500.com/

About
Plus500

Plus500 Ltd (the “Company”) is a fast growing online provider of Contracts for Difference (“CFDs”).
Plus500 has developed and operates an online trading platform for retail customers to trade CFDs
internationally over more than 2,100 different underlying global financial instruments comprising
equities, indices, commodities, options, exchange-traded funds (“ETFs”) and foreign exchange. The
Company enables retail customers to trade CFDs in more than 50 countries and in 31 languages.
The trading platform is accessible from multiple operating systems (Windows, smartphones (iOS,
Android and Windows Phone), tablets (iOS, Android and Surface), Apple Watch and web browsers).

Plus500 retains operating licences and is regulated in the United Kingdom, Australia, Cyprus,
South Africa, New Zealand and Israel. Customer care is integral to Plus500: customers cannot lose
more than they deposit and there are no commissions on trades. Plus500 offers its customers
sophisticated risk management tools to manage their trading positions and a free demo account
is available on an unlimited basis for platform users.

Plus500 Ltd. 2016 Annual Report2

Plus500 Ltd. 2016 Annual ReportContents Page

OVERVIEW
2016 Highlights

Chairman’s Statement

Chief Executive Officer’s Review

Our Strategic Objectives

Financial Review

Sponsorships

DIRECTORS AND GOVERNANCE
Board of Directors

Directors’ Report

Remuneration Report

Corporate Governance

Corporate Law

2016 FINANCIALS
Statement of Directors’ Responsibilities

FINANCIAL STATEMENTS
Report of the Auditors

Consolidated statements of financial position

Consolidated statements of comprehensive income

Consolidated statements of changes in equity

Consolidated statements of cash flows

Notes to consolidated financial statements

FURTHER INFORMATION
Advisors

Plus500 Ltd. 2016 Annual Report4

Plus500 Ltd. 2016 Annual Report2016 ANNUAL REPORT
OVERVIEW

Plus500 Ltd. 2016 Annual Report2016 HIGHLIGHTS

FINANCIAL HIGHLIGHTS

EBITDA1 was $151.0 million (2015: $132.9 million)
EBITDA margin was 46.0% (2015: 48.2%)

• Revenue increased 19% to $327.9 million (2015: $275.6 million)
•
•
• Net profit was $117.2 million (2015: $96.6 million)
•
•
• Cash generated from Operations was $153.3 million

Earnings per share was $1.02 (2015: $0.84)
ARPU2 was $2,103 (2015: $2,019)

•

(2015: $128.1 million)
Total dividend of $101.7 million, representing a total pay-out of
87% of net profit for the year

OPERATIONAL HIGHLIGHTS

•

Another record year of strong customer growth in excess of
expectations, reflecting effective marketing and robust business
model:
* Active Customers3 increased 14% to 155,956 (2015: 136,540)
* New Customers4 increased 23% to 104,432 (2015: 84,858)
• Continue to build international presence and diversify revenues

through new licences in New Zealand and Israel

• Maintained leadership positions:

* Second largest CFD provider in the UK5
* Leadership in technology and product innovation:
** a true omni-channel trading experience allowing access to
information and trading across PC, web, tablet, mobile or
wearable platforms in a device-agnostic manner

** a majority of revenues and signups come from mobile
devices reflecting speed of innovation compared to
competitors (over 70% of 2016 revenues and signups
originated from mobile devices)

$327.9m

Revenue
2015: $275.6m

$151.0m

EBITDA
2015: $132.9m

1 EBITDA: Earnings before interest and taxes and depreciation and amortization
2 ARPU: Average Revenue Per User
3 Active Customers: Customers who make at least one trade using money on the trading platform during the relevant period
4 New Customers: Customers who have deposited money into their own account for the first time
5 Investment Trends’ report, July 2016

Plus500 Ltd. 2016 Annual Report

DIVIDENDS

•

Total dividend of $101.7 million, consists of interim dividend of $26.7 million, final dividend of $43.6 million
and a special dividend of $31.4 million, representing a total pay-out of 87% of net profit for the year
Total dividends to shareholders in the three-year period since flotation, including dividends declared in
February 2017, are $332.3 million, which exceeds the market capitalisation at flotation of $200 million

DIVIDENDS PER SHARE (CENTS)

• Interim
• Final
• Special
• Total

DIVIDEND PAYOUT ($M)

• Interim
• Final & Special
• Total

2016

2015

$0.2324
$0.3799
$0.2729
$0.8852

$26.7m
$75.0m
$101.7m

$0.2121
$0.2922
$0.3362
$0.8405

$24.4m
$72.2m
$96.6m

Plus500 Ltd. 2016 Annual Report

Chairman’s Statement

Introduction
The Company is delighted to announce a strong set
of 2016 KPIs which reflect the strength of Plus500’s
brand and business model. We have reported another
record year in terms of the most important measures,
revenue and EBITDA, which were driven by strong
growth in New and Active Customers that support our
position as an industry leader in customer growth.

The Board remains committed to ensuring the highest
standards of regulatory compliance. During the year of
2016, the Company has undertaken significant work on
enhancing and aligning its regulatory framework with
new requirements that were published by regulators in
various markets in which the Company operates.

Dividends
Given the Company's strong financial performance, the
Board has considered Plus500's dividend policy, and
in particular the optimal balance between allocating
surplus funds to the payment of ordinary and special
dividends or share buybacks. The Board will consider
undertaking buybacks in the future and has the power to
implement them at short notice.

The Board has concluded that it is in shareholders’ best
interests to distribute 87% of 2016 net profits (2016 total
dividend: $101.7 million) and therefore to propose a final
dividend in respect of 2016 together with an additional
distribution by way of a special dividend.

This equates to a total payment of $0.8852 per share
compared to $0.8405 last year, an increase of 5%.

Strategy
Plus500’s strategy is unchanged; we aim to strengthen
the Company’s position as a leading provider of CFD
trading to retail customers globally and thereby continue
to deliver good shareholder returns. We will maintain
our momentum in existing markets such as Western
Europe by launching new financial instruments and
continuing to enhance our trading platform, ensuring
our technology remains at the cutting edge, all the
while improving our customer service. This will all be
supported by continuing investment in marketing to
enhance our brand globally and attract new, high value

The Board is confident that Plus500
will become a stronger business with
an enhanced competitive position
as a result of the regulatory changes
being implemented, and the continued
investment in and innovation of its
trading platform.

Alastair Gordon
Chairman

Plus500 Ltd. 2016 Annual Reportcustomers with good lifetime value. And by our
continued investment in best practice regulatory
compliance to ensure we mitigate the impact of the
current changes being proposed by many regulators.
We will also do this by gaining new operating licences in
existing and new territories thereby increasing customer
numbers and geographically diversifying our earnings.

Outlook
The Board believes that the Company’s strong financial
position, geographically well diversified revenues,
advanced trading platform and its flexible, low cost
business model, position it well to ride out this period
of regulatory uncertainty and to emerge a stronger
business with an enhanced market position.

Alastair Gordon
Chairman
6 March 2017

Plus500 Ltd. 2016 Annual ReportChief Executive Officer’s Review

Introduction

We are pleased to announce record annual results.
Our continued focus on serving our customers’ trading
needs through product innovation and technology
leadership, combined with our marketing activity, has
led to strong new customer sign ups, reduced churn in
H2 2016 and increased customer activity.

Plus500 retains operating licences and is regulated in
the United Kingdom, Australia, Cyprus, South Africa,
New Zealand and Israel, providing a strong foundation
in an ever evolving regulatory environment. Our safe
and secure trading account already incorporates a
number of the trading controls that regulators are
seeking to introduce: we were among the first to offer
a trading platform where customers cannot lose more
than they invest, and in 2016, as in 2015, there were no
net revenues from market P&L. The latter reflects the
efficiency of our internal risk management systems and
meets the expectations of the regulators that aim to
prevent industry participants from being dependent on
client losses.

We have started to make the necessary adjustments
to comply with the regulatory changes that were
announced during 2016 and we will continue to adopt
any future requirements, as certain regulators continue
to go through a consultation and implementation
process. Proposals to reduce leverage are expected to
have the greatest financial effect. In this regard the UK
regulatory proposals have the most material impact and
we note that approximately 20% of our revenues are
currently derived from the UK regulated subsidiary. At
the same time, we have a highly flexible business model
and a lean cost structure to help mitigate the impact
of regulatory changes on our financial performance.
Overall, we anticipate that the industry will consolidate
around a smaller number of larger participants, of which
we believe Plus500 will be amongst the leaders.

We were delighted to announce recently the extension of
our existing partnership with Atlético Madrid in football
and our new sponsorship agreement with the Plus500
Brumbies, the Australian Super Rugby team; together
these sponsorships extend our strategy of increasing our
brand recognition and expanding our customer base
globally.

We enter 2017 confident we can
continue to develop our business and
successfully incorporating regulatory
changes with minimum disruption

Asaf Elimelech
Chief Executive Officer

Plus500 Ltd. 2016 Annual ReportRevenue

Number of New Customers

Number of Active Customers

ARPU6

AUAC7

Overview

Plus500 is pleased to report another year of strong
revenue and profit growth in 2016 and high levels of
customer growth and activity as set out in the table
above.

The Company successfully maintained its position as
the second largest CFD provider in the UK for the third
year in a row.*

Following the additional marketing and onboarding
costs incurred in the first half acquiring New
Customers, during the second half, the Company
refined its online marketing activity with notable
success and was able to acquire a significant number of
New Customers at a reduced cost compared to last year.

Operational Review

The Company’s primary market is offering retail clients
the ability to trade CFDs in global equities, indices,
commodities, options, ETFs and FX. The Company has
increased its revenue through a combination of an
efficient online-focused customer acquisition strategy
and its easy-to-use trading platform. Customer care
is integral to Plus500: customers cannot lose more
than they deposit and there are no commissions
on trades, whilst the expansion of the 24/7 live chat
feature has reduced response times, which contributed
to an increased satisfaction rate among customers.
This is reducing churn and increasing the longevity of
customers, and ultimately their lifetime value.

In Q3 2016 due to the increased market volatility as a
result of the political situation in Europe and the USA,
the Company experienced particularly strong growth in

*Source: Investment Trends 2016 UK Leveraged Trading report
6 Average revenue per active user
7 Average new user acquisition cost

Full Year

2016

2015

% Growth

$327.9m

$275.6m

104,432

155,956

$2,103

$1,195

84,858

136,540

$2,019

$1,227

19%

23%

14%

-3%

trading in commodities as well as equities. In 2016 as
a whole, there was a marked increase in volatility in
financial markets driven by successive macro events,
which in turn drove news flow and customer activity.
The highest profile events were the dramatic decision
by the United Kingdom to leave the European Union
in June 2016 and the US elections in November 2016;
both resulted in a profitable outcome for Plus500,
which also demonstrated the robustness of the
Company’s risk and credit controls (that do not enable
its customers to lose more than they deposit). These
events also stimulated a significant increase in the
number of New Customers.

The Company had a successful year in terms of its
marketing activities. Online, Plus500’s proprietary
marketing platform continued to improve brand
awareness across multiple advertising channels
and enabled the Company and its subsidiaries (the
“Group”) to attract a greater number of high value
customers. Offline, the sponsorship agreement with
Spanish football club, Atlético Madrid, is accelerating
and delivering brand building benefits to the business.
Plus500 has extended this sponsorship agreement as
the main sponsor for the 2017/18 season. In addition,
Plus500 has signed a sponsorship agreement for the
2017 season with the Plus500 Brumbies, one of the
leading Australian rugby union teams, who compete in
the high profile international Super Rugby competition;
these two sponsorships extend the Company’s
strategy of increasing Plus500’s brand recognition and
expanding the Company’s customer base globally.

Plus500 Ltd. 2016 Annual Report
Risk Management Framework

Research and Development

Plus500’s target audience is exclusively retail customers
and the platform is not available to institutional
traders. Plus500 offers its customers sophisticated
risk management tools to manage their trading
positions, where its customers cannot lose more than
they deposit. As a result, Plus500 is less vulnerable to
dependency on large customers as no single customer
contributed more than 0.4% of total revenue in 2016.

Additionally, the Company’s risk management
framework ensures that risk exposures are strictly
limited. It employs a mix of controls and internal
hedging tools to ensure this across its base of a very
large number of customers, including the monitoring
of exposure limits (by client, instrument and total
exposure), with the ability to cap trades and hedge
once limits are reached. Credit risk is eliminated by
the fact that all customers' accounts are pre-funded.
In addition, Plus500 does not offer CFDs in less liquid
instruments, such as small cap stocks, which also limits
its risk exposures.

As a result, Plus500’s market risk framework is highly
effective in ARPU and life time value maximisation
whilst minimising losses. The worst and best daily
revenues in 2016 were a loss of $2.6 million and profit
of $7.9 million respectively. The average daily revenue
in 2016 was $0.86 million.

In 2016, as in 2015, overall there were no net revenues
from market P&L, i.e. Plus500 earned the vast majority
(95%) of its revenues in 2016 from trading spreads
rather than from client trading losses which were nil.
This reflects the efficiency of the risk management
systems and meets the expectations of the regulators,
which aim to prevent industry participants from being
dependent on client losses.

The Company continues to invest in R&D in order to
maintain its competitive advantage. During 2016, the
Company has improved its 24/7 live chat, its support
has been expanded and the median reaction time to
each customer dropped to less than one minute by
chat and to a few minutes by email.

Additionally, Plus500 is ideally positioned to take
advantage of the increased use of mobile and tablet
devices for trading given the ease of use of its trading
platform and the continued enhancements being
introduced. The Company maintained its lead as being
the highest rated app in its sector by customers on
both Apple’s AppStore and Google’s Play Store.

The Company is now working on further
developments, which are expected to improve the
customer acquisition process and reduce churn.

All developments are expensed and all IP in the
platform belongs to the Company.

Outlook

We enter 2017 confident we can continue to develop
our business and expand into new markets whilst
successfully incorporating regulatory changes with
minimal disruption. Our strong statement of financial
position, cash generative business model, geographic
diversification and competitive market position are
expected to enable us to provide good shareholder
returns despite continuing short term regulatory
uncertainty.

Asaf Elimelech
Chief Executive Officer
6 March 2017

Plus500 Ltd. 2016 Annual Report13

Plus500 Ltd. 2016 Annual ReportOur Strategic Objectives

Maintaining our market position as
a leading CFD provider

Number of Active Customers

155,956

2016 Achievements
•

Increased our leading position in CFDs, with
a record industry number of c. 156,000 Active
Customers in 2016
Increased net profit margins

•

Future Goals
•

Strengthening the international brand through
marketing initiatives and sponsorship of Atlético
Madrid FC and Plus500 Brumbies
Launching new financial instruments

•
• Gaining new licences and penetrating into new

•

geographies
Increasing momentum in Western European
countries
Increasing ARPU and Lifetime Value

•
• Optimising the marketing channels and increasing

+14%

135,540

2015

2016

Number of New Customers

104,432

+23%

84,858

the targeted level of ROI

2015

2016

Top CFD providers in UK By number of primary relationships*

2013

2014

2015

2016

13% 14% 15%

Plus500

*Source: Investment Trends 2016 UK Leveraged Trading report

34%26%29%26%IG6%6%7%7%Saxo Capital Markets5%7%4%5%City IndexPlus500 Ltd. 2016 Annual Report•

•

Continue to provide high quality client
service

2016 Achievements
•

Plus500 leads the industry in mobile platform
client satisfaction and maintains its lead position
as being the highest ranked app in the sector by
customers in both Apple’s AppStore and Android’s
Google Play store
Expansion of Plus500’s 24/7 live chat feature has
reduced response times and increased customer
satisfaction
Significantly reduced customer churn in the latter
part of 2016

Future Goals
•

To develop additional support tools for clients and
optimise the existing ones
To maintain a loyal trading community and
continue to provide excellent client service that
will be available 24/7

• Continue to focus on reducing customer churn

Extension to new geographies

2016 Achievements
•

Plus500 obtained new licences in New Zealand
and Israel

Future Goals
• Continue to add new licenses in further

geographies to increase customer base (such as
licence obtained in South Africa in February 2017)
• Continue to diversify already geographically well

spread revenues

Innovative and leading trading platform

2016 Achievements
•

Expansion of 24/7 live chat feature to further
reduce response times
• Ongoing IT development

Future Goals
•
•
• Maintaining industry leadership in technology

Launching new financial instruments
Launching new Plus500 website

Growing the customer base

2016 Achievements
•

Plus500 was the top industry performer in New
Customer sign ups
The Active Customer base increased to c. 156,000
Attracted about 104,000 New Customers

•
•

Future Goals
• Continue marketing the brand in innovative, cost
effective ways to increase awareness and attract
new high value customers
Attract the right kind of customer: experienced
traders with high lifetime value

•

Continuing to trade profitably

2016 Achievements
•
Improvement of 19% in revenues from last year
• Continued to invest in marketing for additional

growth
Enabled high dividend payout ratio commitment
to be exceeded for the second year in a row
Another year of being profitable in every month

•

Future Goals
• Mitigate the impact of regulatory change on

•

revenues and profitability
Seeking new geographical sources of revenue and
continue to provide good shareholder returns

Plus500 Ltd. 2016 Annual Report
Technology Edge

The industry-wide trend for trading CFDs on smartphones and tablets continued to gather
pace in 2016.

Plus500 is an industry leader in mobile client satisfaction, with over 70% of 2016 revenues
and signups originated from mobile platforms for both smartphones and tablets reflecting
speed of innovation compared to competitors. The Plus500 mobile app has consistently
maintained its lead as the highest ranked app in the sector with an average rating of 4.2
out of 5 in both Apple’s AppStore and Android’s Google Play store. It has also received
more reviews and downloads than its competitors.

Mobile revenues and sign ups by device

Number of Signups by Device

Revenues by Device

Plus500 Ltd. 2016 Annual ReportFinancial Review

Revenue
$327.9m

2015: $275.6m

EBITDA

$151.0m

2015: $132.9m

Net Profit

$117.2m

2015: $96.6m

Total Dividend per Share

$0.8852

2015: $0.8405

An overview of the Company’s financial performance is
provided in the Chief Executive Officer’s Review.

The following section provides a more detailed analysis
of the Company’s financial performance for the year
ended 31 December 2016, including a discussion of the
KPIs used to monitor and control its business.

The Company generates its revenues principally from
the dealing spreads on the trading platform.
In addition, the Company generates revenues from
overnight premiums, effectively a financing charge, on
certain positions held by customers overnight. In 2016,
as in 2015, the Company did not generate revenues
from market P&L. The Company does not charge
customers any commissions on trades.

2016 was a record year of revenues for Plus500.
Revenues totalled $327.9 million (FY 2015: $275.6
million), an increase of 19%. The results benefited
from the scalability of the Company’s business model,
with the combination of revenue growth and further
improvements in the operational cost structure
delivering excellent performance.

EBITDA in 2016 was $151.0 million (FY 2015: $132.9
million), an increase of 14%, with EBITDA margins
decreasing slightly from 48.2% in 2015 to 46% in 2016.
Net profit for 2016 increased 21% to $117.2 million (FY
2015: $96.6 million). Earnings per share were $1.02 (FY
2015: $0.84).

SG&A expenses increased by 24% to $177.4 million (FY
2015: $143.1 million), in line with the 23% increase in
the volume of New Customers and reflecting online
and offline marketing to attract higher value customers
who are more expensive to acquire.

The consolidated financial statements are presented
in US dollars, which is the Company’s functional and
presentation currency. Foreign currency transactions
and balances in currencies different from the US dollar
are translated into the US dollar using the exchange
rates prevailing on the dates of the transactions or at
the statement of financial position dates.

Plus500 Ltd. 2016 Annual ReportDividends

Given the strong financial performance, the Board
has considered the Group’s dividend policy, and in
particular the optimal balance between allocating
surplus funds to the payment of ordinary and special
dividends or share buybacks. The Board will consider
to undertake buybacks in the future and has the power
to implement them at short notice.

The Board has concluded that it is in shareholders’ best
interests to distribute 87% of 2016 net profits ($101.7
million) and therefore to propose a final dividend in
respect of 2016 together with an additional distribution
by way of a special dividend.

As announced in February 2017, the Board was
pleased to declare a final dividend for the year ended
31 December 2016 of $0.3799 per share (final dividend
2015: $0.2922 per share), with an ex-dividend date
of 2 March 2017, a record date of 3 March 2017 and
a payment date of 3 July 2017. This makes a total
dividend for the year of $0.6123 per share (total
dividend for 2015: $0.5043 per share). This equates to
a total dividend pay-out of $70.3 million or 60% of net
profit for the year, in line with the Company’s stated
policy.

In addition to the above, the Board has declared a
special dividend of $0.2729 per share (special dividend
2015: $0.3362 per share) amounting to a payout of
$31.4 million (FY 2015: $38.6 million). The ex-dividend,
record and payment dates of this special dividend will
be as for the final dividend noted above.

The resulting total distribution to shareholders for the
full year will therefore be $0.8852 per share (FY 2015:
$0.8405 per share) amounting to a payout of $101.7
million (FY 2015: $96.6 million).

Total dividends to shareholders, including those
declared in February 2017, in the three-year period
since flotation will be $332.3 million, which exceeds the
market capitalisation at flotation of $200 million.

In 2016, the Company’s financial income, net
amounted to $1.5 million (FY 2015: financial expenses,
net $4.6 million), the majority arising from foreign
exchange and translation differences. This represents
an efficient financial performance in light of the
significant foreign exchange volatility which occurred in
2016. A significant proportion of the Company’s cash is
held in US dollars in order to provide a natural hedge to
reduce the impact of currency movements on financial
expenses.

Plus500’s total assets in FY 2016 were $154.7 million,
a decrease of 8% from $169 million in FY 2015; cash
balances decreased to $136.5 million (FY 2015: $156.5
million) as a result of the Company's exceptional
dividend distribution (amounting to the payment of
$123.3 million in 2016 compared to $65 million in
2015); and equity was $136.0 million (FY 2015: $117.7
million), representing approximately 88% of the total
shareholders’ equity and liabilities on the statement of
financial position.

One of the strengths of Plus500’s business model
is its ability to convert net earnings into cash-flow.
Deposits are collected in advance from customers and
these deposits and the outcome of the customers’
trading activity is immediately reflected in their
regulated segregated accounts, which are not part
of the cash balances of the Company. Earnings from
these customer trades are recognised in cash on
the Company’s statement of financial position as
customers’ trading activity occurs and amounts are
transferred from or to the Company’s accounts. In
addition, the Company requires relatively low levels of
capital expenditure. The combination of these features
is that a high proportion of net income is rapidly
converted into cash. In 2016 the Company generated
$153.3 million of cash from operations (FY 2015: $128.1
million) resulting in cash and cash equivalent balances
of $136.5 million at 31 December 2016 (FY 2015: $156.5
million).

In light of this strong cash generation, the Board will
maintain the flexibility to pay special dividends when
the Company generates surplus cash and the Board
feels it appropriate to make such payments.

Client funds are maintained in segregated accounts
with tier one banks, and are subject to annual audit
and certification in line with best practice; these
amounted to $62.4 million (FY 2015: $39.8 million).

Plus500 Ltd. 2016 Annual ReportThe table below shows the consolidated audited results of the Company for the two financial years ended 31
December 2016:

Revenue

EBITDA

Profit before Tax

Net Assets

2016 ($’000)

2015 ($’000)

327,927

150,997

151,982

136,000

275,651

132,874

127,884

117,654

The table below shows the consolidated audited cash flows of the Company for the two financial years ended 31
December 2016:

2016 ($’000)

2015 ($’000)

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities - paid dividends

108,907

(2,205)

(123,264)

85,475

(65,005)

Significant Investment in Marketing

Focus remains online but Plus500 will continue to explore offline opportunities

Online

Affiliates

Offline

1
2

1
3

13*

103

1
4

2012

2013

2014

2015

2016

*Majority is Atletico Madrid sponsorship deal

%DirectOnlineAdvertising Spend ($m)88%89%92%86%82%Plus500 Ltd. 2016 Annual ReportStrong Product Platform

CFD Financial Instruments

2,100 CFD financial instruments

Stocks

Commodities

Indices

Plus500
Product
Portfolio

ETFs

Forex

iPhone App / iPad App

Options

Apple
Watch App

Windows
Phone App

Platform and Devices

Supporting 31 languages in more than 50 countries

iPhone /
iPad / Apple
Watch App

WebTrader

Android App

Plus500
Platform

Windows
10

Windows
Phone App

Android App

Windows 10 App

Desktop
Trader

Plus500 Ltd. 2016 Annual ReportTrading Platform

Retail customers only - All customers are protected from negative balance

Market Leading Technology

Proprietary technology, developed in-house: A key differentiator within the market practice

System Architecturerapid product development"Marketing Machine"efficient acquisition of new customersAffiliate ProgrammeFraud Managementlow chargeback ratioPayment Interfaceno third party costsHedgingand RiskBackOfficeUser Interfaceconsistent experience across all platformsPlus500 Ltd. 2016 Annual ReportSponsorships

In January 2015 Plus500 announced a business partnership via a
sponsorship agreement with the Spanish football club, Atlético de Madrid
FC, SAD. In June 2015 the Company announced that it had become the
main sponsor for the 2015/16 and 2016/17 seasons and in January 2017 the
partnership was renewed for 2017/18 season.

Atlético de Madrid FC is one of the most successful clubs in Europe that
plays in La Liga, one of the most popular leagues in the world, which is the
top professional association football division of the Spanish football league
system.

Plus500 Ltd. 2016 Annual ReportAtlético Madrid has won ten La Liga titles. The club has also won the
Copa del Rey on ten occasions along with other Spanish cup competitions.
It is also one of the most successful clubs in Europe which regularly
competes in the UEFA Champions League, the most prestigious club
competition in Europe, including winning the UEFA Super Cup in 2010 and
2012, and coming second in the 2013/14 and 2015/16 UEFA Champions
League.

This partnership with Atlético Madrid, one of the most successful clubs in
Europe that plays in one of the most popular leagues in the world, is helping
Plus500 in furthering its strategy of increasing Plus500's brand recognition
and expanding its customer base globally.

Plus500 Ltd. 2016 Annual ReportSponsorships

In December 2016 Plus500 announced a business partnership via a
sponsorship agreement with the Australian professional rugby union team,
the Brumbies. Plus500 will be the Official Sponsor for the 2017 season. The
Brumbies is an Australian professional rugby union team based in Canberra
that competes in the Super Rugby competition and is a member of the
Australian Rugby Union.

This sponsorship complements the Company's new licence in South Africa,
which is one of the countries participating in the Super Rugby competition,
and its existing licences in Australia and New Zealand.

Plus500 Ltd. 2016 Annual ReportSuper Rugby is the preeminent professional men's rugby union competition
in the Southern Hemisphere and Japan featuring teams from Australia, South
Africa, New Zealand, Argentina and Japan. The Brumbies are the current
champion of the Australian conference of Super Rugby, and are also one of
the most successful of the Australian teams, having been the Super Rugby
champions in 2001 and 2004.

Together both sponsorships extend the Company’s strategy of increasing
its brand recognition and expanding its customer base globally.

Plus500 Ltd. 2016 Annual Report26

Plus500 Ltd. 2016 Annual ReportDIRECTORS
AND GOVERNANCE

2727
27

Plus500 Ltd. 2016 Annual ReportBoard of Directors

Alastair Gordon,
Non-Executive Director and Chairman, 66

Alastair Gordon is a non-executive Director and
Chairman of the Company. Mr. Gordon has over 16
years’ experience in global information management,
software and e-commerce.

Mr. Gordon spent 12 years at SDL plc, a provider of
global information management and software services,
where he served as chief financial officer from 1998
to 2008 and executive director from 1998 to 2010.
He played a leading role in the company’s initial
public offering and helped to grow the business, both
organically and by acquisition, to become a FTSE350
company. Mr. Gordon retired as the chief financial
officer in 2008 but remained on the Board for a further
two years as an executive director.

Prior to working at SDL plc, Mr. Gordon spent 10 years
at Berisford International plc, where he held a number
of divisional and group financial roles, including chief
financial officer of the company’s US operations. Prior
to working at Berisford International plc, Mr. Gordon
spent 13 years at Arthur Andersen LLP, where he was a
senior audit manager specialising in small and medium
sized businesses and venture capital.

Mr. Gordon has served as senior independent non-
executive director of Active Risk Group plc (LON: ARI)
(formerly Strategic Thought Group plc), an enterprise
risk management technology company, from 2008 to
2013. He also served as a non-executive director of
Alterian plc, a marketing analysis software business,
from 2010 until 2012. Mr. Gordon is a Qualified
Chartered Accountant and is a member of the ICAEW.

Charles Fairbairn,
Senior Non-Executive Director and
External Director, 54

Charles Fairbairn is a non-executive Director, the
senior independent director and chairman of the Audit
Committee. Mr. Fairbairn has held similar positions
for a number of AIM companies over the past 17 years
including Research Now Ltd, the online research
company of which he was a founder investor, Statpro
Group plc, providing analytics for asset managers, and
Brightview plc, an internet service provider.

Mr. Fairbairn graduated from Durham University with a
BA (Hons) in Economics in 1983 and then qualified as a
Chartered Accountant with Deloitte Haskins & Sells in
London in 1986. Having spent seven years at Deloitte
Haskins & Sells, he joined Pearson Plc in 1990 as
group accountant, group chief accountant and latterly
finance director of Pearson New Entertainment, a start-
up division. Over the following 18 years, since leaving
Pearson New Entertainment in 1998, he has held a
number of positions as finance director, executive and
non-executive director of a portfolio of companies,
helping to develop and scale growth companies from
start-ups into global companies. Mr. Fairbairn is an
active investor in growth companies and reviews new
business and turnaround opportunities, exposing him
to a multitude of sectors and business models. He also
holds an Investment Management Certificate.

Plus500 Ltd. 2016 Annual ReportPenelope Judd,
Non-Executive Director, 53

Ms. Judd is a non-executive Director and chairperson of
the Regulatory and Risk Committee. She is a chartered
accountant with over 30 years of experience in
Compliance, Regulation, Corporate Finance and Audit.

Ms. Judd was until June 2016 Managing Director and
EMEA Head of Compliance at Nomura International
Plc, a position she held for three years. Prior to this Ms.
Judd worked at UBS Investment Bank for nine years
and held the position of Managing Director, EMEA Head
of Compliance.

Ms. Judd began her professional career at KPMG where
she qualified as a chartered accountant. She left KPMG
to join the UK Listing Authority, where she managed
the Equity Markets Division responsible for admission
of companies to the Official List and AIM and regulation
of listed companies. In 2000, Ms. Judd joined the
Corporate Finance team at Cazenove & Co focusing
on bringing companies to the main market as well as
advising on M&A and capital raisings.

Daniel King, Non-Executive Director and
External Director, 51

Daniel King is a non-executive Director and chairman
of the Remuneration Committee and Nomination
Committee. Mr. King has over 19 years’ experience in
e-commerce technologies, data and analytics, digital
and online media and has extensive knowledge in
developing and scaling high-growth companies.

Mr. King is currently the President & COO for Profitero,
a SaaS provider of online insights and e-commerce
intelligence for retailers and brands. Previously Mr.
King worked for UK Trade & Investment as Head
of High Growth & Emerging Markets, working with
companies and individual investors looking to set
up their businesses or investment in the UK. Mr King
was previously managing partner of Blue Leaf Capital,
a private boutique venture capital and advisory
services company based in London. Prior to this Mr.
King held Managing Director roles with Compete, a
WPP company; MySupermarket.co.uk; and Experian
Hitwise, overseeing the company's EMEA operations
and was a key member of staff that led to the eventual
acquisition of Hitwise by Experian in June 2007.

Mr. King is also a Non-executive Director of several
public and private companies and advises companies
on their business model, growth strategies, and
international expansion plans.

Plus500 Ltd. 2016 Annual Report

Gal Haber, Managing Director and
Director, 42

Gal Haber has nearly 16 years’ experience in software
programming and business development. One of the
founders, he currently holds the position of Managing
Director of the Company, having previously held
the position of Chief Executive Officer. He led the
design of the user-friendly trading platform, which
represents one of the key competitive advantages for
the business.

Before founding Plus500, Mr. Haber served as
chief operating officer of InterLogic Ltd, a ‘skilled
games’ programme provider for the internet, digital
television and mobile devices, which he co-founded
in 2004. Previously, Mr. Haber worked for Top Image
Systems Ltd, the enterprise content management
specialist. Mr. Haber holds a B.Sc. in Computer
Science from the Technion, Israel.

Asaf Elimelech, Chief Executive
Officer and Director, 36

Asaf Elimelech is the Chief Executive Officer of the
Company. He previously served as the CEO
of Plus500AU Pty Ltd. and has worked for the Group
since 2012. In his previous role as the Company’s
Chief Subsidiaries Officer, he was responsible for
managing the Company’s subsidiaries, working
with the senior management team to ensure that
the Group, through its subsidiaries, was meeting its
strategic goals. Mr. Elimelech was appointed to the
Board in February 2016.

Prior to joining Plus500, he was a supervisor at PwC
Israel from 2008 to 2012, specialising in biotech and
commercial audit as well as providing tax services to
clients. As part of his role he managed several audit
teams and was responsible for the preparation of
financial reports for private and international public
companies. Mr. Elimelech holds a B.A. in Accounting
and Economics from Haifa University and is a
certified accountant in Israel.

Elad Even-Chen, Chief Financial
Officer, VP Business Development
and Director, 31

Elad Even-Chen is the Group Chief Financial Officer,
VP Business Development and Head of IR. Mr. Even-
Chen’s responsibilities cover a broad range of finance,
business and strategic functions including managing
the Group finance departments, the global legal and
corporate aspects alongside Plus500’s strategic
business development projects and their financial
angles. Mr. Even-Chen joined the Group in 2011 and
was appointed to the Board in June 2016.

Mr. Even-Chen is a certified accountant in Israel and,
prior to joining Plus500, he was a senior associate at
KPMG, specialising in commerce and real estate audit.
Mr. Even-Chen holds a B.A. in Accounting and
Economics from Tel-Aviv University, a LL.B Degree
from the College of Management and an MBA
(specialising in Financial Management) from Tel-Aviv
University.

Dana Comber, Legal & Company Secretary, 30

Dana Comber is the Legal & Company Secretary of
the Company. Ms. Comber is responsible for ensuring
that the Company complies with standard financial
and legal practice and maintains high standards
of corporate governance. In her previous role as
Legal & Business Development, she was part of the
global business development team focusing on
the Company’s strategic goals and its international
operations.

Ms. Comber is a certified lawyer in Israel and, prior
to joining Plus500, she was an associate at HFN Law
firm, specialising in corporate and commercial law. Ms.
Comber holds an LL.B from the Hebrew University and
an MBA (focusing on Innovation & Entrepreneurship)
from IDC Herzliya.

Plus500 Ltd. 2016 Annual Report
Directors’ Report

Activities

Plus500 has developed and operates an online
trading platform for retail customers to trade CFDs
internationally over more than 2,100 different
underlying global financial instruments comprising
equities, indices, commodities, options, ETFs and
foreign exchange.

The Company enables retail customers to trade CFDs
in more than 50 countries. The trading platform is
accessible from multiple operating systems (Windows,
smartphones (iOS, Android and Windows Phone),
tablets (iOS, Android and Surface), Apple Watch and
web browsers).

The Company retains operating licences and is
regulated in the United Kingdom, Australia, Cyprus,
South Africa, New Zealand and Israel. Customer care
is integral to Plus500: customers cannot lose more
than they deposit and there are no commissions on
trades. Plus500 offers its customers sophisticated risk
management tools to manage their trading positions
and a free demo account is available on an unlimited
basis for platform users.

The Company generates its revenues principally
from the dealing spreads on the trading platform.
Additionally, the Company generates revenues from
overnight premiums, effectively a financing charge, on
certain positions held by customers overnight. In 2016,
as in 2015, the Company did not generate revenues
from market P&L. The Company does not charge
customers any commission on trades.

The trading platform has been designed to be as
intuitive and easy to use as possible. The Directors
believe that the success of the Company to date has
been primarily due to its self-developed, proprietary
technology and continues to expand the capabilities
of the trading platform. The trading platform has been
localised into 31 languages. The Directors believe that
this emphasis on technology, together with
the Company’s targeted online marketing strategy,
has helped to differentiate the Company from its
competitors.

The Company currently conducts operations in the
European Economic Area (EEA), Gibraltar, Australia,
South Africa, New Zealand, Israel, the Middle East and
elsewhere. The Company has four subsidiaries which
have been granted licences by regulators.

FCA - In June 2010, the Company’s UK subsidiary,
Plus500UK, received authorisation from the Financial
Conduct Authority (FCA) which regulates its operations
in the United Kingdom.

ASIC - In October 2012, the Company’s Australian
subsidiary, Plus500AU, received the Australian
Securities and Investments Commission (ASIC) licence
which enables it to conduct a financial services
business in Australia.

CySEC - In October 2014, the Company’s subsidiary in
Cyprus, Plus500CY, received the Cyprus Securities and
Exchange Commission (CySEC) licence which enables
it to conduct financial services in Cyprus. Plus500CY
also operates in other EEA countries and Gibraltar
through a regulatory passporting mechanism.

FMA - In October 2016, Plus500AU received
authorization from the Financial Markets Authority
(FMA), the New Zealand government agency
responsible for financial regulation to operate an
online trading platform for retail customers to trade
CFDs in New Zealand.

ISA - In October 2016, the Company’s subsidiary in
Israel, Plus500IL, received from the Israel Securities
Authority (ISA) a licence to operate an online trading
platform for retail customers in Israel to trade CFDs.

FSB - In February 2017, the Financial Services Board
(FSB), the South African authority that oversees the
non-banking financial services industry, has granted
Plus500AU a licence to operate an online trading
platform for retail customers to trade CFDs in South
Africa, under FSP #47546.

Business Review

For the operating and financial review of the business
during the year please refer to the Chief Executive Officer’s
Review on pages 10 to 12 and the Financial Review on
pages 17 to 19 included within the Annual Report. For
future developments please refer to the outlook section of
the Chief Executive Officer’s review on page 12.

Plus500 Ltd. 2016 Annual ReportFinancial

2016 was a record year of revenues for Plus500.
Revenues totalled $327.9 million (FY 2015: $275.6
million), an increase of 19%. The results benefited
from the scalability of the Company’s business model
with the combination of revenue growth and further
improvements in the operational cost structure
delivering excellent performance.

Key Performance Indicators (KPIs)

KPIs, which are set at Group level, as defined
below, have been devised to allow the Board and
shareholders to monitor the “Group” as a whole, as
well as the operating businesses within the Group.
The Company has financial KPIs that it monitors on
a regular basis at Board level and where relevant at
divisional management meetings as follows:
• Number of Active Customers:

•

155,956 (2015:136,540)
• Number of New Customers:
104,432 (2015: 84,858)
Average Revenue Per User (ARPU):
$2,103 (2015: $2,019)
Average User Acquisition Cost (AUAC):
$1,195 (2015: $1,227)

•

Dividend Policy

Given the strong financial performance, the Board
has considered the Group’s dividend policy of 60%
pay-out ratio with payment of special dividends and
flexibility to buyback shares as appropriate, and in
particular the optimal balance between allocating

surplus funds to the payment of ordinary and special
dividends or share buybacks. The Board will consider
to undertake buybacks in the future and has the power
to implement them at short notice.

The Board has declared in February 2017 a final
dividend out of the Company’s net profits for the year
ended 31 December 2016 of $0.3799 per share (final
dividend 2015: $0.2922 per share), with an ex-dividend
date of 2 March 2017, a record date of 3 March 2017
and a payment date of 3 July 2017. This makes a
total dividend for the year of $0.6123 per share (total
dividend for 2015: $0.5043 per share). This equates to
a total dividend pay-out of $70.3 million or 60% of net
profit for the year, in line with the Company’s stated
policy.

The resulting total distribution to shareholders for the
full year will therefore be $0.8852 per share (FY 2015:
$0.8405 per share) amounting to a payout of $101.7
million (FY 2015: $96.6 million).

Total dividends to shareholders including those
declared in February 2017 in the three-year period
since flotation on July 2013 will be $332.3 million,
which exceeds the market capitalisation at flotation of
$200 million.

Research and Development

The Company’s trading platform, which acts as a key
differentiator and competitive advantage relative to
its peers, has been specifically developed to be as
intuitive and user friendly as possible providing
customers with real-time prices, continuous monitoring
of open positions and trading activity, execution facilities
and a multitude of order types. Customers are able to
trade and access all of their account information online
through a variety of different channels, which results in
increased traffic to the trading platform.

Plus500 Ltd. 2016 Annual ReportAs a result of Plus500’s self-developed proprietary
technology, the Company does not pay external
licence fees for its core trading platform technology.
This allows the Company to operate without limiting
the amount of time that a customer can use a demo
account or placing high thresholds on the minimum
amount with which a customer can open a real-
money trade. The trading platform also provides, free
of charge, real-time price and data analysis features
to customers, which provides the Company with a
significant competitive advantage.

The development of the trading platform continues
to evolve in order to meet the growing demands
of Plus500's Active Customer base. For example,
following the launch of the Apple Watch, the
Company immediately released a new interface for
Apple Watch users. Plus500 is constantly updating
and introducing new financial instruments, including
options CFDs instruments. The expansion of the 24/7
live chat feature has reduced response times, which
contributed to an increased satisfaction rate among
customers.

All developments are expensed as incurred and all IP
in the platform belongs to the Company.

Supplier Policy of the Company

Company creditors relate mainly to costs associated
with marketing, financial information and payment
processing services. Due to the nature of these
creditors, the Company does not have a specific
supplier payment policy. Average creditors days for
the year ended 31 December 2016 were 30 days
(2015: 30 days).

Employees

Plus500 is committed to the creation of a work
environment in which fairness, trust and individual
responsibility are valued. The Company believes
that talented and dedicated employees are our most
valuable asset and that everyone should be given an
equal opportunity to succeed.

The Company is committed to equal opportunity in
employment and to creating, managing and valuing
diversity in its workforce.

The Company has an equal opportunities policy with
respect to hiring, promotion, compensation, training

and assignment of responsibilities, termination, or
any other aspect of the employment relationship on
age, gender orientation, marital status, physical or
mental disability.

Environment

Plus500 is continuously striving to increase
sustainability efforts and has developed a thorough
company-wide action plan targeted at conservation
of resources. Its efforts include energy-saving
technology integration, responsible product design,
resource conservation, recycling with responsible end
of life electronics management and green information
technology practices.

Social

Plus500 is committed to operating responsibly in
all aspects of its business, including enriching the
communities where it operates and creating an
inclusive, safe and healthy workplace. Plus500 knows
that mobile technology is a great way to bring people
together and build communities and that is why at
the core of its Corporate and Social Responsibility
(“CSR”) efforts it uses the same expertise, technology
and partnerships it uses in working with its customers.
Plus500 believes that CSR is both its responsibility
and an essential part of good management. As
Plus500 grows its business it remains committed to
integrating CSR initiatives into its business, not only to
enrich and contribute to the lives of the communities
in which it works and lives, but also to create tangible
value for its employees, customers and shareholders.

Capital Management

The Company’s objectives when managing capital
are to safeguard the Company’s ability to continue
as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce
the cost of capital. There were no changes to the
Company’s approach to capital management during
the year.

Share Capital

At the close of business on 6 March 2017, the
Company had 114,888,377 ordinary shares in issue, of
which none were held in treasury. The Company does
not currently have any share schemes.

Plus500 Ltd. 2016 Annual Report% of Ownership of Shares

10.35%

9.90%

8.59%

4.09%

3.74%

3.66%

Substantial Shareholdings

As of 6 March 2017, based on information reported to
the Company by shareholders, the Company had the
following shareholders with direct or indirect interest of
3% or more of the issued and outstanding share capital
of the Company (as of 28 February 2017):

Significant Shareholders

Sparta24 Ltd.8

Brighttech Investments

Odey Asset Management LLP

Investec Asset Management

J.P. Morgan Asset Management

Wavesoft Ltd.9

Smarty Ltd.10

Principal Risks and Uncertainties

Management and control of risks within the Company
is embedded within day to day operating procedures.
The Company has developed a comprehensive
risk mitigation plan to ensure minimum exposure
and secure solutions. These procedures comprise
a range of measures including corporate policies,
operating rules, systematic reporting, external audits,
self-assessment and continuous monitoring by the
Regulatory & Risk Committee, the Board and the
executive management team.

The Company operates globally in varied markets
and the principal risks and uncertainties have been
reviewed by the Board together with agreed mitigating
actions. The most significant risks and uncertainties
and mitigation actions are outlined in Note 3 on pages
67 to 70, on pages 41 to 56 of the Company’s Admission
Document, dated 24 July 2013, a copy of which is
available on the Company’s website at http://www.
plus500.com/Docs/Plus500UK/AdmissionDocument.
pdf and on pages 36 to 37 included within the
Annual Report.

8 A company wholly owned by Alon Gonen, one of the Company’s founders
9 A company wholly owned by Gal Haber, Director and one of the Company’s founders
10 A company wholly owned by Elad Ben Izhak, one of the Company’s founders

Plus500 Ltd. 2016 Annual Report
Going Concern

Auditors

There is no limitation of liability in the terms of
appointment of Kesselman & Kesselman, a member
firm of PricewaterhouseCoopers International Limited,
the External Auditors. The Company’s Auditors for
the next year will be appointed in the Annual General
Meeting.

Summary

In the last 12 months Plus500 has made strong
progress in further market penetration in all countries
where it operates. Its pace of acquiring New Customers
has accelerated during the year.

Plus500 believes it has in place the product offering,
risk management tools and customers protection
functions, back office, online marketing tools and
employees to allow it to grow organically in all
current jurisdictions.

Plus500 is delighted to have reported a strong
performance in its fourth annual report as a public
company and believes it is well positioned to make
further progress towards its aim of being the market
leaders in the global retail online CFD sector.

Approved by the Board and signed on its behalf by

Elad Even-Chen, Chief Financial Officer
6 March 2017

The Directors, after considering the risks and
uncertainties set out in Note 3 on pages 67 to 70,
in the admission document on pages 41 to 56 and
on pages 36 to 37 included within the Annual Report
and after reviewing the Company’s operating budgets,
investment plans and financing arrangements,
consider that the Company has sufficient resources
at their disposal to continue their operations for
the foreseeable future. Accordingly, the financial
statements have been prepared on a going
concern basis.

Annual General Meeting

The Annual General Meeting will be held in the
second quarter of 2017. The exact date of the meeting
and details of all resolutions to be proposed at the
Annual General Meeting will be included in the Notice
of Annual General Meeting to be circulated by the
Company in due course.

Events after the reporting period

For significant events after the reporting period please
refer to Note 16 on page 82.

Directors’ Statement as to Disclosure of
Information to Auditors

Having made enquiries of fellow Directors and of the
Company’s auditors, each Director confirms that to
the best of each Director’s knowledge and belief, there
is no information relevant to the preparation of the
auditors’ report of which the Company’s auditors are
unaware. The Directors of the Company have taken all
the steps that they might reasonably be expected to
have taken as directors in order to make themselves
aware of any information needed by the Company’s
auditor in connection with preparing their report
and to establish that the auditors are aware of that
information.

Plus500 Ltd. 2016 Annual ReportSignificant Risk Factors and Uncertainties

Risks Relating to the Legal and Regulatory
Framework Applicable to the Industry in
which the Group Operates

•

The vast majority of the Group’s revenue
depends upon the maintenance of licences from
regulators.

• Non-compliance with the regulatory framework
of jurisdictions in which the Group’s offering
is available could adversely affect the Group’s
profitability and may result in the suspension,
revocation or amendment of its licences and/or
other enforcement action.

•

Increased regulatory scrutiny of the industry in
which the Group operates could adversely affect
the Group’s revenue, business and profitability.

• Changes to the EU regulatory framework and
current and proposed EU regulations and
directives could restrict the Group’s business,
and the implementation of necessary changes
to comply with them could place a significant
demand on the Group’s resources.

•

The Group is required to conduct
“appropriateness tests” on customers,
and there can be no guarantee that the
Group’s assessments or tests of a customer’s
appropriateness for its product will be adequate
in all or any particular jurisdictions or will not be
subject to regulatory scrutiny or challenge.
• Operating online in different jurisdictions

exposes the Group to a number of risks which
may have a significant adverse effect on the
Group’s business and operations.

•

The Group may not adequately discharge its
obligations under anti-money laundering, anti-
bribery and corruption and financial sanctions
laws and regulations.

• Customer complaints may affect the Group’s

business and operations.

•

The requirement to maintain regulatory capital
may affect the Group’s ability to distribute
profits and/or restrict expansion which may
affect the Group’s ability to conduct its business
and may reduce profitability.

•

The Group may be held liable for the activities
of its affiliates under the “500Affiliates”
programme.

Laws, regulations or rules in the jurisdictions
where the Group operates, or where its
offering is available, could result in customer
agreements being deemed unenforceable as
against the customer.

The Group must comply with data protection
and privacy laws and may be targeted by
cybercriminals.
Financial promotions regimes and other
regulations may impact on the Group’s
ability to advertise.

The Group is subject to rules regulating how
it holds customer money, and the adoption of
the EU FTT could have a material adverse effect
on the Group’s business, prospects, financial
condition and results of operation.

• Changes in tax law could adversely affect the

Group’s profitability.

Risks Relating to the Group’s
Trading Activities
•

If the Group fails to attract New Customers and
maintain its Active Customers, its growth may
be impaired.

•

•
•

•

The Group faces risks associated with the
implementation of its business strategy.

The Group faces significant competition.

Reduction in trading volume and market activity
and low market volatility could harm the
Group’s profitability.

Political and economic events within the EEA
may harm the Group’s operations.

Any significant decline in the market for CFDs
could significantly harm the Group’s business.

The Group may suffer losses if its reputation
is harmed.

The Group depends on its senior management
team, and if it is unable to retain its current
personnel and hire qualified additional
personnel, its ability to implement its growth
strategy and compete in its industry could
be harmed.

Plus500 Ltd. 2016 Annual Report
•

•

Financial risk limitation policies, procedures
and practices may not be effective and may
leave the Group exposed to certain risks.

Losses due to fraud and other misconduct by
customers could have a material adverse effect
on the Group’s business.

A reduction in the availability of credit and
debit cards and alternative payment systems
for customers of the Group’s operations and/or
complaints to credit and debit card providers
and alternative payment system processors
could damage the Group’s business.
The Group is exposed to litigation risk.

Risks Relating to the Group’s Trading
Systems
•

Systems failures or delays could materially harm
the Group’s business.

• Network security breaches could result in

the Group losing customers and being held
criminally or civilly liable.

•

In order to compete effectively, the Group must
keep up with rapid technological changes and
changes in its customers’ requirements and
preferences.

The Group is partially dependent on third
parties, including infrastructure suppliers,
data providers and data sources, and online
marketing service providers.

The terms on which the Group has contracted
with certain customers, affiliates and suppliers
may not be standard.

Any inability of the Group to protect or continue
the current use of its proprietary intellectual
property could adversely affect its business.

Risks Relating to the Group’s Financial
Condition
•

The Group’s financial results may be adversely
affected by currency fluctuations.

•

The Group’s insurance coverage may be
inadequate to cover its losses in respect of claims
made against the Group.

•

Risks Relating to the Group’s Domicile and
Operations in Israel
•

Security, political and economic instability in the
Middle East and Israel in particular may harm the
Group’s business.
It may be difficult to enforce an English judgment
against the Company or its officers and directors,
to assert English securities laws claims in Israel or
serve process on certain of the Company’s officers
and directors.

The rights and responsibilities of the Company’s
shareholders are governed by Israeli law and differ
in some respects from the rights and responsibilities

of shareholders under English law.

The Takeover Code does not apply except to
the extent certain provisions analogous to the
equivalent provisions of the Takeover Code have
been incorporated into the Articles.

Plus500 Ltd. 2016 Annual Report

Remuneration Report

Directors’ Remuneration

Remuneration Committee

The Board recognises that Directors’ remuneration is of
legitimate interest to the shareholders. The
Company operates within a competitive environment,
performance depends on the individual contributions
of the Directors and employees and it believes
in rewarding vision and innovation. As an Israeli
company, listed on the AIM market of the London
Stock Exchange, Plus500 is not required to comply
with the requirements of Schedule 8 to the Large and
Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008; however, it has included
the Remuneration Report to disclose key aspects of the
Directors’ remuneration.

Policy on Directors’ Remuneration
The policy of the Board is to provide executive
remuneration packages designed to attract, motivate
and retain Directors of the calibre necessary to
maintain the Company’s position. It aims to provide
sufficient levels of remuneration to do this, but to avoid
paying more than is necessary. The remuneration will
also reflect the Director’s responsibilities.

The remuneration of the Directors in the following
table represents the entire remuneration paid to the
Directors in 2015 and 2016 (the fees paid to executive
Directors during 2016 represent the full amount
accrued to them).

On 15 December 2016 the Company's shareholders
approved the grant of a share appreciation right in the
amount of NIS 1,200,000 (approx. USD 315,400)
vesting after two years from the date of grant, with a
maximum payout amount of NIS 4,800,000
(approximately USD 1,261,700) to each of Mr.
Elimelech, the Chief Executive Officer and executive
Director and Mr. Even-Chen, Chief Financial Officer
and executive Director. The share appreciation rights
were granted to Mr. Elimelech and Mr. Even-Chen
on 30 December 2016.

The remuneration of the Directors in 2016 (including
directors who resigned from the Board during 2016)
was as follows (all amounts in USD):

2016 Fees

2015 Fees

92,813

72,747

36,934

69,016

377,545

524,319

770,113

23,849

377,545

426,115

91,118

109,245

49,318

289,657

75,697

289,657

192,726

Alastair Gordon

Charles Fairbairni

Penelope Juddii

Daniel King

Gal Haber

Asaf Elimelechiii

Elad Even-Cheniv

Paul Boylev

Alon Gonenvi

Inbal Maromvii

Including fees of USD 34,695 for additional days during 2015

i.
ii. Ms. Judd joined the Board in June 2016
iii. Mr. Elimelech joined the Board in February 2016
iv. Mr. Even-Chen joined the Board in June 2016
v. Mr. Boyle resigned from the Board in May 2016
vi. Mr. Gonen resigned from the Board in February 2016
vii. Ms. Marom resigned from the Board in June 2016

Plus500 Ltd. 2016 Annual Report
The Remuneration Committee is formally required
to meet not less than twice a year and at such other
times as necessary. The Remuneration Committee
has responsibility for determining, within the
agreed terms of reference, the Company’s policy
on the remuneration packages of the Company’s
Chief Executive Officer, the Chairman of the Board,
the executive and non-executive Directors, the
Company Secretary and other senior executives. The
Remuneration Committee also has responsibility for:
(i) recommending to the Board a compensation
policy for Directors and executives and monitoring its
implementation; (ii) approving and recommending to
the Board and the Company’s shareholders, the total
individual remuneration package of the Chairman of
the Board, each executive and non-executive director
and the Chief Executive Officer (including bonuses,
incentive payments and share options or other share
awards); and (iii) approving and recommending to the

Board the total individual remuneration package of
the Company Secretary and all other senior executives
(including bonuses, incentive payments and share
options or other share awards), in each case within the
terms of the Company’s policy and in consultation with
the Chairman of the Board and/or the Chief Executive
Officer. No Director or manager may be involved in
any discussions as to their own remuneration. The
Remuneration Committee comprises Daniel King,
Charles Fairbairn and Penelope Judd and is chaired
by Daniel King and operates under written terms of
reference.

The remuneration of the Company’s eight most highly
compensated executives in 2016 (including three of its
executive directors and another executive who served
as a director during 2016) was as follows
(all amounts in USD):

Elad Even-Chen

Asaf Elimelech

Inbal Marom

Alon Gonen

Gal Haber

Elad Ben Izhak

Omer Elazari

Shlomi Weizmann

2016 Fees

770,113

524,319

426,115

377,545

Plus500 Ltd. 2016 Annual ReportCorporate Governance

The Board is responsible to shareholders for effective direction and control of the Company and this report
describes the framework for corporate governance and internal control that the directors have established to
enable them to carry out this responsibility. As an AIM listed company, the Company is not required to comply
with the provisions of the UK Corporate Governance Code (the “Code”) and this is not a statement of compliance
as required by the Code. However, the Directors recognise the importance of sound corporate governance and,
accordingly, comply with the Code, to the extent they believe appropriate for a company of its nature and size.
The Board also follow, as far as practicable, the recommendations in the Corporate Governance Code for Small
and Mid-size Quoted Companies published by the QCA in May 2013 (the “QCA Guidelines”), which have become a
widely recognised benchmark for corporate governance of small and mid-size quoted companies, particularly AIM
companies. As an Israeli company, the Company also complies with the corporate governance provisions of Israel’s
Companies Law, 5759-1999 (the “Companies Law”).

The Board and Committees
Board

The Board is responsible for the overall strategy and
financial performance of the Company and has a formal
schedule of matters reserved for its approval. Each Board
meeting is preceded by a clear agenda and any relevant
information is provided to directors in advance of the
meeting. The Company has established properly constituted
audit, remuneration, nomination, regulatory and risk
and disclosure committees of the Board (in accordance
with the Companies Law) with formally delegated duties
and responsibilities. Terms of reference for each of these
committees can be found on the Company’s website
(www.plus500.com).

On 6 March 2017 the Board is comprised of three executive
directors, Gal Haber, Asaf Elimelech and Elad Even-Chen, and
four non-executive directors, Alastair Gordon (Chairman of
the Board), Charles Fairbairn (Senior Non-Executive Director),
Daniel King and Penelope Judd.

The performance of the Board, the Board committees and
the individual Board members is assessed on an evaluation
of Board performance survey conducted on an annual basis
via questionnaire and board discussion.
In addition, an external review of the Board performance and
the Company's corporate governance framework has been
conducted by an external advisor in 2016. The
recommendations of the external advisor 's review were
implemented by the Company.

The Board has met on twelve occasions since the beginning
of 2016 to discuss operational business.
The Board also holds occasional telephone calls to update

the members on operational and other business. An agreed
procedure exists for directors in the furtherance of their duties
to take independent professional advice. Newly appointed
directors are to be made aware of their responsibilities
through the Company Secretary. The Company provides
training to directors where required. No individual or group
of directors dominates the Board’s decision making.
Collectively, the non-executive directors bring a valuable
range of expertise in assisting the Company to achieve its
strategic aims.

In accordance with the Companies Law, the Board must
always have at least two external directors who meet certain
statutory requirements of independence (the “External
Directors”). The Company’s External Directors are currently
Charles Fairbairn and Daniel King. The term of office of an
External Director is three years, which can be extended for
two additional three year terms. Under the Companies
Law, External Directors are elected by shareholders by a
special majority and may be removed from office only in
limited cases. Any committee of the Board must include at
least one External Director and the Audit Committee and
Remuneration Committee must each include all of the
External Directors (including one External Director serving
as the chair of the Audit Committee and Remuneration
Committee), and a majority of the members of each of
the Audit Committee and Remuneration Committee must
comply with the director independence requirements
prescribed by the Companies Law.

Remuneration Committee

The Remuneration Committee has responsibility for
determining, within the agreed terms of reference, the
Company’s policy on the remuneration packages of the

Plus500 Ltd. 2016 Annual ReportCompany’s Chief Executive Officer, the Chairman of
the Board, the executive and non-executive directors,
the Company Secretary and other senior executives.
The Remuneration Committee also has responsibility
for: (i) recommending to the Board a compensation
policy for directors and executives and monitoring its
implementation; (ii) approving and recommending to
the Board and the Company’s shareholders, the total
individual remuneration package of the Chairman of the
Board, each executive and non-executive director and
the Chief Executive Officer (including bonuses, incentive
payments and share options or other share awards);
and (iii) approving and recommending to the Board the
total individual remuneration package of the Company
Secretary and all other senior executives (including
bonuses, incentive payments and share options or
other share awards), in each case within the terms of the
Company’s policy and in consultation with the Chairman
of the Board and/or the Chief Executive Officer. No
Director or manager may be involved in any discussions
as to their own remuneration.

The UK Corporate Governance Code recommends that a
remuneration committee should comprise at least three
members who are independent non- executive directors.
The Remuneration Committee comprises Daniel King,
Charles Fairbairn and Penelope Judd and is chaired by
Daniel King and operates under written terms of reference.
The Remuneration Report on pages 38 to 39 contains
a detailed description of the Company’s remuneration
policy. The committee met on four occasions since the
beginning of 2016.

The quorum for meetings is two independent non-
executive director members, and all relevant
committee members attended the meetings. During
these meetings the committee determined and agreed
with the Board about the Company’s remuneration
philosophy and the principles of its remuneration
policy, ensuring that these are in line with the business
strategy, objectives, values and long-term interests of the
Company and comply with all regulatory requirements.
In addition, in 2016 the committee, together with an
external dedicated consultant, reviewed the Company’s
remuneration practices in relation to the Board’s risk
appetite statements ensuring that remuneration does not
encourage excessive risk- taking. As a result of this review
the executive Directors' remuneration was amended and
approved by the Company's shareholders at Extraordinary
Shareholders Meeting held in December 2016. This is
determined within the Company's risk management
and internal control framework and takes account of

the Company’s values and the long- term interests of
shareholders, fund investors and other stakeholders.

Nomination Committee

The Nomination Committee has responsibility for
reviewing the structure, size and composition
(including the skills, knowledge and experience) of
the Board, and giving full consideration to succession
planning. It also has responsibility for recommending
new appointments to the Board.

The UK Corporate Governance Code recommends that
a majority of members of the nomination committee
should be independent non-executive directors. The
Nomination Committee in 2016 comprised Daniel King,
Gal Haber and Charles Fairbairn and is chaired by Daniel
King. The committee met on four occasions in relation to
the appointment of Penelope Judd, Asaf Elimelech and
Elad Even-Chen, the re-election of Alastair Gordon, Gal
Haber, Asaf Elimelech and Inbal Marom, for review of the
Company organizational structure and senior leadership
and for review of Board composition. In accordance
with the Companies Law, the term of office of Charles
Fairbairn and Daniel King, the Company’s External
Directors, continues until July 2019, and therefore they
are not standing for re-election at the forthcoming
Annual General Meeting. The Nomination Committee’s
members believe that the directors put forward for
re-election at the forthcoming Annual General Meeting
continue to be effective and demonstrate commitment
to their role. The Nomination Committee and Board
unanimously recommend the re-election of all Board
members offering themselves for re-election.

Audit Committee

The Audit Committee has responsibility for ensuring
that the financial performance of the Company is
properly reported on and reviewed, and its role includes
monitoring the integrity of the financial statements of
the Company (including annual and interim accounts
and results announcements), reviewing internal control
and risk management systems, reviewing any changes
to accounting policies, reviewing and monitoring the
extent of the non-audit services undertaken by external
auditors and advising on the appointment of external
auditors. In addition, under the Companies Law, the
Audit Committee is required to monitor the effectiveness
of the internal control environment of the Company,
including consulting with the internal auditor, Deloitte
Israel and independent accountants, to review, classify
and approve related party transactions and extraordinary
transactions, to review taxation and transfer pricing,

Plus500 Ltd. 2016 Annual Reportto review the internal auditor’s audit plan and to
establish and monitor whistle-blower procedures.
The UK Corporate Governance Code recommends that
an audit committee should comprise at least three
members who are independent non-executive directors,
and that at least one member should have recent and
relevant financial experience. The Audit Committee
comprises Charles Fairbairn, Penelope Judd and Daniel
King, and is chaired by Charles Fairbairn. The committee
operates under written terms of reference and meets at
least twice a year with the Company’s external auditors,
and with the executive directors present by invitation
only. The committee meets with the external auditors
without the executive directors present as it considers
appropriate. The committee met on six occasions since
the beginning of 2016. Among others, the committee
reviewed the financial performance and financial
statements of the Company, review an assessment of
the control environment, via internal audit reports, and
progress on implementing both internal and external
audit recommendations, monitor and review the internal
audit function’s effectiveness in the overall context of the
Group’s internal controls and risk management systems.

Regulatory and Risk Committee
The Regulatory and Risk Committee has responsibility for
providing oversight with respect to current and potential
future risk exposures of the Company and for overseeing
and monitoring the Company’s compliance with laws,
regulations and orders as required. Its activity includes
reviewing relationships with regularity authorities such as
FCA, ASIC, CySEC, FSB, FMA, ISA and regulatory
authorities, where appropriate, in jurisdictions
where the Company has a significant presence;
reviewing risk assessment programme and internal
controls and risk management.

The Regulatory and Risk Committee comprises Charles
Fairbairn, Penelope Judd, Asaf Elimelech and Elad Even-
Chen, and is chaired by Penelope Judd. The committee
met on three occasions since establishment in
August 2016. The quorum for meetings is two director
members, and all relevant committee members
attended the meetings.

Disclosure Committee
The Disclosure Committee has responsibility for assisting
the Board in fulfilling its responsibilities in respect of the
requirement to make timely and accurate disclosure
of all information that is required to be disclosed to
meet legal and regulatory obligations. The Disclosure
Committee in 2016 comprised Charles Fairbairn, Asaf

Elimelech and Elad Even-Chen and is chaired by Elad
Even-Chen. The committee met on five occasions since
the beginning of 2016. The quorum for meetings is two
director members, one of whom must be an executive
director and all relevant committee members attended
the meetings.

Conflicts of Interest
The Company has procedures for the disclosure and
review of any conflicts, or potential conflicts, of interest in
compliance with the Companies Law, which the directors
may have. Under the Companies Law, any transaction
of the Company with a director or any transaction of
the Company in which a director has a personal interest
requires the approval of the Board. The transaction must
not be approved if it is adverse to the Company’s interest.
If the transaction is an extraordinary transaction (i.e. a
transaction that is not in the ordinary course of business,
that is not on market terms or that is likely to have a
material impact on a company’s profitability, assets or
liabilities), then Audit Committee approval is required in
addition to Board approval. If the transaction concerns
exculpation, indemnification, insurance or compensation
of the director, then the approvals of the Remuneration
Committee, the Board and the shareholders by way of
ordinary resolution are required (in that order). A Director
who has a personal interest in a matter that is considered
at a meeting of the Board, the Audit Committee or the
Remuneration Committee may not attend that meeting
or vote on that matter, unless a majority of the Board,
the Audit Committee or the Remuneration Committee,
as applicable, has a personal interest in the matter. If
a majority of the Board, the Audit Committee or the
Remuneration Committee, as applicable, has a
personal interest in the transaction, the shareholders’
approval, by way of ordinary resolution, is also required.
The authorisation of a conflict matter, and the terms of
authorisation, may be reviewed at any time by the Board.
The Board considers that these procedures are operating
effectively. There have been no matters arising requiring
assessment by the Board as a potential conflict during
the year.

Relationship with Shareholders
The Company encourages the participation of both
institutional and private investors. The Chief Executive
Officer, Asaf Elimelech, and Chief Financial Officer, Elad
Even-Chen, meet regularly with institutional investors,
usually in regard to the issuance of half and full year
results. Communication with private individuals is
maintained through the Annual General Meeting and the
Company’s annual and interim reports. The chairmen of

Plus500 Ltd. 2016 Annual Reportthe Company’s Audit, Remuneration, Nomination and
Regulatory and Risk Committees are made available
to answer questions at the Company’s Annual General
Meetings. In addition, further details on the strategy and
performance of the Company can be found at its website
(www.plus500.com), which includes copies of the
Company’s press releases.

Regular updates are provided to the Board on meetings
with shareholders and analysts, and broker’s opinions.
Non-executive directors are available to meet major
shareholders, if required. Investors are encouraged to
contact the Company’s Investor Relations at
ir@Plus500.com.

Internal Controls
The Board maintains full control and direction over
appropriate strategic, financial, organizational and
compliance issues. The Company’s organisational structure
has clearly defined lines of authority, responsibility and
accountability, which is reviewed regularly. The annual
budget and forecasts are reviewed by the Board prior to
approval being given. This includes the identification and
assessment of the business risks inherent in the Company
and the online financial trading industry as a whole along
with associated financial and regulatory risks.

The Board has overall responsibility for the Company’s
systems of internal control and for monitoring their
effectiveness. Although no system of internal control can
provide absolute assurance against material misstatement
or loss, the Company’s systems are designed to provide
the directors with reasonable assurance that issues are
identified on a timely basis and dealt with appropriately.
The Company’s key internal financial control procedures
include:

•

•
•

•

a review by the Board of actual results compared with
budget and forecasts;
reviews by the Board of year end forecasts;
the establishment of procedures for acquisitions,
capital expenditure and expenditure incurred in the
ordinary course of business;
the appraisal and approval of proposed acquisitions -
by the Board;
the detailed budgeting and monitoring of costs
incurred on the development of new products;
the reporting to, and review by, the Board of changes
in legislation, regulatory requirements and practices
within the sector and accounting and regulatory and
legal developments pertinent to the Company; and

•

the appointing of experienced and suitably qualified
staff to take responsibility for key business functions to
ensure maintenance of high standards of performance.

The external auditors are engaged to express an
opinion on the financial statements. They discuss with
management the reporting of operational results and
the financial condition of the Company, to the extent
necessary to express their audit opinion.

In accordance with Companies Law, the Board must
appoint an internal auditor nominated following the
recommendation of the Audit Committee. The primary
role of the internal auditor is to examine whether a
company’s actions comply with the law and proper
business procedure. The internal auditor may be an
employee of the Company but may not be an interested
party or office holder, or a relative of any interested
party or office holder, and may not be a member of
the Company’s independent accounting firm or its
representative. The Company’s internal auditor is
Brightman Almagor Zohar & Co. (Deloitte Israel) a
member firm of Deloitte Touche Tohmatsu Limited.

Audit and Auditor Independence
An additional responsibility of the Audit Committee is to
keep under review the scope and cost effectiveness of
the external audit. This includes recommending to the
Board the appointment of the external auditors and for
reviewing the scope of the audit, approving the audit fee
and, on an annual basis, the Committee being satisfied
that the auditors are independent.

Kesselman & Kesselman, a member firm of
PricewaterhouseCoopers International Limited, are
retained to perform audit and audit-related work on the
Company and its subsidiaries. The Audit Committee
monitors the nature and extent of non- audit work
undertaken by the auditors. It is satisfied that there
are adequate controls in place to ensure auditor
independence and objectivity. The matter is kept under
review and is a standing item on the agenda for the Audit
Committee. Periodically, the Audit Committee monitors
the cost of non-audit work undertaken by the auditors.
The Audit Committee considers that it is in a position to
take action if at any time it believes that there is a risk of
the auditors’ independence being undermined through
the award of this work.

Plus500 Ltd. 2016 Annual ReportCorporate Law

Mandatory bids, squeeze out and sell out rules relating to
the Company's ordinary shares

As the Company is incorporated in Israel, it is subject to
Israeli law and the City Code on Takeovers and Mergers
will not apply to the Company, except to the extent the
Company incorporated in its Articles of Association
provisions analogous to Rules 4, 5, 6 and 8 of the
Takeover Code, as described below.

Mergers

The Companies Law permits merger transactions,
provided that each party to the transaction obtains
the approval of its board of directors and shareholders
(excluding certain merger transactions which do not
require the approval of the shareholders, as set forth in
the Companies Law).

Pursuant to the Company’s Articles of Association, the
shareholders of the Company are required to approve
the merger by the affirmative vote of a majority of
the outstanding Ordinary Shares of the Company. In
addition, for purposes of the shareholder vote of each
party, the merger will not be deemed approved if a
majority of the shares not held by the other party, or
by any person who holds 25 per cent. or more of the
shares or the right to appoint 25 per cent. or more of
the directors of the other party, has voted against the
merger.

The Companies Law requires the parties to a proposed
merger to file a merger proposal with the Israeli
Registrar of Companies, specifying certain terms of
the transaction. Each merging company’s board of
directors and shareholders must approve the merger.
Shares in one of the merging companies held by the
other merging company or certain of its affiliates are
disenfranchised for purposes of voting on the merger.
A merging company must inform its creditors of the
proposed merger. Any creditor of a party to the merger
may seek a court order blocking the merger, if there
is a reasonable concern that the surviving company
will not be able to satisfy all of the obligations of the
parties to the merger. Moreover, a merger may not
be completed until at least 50 days have passed from
the time that the merger proposal was filed with the

Israeli Registrar of Companies and at least 30 days have
passed from the approval of the shareholders of each
of the merging companies.

In addition, the provisions of the Companies Law that
deal with ‘‘arrangements’’ between a company and
its shareholders may be used to effect squeeze- out
transactions in which the target company becomes
a wholly-owned subsidiary of the acquirer. These
provisions generally require that the merger be
approved by a majority of the participating
shareholders holding at least 75 per cent. of the shares
voted on the matter, as well as 75 per cent. of each
class of creditors. In addition to shareholder approval,
court approval of the transaction is required.

Under the Companies Law, in the event the Company
enters into a merger or an “arrangement” under the
Companies Law (as described above), the provisions
of the Companies Law and the Articles of Association
provisions analogous to Rules 4,5,6 and 8 of the
Takeover Code (as described below) do not apply.

Companies Law - Special Tender Offer

The Companies Law provides that an acquisition of
shares of a public Israeli company must be made by
means of a special tender offer if, as a result of the
acquisition, the purchaser could become a holder of 25
per cent. or more of the voting rights in the Company.
This rule does not apply if there is already another holder
of at least 25 per cent. of the voting rights in the Company.

Similarly, the Companies Law provides that an
acquisition of shares in a public company must be
made by means of a tender offer if, as a result of the
acquisition, the purchaser could become a holder
of more than 45 per cent. of the voting rights in the
company, if there is no other shareholder of the
company who holds more than 45 per cent. of the
voting rights in the company.

A special tender offer must be extended to all
shareholders of a company but the offeror is not

Plus500 Ltd. 2016 Annual Reportper cent., as applicable, of the company’s shares or
class of shares, the purchaser may not own more
than 90 per cent. of the shares or class of shares of
the target company.

Articles of Association - Takeover
Provisions

In addition to the tender offer rules applied by the
Companies Law (as described above), offers are
also subject to the takeover provisions incorporated
in the Company's Articles of Association, which
provisions are generally analogous to Rules 4, 5, 6
and 8 of the Takeover Code.

required to purchase shares representing more
than 5 per cent. of the voting power attached to the
company’s outstanding shares, regardless of how many
shares are tendered by shareholders. A special tender
offer may be consummated only if (i) at least 5 per
cent. of the voting power attached to the company’s
outstanding shares will be acquired by the offeror and
(ii) the number of shares tendered in the offer exceeds
the number of shares whose holders objected to
the offer.
If a special tender offer is accepted, then the purchaser
or any person or entity controlling it or under common
control with the purchaser or such controlling person
or entity may not make a subsequent tender offer for
the purchase of shares of the target company and may
not enter into a merger with the target company for a
period of one year from the date of the offer, unless the
purchaser or such person or entity undertook to effect
such an offer or merger in the initial special
tender offer.
Shares that are acquired in violation of this
requirement to make a tender offer will be deemed
Dormant Shares (as defined in the Companies Law)
and will have no rights whatsoever for so long as they
are held by the acquirer.

Israel Companies Law - Full Tender Offer

Under the Companies Law, a person may not purchase
shares of a public company if, following the purchase,
the purchaser would hold more than 90 per cent. of
the company’s shares or of any class of shares, unless
the purchaser makes a tender offer to purchase all of
the target company’s shares or all the shares of the
particular class, as applicable. If, as a result of the
tender offer, either:

•

the purchaser acquires more than 95 per cent. of
the company’s shares or a particular class of shares
and a majority of the shareholders that did not
have a Personal Interest accepted the offer; or the
appointing of experienced and suitably qualified
staff to take responsibility for key business
functions to ensure maintenance of high standards
of performance.

the purchaser acquires more than 98 per cent.
of the company’s shares or a particular class of
shares; then, the Companies Law provides that the
purchaser automatically acquires ownership of
the remaining shares. However, if the purchaser is
unable to purchase more than 95 per cent. or 98

Plus500 Ltd. 2016 Annual Report46

Plus500 Ltd. 2016 Annual Report2016
FINANCIALS

4747
47

Plus500 Ltd. 2016 Annual ReportStatement of Directors’ Responsibilities

The Directors are responsible for preparing the annual
report and the financial statements in accordance with
applicable law and regulations.

The Companies Law requires the Directors to prepare
financial statements for each financial year. Under that
law the Directors have elected to prepare the financial
statements in accordance with International Financial
Reporting Standards (“IFRS”). The Directors must not
approve the financial statements unless they are
satisfied that they give a true and fair view of the state
of affairs of the Company and the profit or loss of the
Company for that period. In preparing these financial
statements, the Directors are required to:

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with applicable law. They
are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps
in the prevention and detection of fraud and other
irregularities.

The Directors are also responsible for preparing the
Directors’ Report, and the Directors’ Remuneration
Report.

•

Present fairly the financial position, financial
performance and cash flows of the Company;
Select suitable accounting policies in accordance
with IAS 8- Accounting policies, changes in
Accounting Estimates and Errors and then apply
them consistently;
Present information, including accounting policies,
in a manner that provide relevant, reliable,
consistent and understandable information;

• Make judgments and accounting estimates that are

•

reasonable;
State whether applicable IFRS have been followed,
subject to any material departures disclosed and
explained in the financial statements;
Provide additional disclosures when compliance
with the specific requirements in IFRS is insufficient
to enable users to understand the impact of
transactions, other events and conditions on
the Company’s financial position and financial
performance; and
Prepare the financial statements on the going
concern basis unless it is inappropriate to presume
the Company will continue in business.

Plus500 Ltd. 2016 Annual ReportFINANCIAL
STATEMENTS

4949
49

Plus500 Ltd. 2016 Annual Report50

Plus500 Ltd. 2016 Annual Report2016 Financial Statements Contents

Report of the Auditors

Consolidated financial statements in U.S. Dollars ($):

Consolidated statements of financial position

Consolidated statements of comprehensive income

Consolidated statements of changes in equity

Consolidated statements of cash flows

Notes to consolidated financial statements

Plus500 Ltd. 2016 Annual Report52

Plus500 Ltd. 2016 Annual ReportReport of the Auditors

To the shareholders of Plus500 Ltd.

We have audited the accompanying consolidated statements of financial position of Plus500 Ltd. (hereafter - the
Company) as of 31 December 2016 and 2015, and the related consolidated statements of comprehensive income,
statements of changes in equity and statements of cash flows for each of the two years in the period ended
31 December 2016. These financial statements are the responsibility of the Company's Board of Directors and
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Israel, including those
prescribed by the Israeli Auditors (Mode of Performance) Regulations, 1973. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by the Company's Board of Directors and management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company and its subsidiaries as of 31 December 2016 and 2015, and the statements
of comprehensive income, changes in equity and cash flows for each of the two years in the period ended 31
December 2016, in accordance with International Financial Reporting Standards (IFRS).

Haifa, Israel
6 March 2017

Kesselman & Kesselman
Certified Public Accountants (lsr.)
A member firm of PricewaterhouseCoopers International Limited

Kesselman & Kesselman, Building 25, MATAM, P.O BOX 15084 Haifa, 3190500, Israel
Telephone: +972 -4- 8605000, Fax:+972 -4- 8605001, www.pwc.com/il

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Assets
CURRENT ASSETS:

Cash and cash equivalents

Short-term bank deposit

Restricted deposits

Accounts receivable

Income tax receivable

NON-CURRENT ASSETS:

Long term restricted deposit

Property, plant and equipment, net

Intangible assets, net

Deferred income taxes

As of 31 December

2016

2015

Note

U.S. dollars in thousands

10a

136,481

156,497

10b

356

9,690

4,147

181

9,761

227

150,711

166,704

102

3,429

113

353

3,997

1,977

173

2,266

Total assets

154,708

168,970

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

Liabilities and Shareholders’ Equity
CURRENT LIABILITIES:

Trade payables – due to clients

Other accounts payable and accruals:

Service supplies

Other

Income tax payable

Share-based compensation

Dividend

NON-CURRENT LIABILITIES-

Share-based compensation

EQUITY:

Ordinary shares

Share premium

Retained earnings

Total equity

Total equity and liabilities

As of 31 December

2016

2015

Note

U.S. dollars in thousands

10c

10d

1,588

1,519

5,827

7,083

1,912

2,298

18,708

13,391

3,480

7,972

372

24,368

51,102

214

317

22,220

113,463

136,000

154,708

317

22,220

95,117

117,654

168,970

Asaf Elimelech
Chief Executive Officer

Elad Even-Chen
Group Chief Financial Officer

Alastair Neil Gordon
Non-Executive Director and
Chairman

Date of approval of the annual financial information by the Company’s Board of Directors:
6 March 2017

•

The accompanying notes are an integral part of the financial statements.

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

TRADING INCOME

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:

Selling and marketing

Administrative and general

Loss on disposal of property, plant and equipment

INCOME FROM OPERATIONS

Financial income

Financial expenses

FINANCING INCOME (EXPENSES) – net

INCOME BEFORE TAXES ON INCOME

TAXES ON INCOME

PROFIT AND COMPREHENSIVE INCOME
FOR THE PERIOD

Year ended 31 December

2016

2015

Note

U.S. dollars in thousands

327,927

275,651

11a

11b

157,277

125,413

20,132

17,647

109

150,518

132,482

3,624

2,160

1,464

151,982

34,740

117,242

178

4,776

(4,598)

127,884

31,317

96,567

In U.S. dollars

EARNINGS PER SHARE (basic and diluted)

1.02

0.84

•

The accompanying notes are an integral part of the financial statements.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Ordinary
shares

Share
premium

Retained
earnings

Total

U.S. dollars in thousands

BALANCE AT 1 JANUARY 2015
Profit and comprehensive income for the year

TRANSACTION WITH SHAREHOLDERS-

Dividend

317

22,220

BALANCE AT 31 DECEMBER 2015
Profit and comprehensive income for the year

TRANSACTION WITH SHAREHOLDERS-

Dividend

317

22,220

87,923

96,567

110,460

96,567

(89,373)

95,117

117,242

117,654

117,242

(98,896)

BALANCE AT 31 DECEMBER 2016

317

22,220

113,463

136,000

•

The accompanying notes are an integral part of the financial statements.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:
Cash generated from operations (see Appendix A)

Income tax paid – net

Interest received

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits withdrawals

Purchase of deposits

Purchase of restricted deposits

Purchase of property, plant and equipment

Proceeds from sale of property, plant and equipment

Purchase of intangible assets

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES-

Year ended 31 December

2016

2015

U.S. dollars in thousands

153,294

(44,548)

161

128,078

(42,658)

108,907

85,475

(253)

(1,905)

(47)

(2,205)

1,039

(38)

(136)

(819)

(54)

Dividend paid to equity holders of the Company (see Appendix B)

(123,264)

(65,005)

INCREASE (DECREASE ) IN CASH AND CASH EQUIVALENTS

Balance of cash and cash equivalents at beginning of year

Losses from exchange differences on cash and cash equivalents

BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR

(16,562)

156,497

(3,454)

136,481

20,488

139,164

(3,155)

156,497

•

The accompanying notes are an integral part of the financial statements.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Year ended 31 December

2016

2015

U.S. dollars in thousands

APPENDICES CONSOLIDATED STATEMENT OF CASH FLOWS
APPENDIX A:

CASH GENERATED FROM OPERATIONS -
Net income for the period

117,242

96,567

ADJUSTMENTS REQUIRED TO REFLECT THE CASH FLOWS
FROM OPERATING ACTIVITIES:

Depreciation and amortization

Loss on disposal of property, plant and equipment

Taxes on income

Interest and foreign exchange losses on operating activities

OPERATING CHANGES IN WORKING CAPITAL:

Decrease (increase) in accounts receivable

Increase (decrease) in trade payables-due to clients

Increase (decrease) in other accounts payable:

Service supplies

Other

Liability for share-based compensation

Settlement of share-based compensation

CASH FLOWS FROM OPERATING ACTIVITIES

479

34,740

2,942

38,161

(7,564)

3,603

2,544

(832)

(2,109)

153,294

283

109

31,317

2,927

34,636

(5,834)

(4,366)

5,560

1,098

417

(3,125)

128,078

APPENDIX B: NON-CASH TRANSACTIONS-

On 23 November 2015 the Company declared an interim dividend in an amount of $24,368 thousands ($0.2121 per
share). The dividend was paid to the shareholders on 29 February 2016.

•

The accompanying notes are an integral part of the financial statements.

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General Information
Information on activities of plus500 Ltd and its
subsidiaries (hereafter- the Group):
Plus500 Ltd. (hereafter – the Company) was established
in 2008 in Israel as a private limited company with the
name Investsoft Ltd. On 18 June 2012 the Company
changed its name to Plus500 Ltd. The Company has
developed a trading platform for private clients, enabling
trading on contracts for differences (hereafter - CFD) on
shares, indices, commodities, ETFs, options and foreign
exchange.

On 24 July 2013, the Company's shares were listed for
trading on the London Stock Exchange in the Company's
initial public offering ("IPO").

Plus500UK Limited (hereafter - UK Subsidiary or
Plus500UK) is a subsidiary of the Company with its main
offices located in London, UK. Plus500UK is regulated by
the Financial Conduct Authority ("FCA") to offer CFDs.

Plus500AU Pty Ltd (hereafter - AU Subsidiary or
Plus500AU) is a subsidiary of the Company with its
main office located in Sydney, Australia. Plus500AU has
an Australian Securities and Investments Commission
("ASIC") license, a license from the New Zealand regulator,
the Financial Markets Authority ("FMA") and a license from
the South African regulatory ("FSB") (see note 16).

Plus500CY Ltd (hereafter - CY Subsidiary or Plus500CY) is a
subsidiary of the Company with its main offices located in
Limassol, Cyprus. Plus500CY has a Cyprus Securities and
Exchange Commission ("CYSEC") license.

Plus500IL Ltd (hereafter - IL Subsidiary or Plus500IL)
is a subsidiary of the Company with its main offices
located in Tel Aviv, Israel. Plus500IL is regulated by the
Israeli Securities Authority (“ISA”) to offer CFDs to Israeli
customers.

Plus500BG EOOD (hereafter - BG Subsidiary or Plus500BG)
is a subsidiary of the Company located in Sofia, Bulgaria.
Plus500BG provides only operational services and it is not
regulated.

The Group is engaged in one operating segment - CFD
trading.

The address of the Company's principal offices is
Building 25, Matam, Haifa 31905, Israel.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies:
a. Basis of Preparation
The Group's financial information as of 31 December
2016 and 2015 and for each of the two years for the
period ended on 31 December 2016 are in compliance
with International Financial Reporting Standards that
consist of standards and interpretations issued by the
International Accounting Standard Board (hereafter –
IFRS).

c. Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provided to the
chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the
operating segments.
As stated in note 1 above, the Group operates in one
operating segment: CFD trading.

The significant accounting policies described below
have been applied consistently in relation to all the
reporting periods, unless otherwise stated.

The financial information has been prepared under the
historical cost convention, subject to adjustments in
respect of revaluation of financial assets at fair value
through profit or loss presented at fair value.

b. Principles of consolidation:
The Company controls the subsidiaries since it is
exposed to, or has rights to, variable returns from its
involvement with the entities and has the ability to
affect those returns through its power over them.

1. The consolidated financial statements include the
accounts of the Company and its subsidiaries.

Intercompany balances and transactions between
the Group’s entities have been eliminated.

3. Accounting policies of the subsidiaries have been
changed where necessary to ensure consistency
with the policies adopted by the Group.

d. Foreign currency translation:
1. Functional and Presentation Currency

Items included in the financial information of each
of the Group’s entities are measured using the
currency of the primary economic environment
in which that entity operates (hereafter - the
functional currency). The consolidated financial
statements are presented in U.S. dollars ("USD"),
which is the Group's functional and presentation
currency.

2. Transactions and balances

Foreign currency transactions in currencies
different from the functional currency (hereafter –
foreign currency) are translated into the functional
currency using the exchange rates prevailing at the
dates of the transactions or valuation where items
are re-measured.

Gains and losses arising from changes in
exchange rates are presented in the statement of
comprehensive income among 'financial income
(expenses)'.

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2 – Summary of Significant Accounting Policies (continued):
e. Property, plant and equipment
The cost of a property, plant and equipment item is
recognized as an assets only if: (a) it is probable that
the future economic benefits associated with the item
will flow to the Group and (b) the cost of the item can
be measured reliably.

g. Financial instruments:
1. Classification

The Group classifies its financial assets in the
following categories: at fair value through profit or
loss and loans and receivables. The classification
depends on the purpose for which the financial assets
were acquired. Group management determines
the classification of its financial assets at initial
recognition.

a. Financial instruments at fair value through

profit or loss
This category includes financial assets and
financial liabilities held for trading. A financial
instrument is classified in this category if acquired
principally for the purpose of selling in the short
term, or if designated by management in this
category. Derivatives are also categorized as held
for trading unless they are designated as hedges.
Assets in this category are classified as current
assets if expected to be settled within 12 months;
otherwise, they are classified as non-current.
The Group's financial instruments at fair value
through profit or loss comprise 'Financial
derivative open positions' offset from, or
presented with, 'Customer deposits, net' within
'Trade payables - due to clients' (see note 2j) in
the consolidated statements of financial position.

b. Loans and receivables

Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. They are included in current assets,
except for maturities greater than 12 months after
the statement of financial position date. These
are classified as non-current assets.

The Group's loans and receivables comprise
'Cash and cash equivalents', 'Short-term
bank deposit', 'Restricted deposits', 'Accounts
receivable' and 'Long-term restricted deposit' in
the consolidated statements of financial position.

Property, plant and equipment are stated at historical
cost less accumulated depreciation. Historical cost
includes expenditure that is directly attributable to the
acquisition of the items and only when the two criteria
mentioned above for recognition as assets are met.

Depreciation is calculated using the straight-line
method to allocate the cost of property, plant and
equipment less their residual values over their
estimated useful lives, as follows:

Percentage of
annual depreciation

Computers and office
equipment

Leasehold improvements

6-33

Leasehold improvements are amortized by the straight-
line method over the terms of the lease (ten years)
which is shorter than the asset's useful life.

The asset’s residual values, the depreciation method
and useful lives are reviewed, and adjusted if
appropriate, at least once a year.

An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated
recoverable amount.

f. Intangible Assets - computer software
Acquired computer software licenses are capitalized
on the basis of the costs incurred to acquire and bring
to use the specific software licenses. These costs are
amortized over their estimated useful lives (3-5 years)
using the straight line method.

Costs associated with maintaining computer software
programs are recognized as an expense as incurred.

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2 – Summary of Significant Accounting Policies (continued):
h. Cash and cash equivalents
g. Financial instruments (continued):
2. Recognition and measurement
Cash and cash equivalents include cash in hand, short-
term bank deposits and other highly liquid short-term
investments, the original maturity of which does not
exceed three months.

Investments are initially recognized at fair value
plus transaction costs for all financial assets not
measured at fair value through profit or loss.
Financial assets measured at fair value through
profit or loss, are initially recognized at fair value
and transaction costs are expensed in profit or loss.
Financial assets are derecognized when the rights
to receive cash flows from the investments have
expired or have been transferred and the Group
has transferred substantially all risks and rewards
of ownership. Financial assets at fair value through
profit or loss are subsequently carried at fair value.
Receivables are measured in subsequent periods at
amortized cost using the effective interest method.

Gains or losses arising from changes in the fair
value of the 'financial instruments at fair value
through profit or loss' category are presented in the
consolidated statements of comprehensive income
within 'Trading income' in the period in which they
arise.

A financial instrument is derecognized when
the contract that gives rise to it is settled, sold,
cancelled or expires.

3. Offsetting financial instruments

Financial assets and liabilities are offset and
the net amount reported in the consolidated
statements of financial position when there is a
legally enforceable right to offset the recognized
amounts and there is an intention to settle on a
net basis, or realize the asset and settle the liability
simultaneously.

The legally enforceable right must not be
contingent on future events and must be
enforceable in the normal course of business and
in the event of default, insolvency or bankruptcy of
the Company or the counterparty.

All of the subsidiaries, except the BG Subsidiary,
hold money on behalf of clients in accordance with
the client money rules of the UK Financial Conduct
Authority (FCA), Australian Securities and Investments
Commission (ASIC), New Zealand Financial Markets
Authority (FMA), Cyprus Securities and Exchange
Commission (CYSEC) and Israel Securities Authority
(ISA), respectively. Such monies are classified as
‘segregated client funds’ in accordance with the
regulatory requirements. Segregated client funds
comprise retail client funds held in segregated client
money accounts.

Segregated client money accounts hold statutory
trust status restricting the Group’s ability to control
the monies and accordingly such amounts are not
reflected as Company's assets in the consolidated
statements of financial position.

i. Other accounts payable
Other accounts payable are obligations to pay for
services that have been acquired in the ordinary course
of business from suppliers. Other accounts payable are
classified as current liabilities if payment is due within
one year or less. If not, they are presented as non-
current liabilities.

Other accounts payable are recognized initially at fair
value and subsequently measured at amortized cost
using the effective interest method.

j. Trade payables – due to clients
As part of its business, the Group receives from its
customers deposits to secure their trading positions,
held in segregated client money accounts.

Assets or liabilities resulting from profits or losses on
open positions are carried at fair value. Amounts due
from or to clients are netted against, or presented with,

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2 – Summary of Significant Accounting Policies (continued):
j. Trade payables – due to clients (continued):
the deposit with the same counterparty where a legally-
enforceable netting agreement is in place and where it
is anticipated that assets and liabilities will be netted on
settlement.

obligations once the contributions have been paid.
The contributions are recognized as employee benefit
expense commensurate with receipt from employees of
the service in respect of which they are entitled for the
contributions.

Trade payables - due to clients represent balances with
clients where the combination of customers deposits
and the valuation of financial derivative open positions
result in an amount payable by the Group.

Trade payables - due to clients are classified as current
liabilities as the demand is due within one year or less.

k. Share-based compensation
The Group operates a cash- settled share-based
compensation plan, under which it receives services
from employees as consideration for rights. The fair
value of the employee services received in exchange for
the grant of the rights are recognized as an expense in
the consolidated statements of comprehensive income.
At the end of each reporting period, the
Group evaluates the rights based on their fair value
and the change in the fair value is recognized in the
consolidated statements of comprehensive income.

l. Employee benefits and Pension Obligations
The Group operates various pension schemes. The
schemes are generally funded through payments to
insurance companies or trustee-administered pension
funds.

The Group has defined contribution plans. A defined
contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity.
The Group has no legal or constructive obligations
to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits
relating to employee service in the current and prior
periods.

The Group pays contributions to publicly or
privately administered pension insurance plans on a
mandatory basis. The Group has no further payment

m. Trading income
Trading income is recognized when it is probable that
economic benefits associated with the transaction
will flow to the Group and the income can be reliably
measured.

Trading income represents gains (including commission)
and losses arising on client trading activity, primarily in
contracts for difference on shares, indexes, commodities
and foreign exchange. Open client positions are carried
at fair market value and gains and losses arising on this
valuation are recognized as trading income, as well as
gains and losses realized on positions that have closed.

Trading income is reported gross of commissions
to agents as the Group is acting as a principal and is
exposed to the significant risks and rewards associated
with its trading transactions with its customers.
The said commissions are included in 'selling and
marketing' expenses and disclosed separately in note
11a.

n. Dividends
Dividend distribution is recognized as a liability in the
Group's statement of financial position on the date on
which the dividends are approved by the Group’s Board
of Directors.

o. Current income tax
Tax is recognized in profit or loss, except to the extent
that it relates to items recognized directly in equity. In
this case, the tax is also recognized directly in equity.

The current income tax charge is calculated on the basis
of the tax laws enacted at the statement of financial
position date in countries where the Company

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2 – Summary of Significant Accounting Policies (continued):
and the subsidiaries operate and generate taxable
income. Management periodically evaluates positions
taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.

operating leases (net of any incentives received from
the lessor) are charged to profit or loss on a straight-line
basis over the period of the lease.

p. Deferred income tax
Deferred income tax is recognized, using the liability
method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements.
Deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction
other than a business combination that at the time of
the transaction affects neither accounting nor taxable
profit and loss.

Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted
by the statement of financial position date and are
expected to apply when the related deferred income
tax asset is realized or the deferred income tax liability is
settled.

The Group recognizes deferred taxes on temporary
differences arising on investments in subsidiaries,
except where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable
that the temporary difference will not reverse in the
foreseeable future.

Deferred income tax is recognized in profit or loss, except
to the extent that it relates to items recognized directly
in equity. In this case, the deferred income tax is also
recognized directly in equity.

Deferred income tax assets are recognized only to the
extent that it is probable that future taxable profit will be
available against which the temporary differences can
be utilized.

q. Leases
Leases in which a significant portion of the risks and
rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under

r. New International Financial Reporting Standards,
Amendments to Standards and New interpretations
1. New and amended standards adopted by the
Group for the first time for the financial year
beginning on or after 1 January 2016-

Amendment to IAS 1 - "Presentation of financial
statements" (hereafter – IAS 1).
The amendment to IAS 1 deals with the following
topics: materiality and its impact on disclosures
in the financial statements, disaggregation and
subtotals, order of notes in the financial statements
and disclosure of new accounting policy.
This amendment did not have a significant effect on
the Group's financial statements.

2. New and amended standards not yet adopted by

the Group for reporting periods starting 1 January
2016:

IFRS 9 – "Financial Instruments"

(hereafter – IFRS 9).
IFRS 9, ‘Financial instruments’, addresses the
classification, measurement and recognition
of financial assets and financial liabilities. The
complete version of IFRS 9 was issued in July 2014.
It replaces the guidance of IAS 39 that relates to
the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed
measurement model and establishes three primary
measurement categories for financial assets:
amortized cost, fair value through OCI and fair value
through P&L. The basis of classification depends
on the entity's business model and the contractual
cash flow characteristics of the financial assets.
Investments in equity instruments are required to be
measured at fair value through profit or loss with the
irrevocable option at inception to present changes
in fair value in OCI not recycling. There is now a
new expected credit losses model that replaces the
incurred loss impairment model used in IAS 39.

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2 – Summary of Significant Accounting Policies (continued):

r. New International Financial Reporting
Standards, Amendments to Standards and New
interpretations (continued):
For financial liabilities there were no changes to
classification and measurement except for the
recognition of changes in own credit risk in other
comprehensive income, for liabilities designated at
fair value through profit or loss. IFRS 9 relaxes the
requirements for hedge effectiveness by replacing
the bright line hedge effectiveness tests. It requires
an economic relationship between the hedged item
and hedging instrument and for the ‘hedged ratio’ to
be the same as the one management actually uses
for risk management purposes. Contemporaneous
documentation is still required but is different to
that currently prepared under IAS 39. The standard
is effective for accounting periods beginning on or
after 1 January 2018. Early adoption is permitted.
The Group estimates that there will be no material
impact in the application of IFRS 9 on its financial
statements.

IFRS 15- "Revenue from Contracts with Customers"
(hereafter- IFRS 15).
Upon first-time adoption, IFRS 15 will replace
existing IFRS guidance on revenue recognition.
The core principle of IFRS 15 is that an entity
recognizes revenue to depict the transfer of
promised goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange for those
goods or services.
IFRS 15 introduces a single model for revenue
recognition, in which an entity recognizes revenue in
accordance with that core principle by applying the
following five steps:
1.
2.

Identify the contract(s) with a customer.
Identify the performance obligations in the
contract.

3. Determine the transaction price.
4. Allocate the transaction price to the separate
performance obligations in the contract.
5. Recognize revenue as each performance

obligation is satisfied.

IFRS 15 provides guidance about various issues
related to the application of that model, including:
recognition of revenue from variable consideration
set in the contract, adjustment of transaction for
the effects of the time value of money and costs to
obtain or fulfill a contract.

The standard extends the disclosure requirements
regarding revenue and requires, among other things,
that entities disclose qualitative and quantitative
information about significant judgments made by
management in determining the amount and timing
of the revenue.

On 22 July 2015, the IASB released a decision on
deferral of the effective date of the standard by one
year, and the standard will be applied retrospectively
for annual periods beginning on 1 January 2018, with
transitional provisions. Early adoption is permitted.
The Group is exploring the expected impact of IFRS
15 on its financial statements.

IFRS 16 – "Leases" (hereafter – IFRS 16)
In January 2016, the IASB issued IFRS 16 - Leases
which sets out the principles for the recognition,
measurement, presentation and disclosure of
leases for both parties to a contract and replaces the
previous leases standard, IAS 17 - Leases.
IFRS 16 eliminates the classification of leases for
the lessee as either operating leases or finance
leases as required by IAS 17 and instead introduces
a single lessee accounting model whereby a lessee
is required to recognize assets and liabilities for all
leases with a term that is greater than 12 months,
unless the underlying asset is of low value, and to
recognize depreciation of leases assets separately
from interest on lease liabilities in the income
statement. IFRS 16 is effective from 1 January 2019
with early adoption allowed only if IFRS 15 - Revenue
from Contracts with Customers is also applied.
The Group estimates that there will be no material
impact in the application of IFRS 16 on its financial
statements.

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 3 - Financial Risk Management

The Group specializes in the field of Contracts for
Differences (‘‘CFD’’) for retail clients only, primarily
on commodities, indices, stocks, options, ETFs and
foreign exchange. The Group activities expose it to
a variety of financial risks: market risk (including
currency risk and price risk), credit risk and
liquidity risk. The Group's overall risk management
programme focuses on the unpredictability of
financial markets and seeks to minimize potential
adverse effects on the Group's financial performance.

a. Market risk
The management of the Group deems this risk as the
highest risk the Group incurs.
Market risk is the risk that changes in market prices will
affect the Group's income or the value of its holdings
of financial instruments. This risk can be divided
into market price risk and foreign currency risk, as
described below.

The Group’s market risk is managed on a Group-wide
basis and exposure to market risk at any point in time
depends primarily on short term market conditions
and the levels of client activity. The Group utilizes
market position limits for operational efficiency and
does not take proprietary positions based on an
expectation of market movements. As a result, not all
net client exposures are hedged and the Group may
have a substantial net position in any of the financial
market in which it offers products.

The Group’s market risk policy incorporates a
methodology for setting market position limits,
consistent with the Group risk appetite, for each
financial instrument in which the Group clients can
trade, as well as certain markets which the CEO
considers to be correlated. These limits are determined
based on the Group clients’ trading levels, volatilities
and the market liquidity of the underlying financial
product or asset class and represent the maximum
long and short client exposure that the Group will hold
without hedging the net client exposure.

The Group’s real-time market position monitoring
system is intended to allow it to continually monitor
its market exposure against these limits. If exposures
exceed these limits, the Group either hedges, or new
client positions are rejected under the Group’s policy.

It is the approach of the Group to observe during
the year the ‘natural’ hedge arising from the Group’s
global clients in order to reduce the Group’s net market
exposure.

Under the Group’s policy, if it is not cost effective to
hedge market positions, the Group will review the
appropriate action.

The Group’s exposure to market risk at any point
in time depends primarily on short-term market
conditions and client activities during the trading day.
The exposure at each statement of financial position
date may therefore not be representative of the market
risk exposure faced by the Group over the year. The
Group’s exposure to market risk is determined by the
exposure limits described above which change from
time to time.

1. Market price risk

This is the risk that the fair value of a financial
instrument fluctuates as a result of changes in
market prices other than due to the effect of
transactional foreign currency exposures or interest
rate risks.

The Group has market price risk as a result of its
trading activities CFDs on foreign exchange, stocks,
indices, commodities and ETFs, part of which is
naturally hedged as part of the overall market risk
management. The exposure is monitored on a
Group-wide basis.

Exposure limits are set by the risk manager for each
product, and also for groups of products where it is
considered that their price movements are likely to
be positively correlated.

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 3 - Financial Risk Management (continued):
Daily profit on closed positions:

balance denominated in Australian Dollar on
income after taxes is $ 54 thousand (2015: $ 85
thousand).

The exposure in respect to balances denominated
in other currencies is immaterial.

b. Credit risk
The Group operates a real-time market-to-market
trading platform with customers' profits and losses
being credited and debited automatically to their
accounts.

Under the Group's policy, costumers cannot owe the
Group's funds when losing more than they have in their
accounts.

Client credit risk principally arises when a customer's
total funds deposited (margin and free equity) are
insufficient to cover any trading losses incurred. In
particular, costumer credit risk can arise where there
are significant, sudden movements in the market
(i.e. due to high general market volatility or specific
volatility relating to an individual financial instrument
in which a customer has an open position).

The Group's offering is margin-traded. If the market
moves adversely by more than the customer's
maintenance margin, the Group is exposed to
customer credit risk.

The principal types of customer credit risk exposures
are managed by monitoring all customer positions
on a real time basis. If customers' funds are below the
required margin level, their positions are liquidated
(margin call).

The carrying amount of the Group's financial assets
best represents their maximum exposure to credit risk.

The Group has no material financial assets that are
past due or impaired as at the reporting dates.

As of 31 December 2016 and 2015 counterparties
holding about 96% and 84%, respectively, of the

2016

2015

U.S. dollars in thousands

Highest profit

Highest loss

Average

7,917

(2,610)

864

5,732

(725)

757

During the years 2016 and 2015, as to the closed
positions, there were 312 and 337 profitable trading
days, respectively.
The Group is of the opinion that its exposure to market
risk is managed among others by capping the exposure
of each instrument through risk limitation protocols.

2. Foreign currency risk

Transactional foreign currency exposures represent
financial assets or liabilities denominated in
currencies other than the functional currency
of the Group. Transaction exposures arise in the
normal course of business.

Foreign currency risk is managed on a Group-wide
basis, while the Group exposure to foreign currency
risk is not considered by the Board of Directors to
be significant. The Group monitors transactional
foreign currency risks including currency statement
of financial position exposures, equity, commodity,
interest and other positions denominated in
foreign currencies and trades on foreign currencies.

At 31 December 2016, if the U.S. dollar had
strengthened by 1% against Pound sterling with
all other variables unchanged the exposure in
respect of balances denominated in Pound sterling
on income after taxes is $ 27 thousand (2015: $ 61
thousand); if the U.S. dollar had strengthened by
1% against Euro with all other variables unchanged
the exposure in respect of balance denominated in
Euro on income after taxes is $ 64 thousand (2015:
$ 109 thousand); if the U.S dollar had strengthened
by 1% against Australian Dollar with all other
variables unchanged the exposure in respect of

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 3 - Financial Risk Management (continued):
Group's cash and cash equivalents, credit cards and
deposits are Barclays, Bank Leumi, Credit Suisse,
Commonwealth Bank, Societe Generale and BNP. The
credit ratings as of 31 December 2016 are as follows:

wide basis. The Group's approach to managing
liquidity is to ensure it will have sufficient liquidity
to meet its financial liabilities when due, under both
normal circumstances and stressed conditions.

Financial institution

Rating*

Credit Suisse

Commonwealth Bank

Societe Generale

Barclays

Bank Leumi

BNP

AA-

A-

* The Financial institutions were rated by the same
third party

The remaining counterparties, for the year ended 31
December 2016 and 2015 hold about 4%, and 16%,
respectively, of Group's cash and cash equivalents.
Those amounts are held in a few banks worldwide and
the balance in each of those banks does not exceed 6%
of total cash and cash equivalents.

The Group’s largest credit exposure to any single
bank as of 31 December 2016 was $ 54,301 thousands
or 27% of the exposure to all banks (2015: $ 65,231
thousands or 33%).

c. Concentration risk
Concentration risk is defined as all risk exposures with
a loss potential which is large enough to threaten
the solvency or the financial position of the Group.
In respect of financial risk, such exposures may be
caused by credit risk, market risk, liquidity risk or a
combination or interaction of those risks (see note 13).

d. Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations arising from its
financial liabilities that are settled by delivering cash or
other financial assets.

Liquidity risk is managed centrally and on a Group-

The Group's approach is to ensure that there will be no
material liquidity mismatches with regard to liquidity
maturity profiles due to the very short-term nature of
its financial assets and liabilities. Liquidity risk can,
however, arise as a result of the Group's adopting what
it considers to be best industry practice in placing
some retail client funds in segregated client money
accounts. A result of this policy is that short-term
liquidity ‘gaps’ can potentially arise in periods of very
high client activity or significant increases in global
financial market levels.
The contractual maturity of the financial liabilities is up
to two months.

e. Capital Management:
1. The UK Subsidiary is regulated by the UK’s

Financial Conduct Authority (“FCA”). The UK
Subsidiary manages its capital resources on the
basis of regulatory capital requirements (hereafter -
Pillar 1) and its own assessment of capital required
to support all material risks throughout the
business (hereafter - Pillar 2). The UK Subsidiary
manages its regulatory capital through an Internal
Capital Adequacy Assessment Process (known as
the ICAAP) in accordance with guidelines and rules
implemented by the FCA.

Both Pillar 1 and Pillar 2 assessments are
compared with total available regulatory capital on
a daily basis and monitored by the management
of the Group. As of 31 December 2016 and 2015,
the UK Subsidiary had £ 16,436 thousands and
£ 19,061 thousands, respectively, of regulatory
capital resources, which is in excess of both its
regulatory capital requirement (Pillar 1) and the
internally measured capital requirement (Pillar 2).

2. The CY Subsidiary is regulated by the Cyprus
Securities and Exchange Commission (the
“CySEC”). The CY Subsidiary manages its capital

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 3 - Financial Risk Management (continued):

capital in accordance with rules and guidelines
implemented by ISA. As at 31 December 2016,
the IL Subsidiary held regulated capital of
$3,202 thousands, which is in excess of its ISA
requirements.

f. Fair value estimation
Financial derivative open positions (offset from, or
presented with, deposits from clients within 'Trade
payable - due from clients') (see also note 10c) are
measured at fair value through profit or loss using
valuation techniques. The said valuation techniques
are based on inputs other than quoted prices in active
market that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).

These valuation techniques maximize the use of
observable market data where it is available and rely as
little as possible on entity specific estimates. Since all
significant inputs required for the fair value estimations
of the said instruments are observable, the said
instruments are included in level 2.

Specific valuation techniques used to value financial
instruments are based on quoted market prices at the
statement of financial position date and an additional
predetermined amount.

resources on the basis of regulatory capital
requirements (hereafter - Pillar 1) and its own
assessment of capital required to support all
material risks throughout the business (hereafter -
Pillar 2). The CY Subsidiary manages its regulatory
capital through an Internal Capital Adequacy
Assessment Process (known as the ICAAP) in
accordance with guidelines and rules implemented
by the CySEC.
The CY Subsidiary monitors on a frequent basis
its Pillar 1 capital requirements and ensures
that its capital position remains always above
the minimum regulatory thresholds. As of 31
December 2016 and 2015, the regulatory capital
of the CY Subsidiary was €18,046 thousands and
€12,373 thousands, respectively, which is in excess
of both its regulatory capital requirement (Pillar 1)
and the internally measured capital requirement
(Pillar 2).
Moreover, the Group is evaluating its overall risk
profile and capital position through its internal
capital adequacy assessment process, which is
performed at least on an annual basis.

3. The AU Subsidiary is regulated by the Australian
Securities and Investment Commission (ASIC).
The AU Subsidiary manages its capital resources
on the basis of regulatory capital requirements
and its own assessment of capital required to
support all material risks. The AU Subsidiary
manages its capital through its Net Tangible Assets
(NTA) assessment in accordance with rules and
guidelines implemented by ASIC.
As at 31 December 2016 and 2015, the AU
Subsidiary held Net Tangible Assets of $8,983
thousands and $7,326 thousands, respectively
of regulatory capital, which is in excess of its NTA
requirements.

4. The IL Subsidiary is regulated by the Israeli
Securities Authority (hereafter – ISA). The IL
Subsidiary manages its capital resources on the
basis of regulatory capital requirements and its
own assessment of capital required to support
all material risks. The IL Subsidiary manages its

Plus500 Ltd. 2016 Annual Report

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Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 6 - Share Capital

Composed of ordinary shares of NIS 0.01 par value,
as follows:

Authorized

Issued and fully paid

The amounts of dividends and the amounts of
dividends per share for the years 2016 and 2015
declared and distribute by the Company's Board of
Directors are as follows:

Date of declaration

24 February 2015

23 November 2015

16 February 2016

2 September 2016

The dividends paid in 2016 and 2015 amounted to
$123,264 thousands (along with dividend declared on
23 November 2015 in the amount of $24,368 thousands
and paid to shareholders on 29 February 2016) ($1.073
per share) and $65,005 thousands ($0.566 per share),
respectively.

Number of shares

31 December

2016

2015

300,000,000

114,888,377

Amount of dividend in thousands of $

65,005

24,368

72,196

26,700

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The CY Subsidiary is assessed for direct and indirect
tax under tax laws in Cyprus. The corporation tax rate
applicable to the CY Subsidiary in Cyprus is 12.5%.

Other subsidiaries in the Group do not have significant
taxable income and the overall effect of the income
of those subsidiaries on the Group's tax expenses is
immaterial.

c. Deferred tax asset
The Deferred tax assets in 2016 and 2015 in total
amount of $353 thousands and $173 thousands,
respectively, is presented among "non-current assets".
The Defferred tax assets in 2016 and 2015 were
computed at tax rate of 24% and 26.5%, respectively.

The Deferred tax assets which will be settled in 2017 are
in total amount of $353 thousands.

The deferred tax assets in the financial statements,
are mainly caused by payroll expenses of share-based
compensation plan (see note 9).

Note 7 - Taxes on Income:
a. Corporate taxation in Israel
Under the "Tax Burden Distribution Law",
corporate tax rate is 25% as from 2012.
On 5 August 2013, the Law for Change of National
Priorities, 2013 (hereinafter - the Law) was published
in Reshumot (the Israeli government official gazette),
enacting, raising the corporate tax rate beginning in
2014 and thereafter to 26.5% (instead of 25%).

On 5 January 2016, the Law for the Amendment to the
Income Tax Ordinance (No. 216), 2016 was published
in the official gazette. The said law stipulated the
reduction of the rate of corporate tax from 26.5% to
25% commencing tax year 2016.

In December 2016, the Economic Efficiency Law
(Legislative Amendments for Implementing the
Economic Policy for the 2017 and 2018 Budget Year),
2016 was published, introducing a gradual reduction
in corporate tax rate from 25% to 23%. However, the
law also included a temporary provision setting the
corporate tax rate in 2017 at 24%. As a result, the
corporate tax rate will be 24% in 2017 and 23% in 2018
and thereafter.

The decrease in the tax rate did not materially affect
the Company's deferred tax assets.

b. Corporate taxation in subsidiaries
The UK Subsidiary is assessed for the tax under the tax
laws in the UK. The principal tax rate applicable to the
UK Subsidiary in the UK is 20%.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 7 - Taxes on Income (continued):
d. Taxes on income included in the income
statements for the reported periods:

Current taxes:
Current taxes in respect of current year's profits

Current taxes in respect of previous years

Deferred taxes:

Reversal (recognition) of deferred taxes asset (see c above)

Changes in tax rates applicable to deferred tax assets

Year ended 31 December

2016

2015

U.S. dollars in thousands

34,920

(196)
16

31,181

(186)

30,995

322
-

Taxes on income expenses

34,740

31,317

e. Reconciliation of the theoretical tax expense
Following is a reconciliation of the theoretical tax
expense, assuming all income is taxed at the regular
tax rates applicable to companies in Israel (note 7a
above) and the actual tax expense:

Year ended 31 December

2016

2015

U.S. dollars in thousands

Income before taxes on income, as reported in the income statements

151,982

127,884

Theoretical tax expense in respect of this year’s income - at 25% (2015: 26.5%)

Decrease in taxes resulting from different tax rates applicable to foreign subsidiaries

Decrease in taxes in respect of currency differences and expenses not deductible for tax purposes

Decrease in taxes resulting of final tax assessments

Increase in taxes resulting from changes in tax rates applicable to deferred tax assets

Taxes on income for the reported period

37,996

33,889

(2,504)

(2,287)

(768)

(99)

(186)

34,740

31,317

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As the legislation process relating to the law
memorandum has not been completed, management
believes that the temporary provision for 2007 to 2013
may be extended to cover 2014, 2015 and 2016 as
well. Due to the application of temporary provision on
the 2007-2013 tax years, as above, and the possibility
for extension to 2014, 2015 and 2016, management
expects at this stage that the new legislation will not
apply to tax years preceding 2017.

Considering that the temporary provision applies to
the 2007-2013 tax years and Company's assessment
on the likelihood for extension to cover 2014, 2015 and
2016, as above, the Company computed its taxable
income for 2009-2016 based on the Israeli accounting
standards that existed prior to adopting IFRS in Israel.

g. A final tax assessments has been received by the
Company for the year ended 31 December 2013.
The UK Subsidiary, AU Subsidiary, CY Subsidiary and IL
Subsidiary have only been subject to self-assessments
since their incorporation.

Note 8 – Restricted deposits
In April 2014 the Company has entered into a lease
agreement with a third party for its headquarters facility in
Haifa. In June 2015 and in November 2015 the Company
signed two additions to the lease contract from April 2014
for leasing an additional area (see note 14).

The restricted deposit serves as a security for a bank
guarantee provided in favor of the said third party in the
amount of US $ 278 thousands (NIS 1,069 thousands)
until 30 June 2017.

In addition, the IL Subsidiary has restricted deposits in
amounts of US $103 thousands and the BG Subsidiary
has restricted deposits in amounts of US $77 thousands.

Note 7 - Taxes on Income (continued):

f. Effect of adoption of IFRS in Israel on tax liability
As mentioned in note 2a, the Group prepares its
financial statements in accordance with IFRS.

IFRS standards differ from accounting principles
generally accepted in Israel and accordingly, the
preparation of financial statements in accordance
with IFRS may reflect a financial position, results of
operations and cash flows that are materially different
from those presented in financial statements presented
in accordance with accounting principles generally
accepted in Israel.

In accordance with the law for the amendment of
the Income Tax Ordinance which was published in
the official gazette in the years 2010, 2012 and 2014
(hereinafter together – the temporary provision), the
provisions of Israel Accounting Standard No. 29 of the
Israel Accounting Standards Board do not apply in
determining taxable income for tax years 2007 to 2013,
even if applicable in financial statements for those tax
years. The meaning of the temporary provision is that
IFRS do not apply in practice when calculating the
reported income for tax purposes in the specified
tax years.

On October 31, 2011 the Government of Israel
published a law memorandum in connection with the
amendment to the Income Tax Ordinance (hereafter
– the law memorandum) resulting from application
of IFRS in the financial statements. Generally, the
law memorandum adopts IFRS. However, it suggests
several amendments to the Income Tax Ordinance
that will serve to clarify and determine the manner of
computing taxable income for tax purposes in cases
where the manner of computation is unclear and
IFRS is incompatible with the principles of the tax
method applied in Israel. At the same time, the law
memorandum generally adopts IFRS. The legislation
process involving the law memorandum has not been
completed, and is not likely to be completed in the
near future.

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 9 – Share-Based Compensation
The Group grants "Share Appreciation Rights" to
selected employees upon approval of the Board of
Directors (hereafter - the grant).

During 2014, the Group granted 1,382 rights to 14
employees on three different occasions.
On 1 January 2015, the Group granted 894 rights to
20 employees.

The Group granted another 3,122 rights to 26
employees on 3 January 2016, 41 rights to 1
employee on 17 April 2016 and 3,722 rights to 45
employees on 30 December 2016.

The rights will be settled in cash two years after the
date of grant.

The rights represent the total amount of grant divided
by the average closing price of the ordinary shares
of the Company on the AIM over the course of the 60
trading days immediately preceding the dates of grant
(hereafter - the share price on grant date).

As of the end of each period, the fair value of the rights
is calculated by the number of rights, as calculated
on grant date, multiplied by the average closing price
of the ordinary shares of the Company on the AIM
over the course of the 60 trading days immediately
preceding the end of each period (or the payout date)
divided by the share price on grant date.

The fair value of the rights was estimated using the
Restricted Stock Unites option pricing model.

The following table specifies the dates of grants and
the grant rights as of each date:

As of 31 December 2016 and 2015 the Group
recognized a liability at fair value of $2,298 thousands
and $586 thousands, respectively.

In the year 2016, the Group recognized expenses within
'Selling and marketing expenses' and within
'Administrative and general expenses', with respect of
the grant, in amount of $1,415 thousands and $1,129
thousands, respectively.

In the year 2015, the Group recognized expenses within
'Administrative and general expenses', with respect of
the grant, in amount of $417 thousands.

In January 2016, 10 employees exercised 1,072 rights
for cash in total amount of $755 thousands. The
exercise price per granted right is approximately $704.

In July 2016, 1 employee exercised 33 rights for cash in
total amount of $35 thousands. The exercise price per
granted right is approximately $1,061.

In December 2016, 1 employee had the right to exercise
52 rights for cash in total amount of $42 thousands.
The exercise price per granted right is approximately
$808.

During 2016, 304 rights were forfeited.

Grant date

Settlement date

14 January 2014

14 January 2016

16 July 2014

16 July 2016

19 December 2014

19 December 2016

1 January 2015

1 January 2017

3 January 2016

3 January 2018

17 April 2016

17 April 2018

30 December 2016

30 December 2018

Share price on
grant date (GBP)

Granted rights

260.19

524.30

499.80

522.94

388.81

563.25

541.21

1,149

200

894

3,122

3,722

Plus500 Ltd. 2016 Annual Report
Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 10 - Supplementary Statement of Financial Position Information:
a. Cash and cash equivalents

Cash and cash equivalents by currency of denomination

USD

EURO

GBP

AUD

NIS

Other

Gross cash and cash equivalents

Less: segregated client funds

Own cash and cash equivalents

*Reclassified

b. Accounts receivable

Prepaid expenses

Credit cards

Other

31 December

2016

2015

U.S. dollars in thousands

120,253

118,445

43,338

10,995

11,050

6,683

6,530

198,849

(62,368)

136,481

41,751

16,299

13,470

*3,505

*2,798

196,268

(39,771)

156,497

31 December

2016

2015

U.S. dollars in thousands

6,235

3,097

358

9,690

4,827

1,994

2,940

9,761

As of 31 December 2016 and 2015, the total amount of 'prepaid expenses' includes expenses from the Company's
sponsorship agreement with Atletico Madrid Football Club in amount of $5,521 thousands and $3,991 thousands,
respectively (see note 14b).

All the financial assets included among current assets are for relatively short-periods; therefore, their fair values
approximate or are identical to their carrying amounts.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 10 - Supplementary Statement of Financial Position Information:

c. Trade payables – due to clients:

Customers deposits, net*

Segregated client funds

31 December

2016

2015

U.S. dollars in thousands

63,956

(62,368)

1,588

41,290

(39,771)

1,519

*Customers deposits, net are comprised of the following:

Customers deposits

83,580

47,469

Less- financial derivative open positions:

Gross amount of assets

Gross amount of liabilities

(25,902)

6,278

63,956

(8,982)

2,803

41,290

As of 31 December 2016 and 2015, the total amount of 'Trade payables - due to clients' includes bonuses to the
clients from all of the subsidiaries.

d. Other accounts payable and accruals:
1. Service suppliers

Accounts payable and accruals for service supplies are comprised mainly of amounts due to advertising
service suppliers.

2. Other

Payroll and related expenses

Accrued expenses

Other

31 December

2016

2015

U.S. dollars in thousands

3,010

4,054

7,083

971

2,464

3,480

The financial liabilities included among other accounts payable, accruals and deposits from clients are for
relatively short periods; therefore, their fair values approximate or are identical to their carrying amounts.

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 11 - Supplementary Statement of Comprehensive Income Information:

Year ended 31 December

2016

2015

U.S. dollars in thousands

9,784

1,415

8,773

116,075

14,323

4,451

1,859

597

* 5,816

5,950

*97,810

10,683

3,337

1,296

521

157,277

125,413

6,831

5,486

1,129

2,754

553

997

1,872

510

5,829

7,051

417

1,888

500

969

*652

*341

20,132

17,647

a. Selling and marketing expenses:

Payroll and related expenses

Share-based compensation

Commission to agents

Advertising

Commissions to processing companies

Server and data feeds commissions

Third party customer support

Sundry

b. Administrative and general expenses:

Payroll and related expenses

Professional fees and regulatory fees

Share-based compensation

Office expenses

Traveling expenses

Public company expenses

Irrevocable VAT

Sundry

*Reclassified

Plus500 Ltd. 2016 Annual ReportPlus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 12 - Related Parties
"A related party" - As this term is being defined in IAS 24 -
"Related Party Disclosure" (hereafter – IAS 24R).

Key management personnel of the Company include
five founding shareholders: one of those shareholders
is a Director. These shareholders provide services to the
Company directly or through companies they control.

As of 31 December 2016 and 2015, the balance of the
Company's liability in respect of these services amounts
is $163 thousands and $128 thousands respectively; the
said liability is recorded among 'Accrued expenses' (see
note 10d(2)).

In 2016 and 2015, the Company paid service fees to
related parties at the total amount of $1,888 thousands
and $1,479 thousands, respectively. A total of $1,510
thousands and $1,183 thousands were recognized as
payroll and related expenses under the 'Selling and
marketing expenses' item for the years 2016 and 2015,
respectively. The remaining balance of $ 378 thousands
and $296 thousands was recognized as payroll and
related expenses under the 'Administrative and general
expenses' item in 2016 and 2015, respectively.

In 2016 and 2015, the Company paid directors fees at the
total amount of $645 thousands and $ 639 thousands,
respectively under the 'Administrative and general
expenses'.

Note 13 – Enterprise Wide Disclosures
The Company is domiciled in Israel. Trading income
and non-current assets from Israeli customers are not
material.
The Trading income attributed to geographical areas
according to the location of the customer is as follows:

Year ended 31 December

2016

2015

U.S. dollars in thousands

61,378

200,653

65,896

327,927

42,457

184,613

48,581

275,651

United Kingdom

Europe

Other

Note 14 - Commitments
a. On 28 April 2014 the Company signed a lease contract
(hereafter –the contract) with a third party for the
lease of 1,360 square meter offices in Haifa, Israel.
According to the contract, the lease is for 60 months
and the Company has an option to shorten the lease
period to 36 months with a payment of NIS 337
thousands plus VAT.
On 30 June 2015 and on 11 November 2015 the
Company signed two additional lease contracts to the
contract (hereafter – the additional contract), for the
lease of additional 730 square meters and 804 square
meters, respectively. According to the additional
contract terms, the additional lease is for the same
period as the contract.
The rental payments are linked to the Israeli CPI.
The expected rental payments for the next years are
as follows:

U.S. dollars in thousands

2017

2018

2019

Total

756

252

1,764

b. The Company and Club Atlético de Madrid,

S.A.D. (hereafter - Atlético Madrid) entered into a
sponsorship agreement on 6 January 2015 under
which the Company is entitled to advertise and
promote itself as the main sponsor of Atlético Madrid
for the 2015/16 and 2016/17 seasons.
See also note 16.

c. The Company and Brumbies Rugby, the Australian
professional rugby union team (hereafter - the
Brumbies) entered into a sponsorship agreement
on 5 December 2016 under which the Company is
entitled to advertise and promote itself as the official
sponsor of the Brumbies for the 2017/2018 season.

Plus500 Ltd. 2016 Annual Report

Plus500 Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15 - EARNINGS PER SHARE
Earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue
during the year.

Year ended 31 December

2016

2015

U.S. dollars in thousands

Profit attributable to equity holders of the Company (In U.S dollars)

117,242,000

96,567,000

Weighted average number of ordinary shares in issue

114,888,377

NOTE 16 - SUBSEQUENT EVENTS:
a. On 9 January 2017, the Company announced that

its sponsorship agreement with Atlético Madrid will
continue to 2017/2018 season.

b. On 7 February 2017, the Company’s Board of

Directors declared the distribution of a dividend
of $ 0.3799 per share, in the total amount of $ 43.6
million with an ex-dividend date of 2 March 2017.

In addition to the above, the Board has declared a
special dividend of $ 0.2729 per share, in the total
amount of $31.4 million with an ex-dividend date
of 2 March 2017.

c. On 9 February 2017, the Company announced that
the Financial Services Board, the South African
authority that oversees the non-banking financial
services industry, has granted Plus500AU a license
to operate an online trading platform for retail
customers to trade CFDs in South Africa.

Plus500 Ltd. 2016 Annual Report
FURTHER
INFORMATION

Plus500 Ltd. 2016 Annual ReportAdvisors

Nominated Advisor and Broker
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY, UK

Joint Broker
Berenberg
Joh. Berenberg, Gossler & Co. KG
60 Threadneedle Street
London EC2R 8HP, UK

Independent Auditors
Kesselman & Kesselman, a member firm of
PricewaterhouseCoopers International Limited
Building 25, MATAM
Haifa 3190500, Israel

Financial PR
MHP Communications
6 Agar Street
London WC2N 4HN, UK

Legal Advisor (Israel)
Naschitz, Brandes, Amir & Co.
5 Tuval Street
Tel Aviv 6789717, Israel

Legal Advisor (United Kingdom)
Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA, UK

Depositary
Capita IRG Trustees Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU, UK

Registrar
Capita Registrars (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH, UK

Plus500 Ltd. 2016 Annual ReportPlus500 Limited
Plus500 Limited
ANNUAL REPORT AND ACCOUNTS 2016
ANNUAL REPORT AND ACCOUNTS 2016
www.plus500.com
www.plus500.com
Published in March 2017
Published in March 2017

Perivan Financial Print 244161